Music subscription service Rdio is expanding its “freemium” business model by launching an ad-supported web service in Australia. The service previously offered a limited amount of free listening without advertisements.
“We want to make it more accessible and less expensive for people to use Rdio for discovery,” says Nada Antoun, Global Director of Communications. The company does not currently plan to launch ad-supported services in additional counties.
Currently users of the free Rdio service can listen to a limited in the number of streams in a given month and in a six-month period. Listening is cut off once the limit is reached. Additional listening requires the purchase of a subscription.
The ad-supported service being launched in Australia gives listeners six months of unlimited listening. After six months, listeners are given a 10-hour monthly allotment of ad-supported music. Listeners will still be able to enjoy a 14-day trial of ad-free listening that includes use of the mobile service.
Advertisements will be served via a partnership with Australian terrestrial radio company DMG. In-house advertisements for the Rdio service will be served for the first four to six weeks. Announced in October, the partnership allows listeners to dive deeper into music heard on DMG’s eight FM and one AM radio stations.
Now available in 31 countries, Rdio does not release numbers on subscribers or users. Australia, which has had Rdio since January, seems to be a relatively good market. Rdio’s app has been a top 5 at Australia’s iOS App Store and was ranked around #40 earlier in the year.
Rdio’s shift to ad-supported listening makes perfect sense given the difficulty of obtaining subscribers at current price points. Subscription music is a numbers game. The services with the most subscribers have the best chance of long-term survival. The best, easiest way to quickly get subscribers is to offer a free, ad-supported service. Then the laws of marketing take over: you’ll get more sales if you get more potential customers into your store.
In a sense, Rdio is simply following the market leader. Spotify has over six million subscribers and attracts over 24 million users in a given month. Like Rdio, Spotify charges a fee — $10 a month in the U.S. — to use the service on mobile devices and offers an ad-supported web service to help lure listeners (unlimited listening in the U.S. but restricted listening in Europe). The two-tier strategy hasn’t allowed Spotify to reach profitability, but it has given the company the largest market share.
Deezer also has a free, ad-supported service. CEO Axel Dauchez called the December launch of the free service “one of the most important investments in the company” because of its ability to expand Deezer’s reach.
Other music subscription services do not utilize advertisements. Muve Music was created by Leap Wireless to be bundled with its prepaid mobile plans. Rhapsody encourages people to subscribe without first luring them with free music. WiMP, available in five European countries, also lacks an ad-supported service.