How much would you pay to have the world's best record collection? What if you didn't actually own those albums, but could visit them online at any time? That's the concept behind San Francisco-based Rdio Inc., an all-you-can-stream music service—sort of like Netflix for your ears—founded by the folks who created Skype. But unlike higher-profile competitors like Pandora, Rhapsody and Spotify, it's chosen to enter a market no other has attempted: Canada. In the past year, Rdio has struck partnerships with Telus and Kobo to help promote its service to the Canadian masses. Susan Krashinsky caught up with CEO Drew Larner to discuss the idea of an iTunes alternative, Coldplay's chagrin and maybe the future of media as we know it.
Streaming music hasn't caught on as quickly as video services like Netflix. Is that because consumers are already conditioned to owning the music they purchase online? It is our biggest challenge, and I'm not just talking us but all the services: making people understand why it's worth paying 10 bucks a month. The tipping point has occurred for video. I think we will reach that tipping point with music, but it's still early. Add all the subscription services up, globally—Spotify, Rhapsody, Deezer, everybody —it's maybe five million subs total. Compare that to Netflix (25 million subs) and SiriusXM (25 million subs), that's where it's got to go.
Canada has a reputation for having a more complicated, expensive and time-consuming content licensing process. What made it worthwhile for Rdio? In the U.S., there's a statutory rate. In Canada, as in Europe and other territories, you have to make deals with the local licensing societies. We made our deals. We saw Canada as a really ripe market for what we're doing. There's a lot of competition down here [in the U.S.] multiple services launching with basically the same offering. Going into Canada, there wasn't that same level of competition, yet.
Coldplay recently refused to license its new album, Mylo Xyloto, to any music streaming services. Do you believe that what you pay the labels—the industry standard being roughly one-fifth of a cent per play—is fair? I do. I'm not one of those people who thinks content should be free or really inexpensive. It costs money to create this stuff. As Rdio and other services grow in subscribers and start driving more revenue, that'll be good for the labels and that'll be good for the artists. I think the resistance will abate.
Are there any artists or licensing deals you're particularly proud to have landed? I would love to say, "yes, we have this great piece of content that nobody else does," but there's really very little exclusivity. Netflix can trumpet that they just made a deal with so-and-so, or that they're doing original programming like HBO does, but music doesn't have that...it's not the way this business works.
If the content is all the same, what prevents users from jumping ship at the sight of a cheaper deal? Will contracts become part of the equation? It's about getting people engaged in the service in terms of using it every day. That's what's unique about what we do. A lot of the other services are predominantly search-and-play, meaning you have to know what you want to listen to when you log on. What we've created is something like Twitter meets music. You can see what other people are doing hour over hour, share playlists or find out that your friend Mark has added something to his collection. We've seen that people are very engaged in our service on a daily basis, for a lot of time. That's a good indicator of how you keep people subscribing.
Do you think subscription-based services like yours will ultimately mark the end of the record collection? Absolutely. That's the goal: from ownership to access.