Audio Entertainment Landscape Sees More Change – Clear Channel, Rhapsody
The audio entertainment landscape is morphing faster now than ever before. With satellite radio, AM, FM, Internet, and smartphones all weighing in consumers have an ever expanding amount of choices in how and what they listen to for audio entertainment. It is now more important than ever for investors in media sector companies to keep pace with these burgeoning competitive forces, and why this site follows the news closely and yes, even writes about it.
The first thing that investors need to understand is that the media space is large enough for several players. No one company is going to be so dominant that they bury everyone else. Consumers have choices.
The key to success in the media landscape is maintaining your presence and growing your share. What that means is that companies can not rest on their laurels, and they need to have their finger on the pulse of what consumers desire.
Today it was announced that Clear Channel has acquired Thumbplay a small internet radio subscription business which had managed 20,000 subscribers paying $10 per month for on demand music of any artist, song, or genre. Key features of the service are playlist genie, which allows for new music discovery, an offline mode so you can listen without a connection, and full customization.
While Clear Channel has not announced their full intent for Thumbplay as yet, it is speculated that they will integrate it with their iHeartRadio apps for the radio customization features. It is also speculated that Thumplay did not come at a high price tag, meaning Clear Channel likely will vastly improve their offerings for a small investment.
What has been said is that Clear Channel will be able to, “leverage its significant radio assets across all digital platforms, including the Internet, automotive and mobile devices.” This points to the company thinking ahead and applying themselves to the ever adapting auto dashboard.
In other audio entrainment news Rhapsody announced that they are increasing the length of their free trial from 14 days to 60. The move will allow for a 60 day free trial fore consumers who elect to test drive Rhapsody during the month of March. The campaign is called the “60 Day Free-For-All”, and will include the Rhapsody experience throughout MTV Networks’ programming and social media (RealNetworks and MTV Networks each own slightly less than half of Rhapsody). Taking advantage of their existing network relationships, Rhapsody will be promoted on MTV, MTV2, VH1 and CMT. Exposure on popular shows like MTV’s “Jersey Shore” will also be included.
The reason behind the “60 Day Free-For-All” is simple. Rhapsody wants to boost their subscription model to grow beyond the current 750,000 subscriber level the company currently boasts. Rhapsody cited that a frequent complaint was how brief the free trial was. This campaign should allow the company to test the waters on this type of campaign, while at the same time giving consumers a substantial chance to experience the service before they buy. A Rhapsody subscription runs about $10 per month.
News such as this is important to those invested in Sirius XM Satellite Radio (NASDAQ: SIRI). One major item being considered by the FCC right now is whether or not Sirius XM can raise prices and whether the company needs continued pricing oversight from the government agency.
Investors see a potential price increase as an added revenue stream for the company. Even a slight increase would change the bottom line dramatically and thus boost the stock price. What investors should realize is that a decision by the FCC to forgoe their oversight of satellite radio pricing does not mean that a price increase will happen.
The audio entertainment landscape is shifting to a subscription based model. Slacker, Pandora, Thumbplay, RDio, etc. are all promoting subscriptions more heavily now than ever. The “free” aspect of these services is quickly disappearing and pricing for audio content is beginning to become more clear. Sirius XM is the most expensive, but there are certain benefits to what the company offers. Sirius XM has more sports, talk, news, and exclusive content than anyone else, meaning in theory, they could charge a premium over others. The question is how much more they can charge while still maintaining or growing their market share.
Recently Pandora announced their intention to go public. The company is among the least expensive audio entertainment subscriptions at about $36 per year. Slacker offers subscriptions at about $60 per year. With Rhapsody and Thumplay priced at $120 per year, it will be interesting to see the growth of the respective companies at the varied price points. I would venture to say that Pandora will increase prices to get more in line with others and increase revenue. Should this happen it will help validate current prices of Sirius XM and possibly allow for Sirius XM to increase prices in conjunction with a more robust and customized experience when Satellite Radio 2.0 is released later this year.
The reasons for covering writing and following these competitive services is not to promote them over Sirius XM or to insinuate that they will put Sirius XM in jeopardy. The reasoning is that unless you understand the “battlefield” you will not fully understand the moves of Sirius XM.
Position – Long Sirius XM Radio
With no automobiles being manufactured during WW2, all automobible manufacturers could sell vehicles after the war. However, by the mid 50s companys started falling by the wayside.
Many merged only to fail a few years later.
We appear to be seeing a similar process going on in the radio business. There will be too many created and in time only a few will persevere.
It amuses me that many are offering to play “your music” on demand. How do you ever hear anything new or something old, you have’t heard?
Everytime I make a trip of a few or several hundred miles, I hear at least a couple dozen songs, new or old, I have never heard before. That makes a nice contrast to the same scenery you are looking at for the gazillionth time.
That and the user friendly aspects of SiriusXM make it a “significant other” for me.
James G….
I apologize in advance, but I am going to use you as an example.
If you take a few minutes to look at Thumbplays site and explore it you will see exactly how you can heard something new.
