Clear Channel didn't buy Thumbplay  for its cloud-based, on-demand subscription service. It bought the company for a not-yet-launched personalized Internet radio service that could debut within "a couple months," Bob Pittman, a Clear Channel investor and its chairman of media and entertainment platforms, told Billboard.biz.
"Our strategy is to be where our listeners are with the products and services they expect," Pittman said. And right now that means radio -- both broadcast and Internet.
He has done it before: Pittman was a founder of MTV and later the president and chief operating officer at America Online, Inc. He has plenty of experience with ad-supported, mass media products.
Clear Channel, he said, felt an urgency to enter the personalized Internet radio market and improve the company's digital products. So the company decided to buy Thumbplay rather than build its own service. "It speeds us to market tremendously," he said of the acquisition. Although only 3% of radio listening comes from digital, the company sees personalized Internet radio as a growth opportunity. "We want to be in front of it."
Thumbplay's existing on-demand product, however, attracted little of Clear Channel's interest. "It's very hard to acquire paying customers," Pittman said. "It's very, very expensive. Look at Sirius XM: great revenue, not much earnings. Not because they're not doing a great job, but because it's expensive."
Pandora, which filed for an IPO last month, has proven the popularity of personalized experience. But Pittman contends that type of product doesn't make for a good standalone business. "It reminds me of AOL instant messenger," he said of his days as at AOL. "Very powerful feature. People loved it. But it wasn't a freestanding business."
Besides, he added, people listen to radio because they like to connect with people, not algorithms. "You can't bond with a robot."
Like broadcast radio, Internet radio is a business that requires scale - it needs a big audience. Paid on-demand services don't have that kind of potential. Free, ad-supported services, on the other hand, have the proven ability to reach a large critical mass.
Isn't Pittman worried that personalized radio will harm Clear Channel's core product: broadcast radio? No, he says, because a Pandora-like service will complement the company's existing products just as personal music collections have always complemented radio. "Radio has always lived with people having their own music collection."
So the plan is to integrate Thumbplay's personalized Internet radio service into Clear Channel's iheartradio product and push it to Clear Channel's listenership using its vast corporate infrastructure. "We, unlike anyone else, have the promotional power to promote it. We've got 228 million monthly listeners. No one comes close."