A Story

Late yesterday afternoon Pandora reported on its finances and audience levels for the first quarter of its 2014 fiscal year (which ended April 30).

The leading webcaster's total revenue for the period of $125.5 million represents 55% growth since a year ago ($105 million came from ads, $20 million from subscriptions). Total listener hours grew 35% to 4.18 billion for the first quarter of fiscal 2014, compared to 3.09 billion for the first quarter of fiscal 2013.

Despite record revenues and audience, the company ended up losing nearly $29 million during the quarter.

"Content acquistion costs" (i.e. royalties for licensing music) grew 48% from $56 million a year ago to $83 million in this period. This means these costs amounted to 66% of Pandora's revenue that quarter.

Total mobile revenue was nearly $84 million -- nearly double year-over-year -- and outpacing growth of its mobile audience (which grew 47%).

Pandora added more than 700-thousand new subscribers to its ad-free Pandora One service in the first quarter, up 114% to more than two-and-a-half million (and more net new subscribers in the quarter than in all of fiscal 2013, which means Pandora has the largest U.S. streaming subscription audience of any music service).

Pandora says it now regularly reaches 70.1 million active users (up 35% from a year ago), and accounted (in April) for 7.33% of total U.S. radio listening.

Two online audio content aggregators have announced new partnerships to bolster their offerings this week.

TuneIn has added channels and podcasts from MBC Radio, Korea’s largest radio broadcasting company. TuneIn counts over 70,000 radio stations and two million on-demand programs in its service, which powers over 200 devices (smartphones, car entertainment systems, and other connected devices).

Aha by Harman similarly organizes audio content (live and on-demand) for in-car interfaces as well as Android and iOS mobile devices. Aha has added the CRN Digital Talk Radio network's seven channels to its global offering.

Streaming music service Rhapsody has committed to providing "liner-note-style credits" for every track in its 17 million-plus library, including the names of producers, engineers, composers, session performers, and more (you can read more about this in The New York Times here).

There are likely several reasons why Rhapsody would commit to such a huge undertaking, but one might just be that enhancements like this help make service the center of (listeners') music experience," to quote the company's Jon Irwin. Irwin, Rhapsody International president, gave the second of two keynote addresses at the recent RAIN Summit West event in Las Vegas.

Liner note-style credits would also help the listener and the artist to "connect in a meaningful way," to again paraphrase Irwin -- fundamentally necessary for creating the experience for which consumers will pay. 

The streaming music/Internet radio space is certainly crowded, yet Irwin maintained that none of these companies are "really killing it" from a customer experience perspective, or from a profitability perspective (and he includes his own company in that assessment). "Nobody has nailed it across all content types and all listening modes," he said, to offer what he termed "the Ultimate Stream." That is, the various types of content (music, news, sports, comedy, live radio) a listener might want at different times, in any listening venue or device (in the car, the mobile phone, at home).

Irwin listed what he thought the necessary qualities of the perfect music service interface. It would (be):

1. deeply personal
2. drop-dead simple
3. connect fans to artists, personalities
4. new yet familiar
5. easier than piracy
6. guided by trusted sources
7. needs to be embraced by artists and personalities.

Yet creating that is just half the challenge. There's the question of creating "a rational business model" he mentioned. That is, balancing the need for momentum and growth, yet "making sure you're following a sustainable business model, in which you're delivering enough value to your listeners so that they'll pay you for the service" (either by accepting ads or paying a subscription fee).

One solution he offered is for streamers to partner with services with which consumers already have "trusted billing relationships" -- like mobile carriers. Rhapsody itself has partnerships with moblie carriers Metro PCS in the U.S., and E-Plus in Germany. The cost to the consumer is decreased (as its subsidized by the carrier), and it's easier to pay because it's rolled into a bill they already pay. Parntering in this way "takes you down off that $10 price point, you can get actual and perceived reductions in well over 50% for consumers and still give them a great experience," Irwin said.

We have audio of Irwin's speech (and all our RAIN Summit West content) available for free via SoundCloud. Look for the links in the right-hand margin of kurthanson.com. Irwin also published an op-ed summarizing his speech in Hybebot here.

Greg Sandoval at The Verge and Paul Sloan at CNet both report that negotiation snags are delaying Apple's roll-out of its much-anticipated "iRadio" streaming service (Apple reportedly wants to debut this summer at the latest, and possibly by next month's Worldwide Developers Conference).

Part of the problem is apparently that Apple's service will be more like Pandora, and less like Spotify. Sandoval writes, "The record companies and music publishers don't want another web radio service that satisfies a lot of music consumption but doesn't pay them much... The widely held belief by industry leaders is that to stop the slide in music sales, consumers have to be offered unlimited access to deep pools of songs that are supported by either small, monthly subscription fees, or advertising sales."

According to The Verge, it's Sony/ATV -- that's a music publisher, not a label group (and administers copyright song compositions, not recordings) -- that's holding up the negotiations. BMG Rights Management, the fourth largest music publisher, is another hold-out.

But CNet says it's Sony Music (the label group) holding things up for Apple, "over how much Apple would pay for songs that people listen to a fraction of and then skip." Sloan writes, "That skipping has become an issue is frustrating executives at the other labels because they see Apple's free radio service as a potential boon for the music industry overall and are eager to help the company get it launched... While it's unclear what Sony is asking for... if Apple bends for Sony on this issue, it would cause problems with its deals with Warner and Universal."

Read The Verge's coverage here and CNet's coverage here.

Dozens of top radio and online audio executives from across Europe will meet in Brussels this week for the second annual RAIN Summit Europe, at the stylish Hotel BLOOM!

As with other RAIN Summit events such as last month's successful RAIN Summit West in Las Vegas, web radio professionals will gather to discuss all facets of Internet radio and online audio, participating in panel discussions and presentations and advancing the development of the business of online audio across Europe.

Brussels, just a few hours away from almost everyone in Europe (either by plane or train), is an ideal location for the Summit. And even though we're just days out, and the seating that remains is limited (last year's gathering in Berlin sold out), we're not raising prices for last-minute attendees. You can register for the event using either Eventbrite or Amiando.

Topics on the agenda will range from business to technology to programming and include best practices for measurement of online audio, multiplatform content distribution, mobile streaming, sales strategies, and programming for audience growth.

And we're happy to announce a last-minute addition to the day's agenda: Mediatic Conseil’s executive director Michel Colin will make one of the day's "featured presentations." Based in Switzerland, Mediatic Conseils offers training courses on local advertising techniques and on the effective use of local media. 

Other confirmed speakers already include an impressive mix of Internet radio and online audio executives, including:

• Ali Abhary, CEO, Spectrum Medya, Turkey
• Jan-Willem Bruggenwirth, Managing Director, 538.nl, The Netherlands
• Matthew Carver, Radio Coordinator, EGTA, Belgium
• Ben Drury, Founder/CEO, 7Digital, U.K.
• Hakan Kostepen, Executive Director, Product Strategy & Innovation, Panasonic, U.S.
• Jan Poelmann, RMS, Germany
• Robert Proctor, CEO, Audioboo, U.K.
• Alain Reyes, Head Manager, NRJ, France
• Patrick Roger, VP/Global Sales & Marketing, Adswizz, France
• Jöel Ronez, Director of New Media, RadioFrance, France
• Christian Schalt, General Manager, rs2 and KISS FM (Berlin), Germany
• Kjarten Slette, Head of Music, WiMPmusic, Norway
• Holger Weiss, CEO, Aupeo, Germany
• Steve Whilton, Director of Product, Last.fm, U.K

The day's entire agenda is now available on the RAIN Summits Europe web page here. We hope to see you in Brussels!