Using their “Playlist Genie” ) you can choose a song you like and the service lists out 14 more songs that are similar in nature. This is a discovery feature that many such services employ. This is a reason services such as this have appeal to people.
The average Sirius XM investor has not explored these other services enough yet. Instead I tend to hear comments based not on experience but second and third hand hearsay, often from people who would rather you not understand these services.
My suggestion….try them out. See what they are capable of and what they offer. Doing this does not make you an enemy of SIRI. Instead it makes you a better investor and someone who can better understand the landscape.
Spencer, I started selling business systems in 1960 and then computer systems in ’62.
I retired at 52 in 1990 because I was sick of leap frogging data systems.
I started my own business two years later. I’m on a regular basis having to still deal with constant upgrades for my business.
Today, Schwab wants me to take on their new trading platform. Maybe I will and maybe I won’t.
When it comes to entertaing myself, or gathering basic information, I want the speed and efficiency of familiarity.
I have quizzed many contemporarys of mine, some who created systems, and we are all the same—-enough is enough for us.
The systems leap frogging is going to go on and on—-but it’s going to do it without me.
You are correct about having the objectivity of looking at competing systems. When you ae heavily invested, your better be damn familiar with the competition. I gave Pandora a fair examination over several months. I think it’s a ho-hummer. Also, it’s a music service. SiriusXM is full spectrum broadcasting service.
Slacker also has a new music discovery setting which users can set to low, medium, or high. Each level gives users a different level of new songs (not on their personalized list) per hour.
The best part of all thes emusic discovery systems is that not one of them…did you hear me “not one of them” makes $ 1.00 profit or has a business model that is viable at this point. This, as everyone continues to find a reason Sirius XM will fail.
Let’s see 2014 1 billion in free cash flow for Sirius XM. None of the entities are a pimple on Mel’s ass.
Satellite 2.0 will offer all the same crap these non-viable business do to shut everyone up, but at the end of the day they will continue to prevail because of the wide array of content and their delivery system, which is far superior than the internet or cell phones for cars.
I know all these little nothing companies get you guys excited, but not sure why. Each and every one of them is validating Sirius more and more as each day goes on.
This site should be called internetmusicbuzz.com
sxminvestor….
Whether or not these services make money is not really the issue. The fact that they exist and can bring in consumers is why we need to monitor them. Some are on their way to making money.
If you are invested in Ford should you ignore GM? people laughed at Hyundai for years, but now they are making HUGE strides.
It is getting way too fragmented and I don’t even understand why they all want to get in a business where they lose $. There is only one company in the radio business that makes $ and that is Sirius XM.
Every single internet company is bleeding $ and terrestrial radio companies are all heading to, if not already in bankrutcy with revenues dropping year after year.
Sirius XM is thriving and growing revenue and the bottom line despite all these splinter internet co’s and what the NAB and terrestrial co’s did to them for 18 months, which should have been illegal.
None of the internet co’s will take any significant share from Sirius in the car because the internet does not have a technology that is viable nationwide other than fixed locations.
Don’t tell me millions will take up smartphones and listen through their bluetooth cell service. It is going to be a small % that will want to fiddle with this and if they do, they likely with choose the Sirius XM internet app anyhow once all these make believe internet companies are all charging to try to stay in business another year or two and you make comparisons between the bang for your buck.
All these moves by Clear Channel,Rhapsody, CBS/last FM, Pandora, Spotify are desperate moves and all it will take is another downturn to put them all out of business.
Only the strong survive and thrive and Sirius XM now has the cash flow generation, cost controls in place, capital expenditures all but behind them and uncontested content and delivery system that is paid for for the next 7 years.
Satellite 2.0 will likely address any concerns against any perceived threats.
13 million plus cars a year with a 65% penetration rate of Sirius XM, plus the CPO market that you are well aware of.
Unmatched for the forseeable future.
If you’re invested in this company or any company, you better be aware of the competition. You can definitely lose your objectivity when you invest in a company. Hey, all this competition can make sirius/xm better. The foreign auto companies definitely made the u.s. car companies better. But it took the u.s. car makers way too long to realize they were getting their buts kicked. Spencer is just trying to fire sirius/xm and us up to not let sirius/xm fall behind. I’m just curious to Spencer or anyone else that’s paying for pandora,slacker, etc., 1. Is the service worth the price, not just in the beginning but for an extented length of time? and 2nd. Would you continue paying for the service even if the price were increased?
siriusperspective….
I use Slacker frequently when not in the car, and I find the $60 per year worth while. What I like is the customization, the ability to skip a song, and the media player itself.
I would likely continue with a price increase if Sirius XM does not offer the same capabilities. If Sirius XM upgrades their Internet side of the business to emulate what others are doing, I would have no need to pay for or use these other services.
The danger is Sirius XM is getting to be cost prohibitive. I pay a full price subscription for Sirius plus the internet access fee ($17 per month). I pay a full price subscription for XM plus the best of Sirius ($18 per month). I pay full royalty fees for both Sirius and XM (an added $3 per month). All told, I am paying about $40 per month for satellite radio. I really am only able to justify this cost because of this site.
last.fm and muziic are free and are great!