Later this summer the Web site will begin selling access to two new premium Web radio services, which will let listeners enjoy digital radio via their iPhones — and later via iPads and Google’s Android handsets.

The offering is part of a larger move where AOL will use digital music start-up Slacker to power its free radio service, replacing longtime partner CBS.

AOL’s subscription service will also be based off Slacker. Slacker sells a “Radio Plus” offering for $4 a month and a “Premium Radio” for $10 a month, and AOL’s services should be priced similarly. Unlike the free radio service, both paid versions offer ad-free music and more interactivity than the free version, which is like Pandora except that it uses humans instead of algorithms to program music.

AOL Music chief Jeff Bronikowski says AOL’s existing radio service already draws around three million unique visitors a month, who listen to about 30 million hours of music.

AOL used to have a monthly subscription service, but sold it off in 2007 to Napster. Why try selling music again?

“Users have actually asked us for a subscription offering for a while,” Bronikowski says.

The trick will be distinguishing AOL’s offering from the competition, which is growing all the time: In addition to Pandora’s radio service, which also offers a premium version, there are on-demand subscriptions from the likes of Rhapsody, Rdio and MOG; U.K.-based Spotify should also be in the U.S. by the time AOL is selling subscriptions again.

AOL ANNOUNCES PARTNERSHIP WITH SLACKER INC. TO DELIVER
ENHANCED ONLINE RADIO LISTENING EXPERIENCE

Slacker Inc. to Become AOL Music Network’s Exclusive Radio Partner

New York, NY – June 28, 2011 – The AOL Huffington Post Media Group’s AOL Music is re-launching AOL Radio in partnership with Slacker Inc., it was announced today. AOL Radio will offer an enhanced radio experience with fewer ads, new personalization features and premium subscription offerings. The new service will deliver three product tiers to users: free AOL Radio with personalization and customization by Slacker, ad-free and feature-rich Slacker Radio Plus and on-demand access with Slacker Premium Radio.

AOL’s partnership with Slacker Inc. will provide access to ad-free radio and enable users to create tailored radio stations, save favorite songs and stations, read album reviews, access artist biographies, review station histories, and skip up to six songs per hour, per station. The partnership will enable Slacker to deliver its new radio offerings to a larger audience, allow AOL Radio and Slacker to develop new advertising opportunities for mutual clients and integrate AOL Music’s original editorial voice across all its services.

“Slacker Radio is the perfect partner to significantly increase the quality of our offerings,” said Lisa Namerow, Head of AOL Radio. “By combining AOL Radio’s reach with the success of Slacker in mobile, we are increasing the distribution of our brands and further identifying AOL Radio as a leader in delivering superior radio experiences.”

“Both companies bring unique content and functionality to this new partnership,” said Jim Cady, CEO of Slacker. “Aligning our strengths will enable us to expand our reach to greater opportunities across multiple platforms. We are thrilled to work with AOL Radio to continue to improve how music lovers experience radio.”

Upon the launch of the new AOL Radio player, Slacker will lead advertising sales within the player, enabling AOL to package a portion of the inventory for premium AOL Music integrated sponsorships.

The new AOL Radio and its award winning iPhone App, which has been downloaded more than 3 million times*, will re-launch in late summer. Android and other platform launches will follow shortly thereafter. The new player will also continue to host AOL’s 250 expert-programmed original music stations, as well as additional new Slacker programming including stations and content from ESPN Radio and ABC News Radio, which will include additional offerings and stations for subscribers.

*According to Apple’s App Store (via iTunes Connect)

“To all our international friends, we’re sorry you can’t use turntable right now due to licensing constraints,” Turntable told users via Twitter. “Trying to get you back in asap.”

The bad news: I wouldn’t count on international access opening up again for a long time.

The good news: This is good news. It’s another sign that Turntable is trying to figure out how to use the Digital Millennium Copyright Act as a way around having to negotiate onerous music licenses, which improves its chances for survival.

Turntable, which lets people play and listen to just about any song they want, is trying to position itself — legally, at least — as a “non-interactive” Web radio, which would be shielded by the DMCA.

But the DMCA only covers use in the U.S., and there’s no equivalent licensing option available overseas. Which means either hammer out license deals in every country it wants to operate in, or turn the company into a U.S.-only operation.

This is exactly what Pandora, which also uses the DMCA for licensing, had to do back in 2007. And that seems to have worked out okay.

It’s worth noting that although Pandora is now on a $200 million revenue run rate, and reopening international operations is part of the company’s long-term plans, it is cautioning investors not to expect anything soon.

