March 25, 2023

Online Music Service Rdio in Deal With Cumulus

As radio broadcasters go digital and online music services try to stand out in a crowded market, both are finding ways to scratch each other’s backs.

On Monday, Cumulus Media, which operates 525 radio stations, will announce a deal with Rdio, a subscription music service from the founders of Skype, that will give Cumulus an online outlet and help Rdio compete against more established players like Spotify.

In exchange for what it calls a significant equity stake in Rdio’s parent company, Pulser Media, Cumulus will give Rdio broad access to its programming and promote Rdio on its stations.

“This is our digital play,” Lewis W. Dickey Jr., the chief executive of Cumulus, said in a joint interview on Friday with Rdio’s chief, Drew Larner.

Crucially for Rdio, which was introduced in 2010 and has struggled to gain a foothold in the market, Cumulus will also sell advertising for a free version of the service in the United States. Rdio, which costs $5 to $10 a month and is available in 31 markets around the world, lets its subscribers listen to millions of songs, build playlists and interact with other users.

“The biggest challenge we face is really awareness,” Mr. Larner said. “We live in this bubble in which everybody is talking about this stuff constantly, but to the wider world, streaming is still relatively nascent.”

The deal between Rdio and Cumulus is a trade, with no cash changing hands. Further terms were not disclosed, but the value of Cumulus’s content and services is estimated at more than $100 million.

Cumulus operates stations like Nash FM (WNSH, 94.7 FM), the only country outlet in New York, and the rock station KFOG-FM in San Francisco. Last month, it announced a $260 million deal to buy Dial Global, which syndicates programming like NBC News and sports from the National Football League and the N.C.A.A. to thousands of stations; that deal is still subject to regulatory approval.

Cumulus will draw on its stations and syndicated shows to create playlists and other programs for Rdio users, stripping out localized details like traffic and weather.

That kind of content could give Rdio an edge against other services. But even more important is its ability to offer a free, ad-supported version to compete directly against Spotify. Cumulus will use its 1,500 sales agents around the country to sell commercials for Rdio’s free version, which is expected by the end of the year, and the companies will share ad revenue.

Rdio has never revealed its subscriber numbers, but they are believed to be far lower than those of Spotify, which has more than 24 million users, 6 million of whom pay. Yet recent studies of Rdio’s popularity in Google searches suggest it is faring well against other competitors like Rhapsody, Slacker and Mog.

Cumulus already supplies streams of its stations to Clear Channel Communications’ iHeartRadio app, a deal that should continue through at least next year. But Mr. Dickey called that arrangement “a marriage of convenience” and said that the Rdio deal allowed it to do much more.

“We’re trying to be much more active in the audio ecosystem than just passively handing our streams over,” Mr. Dickey said. “That has severe limitations in terms of our ability to monetize.”

By moving to the so-called freemium model, Rdio is hoping to attract new customers who can be enticed into paying for premium service. That model has allowed Spotify to grow more quickly than its competitors, but it is still a subject of debate in the industry over how many people will ultimately pay for service when so much digital music is available free.

“It’s not that people don’t like streaming music,” said Mark Mulligan, a music technology analyst. “It’s that people are unwilling or unable to pay $9.99 for the privilege.”

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Media Decoder Blog: Judge Backs U.S. Settlement on E-Book Pricing

Judge Denise Cote in 2005.Fred R. Conrad/The New York TimesJudge Denise Cote, whose opinion expressed support for the government’s position.

8:35 p.m. | Updated In a decision that could start an e-book price war in the publishing industry, a federal judge on Thursday approved a settlement between the Justice Department and three major publishers in a civil antitrust case that accused the companies of collusion in the pricing of digital books.

The long-expected approval soundly rejected criticisms of the deal that had accumulated throughout the summer from hundreds of parties, including Barnes Noble, the Authors Guild and the American Booksellers Association.

And the ruling promised to empower Amazon, the e-retailing giant, to drop the price of many e-books back to $9.99 or even lower in the coming months, a move that could pressure competing retailers to do the same.

Publishers and authors direly predicted that in the long run, the settlement could allow the e-book marketplace to return to its state several years ago, when Amazon had close to 90 percent of the market and other retailers struggled to get a foothold.

