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iHeart Media to launch paid music-streaming service: sources

(By: Claire Atkinson 9.20.16 for

Terrestrial radio giant iHeartMedia will announce this week the launch of a major paid streaming service, The Post has learned.

The paid streaming service, the first of its kind for a traditional radio outfit, will include a $5-a-month ad-free radio station and a $10-a-month on-demand music service, according to people familiar with iHeartMedia’s plans.

iHeartMedia Chief Executive Bob Pittman is expected to make the announcement during the company’s music festival in Las Vegas this week, sources said.

While the service is close to being announced, iHeart must still secure music licenses before it begins.

The moves come as Pandora recently took the wraps off its $5 service and Amazon is expected to do the same for owners of its Echo device.

Pittman’s company, however, is planning to build different functionality for its $5-per-month service, including off-line play, sources said.

By jumping into the paid streaming game, iHeart will get a toehold in the lucrative subscription business and a direct credit card relationship with its listeners.

Digital music subscriptions rose by 50 percent last year, and paid streaming is set to grow from $2.2 billion in 2015 to $12.7 billion by 2020.

“It is so clear that digital is everything in radio and in streaming,” said a source familiar with iHeart’s plans.

The San Antonio, Texas-based company has already built a sizable digital business with its iHeartRadio app that lets consumers stream the company’s 850 radio stations — which is expected to continue when the paid service is introduced.

The radio giant, however, has been figuring out how to navigate a more mobile digital music world that requires it to pay for a music on less favorable terms than its current terrestrial business, which reeled in $6.24 billion in revenue in 2015.

The paid streaming service will require new licenses from the major labels, and iHeart is negotiating directly with those, sources said, rather than opting for statutory radio licenses.

“Radio has under invested in digital. I’m very impressed with iHeart services, and although they haven’t announced anything in response to Pandora, I’ve got to believe they are feeling the heat of competition, especially in the car, which has been the one area they have enjoyed exclusive positioning,” Larry Miller, a director at NYU’s Steinhardt School of Culture, told The Post.

The terrestrial radio business has been in turmoil in recent years as streaming services, including Pandora, Spotify and Apple, steal away listeners. IHeart has the additional issue of $21 billion in debt and stagnant revenue over the six months ended June 30.

iHeart shares have fallen 76 percent over the past year. They closed Monday at $1.22, down 6.2 percent.

At rival Cumulus Media, shares have dipped 63 percent in the past 12 months.

CBS Radio, meanwhile, is on track to be spun off from its parent company.

The $5 fee is a lot easier for customers to handle than $10 a month, and is seen as “a gateway to get people to trade up to the $10-per-month services,” said one source.

iHeart had no comment on its streaming plans.





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