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Clear Channel Radio vs. Pandora: Which is David, Which is Goliath?



iheartradio Mobile Radio Application for iPhone

iheartradio Mobile Radio Application for iPhone

Photo: Clear Channel Radio
Last week, Clear Channel Radio announced its iHeartRadio Music Festival promotion which is designed to bolster the company's Internet radio app and to focus users on an upcoming new release of the mobile app with new customization features.

It was also a declaration of war on Pandora, the personalized music service which allows a user to build a "radio station" that emulates a particular artists' sound. Pandora does this by accessing the years of research which resulted in the the Music Genome - "... an effort to 'capture the essence of music at the fundamental level' using almost 400 attributes to describe songs and a complex mathematical algorithm to organize them," says Wikipedia.

Pandora has a database of 80,000 artists and 900,000 music tracks. It also has 100 million registered users.

Clear Channel operates over 850 radio stations and reaches an audience of 110 million listeners every week. The company says, "Programming decisions are based on local research into the needs of communities..."

David or Goliath: Which is Which?

What we have here are two snorting steers face-to-face ready to battle for streaming dominance. A traditional radio company in the throes of redefining itself in a New Media age and an Internet-radio company born without the chains of Old Media though having struggled for the first 10 years of existence without making a profit. It's a little hard to know which one is David and which one is Goliath.

But, both know there are huge rewards to reap as the concept of what "radio" is continues to become diluted the more it departs from the traditional AM and FM devices. Radio is on your PC, your Nook Color eBook reader, your cell phone, your wireless Wi-Fi receiver, via satellite, satellite via streaming, - - anywhere you have a plugged-in platform.

As far as the big payoff, the pie each company still wants to cut and serve itself and investors are potential advertising revenues and subscription fees - which can be substantial.

The Radio Station Bubble

The value of radio stations reached a "bubble-like" crescendo in the late 1990s and early 2000s and then the bubble burst. By the time Clear Channel Radio changed into the hands of a private equity firm in November, 2008, the worth of the company's radio stations and assets had eroded and the monolith media company was facing extraordinary debt. The U.S. was also going into recession, revenues were dropping, and the company was forced to make company wide job cuts to stay afloat.

Although a little late to the party, Clear Channel did eventually see the wisdom of investing heavily into Internet radio. You might even argue that the nature of Internet radio continues to prop up the value of Clear Channel's traditional assets. In the old days, if a radio station wanted to increase listenership, it could do a few things: increase power, increase tower height (for FM), or move the transmitter to a more populated area. All of these options included approval by the Federal Communications Commission.

Today, a 12-year old kid in Jawdunk, Utah can start an Internet radio station from his bedroom and people from around the world can listen in. And the F.C.C. has nothing to do with it.

Imagine then, what a Godsend Internet Radio has been to a company like Clear Channel. By building out the company's websites, streaming, and on-demand audio options, it has effectively been able to increase listenership and avoid all the traditional bureaucratic red tape and regulations requiring tiresome F.C.C. approval or rejection.

More listeners = More money.
More listeners = Stronger assets.

On the other side of the equation is Pandora, a prodigal son of the Internet - born and nurtured by the rapid innovation of technology coupled with a natural shifting paradigm for both controlling and receiving the audio one listens to. The hardest part for Pandora so far was waiting for conventional listeners to catch up to the new opportunities afforded by Internet radio.

But, they're listening now.

Great Expectations

We are moving into a time when radio listeners have great expectations for their "radio". They want more choice than ever, they want high quality audio, and they want it when they want it.

Is Old Media still powerful enough to throw its weight around or will New Media tire out its opponent by being more nimble? Clear Channel Radio does have its share of baggage in the form of debt and a lingering public relations problem for being known as "Corporate Radio." On the other hand, Clear Channel also has a stable of great talent, resources, and content.

Pandora has the Music Genome Project, a clever answer to commercial radio's perennial criticism that its music libraries are too small and songs rotate and play too often. It is also a business built up through the Internet, not on the back of it.

We are in for a jousting match - and it's for the future of Internet radio.

(Full Disclosure: the author is also a full-time employee of Clear Channel Radio.)

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