“I think that everybody competing with Amazon in the e-book market had better fasten their seat belts,” Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a consultant to publishers, said in an interview. “I would expect Amazon to be leading the charge to cut prices on the most high-profile e-books as soon as the decision allows them to do so. As soon as that starts to happen, all the books that are competing with them will have to reconsider their prices.”

The Justice Department cited a lack of price competition when it filed the suit in April against five major publishers and Apple, accusing them of conspiring to raise the cost of e-books and causing consumers to pay tens of millions more than they otherwise would have.

Gina Talamona, a spokeswoman for the Justice Department, praised the ruling on Thursday, saying that “consumers will start to benefit from the restored competition in this important industry.”

Denise L. Cote, the federal district judge in Manhattan overseeing the case, expressed support for the government’s position in her opinion, particularly in regard to a “cooling off” period during which the publishers cannot restrict the ability of retailers to set their own prices for e-books. This period, she wrote, would allow the industry “to return to a competitive state free from the impact of defendants’ collusive behavior.”

The government’s case stemmed from a policy that the publishers adopted in 2010 that effectively coordinated the price of many newly released e-books to $12.99 to $14.99, a change encouraged by Steven P. Jobs, then Apple’s chief executive. After striking a deal with Apple, the publishers then renegotiated contracts with Amazon and other retailers, allowing the publishers, and not the retailers, to set prices on e-books.

Three publishers — the Hachette Book Group, Simon Schuster and HarperCollins — denied wrongdoing but agreed in April to settle with the government, while the Penguin Group USA, Macmillan and Apple declined to settle. They face a trial next summer.

In her 45-page opinion issued Thursday, Judge Cote said the Justice Department had claimed a “straightforward, horizontal price-fixing conspiracy.” She rejected arguments against the settlement, saying they were “insufficient” to deny its approval, and dismissed requests to hold an evidentiary hearing as an unnecessary delay.

The settlement calls for the three publishers to end their contracts with Apple within one week. The publishers must also terminate contracts with e-book retailers that contain restrictions on the retailer’s ability to set the price of an e-book or contain a so-called “most-favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price.

For the next two years, the settling publishers may not agree to contracts with e-book retailers that restrict the retailer’s “discretion over e-book pricing,” the court said. For five years, the publishers are not allowed to make contracts with retailers that include a most-favored nation clause. “The time limits on these provisions suggest that they will not unduly dictate the ultimate contours of competition within the e-books industry as it develops over time,” Judge Cote wrote.

Penguin and Macmillan are not subject to the settlement and can continue to set the prices for their e-books while the legal case against them proceeds. The sixth major publishing company, Random House, was not named in the Justice Department’s lawsuit.

Amazon declined to comment on Thursday. But when the settlement was announced in April, Amazon called it “a big win for Kindle owners,” and said it looked forward to eventually lowering its prices on e-books.

Simon Schuster, the Hachette Book Group, HarperCollins and Barnes Noble declined to comment.

Paul Aiken, the executive director of the Authors Guild, which vigorously opposed the settlement, said in an interview that the biggest losers would be traditional independent bookstores. If the cost of a newly released e-book drops further, the bookstores will have more trouble selling hardcover books at their current prices, he said.

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DealBook: America Movil Spends $1.59 Billion to Lift Stake in KPN

A branch of KPN, the Dutch wireless phone and Internet service provider, in The Hague.Jock Fistick/Bloomberg NewsA branch of KPN, the Dutch wireless phone and Internet service provider, in The Hague.

América Móvil, the Mexican mobile operator owned by the billionaire Carlos Slim Helú, extended its foothold in Europe after paying 1.27 billion euros, or $1.59 billion, to increase its stake in the Dutch telecommunications company KPN to 20.9 percent.

The move, announced late on Thursday, comes as KPN is losing the battle to keep América Móvil from increasing its ownership in the European company.

The Dutch telecom company has been trying to sell its German and Belgian operations in an effort to thwart Mr. Slim’s advances.

On Thursday, KPN said it had broken off talks to sell its German business. The potential suitor had been the Spanish telecom giants Telefónica, according to a person with direct knowledge of the matter. KPN also said it would start the sale process for its Belgian unit in July.

The tactics follow an announcement in May from América Móvil that it had offered KPN shareholders 8 euros a share to increase its stake in KPN to 28 percent. Since then, the Mexican mobile operator has progressively bought shares in the company at prices well below its offer price

América Móvil’s most recent purchase of KPN shares averaged around 7.6 euros a share. In early afternoon trading in America, shares in KPN had fallen 4.2 percent, to 7.16 euros.

