September 27, 2016
The biggest buzz last week - besides the iHeartRadio Music Festival - was iHeartMedia's announcement of two subscription music streaming services: iHeartRadio Plus and iHeartRadio All Access. The goal is to entice iHeartMedia's 269 million listeners each month into the concept of subscription streaming. That's what the company is betting on in the imminent streaming battle with the likes of Spotify, Apple Music and Pandora, among others. Here, iHeartRadio Pres. Darren Davis goes into detail on the new services, the current business environment and future growth.
When did iHeartMedia first consider the idea of running its own paid streaming services?
At about the time we launched iHeartRadio. The quick answer is that we have always been considering it. The minute we launched iHeartRadio five years ago, we were looking into enhancements to make things better. So, why launch it now? Two reasons: One, it has gotten to the point in America that even though the vast majority of people don't subscribe to a music service, there's at least a general awareness of it and on-demand access. Two, we now have the technology to do this the right way, to bring on-demand functionality to the mass market in an easy-to-use way.
The most important thing here is that we're bringing on-demand functionality to the live radio experience. It's really designed to bridge the gap between music discovery and music collection. That has always been a disjointed broken experience. You go back to when you were a kid who heard a great song on the radio and wanted it. You'd scribble down the song title on a notepad, then take that to a record store to buy it. Nowadays it's still not a seamless experience, you have to fumble around on your phone to download a song. It has never been a quick, clean, easy experience. We set out to solve that problem -- and that's what we did by bringing on-demand features to the iHeartRadio app. For the first time ever, listeners can hear a brand new song -- or even favorite old song -- and have the ability to instantly replay that song to sing along again, or save it right from the radio directly to their playlist. That has never been done before.
Sounds like a radio version of Tivio...
But there's an important distinction. Folks do bring up that comparison, but I wouldn't compare it to a TV DVR because it's not a recording of a live radio show. Say you're listening to KIIS FM and hear a new song from Justin Bieber. Now you can replay it through your iHeartRadio app, which searches through our catalog of 30 million songs, finds it, plays it, and when it's done playing the song, we return you to the live radio experience.
Why did you decide to launch two separate services?
There are two different tiers -- Plus and All Access. Both are rooted in live radio, and that's the key. If you think about what Spotify does, it's for heavy music users and music aficionados. Spotify is essentially a technologically advanced stack of records or CDs, but you're left to your own devices to search and find the songs you want to listen to. When we did research on this, we found out the main reason people don't subscribe to streaming services is not because they cost a little money; it's because they're too confusing to use effectively. Why did Facebook become so huge? Because it's so darn easy to use, people couldn't resist. Why did AOL become a behemoth at the start? Because it was the Internet on training wheels - which some people believed was derogatory, but at the time it was actually a good thing. It brought the Net to the mass market.
That's how we see our services with the on-demand features and functionality. Our radio stations reach 269 million listeners each month, and the vast majority don't subscribe to any music service, but they still enjoy music and love radio. Who wouldn't want to have more control over their radio experience to play any song they wanted at any time? People like that -- and someone needed to come along to make it so darn easy to cross that barrier.
Regarding the two tiers, I can't go into detail about what features and functionality one tier has vs. the other; that's still being worked out. What I can say is that both will enable you to replay songs from live radio and save songs from live radio. Over the next couple months, as we get closer to launching, we'll finalize pricing on the two tiers.
Would it be safe to say that the All Access tier will cost more than iHeartRadio Plus?
Yes. We're researching all price points to see what people will pay for various features and functionality, but we don't see us getting into a price war with Spotify or anybody else. That misses the point; what we built here is not the ability to offer on-demand cheaper than anybody else. This is truly something different. For example, we've shown our product demos to music industry people and they immediately said, "Finally someone has figured out how to put it all together." This is not what Spotify offers or what Pandora is talking about. We're launching something that nobody else can combine ... three big things ... music discovery, music collecting and the companionship live radio gives you. Radio is your friend, where people such as Elvis Duran and Bobby Bones can tell you about the hottest new movies, the greatest restaurants in town and new music to check out.
How do you plan on promoting the services - solely to your own radio audience or via TV and other means?
The best case study for the power of radio advertising is iHeartRadio. I don't think any brand in America advertises more on radio than iHeartRadio, which didn't use TV or magazine ads to build our brand. We just talked about it on the radio and in five years, it has gone from nothing to 84% brand awareness and over 90 million registered users. We hit critical mass faster than Facebook and Pandora, just ticking off milestones without having used other media. No media company in America reaches more people - iHeartMedia reaches more than Google and Facebook, which means we have an awfully big megaphone.
iHeart radio stations are very strong in serving mass-appeal music, be it pop or country, but how do you expect niche music fans to utilize your services if your radio stations primarily don't play niche-appeal artists?
Radio is still the main place people discover all new music; even over 70% of Spotify and Pandora users discover music on FM radio. Our new streaming services give us an expanded platform to expose all kinds of music, be it big or small.
Even though Pandora, Spotify and Apple Music are being widely used and are established in the marketplace, no one is making much, if any, money from them. Do you see your services as a profit center or as more of a promotion complement to your over-the-air product?
The nice thing for us is this isn't our only business venture, but part of our overall business, which is still broadcast radio, first and foremost. Remember, we launched iHeartRadio at the iHeartRadio Music Festival five years ago. And we created the app because we have great broadcast brands that needed a powerful digital expansion, so our listeners can interact with our stations at any time on any platform. What we're doing now supercharges their interaction with our stations, creating more engaging relationships, if you will. I do think we'll get to that point, where there's a profit to be made from services like this. But we didn't go into it simply for that reason. We went into this to reinvent live radio.
Recent news reports indicate that streaming has helped become a legitimate profit center for the labels, yet the artists and songwriters continue to believe that they're being compensated unfairly. What's your view on this? Could iHeart and other streaming services ultimately compensate songwriters and artists better in the future, or is that a label/artist issue and not your main concern?
I really can't get into the weeds on this; what I can say is that our business is tied very closely to a healthy music business -- and what's really exciting is that our partners in the music industry are excited about this. There are millions of Americans who don't subscribe to anything and haven't started paying for music. What we are launching makes it so easy to subscribe. It's so intimate and tied to the comfort of the radio listening experience. It can be a gateway for the mass market to dip their toes in the waters of music subscription services in a way they haven't before. This should be a win-win for everybody.
What was solely a radio group as Clear Channel evolved into the multi-platform iHeartMedia. Now you're incorporating paid streaming into your mix. Could a YouTube-like video service be something to consider and maybe launch in the future?
The sky is the limit. We have looked at that sort of thing, too. We always are looking at new things. Somebody reported this a month ago; they had gotten hold of one of our consumer surveys about subscription music, and then reported that iHeart was looking into doing it. I'm surprised it took someone that long to report it, because we're researched the idea for years. We do research 365 days a year; we look at everything possible. We already create our fair share of video, with huge tentpole events such as the iHeartRadio Music Festival, the iHeartRadio Music Awards, the iHeartRadio Jingle Ball Tour and the iHeartRadio Fiesta Latina. Plus, we have 850 radio stations creating video locally every day. That's a ton of great content. I am certain that, as time goes on, we'll find better ways to expose it all.