It is no secret that terrestrial radio has had to endure some pain with the advent of the iPod, satellite radio, and now Internet radio. While radio executives will say that the impact is minimal, the reality is that like any business facing stiffer competition, terrestrial radio has had to morph its business model. Clear Channel has done just that with the development of iHeartRadio.
Rather than sit back and watch a whole generation of consumers move their listening to the Internet or satellite based services, terrestrial radio has made the leap to deliver its content nation wide via the Internet. Terrestrial radio is not alone. Even Sirius XM (NASDAQ:SIRI) saw the writing on the wall and has beefed up its own Internet offering. In fact, the capabilities of the Internet allow features that simply are not available over the air or via satellite.
Now iHeartRadio has upped the ante again with the addition of 86 Cox Media stations from 19 markets and 20 Emmis stations from 6 markets. This bolsters the concept of iHeartRadio substantially and now terrestrial radio as a more united front will benefit.
The growth of iHeartRadio comes at a time when Internet delivered services are becoming more and more integrated into the lives of consumers. Car dashboards can now link to a consumers smartphone and the ease of obtaining channels from iHeartRadio, Pandora (NYSE:P), Spotify, Slacker, MOG, and virtually any other service are now as simple as the old AM, FM, or even satellite radio.
The Multi-Prong Threat
iHeartRadio has become something bigger than terrestrial radio ever could be. A transplanted Bostonian can catch many of their favorite channels on the iHeartRadio platform even while driving their car in Georgia. This allows IHeartRadio to be a competitive force that threatens many other stations and services.
The threat to terrestrial radio stations is real. Smaller media companies can offer channels on their own platforms, but the reality is that iHeartRadio is a one-stop-shop. How can a small independent station owner get the word out about its service when competing against massive ownership groups that can advertise iHeartRadio all over the airwaves? Certainly a service like Tune-In Radio can help, but even Tune-In does not get the benefit of a terrestrial radio push that is received with membership in iHeartRadio.
iHeartRadio is a threat to Pandora. Pandora, the biggest among the Internet Radio space is seeing a lot of stiff competition. Spotify has created a Pandora-like service and smaller competitor Slacker has added sports, news, and talk content to its line-up. As if that was not daunting enough, Sirius XM is promising on-demand and personalization as well. Want more? Think about what iHeartRadio is doing. While iHeartRadio does not "learn" a consumers musical taste, it does offer a wide range of music programming as well as talk and news. For many consumers the simplicity and variety of iHeartRadio is a great solution.
What about Sirius XM? The juggernaut of content was extremely impressive when the service launched. Since then the proliferation of smart phones and smarter cars has given consumers choices they simply did not have even a few years ago. Satellite radio has a huge advantage in the method of delivery (satellite) and coverage (North America), but the system is one way. The satellites beam a signal and the receivers accept it. There is no way for the consumer to interact. This is the exact reason that Sirius XM's Satellite Radio 2.0 initiative is so important to the company. The biggest benefits of Satellite Radio 2.0 are actually delivered through Sirius XM Internet Radio. It was once thought that satellite radio would be the ultimate destination for top-tier radio talent. This is not necessarily the case.
The biggest factor I see here is that iHeartRadio is now far more than just Clear Channel radio stations aggregated on the web. It is fast becoming the place terrestrial radio big boys are congregating. That makes it much more dangerous to the likes of Pandora, Sirius XM, and even smaller independent terrestrial radio stations. To me it looks like iHeartRadio will be the place terrestrial radio needs to go or be left in the dust. The Clear Channel machine has found a new life on the Internet and we better not underestimate the cards it can bring to the table.
Disclosure: I am long SIRI.
Additional disclosure: I have no position in Pandora or Clear Channel