KPN said that América Móvil’s offer continued to undervalue the company.

América Movil’s bid for KPN is part of company’s strategy to expand into European markets.

Last week, the Mexican operator, which has more than 240 million customers across the Americas, said it had reached an agreement to acquire a 21 percent stake in Telekom Austria, increasing its total stake to 23 percent in that country’s market leader, in a transaction that will conclude by the end of the year.

Mr. Slim also owns a stake of about 8 percent in The New York Times Company.

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Bits Blog: Why Nobody Will Play Nice With Windows Phone 7

Nokia's Lumia 800 runs Windows Phone 7.Paul Hackett/ReutersNokia’s Lumia 800 runs Windows Phone 7.

Microsoft’s Windows Phone 7 software has a unique, modern design that many say is superior to Android’s more rugged, computery look. But a former Microsoft employee says looks alone are not enough to make Windows Phone succeed.

Microsoft introduced Windows Phone 7 in November 2010, and has since formed a major partnership with Nokia in hopes of gaining a foothold in a mobile market that is increasingly dominated by Apple and Google. Despite the company’s best efforts, sales of Windows Phone 7 handsets are still tiny.

Charlie Kindel, an entrepreneur who recently left Microsoft’s Windows Phone team to start his own company, wrote a blog post Monday on why the software still hasn’t taken off. He breaks down what each party in the cellphone business wants — most notably, the carrier and the hardware maker.

The carrier wants to control the customer experience, and the manufacturer wants to own that and the hardware design as well. This is precisely why Windows Phone 7 faces hurdles, Mr. Kindel says.

To explain, Mr. Kindel analyzes Apple’s approach with the iPhone and Google’s approach with Android. With the iPhone, Apple controls the design of the software and additional transactions through the App Store, and it controls its own destiny with hardware because it makes the iPhone itself.

With Android, Google licenses the software to any manufacturer that wishes to use it, and allows the carriers to distribute Android software updates whenever they want. Many hardware makers and carriers are willing to play ball with Android, because it “bows down” to them.

With Windows Phone 7, Microsoft tells the carriers when they must issue software updates, and tells manufacturers how they must design the phones in order to run the operating system. This ensures a consistent experience among different devices.

And that is why Windows Phone faces so much difficulty gaining traction in the market, Mr. Kindel says. It creates friction among Microsoft, the carriers and the manufacturers.

“WP says ‘here’s the hardware spec you shalt use’ (to the device manufacturers). And it says ‘Here’s how it will be updated’ (to the carriers). Thus both of those sides of the market are reluctant,” Mr. Kindel writes.

That could explain why carriers do not immediately support every new Windows handset that hits the market. The brand-new Windows phone made by Nokia, the Lumia 710, for example, will initially be available on T-Mobile, while the bigger carriers ATT and Verizon have not announced plans to offer it.

Mr. Kindel’s post has stirred debate among technology pundits, like Robert Scoble, who criticized him for neglecting to highlight the importance of apps.

“I had dozens of people here for several events this weekend. Phones came up in nearly every conversation. Not a single person brought up Windows Phone 7,” Mr. Scoble wrote. “While watching TV I was reminded again of why: it’s all about apps.”

Mr. Scoble said that all people talk about today is what they can do with their phones using apps, and that businesses are constantly chattering about the apps they create to connect with customers. Therefore, apps act as a “lever” for the operating system maker to overpower the carrier, he argued.

Just where is Microsoft’s opportunity? Mark Winther, a telecommunications analyst at the research firm IDC, says Microsoft should focus on business customers.

“Social, cloud and mobile: It’s a marriage made in heaven that a lot of enterprises want,” Mr. Winther said in an interview. “So what is a huge enterprise environment today? It’s Microsoft, which is all over communications and collaboration tool sets.”

Mr. Winther explained that if Windows Phone 7 gracefully integrated with desktops and business software like Exchange and SharePoint, then it would gain a major advantage over iOS, the Apple mobile operating system.

He acknowledged that business customers are a smaller market than consumers, but said this niche still presents an opening for Windows Phone 7 to compete.

“Clearly the consumer individual is the gigantic market, and enterprise is small compared to that, but I think this is an opportunity,” Mr. Winther said.

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