No one expects the disrupted to be the disruptor, but that appears to be what terrestrial radio giant CC Media Holdings (NASDAQOTH: CCMO) is doing today.
The parent company behind Clear Channel -- the AM and FM behemoth with 850 radio stations attracting 243 million monthly listeners across the country -- is beefing up its iHeartRadio app. The new "Add-Ins" feature lets listeners of iHeartRadio's customized stations to have brief local news, weather, and traffic updates inserted into their streams.
In other words, you now have as many as three fewer reasons to listen to Clear Channel's traditional radio stations if you have smartphone in a newer model car that allows Bluetooth streaming.
It's a bold move for Clear Channel to get ahead of the trend, even if it means sacrificing its own business.
Burning your own boats is naturally a risky strategy, but it has paid off handsomely before. Netflix (NFLX 5.54%) was the country's leading DVD rental service, but that didn't stop the video service from taking the lead in the video-streaming revolution. It's a strategy that played out nicely for Netflix. It now has more than 33 million streaming subscribers worldwide, and that's roughly twice as many DVD-based accounts it had at its peak.
Clear Channel's move will raise the stakes for Pandora (P) and Spotify, and it may even challenge Sirius XM Radio (SIRI 1.15%) for dashboard attention.
After all, Sirius XM and its lesser terrestrial radio peers have always had the advantage of live content. Sirius XM benefits from its ability to pay up for premium programming, setting itself apart from the music-centric Pandora and Spotify. Traditional radio stations offer local perspectives that even Sirius XM can't match outside of its traffic and weather updates for major metropolitan markets.
The beauty of Add-Ins is that it's not just about the local perspective. Add-Ins can be customized. Someone that isn't hitting the open road may not care about traffic. Someone staying in may not care about the weather. Not everyone cares about local news headlines.
Yes, iHeartRadio's biggest threat will be to Clear Channel's own stations, but the move ultimately raises the bar for Pandora, as the rival free ad-supported service and other premium digital platforms will need to offer more to remain competitive.