Rdio's New Investment Analyzed

Rdio, an on-demand music streaming service from the Skype founders, took one more important step in the race for the hearts, minds and wallets of music-lovers. We wrote previously about the impressive team behind the start-up and their close ties to the four major music labels. On top of that influential human capital, this week Rdio added some monetary capital to advance their business - they closed a $17.5M funding round from new and existing investors. The money will go towards spreading the service to new platforms and new regions as well as for further R&D. How significant is this investment for the company and its competitors?

Rdio is already operating in US and Canada and their application is available on Apple, Android and Sonos. Thus, the expansion to new regions might well mean Rdio coming to Europe or Asia - the remaining lucrative markets with millions of digital natives. However, even if Rdio stays in North America for now, the investment puts the company in a better position to become the number one music streaming service there.

The investment also signifies a growing interest in music streaming services. The space is getting more and more crowded with the likes of Spotify, Grooveshark, Rhapsody, Pandora, Deezer and We7 to name just a few. There is also a growing number of users preferring such services over illegal downloads due to the high quality of the content and it's ubiquity. It takes more effort to download an album and spread it across your devices than to pay a small monthly fee and access any music you want from any device you have. Competition being so stiff, there are high stakes for those companies that succeed in getting songs and users on board.

However, the race is not just about content and users but also about the business model that works best. The fact that Rdio came to US  before Spotify was anywhere near it and that it is now reinforced by the new investment shows that record labels and investors alike are not fans of the freemium model. How that resonates with the end users remains to be seen.

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