“Copyright and licensing laws vary from country to country, making international expansion a complex task, and we expect the process for securing licensing rights will require a number of years,” Pandora warns, via an SEC filing. “We are working to obtain the appropriate rights with economics that work for us, with the objective of eventually launching Pandora internationally.”

Meanwhile, whether Turntable will be able to convince the music industry that it is indeed protected by the DMCA remains an open question. It has been trying to comply with the restrictions on the fly, making adjustments as it soars in popularity. Recently, for instance, it stopped allowing users to play music in “rooms” without other listeners.

Will those be enough? We don’t know.

Here, via Twitter, is some skepticism from a knowledgable observer with skin in the game: Sony CFO Rob Weisenthal. “I love turntable.fm but it is tough to see how the DJ is DMCA compliant,” he wrote this morning, before inviting followers to join him in “The Hip Hop Lounge.”

And here’s the counterargument: Surf-singing dude Jack Johnson’s Brushfire Records music label giving the service a big wet kiss.

Brushfire’s stance is the right one, obviously. Of course music labels should embrace a service that lets music fans turn other music fans on to new music. But that doesn’t mean it’s going to happen.

And by the end of Thursday, following a 24 percent stock drop, Pandora was worth $2.1 billion.

What happened?

Anyone who can tell you, with a straight face, why Pandora investors bid the stock up one day and crushed it the next is full of it.

But just to be clear: Other than showing up at the New York Stock Exchange to ring the bell and give some interviews, Pandora executives didn’t do a thing to make the company more or less valuable in the last two days. And nothing outside the company affected its intrinsic value, either.

So unless you’re day-trading, Pandora’s temporary gyrations shouldn’t be that interesting. More interesting: What do the company’s next couple years look like? And crucially, what happens in 2015, when the company’s music licenses get reset?

Here’s Pandora CEO Joe Kennedy’s take, via an edited Q&A I conducted with him in the IPO aftermath:

Peter Kafka: Pandora only offers Web radio, which has been great for you because it means you haven’t had to strike individual licensing deals with music labels. But it also limits the service you can offer. Do you think you’ll end up working with the music industry to expand your offerings?

Joe Kennedy: Our focus is on radio. The research indicates that 80 percent of the average American’s music consumption is in radio form. Only 20 percent is CDs, or iTunes, iPod or whatever. We’ve dedicated ourselves to that 80 percent of the market, radio-like listening, serendipitous listening. It leverages 11-plus years of intellectual property, and that really is our focus as a company.

We’re more than happy to leave the 20 percent to Sony Walkmen, iPods, iTunes, iCloud, Rhapsody, MOG, Spotify, you name it.

But a lot of people seem to think of you in the same category as all of those other services, anyway. Is that a good thing?

Consumers do this 80 percent/20 percent thing without thinking about it. I don’t think they’ve ever thought about it consciously.

As far as general commentary about digital music, I think there is a lack of discrimination: “Oh, it’s digital music. Oh, it’s streaming.” By implication, it all meets the same consumer need. I think that will go through increased refinement and precision over time.

But some services are going to end up mashing up different kinds of features, anyway. Google was reportedly trying to offer a cloud locker, and a store, and a Web radio service like yours. You sure you want to stay streaming radio only?

Yes. We’d rather be best in the world at one thing that’s a great big piece of the market than be less-than-best in the world at several things.

The licensing deal you have goes away in 2015, and lots of people think that when that happens, the music industry will insist on extracting every bit of revenue they can from you. You’ll be worth $3 billion and they’ll want to grab $2.9 billion of it for themselves. How do you plan for that?

We operate under Federal statutory licenses. The license mandates arbitration proceedings every five years, and it’s Federally administered. It’s not a negotiated process. We believe that that process will yield an economically reasonable outcome.

So let me translate: What you’re staying is that this isn’t like iTunes, or Spotify, where a label could say, “I don’t want to participate.”

It’s fundamentally different.

And you’re saying that at some point, you’ll have a deal, brokered by a neutral party, and that if it’s at least not fair, it will be equally disappointing for both sides. And that you guys can live with that.

The law proscribes that judges determine the rates at which a willing buyer and a willing seller would meet in a marketplace transaction. No party has the ability to say, “I’m not in.” It is an economic analysis.

You usage is up dramatically, driven in large part by mobile use via Android and the iPhone. But mobile revenue isn’t that big for you. How do you change that?

