Bob Pittman

Clear Channel: What digital music disruption?

July 20, 2011: 6:54 PM ET

Pandora. Spotify. SoundCloud. A number of companies are challenging a space dominated by the likes of Clear Channel.

FORTUNE -- Despite services like Spotify, Pandora, and Turntable.fm, which have all received generous buzz lately for one reason or another, digital music services aren't quite as disruptive to the music industry as you might think.

Clear Channel's Bob Pittman

At least that's what Clear Channel's Bob Pittman insinuated during a discussion about online music services at Brainstorm Tech, which also featured SoundCloud CEO Alexander Llung, former MySpace Music president Courtney Holt, and Songkick CEO Ian Hogarth. According to Pittman, 93% of Americans listen to the radio -- a slight 1% uptick compared to 1970 -- and just 3% of them consume their music via digital services ranging from Pandora to Sirius XM.

"Some things never change," he said. "People have a music collection, and they have radio stations."

Pointing to Clear Channel's 237 million listeners, Pittman praised music streaming service Spotify, which just launched in the U.S. last week for its speed, music collection, and user experience, but sounded dubious about Pandora's long-term outlook.

"Pandora is a great 'feature.' I think people love it, but it's still very small in the grand scheme of radio," he said. "The question is whether its a real business. I look at AOL Instant Messenger as a cautionary tale. Great feature -- never made a good business."

Pittman could be right about Pandora (P). Despite ads and growing revenues, the 11-year-old company has yet to make a profit due to the fact that the royalty fees it pays music labels every time a song is streamed are higher the company's ad revenues. (Which is why it's incurred $92.1 million in losses since it was founded in 2000.)

Holt took a more progressive stance. He sees a lot of innovation happening and a lot of potential for companies like Turntable.fm, a two-month-old startup that creates virtual music listening rooms where users can DJ their own playlists to the rest of the room.

"If somebody likes it, there's something there," Pittman admitted later on, pointing to cable networks ESPN and MTV as age-old examples of novel ideas, which he says the three big broadcast networks didn't believe would work. "What they're saying is we're afraid of the future, and we'd really like to maintain the status quo. Of course, the flaw in that, is you can't maintain the status quo. The world will walk away from you if you don't catch up."

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