Slacker's new wavelength for satellite radio

Debuting this week at the South by Southwest multimedia festival in Austin, Texas, Slacker is a distinctive new Web music service and portable music player from the San Diego-based company of the same name. Slacker calls its concept "personal radio," based on the idea that a majority of music player owners don't organize or update their music collections as often as they might like because the process is too technical, too time-consuming or both (hence, the "slacker" moniker).

The device-plus-service combines satellite radio, standard portable music player and Wi-Fi-enabled gadget with 10,000 custom music channels that users can tailor according to their taste, covering virtually every possible genre. The end result is essentially portable radio with video instead of audio ads--or, for a price, no ads at all--with content that refreshes automatically based on personal preference.

"The current model being used today is kind of getting a bit long in the tooth--it's a little bit dated," said Jim Cady, president of Slacker and former CEO of Rio, which makes MP3 players. "We started shipping products at Rio in 1998. The model was virtually the same as today: user buys device, figures out how to get content. (Then they) upload it into the device and hopefully they do that on a frequent basis. It's a lot of effort to get what you want."

Slacker built its player and radio service around the company's own proprietary technology that takes advantage of unused commercial satellite signals to send data. After four years, Slacker decided how to monetize the concept.

At first, the company considered a "more satellite-radio-specific (model) as a direct competitor with Sirius and XM," Cady said. "But it morphed into something much broader than that."

The Slacker Web radio service--sans player--will be free to anyone, but supported by video ads. Consumers who purchase the device can opt for the ad-supported free Web service or buy the ad-free premium radio service for $7.50 per month. Prices and memory options for the device won't be announced until closer to the release this summer, but expect it to range in capacity and price (from $149 to $299), and to come preloaded with a variety of tracks. It will have a 4-inch color display on which to view album art, reviews and band bios, and it will support MP3, WMA, WMV and MPEG-4 files.

Later this year, there will also be the option to buy a car kit that uses Slacker's satellite broadcast system.

As with traditional radio, the Slacker music channels are subject to the tastes of DJs. "It's a combination of known tracks and some lesser-known stuff," said Jonathan Sasse, Slacker's vice president of marketing. "But it doesn't go too deep down the discovery path unless you want us to."

To 'heart' or 'ban,' that is the question
That's where the personal part of personal radio comes in: users have "ban" and "heart" buttons that helps to weed out and endorse music on each station. If you're listening to, say, '90s pop and an Ace of Base song comes on, hitting "ban" ensures you'll never hear that song again. Clicking "heart" tells Slacker you want to hear similar music and also saves the song to your personal library. This is also where another of the key distinctions between the free and premium versions comes in: users of the free version can only hit "ban" six times an hour, but can "heart" an unlimited number of tracks.

Furthermore, users of the radio service can republish any of their customized music channels to any blog or Web site. Slacker says it has licensed all music on its service from major record labels. (The company says the Webcasting royalties dustup that arose last week does not apply to it since Slacker is licensing the music directly from labels and doesn't use terrestrial broadcast signals.)

With its venture, Slacker is homing in on new territory in the digital music space: the intersection of what have thus far been three distinct silos of traditional ad-supported radio, portable music and on-demand content.

Trying to take on the three areas of portable music might seem overly ambitious for a company barely a year old, but Slacker has been hoarding digital music veterans from both the device and subscription service side.

Its CEO, CFO, vice presidents and chief counsel held the same positions at online music service MusicMatch, and the rest of the staff is peppered with former Rio, iRiver and Yahoo Music execs who have so far raised $13 million in series A funding. Their collective experience, analysts say, will serve the company well, but will not necessarily guarantee success.

"Any new company, including this company, needs to come into this market with modest expectations to start with," said Susan Kevorkian, an analyst with IDC--especially, she added, since even a company with extensive resources like Microsoft didn't experience instant success with its Zune music player. Nonetheless, she said she expects good things from Slacker. "Having made good strategic decisions in the past, with products like MusicMatch...(the Slacker team's) prospects are strong, considering they're in a market dominated by Apple."

Apple's iTunes service is well-established, and it's essentially cornered the market on digital music players--almost three-quarters of all music players sold last year were iPods, according to The NPD Group. So the obvious question is whether the world needs another portable music player. And the answer seems to be, "Why not?" Despite its success with its player and download service, Apple hasn't established a presence in the on-demand subscription or radio businesses at all, which could leave an opening for Slacker to make a move, observers say.

The ubiquitous iPod is "a portable-CD-player-type experience--a much, much, much better portable CD player--but it doesn't give you access to radio or an on-demand experience," said David Card, senior analyst at JupiterResearch.

The same is true of leaders in other areas of digital music. "You look at Rhapsody and Napster; they're subscription services that give you on-demand, (but) not much momentum on the device side. It's kind of like the supply side of things is all scrambled right now," Card said.

Combining these features, and considering the enduring popularity of radio, Slacker's product seems a logical next step in the evolution of digital music listening, Card said. "There are a lot more people that listen to the radio than buy music regularly. In theory, they're tapping into a very big audience. In theory, I don't know if the numbers are going to work."

One of the biggest challenges will be getting the Slacker name (and hipster logo) out to the digital music-loving masses as well as the novices who haven't yet made a decision on a music subscription service or player. To do that, Slacker can't just be as good or interesting as iTunes and the iPod, it has to be even more interesting, Kevorkian said.

There are other drawbacks too, like the decision to run video versus audio ads. "It's kind of weird they're delivering video ads because if you're listening in the car that's seriously problematic," Card said. "Some of the pieces don't weave together gracefully."