We generate considerable revenue from mobile. I believe we’re one of the biggest mobile advertising sites in the country. Today, mobile advertising is more nascent than desktop advertising, which took 10 to 15 years to develop, but mobile is growing far faster. Key pieces of the puzzle, like third-party measurement, are just coming in. We’ll benefit tremendously from that.

Radio advertising is local, and you guys are predominantly selling national spots. Are you going to have to ramp up to sell locally?

That’s part of the advertising opportunity. But the vast majority of the biggest national online brands spending money on the interactive market — the vast majority of them already spend money on Pandora. We have the opportunity to take that spending and expand it to mobile. So we don’t see our opportunity limited to one bucket or another. We’re fully legitimately an online player, fully legitimately a mobile player, and fully legitimately a radio player.

Cars are a big part of the bull story for you guys — that at some point you’re going to be competing directly with radio on most people’s dashboards. When does that become a big deal for you?

We’ve had announcements from six of the world’s major automakers — Ford, Toyota, GM, Mercedes, BMW and Hyundai — and they’ve all said “we’re going to integrate Pandora into our vehicles going forward.” Now, the nature of automotive is, it isn’t a flip-the-switch phenomena. It rolls out over several models, over time. And then you have a replacement cycle that’s about 7 years per car. So I think of automotive as a snowball, that starts out relatively small, but builds and builds and builds and builds. You get out to years five to ten, and it’s tremendously big.

So five to 10 years?

The way I’d phrase it is that it starts out relatively small, and snowballs.

And over the next five years, we have the explosion of smartphones. They’re selling at a 15 million per quarter pace in the U.S. alone, 15 million android and iPhones. A good year in the car business in 15 million.

So even though the Web radio service is in go-go growth mode, the only way it’s going to work is if its ad revenue grows even faster.

And if you want make the bear case against Pandora, which goes public tomorrow, it’s easy enough: Take a look at the clumsy ads it currently runs on its iPhone app.

BTIG’s Rich Greenfield does that in a 10-minute video, which I’ve embedded at the bottom of this post. But here’s the short version:

• There are lots of ads, but most of them won’t be obvious to most users, because they’re visual, not audio, and you don’t spend much time looking at your Pandora app when it’s running.
• There is a whole lot of advertising from LivingSocial, which gives the operation a late ’90s feel — as Danny Sullivan puts it, one “bubblicious” company advertising on another. And those LivingSocial ads are really, really persistent — if you close them out, they’ll pop back up. And even if you give in and sign up, as I’ve done, they won’t stop. Which is especially bothersome on Pandora, since the whole point of the service is that it’s supposed to learn what you like and give you more of it.
• Conventional radio is a local business. But Pandora’s ads are predominantly national.
• Did we mention all those LivingSocial ads? If you use Pandora a lot, it can seem like its primary purpose is to deliver new users to the daily deals service, and that music is a secondary benefit.

Then again, all of this is easy to flip around: Pandora’s ads are crude and clumsy because Pandora is just starting to become a Web media business — up until recently, it was a technology company that didn’t spend much time figuring out how to generate revenue.

Meanwhile revenue is growing very fast — up 131 percent in the last quarter. Think about what could happen when Pandora learns how to make its ads more sophisticated and targeted.

And along those lines, perhaps all those LivingSocial ads can end up working to Pandora’s advantage. Pandora tells investors that it’s going to spend money building out a local sales force, but perhaps there’s a way to piggy back on the huge sales force that LivingSocial (and/or Groupon) is buying.

Remember that the daily deals companies are at a pretty crude stage, too, which is why I keep getting spa ads I’m never ever going to click on. But local ads sold by LivingSocial, and personalized using Pandora’s algorithms? Pretty interesting.

People familiar with the company say Schiller, who once ran the New York Times’ Web site, will report to NBC News chief Steve Capus. Both Schiller and NBC declined to comment.

[UPDATE: Now NBC has announced the hire: Schiller will be chief digital officer, a new position.]

Schiller resigned from NPR in March, following a series of political flare-ups: The final straw was the release of a gotcha video that showed one of her lieutenants criticizing Republicans and the Tea Party.

If she shows up at NBC, I wouldn’t be shocked to see yelps from partisans who will argue that her hiring proves that the network is biased toward the left, etc.

Then again, NBC’s new owner, Comcast, is getting used to political controversy. Most recently, it has been asked to explain why it hired an FCC commissioner that had just voted on the company’s recent merger.

The Apple iOS and Google Android smartphone location-tracking kerfuffle. Smarty-pants commentators. KQED’s “Forum” radio show with interviewer Michael Krasny yesterday.

Go!

