Less Spotify, more Pandora – We7 shifts focus to more economical 'Internet Radio Plus'

Navigating the choppy waters of ad-supported music, We7 hasn’t been afraid to change course. The UK startup began life as an innovative free music download service before transitioning to an on-demand browser-based offering. While most recently the company, which is backed by Peter Gabriel, Eden Venture and Spark Ventures, made a premium paid-for play with a desktop and mobile version sans-advertising.

Today, We7 is shifting focus once again in the belief that the route to mass market requires a lean-back experience more akin to Internet radio services like Pandora in the U.S. rather than a pure on-demand play such as European competitor Spotify. It’s also a model that sits more comfortably with We7’s ad-supported aspirations since music licensing fees for Internet radio are about a third of that charged for non subscription on-demand services.

The new service and strategy, dubbed “Internet Radio Plus” (a name given the seal of approval by recent We7 users, 10,000 of whom were surveyed on the issue), came about after We7 quietly rolled out a simple radio function in January this year. Without any marketing push, by September more than 55% of tracks on the site were being accessed through the radio feature rather than on-demand, says We7 CEO Steve Purdham. “This is a massive hint on how people want to listen to music.”

After that initial experiment, the company has concluded that what the majority of people want is the simplicity, no effort required, aspect of traditional radio – press a button and listen – with the personalisation opportunities that on-demand offers. Purdham summarises this philosophy as “entertain me but let me have control when I want it”.

On that note – no pun intended – We7’s new Internet Radio Plus focus will begin with ‘Loved Radio’, a personal radio channel that can be created at any time by the user pressing ‘love’ on an artist, song, album or playlist. These choices will then influence what is played going forward. It’s not a new idea but one that certainly fits with my own online listening habits. Additionally, users can share their ‘loved’ station with friends via Facebook, Twitter or through email.

More innovative, however, is that personalisation will also go beyond music to include spoken audio with News, Entertainment, Sport, Weather and “a series of yet to be announced innovations”, building on the news bulletin feature that We7 rolled out in conjunction with GMG Radio back in July. Better still, the company plans to evolve Internet Radio Plus to eventually allow users to include a news alert if anything happens with a chosen football team, for example, or related to other personal interest areas. Now that would be truly personal.

We7 is also keen to talk up the advantage of all of this personalisation and music residing in the cloud, meaning that in theory it can travel with the listener and be accessed from anywhere. A direct quote from the press release reads: “What defines an individual’s music tastes is not their CD or download library but the metadata about the music they like and when they listen to it”, which I think sums up quite nicely the opportunity that We7 is now embracing.

But let’s not forget the economics of all of this either, which we’ve touched on already. Rightly or wrongly, the Internet radio model, which imposes arcane rules such as how many tracks by the same artist can be played sequentially etc., has a different royalty rate to ‘on-demand’. And that’s music to Purdham’s ears.

“I have to admit that this positive consumer shift to radio streams does benefit the economics of the We7 financial model”, he concedes. Although he also notes that Internet radio fees are still more expensive than traditional terrestrial radio.

So, yes, along with feedback from users, economics has clearly played its part, which along with Pandora’s growth in the U.S., “made it one of those no brainer business decisions”, says Purdham.

It also, perhaps conveniently, moves We7 slightly further away from comparisons to Spotify, which remains very much an on-demand play. Who then is We7’s closest competitor now? “Standard radio services listened to on the Internet”, says Purdhmam.

But what about Last.fm?

An “obvious choice”, but Purdham argues that the CBS-owned Internet radio service appeals to a different audience than We7, “such as the early adopter tech savvy music obsessives who are looking for discovery, whereas We7 is my mum, sister, wife, daughter and son.”

Instead, “becoming the Pandora plus of the UK and Europe would be a great aspiration to have”, he says.