Rdio Rising: Skype's Founders May Have a Hit Music Service

Rdio streaming music service
Rdio streaming music service

Last week Rdio, the online music-streaming service launched two years ago, announced it would be adding 1.75 million new tracks from independent bands courtesy of a deal it had struck with Merlin Network, a nonprofit organization that polices and negotiates for the rights of indie bands. As anyone who follows music knows, indie bands are no longer marginal players, and adding acts such as album-rock sensations Arcade Fire to its playlist gives Rdio a big boost. Among San Francisco Bay Area's trendsetters, Rdio is definitely rising fast since it launched in August, 2010. All in all, it looks like Rdio is going to make a serious play in online music.

I was a big fan of Lala.com, a music-streaming service that allowed users to buy the right to play music streams on any device for 10 cents per track. Apple (AAPL) bought Lala, and the service was shut down. I'm also a huge fan of Pandora and am a premium subscriber.

But lately I've been playing around a lot with Rdio, which is a somewhat different streaming-music service. Users pay about $10 per month and can access any of the hundreds of thousands of available songs at any time. The service is easy to use, and I really like it. I think it's going to be one of the next really big Internet business hits. And it emphasizes something I liked about Lala -- the ability to discover new music by following people who seem to have interesting taste or by following curated music collections.

Timing Looks Better This Time

Rdio was envisioned and launched by Janus Friis and Niklas Zennstrom, who had founded Skype, formerly an EBay (EBAY) subsidiary. The duo hit a home run with Skype but have logged notable failures in peer-to-peer music service KaZaa (which was ultimately shut down after music labels accused it of fostering piracy) and Joost, an ill-fated online TV and video content startup that has lagged behind Google's (GOOG) YouTube, Netflix (NFLX) and big broadcaster-owned Hulu.

Sponsored Links

However, a confluence of trends should give Rdio a nifty lift. Wireless broadband has gotten much faster, enabling easier and higher-quality music streaming to handsets or vehicles (cars are the Holy Grail for online music ventures since so much music gets consumed on the road). Equally important, wireless broadband is scheduled to get much faster with the rollout of a next-generation of wireless technology called LTE (for Long-Term Evolution).

A plethora of very smart smartphones like the Apple iPhone, various flavors of BlackBerry (RIMM) devices and numerous phones running Google's Android are now well esconced in the mainstream, so high-powered mobile apps like Rdio finally have an addressable audience that can support a true subscription model.

Internet Rock Stars

Naturally, Rdio is positioned to benefit from paths already cleared by Apple's iTunes store and by Pandora. Collectively, this dominating duo has breathed life into the formerly moribund online music market, and both are turning into nice profit centers. All of these are merely precursors to success, of course. Zennstrom and Friis will get loads of free press and good will because -- let's face it -- they're Internet rock stars. That will help online radio become commonplace.

The two founders also have hired an extremely strong development team that has created a nice interface that's very simple to navigate and highly social -- a key attribute because music sharing clearly leads to music consumption.

The online music field is, of course, quite crowded. Last.fm has a strong user base and remains a real player. GrooveShark also has a big following. Rdio is pretty tight-lipped and user numbers, which are likely pretty small because the service has, until now, struggled due to its limited catalog. But tune in for a rocket ride up the charts with this startup.

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