Will iHeart’s Audience Pay? You bet, maybe!

 

As iHeartRadio rolls out the beta of its PLUS paid streaming service, it’s fair to ask if anyone will pay for it come the live launch in January. PLUS is targeted at the $4.99 monthly price point and offers features such as saving, song replay, search and unlimited skips. MusicWatch’s soon to be released “Light Makes Right” report will examine consumer reactions, purchase interest, and pricing sensitivity for lighter versions of streaming services such as Pandora Plus and iHeartRadio Plus. Positioned between free and ad supported offerings and full on-demand services at ~$9.99—“light” is the hot new category in streaming at the moment.

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The basis of the “Light Makes Right” report is a research project that surveyed 7800 internet users 13 and older. The core of the study was a concept and pricing test around a “Plus” like product. Here’s what we found:

ONE in FOUR free music streamers listened to iHeartRadio in the past month—or nearly 40M. That’s almost the audience level that Spotify Free obtains, and better than Google Play Music, Vevo or SoundCloud (among streamers listening at least one hour per week). iHeartMedia reports 90M registered users for the app, meaning it is seeing strong monthly conversion among potential users.

OVER 40 PERCENT of iHeartRadio listeners expressed interest* in paying for a plus-like service. That’s pretty good, and higher than the benchmark for the average streamer. Remember though, that consumers typically overstate their willingness to pay for services. This is an indicator of interest, and does not suggest that 40% of the 90M registered users will actually subscribe. Some of that interested group now pay for Apple Music or Spotify Premium, and there are hurdles to switching. Some will share their account log-ins with friends or family members. Caveats aside, the response is encouraging.

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It’s NOT just payers. Three out of four iHeartRadio listeners don’t pay for a music subscription.  Among those virgins, one-third of iHeartRadio listeners expressed interest in the “Plus” concept. These users have to be sold on the value of a paid subscription; free trials are proven to help. On the positive side they haven’t built a bank of favorites, playlists or stations, which would make switching painful.

*interest is based on respondents who said definitely/probably would pay (top two box)

iHeart can quickly get to FOUR MILLION PLUS subscriptions. How? The math is simple. There are 40M monthly users. Purchase interest might be half of the reported 40%. There are typically two users per account.

40M MONTHLY LISTENERS X 20% PURCHASE INTEREST /2 USERS PER ACCOUNT = 4M SUBSCRIBERS

 Four million (4M) may not sound like a lot but considering the entire US paid on-demand universe is around 20M, that’s a solid chunk of growth in the paid sector (# does not include Amazon Prime Music or Pandora One). And the number rises as iHeart taps into more registered users who aren’t listening on a regular basis.

 REPLAY enhances the music discovery process. What are the features that motivate iHeart listeners who don’t currently pay for a streaming service? Replay was at the top, with 51% citing it as one of the “musts” in order to get them to pay. iHeart Plus offers listeners the ability to replay, then return to the station. We know the more that listeners replay the more they get engaged with the artist, song, and the service.

As the number of paid streaming services grows, iHeart appears to have hit on a formula that will appeal to its current listeners—most importantly the ones who aren’t used to paying for a music subscription.

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