WHITEFISH, MT / ACCESSWIRE / January 6, 2015 / Internet radio has become immensely popular over the past several years, as evidenced by the rise of companies like Pandora Media Inc. (NYSE: P) and Apple Inc.'s (NASDAQ: AAPL) entry into the space back in mid-2013. As of September 30, 2014, Pandora alone had over 250 million registered users streaming nearly five billion hours of radio last quarter. These dynamics have led to a valuation that has soared to more than $3.5 billion driven largely by advertising dollars.
The problem is that users and musicians aren't always happy with the service. By using the DMCA-mandated rate structure, Pandora is charged just $0.0013 per stream for its free, ad-supported business. These dynamics mean that the service contributes just a few hundred million dollars to the $7 billion recorded music industry, despite having a monthly user base that represents nearly a quarter of the entire U.S. population - a disappointment to many musicians and music labels.
Taylor Swift recently pulled her music from Spotify - a $10 per month on-demand streaming music service that also has a free, ad-supported offering - while leaving the music on more-favorable on-demand only providers like Rhapsody and Apple Inc.'s Beats Music. These non-DMCA compliant fee-based providers typically pay the greater of a percentage of revenue, amounting to around $0.005 per stream, which represents at least a 4x increase compared to the rates that the DMCA and Copyright Royalty Board have set.
On the other side of the equation, many users prefer to listen to ads rather than pay for a service that costs as much as $10 per month, as evidenced by the relatively few subscribers that services like Spotify, Rhapsody, and Beats Music have compared to services like Pandora. Pandora One - the company's $4.99 per month fee-based counterpart - has only 3.5 million subscribers compared to the 73.5 million subscribers to its ad-supported free streaming service.
With ad-based services limiting a user's ability to pick the exact songs they want to hear and fee-based services seen as too expensive by the younger demographic (evidenced by low adoption rates for these pay services), potential users often seek other alternatives such as pirating music through peer to peer networks which siphons untold millions of dollars out of the music industry.
Finding a Better Solution
CUR Media Inc. (OTC: CURM), which went public earlier this year, is developing a unique approach that aims to bridge the gap and ultimately make both users and artists happy with the results. With a team of seasoned professionals, including successful digital media entrepreneur Tom Brophy and music industry veterans John Lack (creator of MTV, Nickelodeon, ESPN2, and the Movie Channel) and Bob Jamieson (former Chairman/CEO of RCA Records), the company has developed a paid subscription Internet Radio service model that it anticipates launching in the first half of 2015.
By combining the listening experience of ad-supported Internet radio products (without interruptive advertising) with a limited on-demand component for an inexpensive monthly cost, the company believes it can keep both users and musicians happy by maintaining low subscription costs while avoiding the DMCA-limited rate structure that limits artists' income.
In terms of the product itself, the company has implemented a number of features that separate it from the competition. CUR is a hybrid music streaming service where users can access millions of songs to stream in the form of Internet radio along with a limited on-demand offering, allowing them to continuously play a set of their favorite songs. The product also seeks to leverage numerous social media platforms like Twitter and Facebook by enabling users to curate playlists with photos and videos, and share them with friends and followers. The company believes this will stimulate users to share CUR with their friends and ultimately help grow its user base virally.
The company's business model includes many different venues for monetization, which promises to keep subscription costs low. For instance, users will have the ability to buy music downloads and receive personalized non-interruptive advertising in the form of sponsored playlists and similar methods. CUR also plans to enable users to purchase concert tickets and merchandise through the app to further support the artists.
The CUR app is expected to launch over the coming months, providing a much-needed alternative in the Internet Radio space. By merging Internet Radio and on-demand concepts, the company hopes to attract and entice users to pay for a service without the high costs associated with existing on-demand services. The many additional features should help stimulate organic growth over time.
Looking Ahead to Launch
With consumers increasingly looking for inexpensive alternatives to terrestrial radio stations, operated by companies like Cumulus Media Inc. (NASDAQ: CMLS) and Saga Communications Inc. (NYSE MKT: SGA), CUR Media's hybrid model could be exactly what the music industry needs. These dynamics could help it capture a key part of the market left open by services like Pandora and others.
For more information, investors should take a look at Cur Media's Corporate Profile located on the company's website http://ir.curmusic.com/.
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SOURCE: Emerging Growth LLC