iHeartRadio Plus is being billed as an "enhancement." Can you clarify what that means?
Darren Davis: If you go back to when we first created iHeartRadio app five years ago, it was because we have all these great local radio stations that people love -- 269 million people a month listen to these stations -- we wanted people to be able to take those stations anywhere they go, and it's been very successful, with 90 million registered users. And now we're going to turbo charge that by making the live radio experience even better. In both tiers of service, the core of the offering is that we're reinventing live radio, and we're the only ones who can do it because of who we are. If you hear a great song on the radio today, you want it, maybe you take a screen shot or write it down in a notepad and you either buy the CD later, or you quickly fumble around on your phone and open a different app and try and buy the song before you forget the name of it. It's not a seamless experience, and it's kind of strange that it took somebody so long to fix that.
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The enhanced radio is the very core of what we're built here, so both Plus and All Access you'll be able to do that. All Access, that's the top tier, that's the one where you'll get to do absolutely anything. And to be clear, anything you can do in Spotify, you will also be able to do in iHeartRadio All Access. So if you want to use a search box and look through any of our 30 million songs, you can absolutely do that. But what's neat about ours is, we're going to be a little more helpful in helping people find the songs.
The vast majority of Americans don't subscribe to any music service. And the reason they don't is because they're just hard to use. So want we wanted to do was make on-demand functionality easy to use and easy to understand.
In iHeartRadio Plus you'll absolutely be able to replay songs and save songs to your playlists; those are the two core functionalities that we've built. Now, what other features that you get at the Plus level, we haven't announced yet whether there's offline listening, whether you get unlimited skips, or how many you get, that's going to be determined.
How will it drive revenue for labels and artists?
The music industry has been really excited about this. To a person, they've all said, "That's amazing, finally somebody got it right, finally somebody took all these disjointed functions and put them into one app where it's easy for people." They see this as the service that will be able to introduce the mass markets to on-demand functionality. Who wouldn't want to be able to access songs whenever they want? It's not that people don't want it, it's just that nobody invented it until now. It opens the flood gates to a whole new demographic of people that right now aren't paying for music.
There's been no mention of pricing. Is it safe to assume it will be $4.99 and $9.99?
No, I wouldn't assume. There will be two different prices, that's safe to assume. But we're going to decide when it gets a little bit closer; we've been researching it, we're still researching it. I would say, though, that price shouldn't be the main consideration here. We're really focused on this being a unique offering, and someone isn't going to choose our service over another service because ours is cheaper; that's not really the discussion we want to get into. We want to have the discussion focused on, "This is a way to make your radio experience better," and I think people are going to love it for that reason.
People have been asking me, "Why are you doing this now?" It's really two things. We're finally at a point in America, at least that we've seen from our research, where there's a general awareness of what it means to subscribe to an on-demand music service. The vast majority of Americans don't do it, but there's a general awareness of the ability to do it. And No. 2, and most importantly, we've finally built the technology to be able to do this in the right way, so that it goes to the core of what we're doing: to further the power of our broadcast radio program. On-demand music is the entire business for Spotify, for the other competitors in that space. It's not our core business: it's a feature. We think it complements things.
Do you think this is a necessary feature for the future of the radio business in general?
Yeah. You know, when we launched iHeartRadio five years ago we said, how can we make this better? We launched with live radio and custom radio, we quickly added podcasts, quickly added mood-based stations -- we've continued to add to the product. This was a natural next step, but we weren't going to do it until we could do it our way. We didn't just want another "me too" copycat on-demand service. We didn't want people to say, "Oh, they just copied Spotify and slapped it into their app." That isn't what we've done at all. We've found a way to root it in our core business, which is live radio.
Who do you see as your competition?
Anybody who is fighting for the attention of Americans. I started at an intern at this company 24 years ago this week, and back when I was a program director at a radio station that was an easy question to answer: the competition is the radio station across the street. Now it's expanded to the point where, as daunting as that sounds, the competition is everybody who is fighting for the eyes and ears and attention of consumers. It changes constantly, it's always shifting, which is why we've constantly had to be on top of it. We have testing going on 365 days a year to see what could make it a better experience or remove friction from the experience. But now the real work is to put the finishing touches on it so we can get it launched in January.
On-demand streaming services have to this point struggled to make a profit. With iHeart's $20 billion debt, is that a concern?
No. As I said, for those other companies, that is their entire business, which we have the wonderful luxury of a robust operating business with our 858 radio stations that do very well -- those stations are the very heart, no pun intended, of our business. What we've done here, again, we've rooted this in radio so we can make the live radio experience better, it allows people to engage even more with their favorite live radio stations -- anything we can do to make someone who is a fan of Z100, become even more of a fan of Z100, or spend more time or interact more with Z100, that's good for our business. That's why we built this the way we built it. It's not intended to be a standalone business, but of course the idea is that there will be subscription revenue, and we'll share that with the label partners, too. But we think we've got a good business model here.