Internet Radio: New Business Models Will Define Growth

Online, April 4, 2011 (Newswire.com) - "Over the last 18 months a number of dominant pure-play regional Internet radio and music streaming companies have emerged with substantial user bases, notably Pandora in the USA and Spotify in the UK," says David Sidebottom, Senior Consultant, Digital Media at Futuresource Consulting. "These services offer many attractions, such as personalisation, playlists, social sharing and access from any device connected to the Internet, though competition is prevalent - in the USA, ad-free subscription satellite radio Sirius/XM is one such example."

The regular Futuresource consumer research study, 'Living with Digital', shows that the number of US and European Internet users listening to Internet radio or music streaming services on a regular basis has remained relatively unchanged since 2009, at 38% in the USA and 30% in Western Europe. However, the study also shows that total Internet radio listening hours in these territories has increased by 27% and around 20% respectively.

"Most pure-play Internet radio and music streaming business models are built around free-with-ads and some low-priced premium subscriptions," says Sidebottom. "Other streamed music services charge up to 15 dollars a month and allow unlimited on-demand streams, though subscriber bases are currently small.

"A key driver of usage is mobile, which now accounts for around half of listening hours for pure-play, using apps on leading smartphone platforms like iPhone and Android. Additionally, 70% of conventional radio listening in the USA takes place in vehicles - a market currently occupied by Sirius/XM. Therefore, increasing use of smartphone Apps, connected devices and the march of mobile broadband are all key to a sustainable future."

Although there are issues still to be resolved, Futuresource believes pure-play Internet radio and music streaming services have a successful future, with one or two major players dominating national markets. Pandora and Spotify are currently attracting investor valuations of around $1bn, indicating that there is market confidence, despite low margins and current low remuneration to record companies. Ultimately, to transition towards a long-term business proposition, pure-play Internet radio providers must overcome the large volume of users that are choosing to listen for free, channelling them towards premium, paid-for services.

The new report, The Outlook for Pure-play Internet Radio and Music Streaming Services, focuses on the USA, which is setting the scene for digital music media development, and also explores and evaluates competitive profiles of leading European players. For more information or to purchase this report please contact David Sidebottom on +44 (0)1582 500 127 or email [email protected].

Futuresource will be hosting the Futuresource Entertainment Summit in London again this year, taking place on 16 and 17 June. Topics will include the rise of digital content delivery, convergent devices vs. dedicated devices, and the business opportunities presented by new home entertainment technologies, platforms and delivery systems. For more information visit fes2011.com.

Notes
Futuresource Consulting is a specialist research and knowledge-based consulting company, providing organisations with insight into consumer electronics, digital imaging, entertainment media, broadcast, storage media, education technology and IT. With a heritage stretching back to the 1980s, the company delivers in-depth analysis and forecasts on a global scale, advising on strategic positioning, market trends, competitive forces and technological developments.
futuresource-consulting.com.

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