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Cumulus bets on radio's future

by RYAN NAKASHIMAAssociated Press

LOS ANGELES - Cumulus Media Inc. CEO Lew Dickey Jr. straddles two worlds: traditional broadcast radio, where his company is the second-largest station owner in the U.S., and Internet radio, where it's just getting started.

Last year, Cumulus created a bridge to the future, taking a 15 percent stake in Internet music streaming service Rdio in exchange for providing $75 million worth of promotional airtime on its stations. Cumulus is to sell ads for Rdio's free mobile service under the deal starting next month.

That and other strategic investments make Cumulus' stock a "buy," according to Noble Financial analyst Michael Kupinski. In the first quarter, Cumulus' revenue ticked up an adjusted 1 percent to $267 million while it pared operating losses by two-thirds to around $9 million. The stock has settled at around $6 since closing at a 7-year high of $8 in January.

Dickey, the 52-year-old founder, recently spoke with The Associated Press. The conversation has been edited for length and clarity.

Q: Who do you view as your biggest competitor - top radio station owner Clear Channel or one of the Pandora-type services?

A: It's Clear Channel. It's not Pandora. The digital services -which is why we put our toe in the water and took a stake in Rdio - we believe the digital services are increasingly going to play a role in the business.

Q: How do you view your strategy with regard to Rdio?

A: This is a scale business. Rdio's in 51 countries. Janus Friis (who co-founded Skype) has spent close to $200 million on this business to build it. This is a business that will be a global scale business and I think there will be handful of survivors at the end of the day. I believe the digital music space today is very nascent. I liken it to the Myspace phase of social. I don't think it's clear who the winners are going to be.

Q: What do you think of Pandora? Each quarter, they seem to be taking a larger share of U.S. radio listening time.

A: Pandora self-measures. So they're, in essence, quoting their own numbers and they're using disparate data sources. They've been very clever in terms of the story they've told, but the actual numbers would tell a different story when held under close scrutiny.

Q: How much of Cumulus' revenue comes from traditional radio and what portion comes from all the other expansions?

A: You've got a business that is predominantly traditional radio right now. Rdio isn't a revenue generator yet. We will be selling all of the ads from Rdio. That will be new media at that point. That's the way to think about this. We've got a business that's growing, we've got a business that's generating an enormous amount of cash, and we're positioning this business for the long run.

Q: How is Rdio doing?

A: Where Rdio has had good radio promotion and good promotional partners like in Mexico, where it's the market leader, Australia and New Zealand, where it's the market leader, Rdio has proven its ability to compete successfully against other entrants and incumbents in various countries. So it's new to the U.S.

It's very, very early. We're just getting started with these guys and they have a new CEO, Anthony Bay. And so, Anthony's been running around the globe, getting everything set in the various countries where they're operating. This is really the setup year for Rdio in 2014. I would look for real progress to be made in terms of users and the beginning of monetization. In our mind, the next 18 months are all about building usage.

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