Paid Streaming Poses Radio Threat

New research has emerged that shows a very favorable outlook should Apple enter the streaming music business.

This option, while not technically being radio broadcasting, could have a significant impact on radio especially if broadcasters can find no equally attractive alternative.

A market research company called NPD Group polled iTunes users – some 50 million strong in the United States – about both free and unlimited streaming of their iTunes libraries as a paid subscription possibility.

The research predicts between seven and eight million people reported strong interest in the paid version.

Free streaming would appeal to between 13-15 million iTunes subscribers.

You’ve heard me talk about the paid option with regard to podcasting, Internet, streaming and music so what I feel is even more significant is that NPD estimates between 7-8 million iTunes users in the U.S. could pay a monthly fee.

That fee?

A minimum of $10 per month.

That’s about two-thirds of the revenue now being brought in by pay-per-tune models or about $1 billion in year one alone. Subsequent years could show increases.

The sample, according to NPD, is based on 3,862 completed surveys from qualified respondents (age 13 and older). Each respondent reported using iTunes at least once in the past three months. Confidence level: 95%.

Two things.

One, it is curious that existing legal music downloading sites are popular but not booming and certainly not in as much demand as free filesharing.

Then there is the fact that companies like Rhapsody that are in a tailspin over decreased support from consumers wanting all you can eat subscription music plans appear to contradict the findings.

But Apple is Apple and one of its benefits may be the 100 million credit cards the iTunes store currently has on file. In other words, selling streaming music to the converted who used cool Apple devices may be what overcomes the apparent objection to paid streaming sites.

One thing is certain.

Apple didn’t buy Lala and shut it down for nothing. It was after Lala's cloud technology that will allow Apple to launch a cloud-based streaming service if record labels allow.

And they may not give their permission. You know the record industry – it would rather spend money to sue filesharers than have Apple pay them for increased sales. Apple may just launch cloud streaming anyway without additional permission citing the already existing contract between them and the labels.

What is worth watching is radio’s response to this.

Radio CEOs have trouble seeing past traditional radio. They don’t understand how young consumers are changing even traditional media users. So, while accessing your music library from iTunes over a cloud for free or a fee is not radio, it can continue to erode time spent listening to music stations.

I am a proponent of the paid model – not as a replacement for the free Internet we know and love – but as an additional option for the Internet that we would like to monetize. If NPD has discovered this active market for paid cloud-based streaming, you can bet Apple already knew it.

So, what are the options for music radio.

iPad Radio.

I am going to devote an entire piece on my concept of iPad Radio because it is not really radio and it is not really an iPad.

The delivery system for all entertainment in the coming years appears to be the iPad – that is, watch video, hear audio, read text, connect to each other and play. If I am right about this call – and I am personally betting on it as you’ll see – then radio’s answer to cloud-based streaming will likely have to reside on the iPad, iPod and iPhone.

What should become apparent, but I fear is not, is that listeners are consuming media differently than traditional media companies would want. That is, even network television is losing young audience because on-demand consumers want to access their video content on their portable devices.

Therefore, more radio formats featuring music and the traditional hot clock will not answer the bell.

Personalities and music experts (note that term) will be an advantage for radio companies if they haven’t already fired them all. But group owners will have to find new ways to put these personalities in the lives of consumers who have already changed the way they listen and watch.

One of my readers wrote a note expressing his frustration that radio companies dabbling in new media are still trying to make it all sound like radio – the radio they want to broadcast.

I hope I have whetted your appetite for a fuller discussion about iPad Radio in which I will outline logical and attractive options for broadcast companies (and entrepreneurs) looking to wrap social networking, streaming, podcasting, video and text in one “clubhouse” for existing and potential fans.

In the meantime, be careful not to discount the Apple cloud coming to iPods and iPads soon.

Now is the time to study the options and look for new opportunities – of which I predict there will be many.

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