iHeartRadio is an interesting beast. It was started as a digital experiment within terrestrial radio giant Clear Channel. John Hogan, the company’s head of radio, once told me iHeartRadio was “not a business.” It was a “feature.”
Since then the service has blossomed into a more serious effort by Clear Channel to do digital. By pimping iHeartRadio to its 243 million monthly traditional radio listeners, the service was able to quickly sign up 20 million registered users. It now inexplicably calls itself the “No. 1 all-in-one audio digital service.” (Pandora has 200 million registered users but okay!)
But even with its early success in user acquisition, iHeartRadio is in a precarious place. How do you disrupt radio from within the world’s largest radio company? Clear Channel gets half of its revenue from radio. Digital threatens to cannibalize that. And guess what, digital doesn’t make much money. It’s the definition of the Innovator’s Dilemma — can an old legacy company replace its large, declining business with a smaller, growing one?
Small, growing iHeartRadio faces the same challenges that its digital peers do, including the dreaded royalty fees. We all know about how these fees are crippling streaming music businesses. Meanwhile it is in the best competitive interest of Clear Channel and traditional radio — who pay nothing in royalty fees — to keep the digital fees high.
And yet, Clear Channel last year joined the fight with Pandora in Congress, lobbying in favor of lowering fees with the Internet Radio Fairness Act. It is a tricky, tricky PR game to play when you are up against artists like Rihanna and Billy Joel, accusing digital radio companies of ripping them off. But Clear Channel boldly jumped into the mix. From what I wrote at the time:
Clear Channel’s joining up with Pandora signals a shift in both Clear Channel’s future as a stodgy old industry dinosaur and in the radio world’s fight between old and new. Nothing erodes old grudges like a shared enemy.
The bill died last year, as did an opposing bill which would make satellite and cable radio pay the same rates as Web-casters. But it showed how serious Clear Channel is about iHeartRadio. The fees can’t be easy to swallow.
Today Clear Channel made another move that shows how serious it is about digital, and how much it wants to offset those onerous fees: it launched iHeartRadio Talk, a platform which allows users to stream popular radio talk shows and user-generated style podcasts. The launch, available on the Web today and on mobile in September, includes 50,000 audio episodes in 20 categories. Content from well-known names like Good Morning America, TED, Ryan Seacrest, CollegeHumor and Rush Limbaugh will be available. Likewise, people can use the platform to broadcast their own talk radio segments.
The beauty of talk radio, as streaming service Slacker Radio discovered awhile back, is that it is way, way cheaper to license than music. CEO Jim Cady says providers of talk radio content are “very eager” to participate with digital services compared to the record labels, and the licensing fees are not going to kill the business. Now ten percent of Slacker’s listening is talk radio. The company also offers weather and local hosts (which boost listening time on average) boosted by audio ads — it sounds more like radio than most other digital streaming services. Oh, and it’s expecting to be profitable-per-user in six to eight months. With the launch of iHeartRadio Talk, Clear Channel is taking a page from that model.
And people love talk radio! Why has it taken us this long to move digital talk radio out of the podcasting age?
It seems makers of media apps are finally waking up to the value of voice. In the last year a number of startups have launched with interesting talk radio options. Umano delivers news articles spoken by voice actors, though it is operating a bit brazenly with no licenses for the content it is delivering. Swell, which recently raised $5.4 million from DJF, acts as a Pandora for talk radio shows. VoiceBunny will turn any text you request into a spoken mp3. Yesterday SpokenLayer, a company which partners with media organizations to deliver audio versions of news articles and feature stories, presented at the demo day for Matter, a media-focused accelerator.
Your move, Pandora.