Filed in 2009, the complaint claims the union gave Sirius a monopoly in radio services, one which resulted in higher prices for consumers. Which is interesting, considering the Department of Justice’s comments on the merger when it first approved it.

“After a careful and thorough review of the proposed transaction, the Division concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers.”

Anyway…

An unfortunate turn of events for Sirius, which is likely still reeling from the other high-profile lawsuit it was slapped with earlier this month.

“When Sirius needed Stern, it promised him a share in any success that the company achieved,” the suit reads. “But now that Sirius has conquered its chief competitor and acquired more than 20 million subscribers, it has reneged on its commitment to Stern, unilaterally deciding that it has paid him enough.”

According to the suit, Sirius did give Stern his initial stock award after he signed on in January 2006, but it failed to pay him out on any others even though it “exceeded its own internal estimates by more than 2 million subscribers” each year for the remainder of the original contract.

“Stern enabled Sirius to surpass its internal subscriber targets by more than 2 million subscribers in 2006 and in 2007,” the suit alleges. “Because of this success and the revenue that it brought into the company, [Stern] was entitled to receive the performance-based stock awards Sirius promised [him].”

So Sirius is stiffing Stern. Not a particularly wise move given the latter’s irascibility and reach of his daily radio show. If there’s a PR battle to be fought here, Sirius will likely lose it first thing tomorrow morning when Stern’s back on the air again.

Reached for comment, Sirius claimed to have met its obligations to Stern. “SIRIUS XM just signed a contract through 2015 with Howard Stern, and he is a valued part of our company,” spokesman Patrick Reilly told me. “We were thus surprised and disappointed by the subsequent legal action initiated by his production company and agent. We have met all of our obligations under the terms of our 2004 agreement with Howard, his agent and production company.”

Here’s a copy of the suit:

SternSuit –

If that sounds familiar, it’s because Harrison was already supposed to have left Clear Channel at the end of 2010. Last August, Clear Channel Radio CEO John Hogan told employees, via an internal memo, that Harrison had “shared his desire to pursue new challenges,” and was going to leave at the end of the year.

But there was always some weird cloudiness about that announcement, and Harrison, who had overseen music at AOL prior to joining Clear Channel in 2004, has stayed on a bit longer. Now he really is going, Hogan says, at the end of this month. It’s worth noting that investor Bob Pittman joined Clear Channel as its “chairman of media and entertainment platforms”, focused on digital opportunities, in November.

Earlier this month, Pittman purchased music subscription service Thumbplay, which he plans to use to power Clear Channel’s Web radio stations, which are competing with Pandora.

Here’s Hogan’s second memo announcing Harrison’s departure, distributed internally today:

Good morning, all:

In the aftermath of the Thumbplay announcement, as we prepare to take iHeartRadio to the next level and extend our leadership and vision in the digital space, I wanted to let you know that Evan Harrison, one of the architects of these successes, will be leaving Clear Channel Radio at the end of March.

Since joining our company as leader of Clear Channel Radio Digital, Evan has played a critical role in CCR’s multi-platform strategy. In iHeartRadio, he built a terrific product, one that leads the industry and forms the strong foundation of all CCR’s digital efforts, as well as a great team. Today, Clear Channel has $100 million in digital revenue, 25 million monthly unique visits to our online sites and 24 million downloads of our mobile apps. All of these accomplishments are a tribute to his leadership and skill, and we thank him most sincerely for all he has done.

While there were a number of opportunities for Evan to remain with us, he feels that there are other options he is interested in pursuing and that this is the right time to explore them. We wish him all the best. Moving forward, Bob will continue in his role overseeing the CCRD team.

Please join me in thanking Evan for the significant contributions he has made to advancing the mission of Clear Channel Radio: To successfully leverage all of Clear Channel’s powerful local brands and personalities, and enable our hundreds of millions of listeners to find the music and features they want on any platform they use.

Regards,

John Hogan

Today, as the left and right continue their epically exhausting battle for hegemony, NPR CEO Vivian Schiller resigned after a series of borks–including a sting video in the public radio’s top fundraiser insulted the Tea Party activists and the fumbled firing of commentator Juan Williams.

Oh dear.

Well, the former New York Times exec was pretty good at moving NPR into the digital age, at least.

In fact, BoomTown interviewed Schiller at the eighth D: All Things Digital conference about the digital future of NPR, which is pretty bright actually.

She talked about prospects for high-quality journalism and the ways the public radio unit could help create a more powerful network of many stations.

Here’s the full D8 video of the Schiller session, as well as a very funny spoof video she brought about some of the more way-out digital initiatives for NPR below it: