Clear Channel To Buy Thumbplay

After less than a year in the music subscription business, Thumbplay is giving up: The company is selling off the struggling service to Clear Channel Radio, according to Peter Kafka's Media Memo blog.

Thumbplay will hang on to its once-booming ringtone business, but only temporarily; it intends to sell that off in a separate deal.

Terms of the Clear Channel deal weren’t disclosed, but a source familiar with the company tells me investors who put some $41 million into the company don’t expect to get all their money back.

According Kafka, Clear Channel will be buying a business that only managed to sign up 20,000 subscribers, who pay $10 a month for unlimited music, since March 2010.

But the radio company seems more interested for now in using Thumbplay’s technology and team to build out its existing, free Web radio service. That is, it is competing with Pandora, more than Rhapsody, Rdio and Spotify.

“This is step one,” says Bob Pittman, the investor who put his own money into Clear Channel and came aboard as its “chairman of media and entertainment platforms” last fall. “Three percent of all radio listened to is digital, and it is early still. We need to get ahead of the curve and not behind it.”

Pittman says Thumbplay’s technology will be integrated in the coming months into Clear Channel’s “iheartradio” service, which offers 750 free Web radio stations and boasts 25 million monthly uniques. He says all 65 Thumbplay employees working on music services will get jobs at Clear Channel.

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