Can streaming music survive without a sugar daddy?
Spotify is the most successful streaming subscription music service on the planet, yet it’s losing money at an alarming and completely unsustainable rate. And after blowing through more than $200 million in capital, Spotify is now reaching a critical juncture: either investors are going to sink more money into this, or realize that this doesn’t make sense as a stand-alone business.
Enter Rdio, a streaming subscription service that is mostly unknown to the world, and has just a tiny fraction of Spotify’s subscription levels. But maybe Rdio is getting the memo before it’s too late: just this morning, the company announced a broad-reaching deal with Cumulus Media, a traditional, terrestrial radio broadcaster (with an ‘a’). The deal finds Cumulus taking an ownership stake in Rdio parent Pulser Media, and opening a range of cross-promotions and digital extensions, sort of like Clear Channel and iHeartRadio.
This isn’t a purchase, not even close. But it is a very serious first step: as part of the deal, Rdio will outsource parts of Cumulus’ ad-sales infrastructure, and share all sorts of content exclusives and opportunities. This is now a much bigger platform, with Rdio suddenly gaining massive exposure on hundreds of traditional radio stations (ie, where mainstream artists are made).
So if Cumulus ultimately becomes a sugar daddy, this is what the first date looks like. But the question is this: if Rdio decided to go it alone, would it survive more the two or three years?
A few weeks ago, Rdio CEO Drew Larner proclaimed that Rdio would be ‘wildly profitable’ with ‘just’ 30 million subscribers, which is probably about 100 times their current subscriber level (if that).
Perhaps YouTube, the largest music streaming service on the planet (by far), offers the ultimate case study. Mark Cuban derides Google for subsidizing the video bandwidth of the entire world for years, sucking the oxygen out of the video streaming space while neglecting to figure out a real business model around video streaming.
Which is exactly the point: because without Google, YouTube most likely wouldn’t exist today.
Written while listening to Free on Sirius XM Radio.