Smartphones Make Mobile Radio Sing

(page 2 of 2)

Mobile-subscription and -song sales may boost revenue further. More than half of Slacker's total sales come from payments by users accessing its online radio-streaming service via smartphones. That's up from less than 20 percent at the beginning of the year, says Jonathan Sasse, marketing senior vice-president at the San Diego-based company. By year-end, mobile revenue may account for 75 percent of the total, he says. After years of struggling to make it as a PC streaming service, Slacker expects to be profitable this year.

Radio listeners are more willing to pay a subscription fee for commercial-free service and to buy songs on a smartphone rather than on a PC, Sasse says. If a radio app is preloaded onto a phone and a purchase can be charged to a wireless bill, users are 10 times more likely to upgrade to Slacker's $3.99-a-month premium service via a one-year subscription, Sasse says. Downloaded more than 10 million times, Slacker's apps are preloaded onto select phones, such as BlackBerrys from Verizon Wireless and T-Mobile USA, which is owned by Deutsche Telekom (DT).

mobile use expanding in double digits

Making money from PC advertising that runs amid streaming music "is very, very difficult" Sasse says. "It became clear that phones were going to be the point of consumption for our consumers. That's the path for us. Monetizing mobile is the key. There's no question that mobile is the strongest opportunity for us."

In recent months, mobile apps have emerged as the industry's biggest user-growth engine. While terrestrial, satellite, and PC-based radio services are adding listeners in the single digits percentagewise, mobile use is expanding at a double-digit pace, according to SNL. Mobile listeners now constitute more than half of Slacker's 1.5 million to 2.5 million monthly users, up from about 25 percent of total users at the beginning of the year.

More than 30 million people use Internet radio provider Pandora Media on their mobile phones, out of 58 million total users, says Joe Kennedy, chief executive officer of the Oakland (Calif.)-based company. "It's only this year that mobile has become the majority of Pandora's usage," he says. "Consumers like to listen to the radio when and where they want to." The company expects to become full-year profitable this year.

Mobile radio adoption will grow as more consumers opt for smartphones over basic mobile devices. Smartphones accounted for 34 percent of all phones sold in the U.S. in the first quarter, twice as much as a year earlier, according to consultant NPD Group. The bevy of lower-priced smartphones coming to the market, as well as cheaper data plans from carriers such as AT&T, (T) should fuel growth. While a third of smartphone customers use radio apps today, that number will increase to 50 percent by 2015, says SNL's Nielson.

wireless broadband in cars

Unlike traditional broadcasts, mobile radio ads can run video and be interactive, features for which advertisers pay extra. "We went from primarily being on air, to [selling] rich media video ads," says Harrison, at Clear Channel. Online and through its mobile apps, the company's users view 500 million photos a month. They can access exclusive content that includes performance videos and 50 digital-only channels, such as one hosted by the group, the Eagles.

As wireless broadband becomes more widely available, particularly in cars, Web radio will become a bigger threat to satellite and terrestrial radio providers, grabbing some of their users, says Susan Kevorkian, a program director for consultant IDC.

By the same token, mobile apps can reduce the outflow of listeners to rival services. Releasing mobile apps for Android and BlackBerry devices this year likely helped satellite radio provider Sirius XM Radio (SIRI) curb monthly outflows of self-paying subscribers to an average of 1.8 percent per month in the second quarter, from 2 percent monthly a year earlier, says David Joyce, an analyst at Miller Tabak & Co. in New York who upgraded his recommendation on the stock to "buy," from "neutral," on July 7. The same day, Sirius said it added more than 583,000 net subscribers in the second quarter.

Kharif is a reporter for Bloomberg Businessweek in Portland, Ore.

Business Exchange

Track and share business topics across the Web.