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Radical.FM Launching New App But Can Their Donation-Based Business Model Work?

Radical-fm-logoRadical.FM, a free, ad-free streaming music service claiming 25 million tracks, launched their first Android app today. A new iOS app is also expected and a desktop version is said to be under development. Things have been pretty quiet with Radical.FM since launching their iOS app last year. But, given their business model, I guess I'm most surprised to see them in existence at all.

Radical.FM was founded in 2010 and has gone through various permutations, including an indie promo stage and experiments with a web-based HTML5 player.

Last summer they fully launched in the U.S. with a brand new iOS app and some momentum, at least in the press. But, since then, there's been little news.

Radical.FM: New Android App, iOS To Follow, Desktop On Way

In some cases, no news means a startup has entered a zombie phase but Radical.FM was apparently busy with such tasks as launching an Android app, updating their iOS app (still on the way) and building a desktop version.

That's a lot to take on. However the general approach seems similar to what they launched last year which suggests they're finding their lane, one which finds ways to make web radio, likely licensed as non-interactive, have a friendly, interactive feel.

The official announcement includes one of founder and CEO Tom McAlevey's characteristic quotes regarding the competition:

“Tremendous effort has gone into making these powerful new apps faster and more intuitive...But unlike Beats, which offers nothing Spotify hasn’t offered for years, or Amazon Prime Music, which is missing half the music iTunes has offered for a decade, Radical.FM offers a truly unique concept built on one of the world’s most comprehensive music libraries.”

I'll let listeners decide if Radical.FM hits the spot in a way that others do not.

How Can This Business Model Work?

What I'm curious about is the business model. I do have a last minute email in asking for some numbers to date that might give us a sense of how things are going but here are my concerns:

Radical.FM is a free service with free apps.

Radical.FM pays royalties which would suggest large outlays unless they're not getting much traffic.

They do not have ads or premium services and are monetizing entirely through a "DONATE" button which takes one to an uninspiring donation page.

While it is possible that listeners might support a "listener-supported" web radio service, that would require a lot of love for the service at a scale that seems unlikely.

Listeners are much more likely to support individual musicians but the web radio format and the inability to pick a donation target blocks that possibility.

The DONATE button is visible on the website but I've never seen it on the iOS app (brief use only) and none of the screenshots of the Android app show a DONATE button (update: there are audio messages every so often between songs encouraging you to donate.)

Tom McAlevey addresses this issue, sort of, in a brief statement in the official announcement:

"It’s a radical revenue model, and people wonder how we can pay music streaming’s high royalties on a free app without commercials...When I drove my dune-buggy across Africa, I was confronted by Arabic police, spear-wielding natives, and AK-47-toting militia. More often than not, they helped rather than hindered me, reminding me that if treated with respect, people tend to do the right thing. As users discover Radical’s outstanding service, many of them will be proud to support it."

Personally I don't see how this approach could actually work given the implementation to date. If I discover something that changes my mind, I'll be sure to share.

Details On Radical.FM's Business Model

Since I was unable to make the time to speak with CEO Tom McAlevey, I missed out on all this great info he shared with the LA Times which shows what Radical.FM is up against. It does counter some of my points above but doesn't change my mind on their prospects:

"For Radical.FM, the trick will be to average $3 to $4 per user each month. It helps that the service doesn't let people play music on demand, because that cuts the royalties they pay to artists and songwriters considerably. 'For an on-demand service to be profitable, in the long run a break-even would probably be around $8 to $9 a month' per user, McAlevey said."

"Public radio's 2.7 million donors in 2011 gave the equivalent of about $11 per month. From McAlevey's perspective, that's good news ... until you consider that these donors represented only 7% of public radio station listeners that year. The average donation per listener works out to less than $10 per year. Ouch."

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Hypebot Senior Contributor Clyde Smith (@fluxresearch) also blogs at DanceLand. Send news about music tech startups and services, DIY music biz and music marketing to: clyde(at)fluxresearch(dot)com.

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