Rdio Takes Aim at Spotify With “Freemium” Overhaul

Marc Hogan

By Marc Hogan

Lead News Writer
on 09.04.14 in News

Last fall, Rdio made its radio feature, Stations, available free to non-subscribers on its mobile apps in the United States, Canada and Australia. In January, coinciding with the launch of streaming rival Beats Music, the company started offering a full, ad-supported service on the Web, writing, “If you love something, set it free.” Today, Rdio has launched its so-called freemium model in earnest, rolling out the free version in 20 countries and updating its much-lauded design to emphasize its Pandora-like radio product.

The result is a service that’s set up to combine two experiences users might currently be getting different places: passive internet radio listening and, for $9.99 a month, Spotify-like on-demand streams. “Listening to these services is an investment in your time,” Rdio’s head of product, Chris Becherer, told Quartz. “As you listen, the service starts to learn more about you and make better recommendations. But if you are bifurcating that investment over multiple services — half with Pandora, half with Spotify — you are really cheating yourself out of getting the most out of any particular service.”

The new design makes Rdio’s radio services more prominent, betting that some free users will turn their investment into a paid, on-demand subscription. The overhauled home page offers a Facebook- or Twitter-like news feed for streaming music. The “stories” here can include recommended radio stations based on listeners’ tastes, releases that are currently trending and various social components, such as comments from friends.

Rdio, created in 2010 by two Skype founders, isn’t the first on-demand streaming service provider to eye internet radio as a way to grow its paid subscriber base. Spotify started offering a free radio service for mobile users in June 2012 and added the ability to listen specific artists and playlists last December. As Billboard reports, Rhapsody’s unRadio service opened its doors in July, though that costs $4.99 a month and is ad-free. Apple kicked off its free iTunes Radio last fall, months before buying the subscription-based service. Somewhat differently, Google Play Music offers free storage of up to 20,000 songs, but its “All Access” subscription costs $9.99 a month.

Rdio has yet to disclose its subscriber numbers, but it certainly has some distance to go to catch up with its competitors. Pandora has 3.5 million paying subscribers (out of 77 million monthly users). Spotify has 10 million and Rhapsody has 2 million. Still, Rdio has money behind it: The current refresh follows a deal announced last September with Cumulus Media, giving the radio network partial ownership of the company in exchange for content and promotion that Cumulus values at $75 million.

“What we’ve learned collectively over the last few years,” Rdio CEO Anthony Bay told The New York Times, “is that the most successful models are freemium models.” With its new push, his company is betting it will be one of the successes.