Thursday, August 22, 2013

Can a Donation Model Work for Streaming Music

Adam Popescu/Mashable

Radical.FM launched an iOS app on Tuesday with a library filled with 25 million songs. The service operates on a pay-as-you-want model — a bit of a head-scratcher, considering major rivals are still losing money. It claims to be ad-free, and it mostly is — but between every few songs, a short infomercial asking for listeners' donations.

Radical still has to pay to license music via an agreement similar to Pandora's. The company does not have any licensing deals with major companies, but rather with independents.
Why Radical.FM?

After logging in with Facebook or creating an account, users select preferred genres, which you can add to playlists. Stations are created based on those selections and fill up with pre-configured cuts chosen by music professionals, not algorithms. By selecting multiple sub-genres, you can program whether you want more techno or house music. You can also search and request music if you can't find what you want, which lets you listen to 30-second snippets. (Listen to the full-length editions by adding 30 or more tracks).

You can also purchase music through iTunes — one possible revenue stream for Radical — but it's not heavily promoted in-app.

Minimal Ads
Approximately every six songs, a 10-second infomercial asks for users' support to keep Radical "free as long as possible." Clicking the link redirects you to a donation page, where you can pay with debit or credit card. This pay-as-you go donation model bears similarities to NPR's strategy for money for its programming. But NPR functions as a non-profit and receives some government subsidies.

The music service SoundCloud is also largely donation-driven, with many artists opting to give away their music for free to draw in listeners.

Founder and CEO Thomas McAlevey, who previously built and sold radio stations as an American expatriate in Sweden, told Mashable he is banking on people falling in love with a better music experience. McAlevey spent the early 2000s running one of the web's first radio sites, Tomsradio, which had 40,000 listeners at its height. Now, he thinks his service can go toe-to-toe with the competition.

Future plans include live artist performances and eventually letting users broadcast their own radio stations, which McAlevey calls "the Pandora killer." Still, McAlevey said he is well-aware that Radical, privately funded by a group of Americans and Scandinavians, only has so long to make money.

"If people don't donate after a year, my investors will be pounding on my door," he said.

An Uphill BattleTegan Monique Gaan, the founder of the artist event booking service Gigit, said Radical's success depends on convincing users of its "value add and differentiation from other streaming sites."

Robin Richards, the chairman of Career Arc Group, and former founding president and chief operating officer of, is equally reserved. He doesn't believe in donations as a business model.

"There's no example of [donations as a business model] working in a for-profit I've ever heard of in history," said Richards. "They're not going to be able to make big money through that. They might be able to keep the lights on for a while, but strategies aren't quite as simple as 'please help me.'"

Radical.FM has more long-term plans under wraps, but McAlevey told Mashable that he is talking to some "major players in the music industry."

Would you pay for this service? Chime in below in the comments.

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