Slacker Radio Prepares To Challenge Big-Name Web Radio
February 14, 2013

Web-Based Slacker Radio Rebrands To Challenge Pandora, Spotify

redOrbit Staff & Wire Reports - Your Universe Online

The streaming music service Slacker Radio unveiled a dramatically simplified brand on Tuesday, including a revamped mobile application, website and a $5-million ad campaign targeted at rivals Pandora and Spotify.

Further emphasizing the web-based radio´s growing confidence, San Diego-based startup has also doubled its staff to 90 over the past several months.

“It´s an opportunity for us to throw a punch when nobody´s looking,” said Slacker´s Chief Marketing Officer Craig Rechenmacher at a San Francisco press event. Until recently Rechenmacher worked for the famed video-game maker Electronic Arts before opening the Slacker's marketing office in Palo Alto, California in July.

Although Slacker is just one of many online music services, the company boasts 10 times the number of songs as rival Pandora as well as content from ESPN and ABC´s family of networks. However, Slacker and Pandora have different business models, with Slacker earning nearly 70 percent of its revenue on paid subscriptions, whereas Pandora gets close to 90 percent of its sales from ads.

Chief executive Jim Cady told Bloomberg that his company invested deeply in consumer research to learn what would be necessary to get customers to transition from rival services over to Slacker — and for what price.

The company offers a monthly $3.99 ℠Radio Plus´ ad-free service that includes unlimited song-skipping as well as a ℠Premium´ $9.99 package that lets users access on demand any song or album offered by Slacker. Cady says more than half a million of Slacker´s 4 million active users are now paying subscribers.

“It´s really an ad business that is helping a subscription business, but not dominating the subscription business,” he said. Slacker´s updated mobile app and website are aimed at making it easier for members to access new music and premium features.

The company, which has raised $50 million in venture capital since 2010, is spending $2 million upfront and $3.5 million throughout the remainder of the year on its re-branding campaign. One of the new ads includes a character complaining about Pandora´s smaller music library, while a display ad takes a dig at Spotify for posting aggravating updates to a user´s Facebook account. The ads will be displayed on YouTube, SBNation and Buzznet.

Capturing new market share from rivals will be challenging. Pandora and Spotify now have more than 65 million and 20 million unique monthly members, respectively, compared to Slacker´s 4 million. And there are a variety of other digital-music and radio services such as Rhapsody and TuneIn, all of which face a possible challenge from tech giant Apple, which has reportedly been in discussions with record labels about a web-radio offering.

When it comes to costs, the most significant difference between Slacker and Pandora is how they pay royalties. Slacker has direct relationships with all of the top music labels in addition to more than 1,000 independent labels. By contrast, Pandora has a licensing agreement with the trade group SoundExchange, which collects royalties and then distributes them to artists and publishers.

A Pandora spokesman declined to comment about any specific plans of its rivals, but reiterated the company´s goal of reaching a 20-percent operating margin, regardless of the royalty rate. Pandora´s third-quarter operating margin was 1.8 percent. The company said its market share for all US radio reached 8 percent last month, up from 5.6 percent a year earlier.

Slacker´s revenue has doubled each of the past three years and is expected to do so again this year, which Cady says will bring the company to profitability. Among the many ways Slacker hopes to meet that goal is through its ESPN offering, which includes live national and regional feeds from the sports network, along with clips of various popular shows. Paid subscribers can also personalize their stations to prioritize updates from their favorite teams.

IHS iSuppli analyst Marija Jaroslavskaja estimates revenues from digital music subscription services will hit $986.9 million in 2016, more than triple last year´s $319.2 million in sales. "It's a matter of getting users," he told Bloomberg, but adds that Slacker's business model “distinguishes them from the rest of the players in the U.S. market, but in terms of the consumer proposition, that's more difficult."

In celebration of its new brand, Slacker is letting users access all of its premium's features for free on February 14 and 15.