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Rdio: the music streamer with the better app and the weaker distribution

Rdio was praised for its design and social features and launched in the US before Spotify. But it couldn't grow its paid base against better-funded rivals, while licensing costs swallowed most of its revenue, and it ran out of money in 2015.

  • Primary cause: Out-competed
  • Broken unit economics
Founded
2010
Ended
2015
Headquarters
United States
Sector
Media & Social
Capital raised
$100M+

What happened

Filed for bankruptcy in November 2015; Pandora bought key assets for $75 million.

What Rdio was

Founded by Skype co-founders Janus Friis and Niklas Zennström, Rdio launched in 2010 with a clean interface and social discovery features that critics often rated above competitors'.

Spotify arrived in the US in 2011 with a free tier, a deep Facebook integration, and a far larger marketing push. Rdio's growth lagged. After years of losses it filed for bankruptcy in November 2015 and sold technology and talent to Pandora.

Why it failed

  1. 1

    Distribution beat design

    Spotify's free, ad-supported tier and its Facebook integration put it in front of millions of people. Rdio's product was strong, but far fewer people ever tried it.

  2. 2

    Licensing costs left little margin

    Music streaming pays a large share of revenue to rights holders. Without enormous scale there is little left to fund marketing and product, so the smaller service falls further behind each year.

  3. 3

    Marketing that never found its audience

    Rdio was widely seen as under-investing in, or misdirecting, its marketing. In a winner-takes-most category, being the critics' favourite is not a growth strategy.

The product lesson

When competitors offer essentially the same catalogue, distribution and scale matter more than polish. If your cost of goods is set by suppliers you can't negotiate down, the plan has to explain how you'll reach scale — not just why your product is nicer.

Early warning sign to watch for

Users who try the product love it, but very few people are trying it, and the competitor's acquisition channel is free.

Compiled from public reporting, court records, and company statements. Figures are approximate. Where legal proceedings are mentioned, convictions are described as convictions and charges as allegations. Corrections welcome at hello@productmanagement.space.

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