Free smart radio is Rdio’s big play against Spotify, Pandora, & the rest

Streaming music service Rdio is launching a new version of its app with free smart radio service to listeners in the U.S., Canada, and Australia today.

The move is a way for Rdio to steal back some of the audiences from the industry’s two largest streaming music services, Spotify and Pandora, as well as Apple’s new-kid-on-the-block iTunes Radio service. Rdio previously offered only an on-demand music service, and it’s strategy was to undercut the other music companies with a pretty interface and a helpful music-recommendation engine.

Its radio service actually launched last month, but it was only available to those who signed up for its premium monthly subscription service.

“There’s a lot of talk about people who prefer to listen to radio versus those who want an entire library of on-demand music,” said Rdio VP of product Chris Becherer in an interview with VentureBeat. “We see it as one universe of music fans.”

Becherer said the company was finding that about half its subscribers were going elsewhere to listen to a radio service, which was the initial motivation behind launching a radio service of its own.

With the free radio service, which runs off data from The Echo Nest, you choose from a number of preset stations or those based on a particular artist, song, playlist, or album. (You won’t be able to listen to one particular artist/band within a station unless you pay for the premium service, though.) The idea is that you’ll be enticed to sign up for the premium service once you’ve been exposed to enough newer music, which you can add to a collection of stuff you like but can’t  play on-demand unless you’re a premium subscriber. And everything you do on Rdio (all the music you listen to, like, add to a collection, etc.) helps curate music from a personal “My.fm” station.

The move into free radio also presents Rdio with a new business opportunity: selling audio advertising. This is possible thanks to a partnership Rdio forged back in September with Cumulus Radio Group, one of the largest commercial radio station companies in the country. That means — unlike Pandora — Rdio won’t have the burden of setting up advertising sales representatives in local areas to sell those ads. Mobile Rdio listerners, for now, won’t hear advertising, which is yet another way the company may end up stealing listeners away from its competitors.

This is a smart move for Rdio, and one that could push the company back into the spotlight of the crowded streaming music space.

Rdio’s free radio functionality should be available with an update to its iOS and Android apps later today.