December 2, 2016:Napster will power iHeartRadio’s on-demand music service

Earlier this year, iHeartMedia announced plans to add two new subscription tiers to its iHeartRadio streaming service. Yesterday, they went live in beta.

Like rival Pandora, the new subscription tiers include a $4.99-a-month option for extra features for the core personal-radio service, and a $9.99-a-month option that offers full on-demand streaming. The full commercial launch for both tiers will be in January.

The twist is clear from the latter tier’s title: ‘iHeartRadio All Access powered by Napster’. iHeartMedia has chosen to link up with an existing on-demand service rather than license its own.

“We’re honoured that iHeartMedia selected the Napster platform and brand to power a great music experience for consumers, and we’re excited to play a role in what will be a successful launch,” said Napster CEO Mike Davis in a statement.

The partnership should be a cost-effective way for iHeartRadio to expand into on-demand, and an interesting contrast to Pandora’s strategy of negotiating the necessary licences direct with labels and publishers. That may also mean that iHeartRadio is more dependent on Napster’s product roadmap for future improvements to the on-demand tier.

How the already-slim margins of a streaming subscription business work in such a partnership also remains to be seen. The iHeartRadio announcement comes less than a month after financials published by Napster co-owner RealNetworks revealed that the streaming service recorded a $1.6m profit in Q3 this year.

Meanwhile, iHeartMedia’s strategy is to capitalise on its big funnel of listeners – not just the 90m+ registered users for iHeartRadio, but listeners to the company’s network of traditional radio stations – to get them to try its $4.99 tier, and then perhaps the full $9.99 tier.

The theory that a decent proportion of free ‘radio’ listeners will upgrade to a paid subscription is tempting, but as with Pandora, the task now is to prove that theory right.

Stuart Dredge
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