Slacker Radio is looking for ways to add revenue to their mobile streams and is teaming with mobile video advertising company YuMe to optimize monetization of its mobile division. Slacker has between 25 and 30 million subscribers, most of whom come to the service from pre-loaded devices on most of the major U.S. carriers. As such, adding a stout mobile advertising model could mark Slacker as the next major force in the competitive music streaming market.
Slacker is in growth mode. With those 30 million members come almost 400,000 paid premium subscriptions. The company is able to convert about 10% of new mobile free subscribers to paid members, a robust number. Yet, it is important for Slacker to optimize its streaming product as 75% to 85% of listening on the service comes from the free streaming product and not the paid on-demand option. That is where YuMe comes in. With Spotify on the rise and Pandora the dominant service in the sector, Slacker has to make as many moves as it can to gain an edge.
Slacker is an interesting player in online music streaming sector because it competes on a variety of business fronts with the other companies in the market. Its biggest advantage is that, through its partnership with the carriers, it offers carrier billing. This definitely helps maintain that 10% premium conversion rate. It has on-demand offerings with its premium membership, which pits it against Spotify, Mog and GrooveShark.
It also does free mobile streaming, which makes it a competitor with Rhapsody, Pandora and Rdio. Music on the Web has been an ultra-competitive market since Napster (which still exists through Best Buy) broke the traditional music industry model in the early 2000s. Yet, Slacker thinks that it can take what made the traditional model so successful and apply it to the new era of music online.
Traditional Model Applied To Digital Era
Slacker's radio channels are curated by a 80 or so "experts" that the company thinks of as traditional disc jockeys. The idea is to have a mix of people's favorite music coupled with new or obscure artists for users to discover. Once a user hears something they might want to buy, the Slacker premium model is there to fulfill that purchase. In this way it is no different from the music industry of the 1950s to 1990s when people listened to the radio and then ran to the record store to buy the newest album.
Yet, free music on the radio has never really existed without ads. Even Pandora, which started sans-advertising, now has ads (or a premium model without) and it has carried the company to a moderately successful IPO. YuMe can help Slacker with this and the two companies are uniquely suited for each other. Both are mobile first and both have services optimized for iOS, Android and Blackberry (Slacker also does Windows Phone 7 and Symbian).
Slacker is only going to get bigger. It has made a deal to be the primary music streaming service for AOL, a move that the company thinks will double its subscription base. The conversion rate to premium memberships will undoubtedly be lower but the more ears Slacker can get, the innovation it can bring to the space and content licenses it can acquire. Will it be enough to separate it from the likes of Mog, Rdio and Rhapsody (and now Spotify) and approach Pandora levels? That remains to be seen.