Sirius XM and Pandora Had Better Watch Out

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Terrestrial radio may be the Justin Bieber of the industry -- widely popular but summarily dismissed by those with musical integrity and taste -- but Clear Channel (OTC: CCMO) may make a Bieber believer out of you yet.

The radio giant announced this morning that the iHeartRadio customized stations that it rolled out two months ago will continue to be commercial-free through the end of March. The streaming app feature was only supposed to remain free of advertising through the end of this year.

It's a surprising move when you consider the history of iHeartRadio. Clear Channel launched the app for Apple (NAS: AAPL) iOS, Google (NAS: GOOG) Android, and even Research In Motion (NAS: RIMM) BlackBerry devices as a way for smartphone users to have access to live streams of its hundreds of terrestrial radio stations. Thin music rotations and thick commercial blocks didn't seem all that appealing, but it was a neat way for someone to check out a cooler FM station than what was available locally.

September's debut of customized streaming was supposed to be a play for Pandora Media's (NYS: P) audience. Now that iHeartRadio joins Pandora as one of the six default icons in Toyota's (NYS: TM) Entune infotainment platform, it's also gunning for premium radio top dog Sirius XM Radio (NAS: SIRI) .

Let's not dismiss Clear Channel's chances. Stretching the commercial-free window is a bolder move than you think. It would seem to devalue its flagship terrestrial streaming feature, encouraging music-hungry -- and comedy-hungry -- smartphone owners and drivers to go the customized route sans ads.

Clearly there will be money to be made when Clear Channel decides to flip the switch. Ad revenue at Pandora soared 102% in its latest quarter, and Clear Channel already has the localized marketing teams in place to serve streaming ads with pinpoint accuracy. Giving music and comedy fans another three months of free uninterrupted content will make it that much more relevant. Clear Channel's decision to forgo near-term profits for long-term results is a brilliant move, and everyone else should be taking notes.

If you want to see how the premium and streaming radio wars play out, consider trackingSirius XM RadioandPandora Mediathrough My Watchlist.

At the time this article was published The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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