Rdio Inks Deal With Cumulus to Offer Free Ad-Supported Music Tier

Online subscription music service Rdio plans to launch a free, ad-supported music service as part of a partnership with radio station operator Cumulus, expected to be announced today, according to the New York Times.

If you haven’t heard of Rdio, don’t worry, you’re not alone.  The music service, which was founded by the same people who brought you Skype and introduced in 2010, has struggled to gain a foothold in the competitive market against bigger players such as Spotify.  But with the Cumulus deal, Rdio will be able to get access to Cumulus’ programming on its 525 radio stations.  Plus, Cumulus will sell advertising on the free version of Rdio in the U.S. in order to compete with other music services that offer free service.

What does Cumulus get?  Aside from the deal helping the radio station go digital, Cumulus will get a significant equity stake in Rdio’s parent company, Pulsar media. Although no money exchanged hands,  the value of Cumulus’ content and services is estimated at more than $100 million.

Rdio hasn’t taken off like other online music services because it charges $5 to $10 per month while competitors offer free versions of their services.  But by offering a free model, Rdio is hoping to attract new customers and compete with the successful free model that has helped Spotify get 24 million users.

Bottom line is, why pay for the cow when you can get the milk for free?