TuneIn, the online radio service, has enlisted LionTree Advisors to help the company evaluate strategic options, including a possible sale.

TuneIn hired the boutique investment bank in recent weeks, CEO John Donham said in an interview. The closely held company is also still evaluating whether it will need to raise money to acquire more audio programming and market its service.

TuneIn was valued at US$500-million when it raised money last summer, but it’s expressed a willingness to sell for less than that sum, according to two people familiar with the matter who asked not be identified discussing private negotiations. Donham declined to address the company’s current valuation and said there are no active sale talks.

One option is to keep going as we’re going, and there are other options, too. You don’t engage a banker if you’re not looking at them

“We are super early in conversations,” Donham said. “One option is to keep going as we’re going, and there are other options, too. You don’t engage a banker if you’re not looking at them.”

Founded as a free way to listen to dozens of different radio stations over the Internet, TuneIn spent the past couple of years building a paid service that includes live sports broadcasts and advertising-free music stations. TuneIn has signed up fewer than 10 million subscribers, Donham said, which makes it a fraction of the size of the two largest paid online audio services, Spotify and Apple Music.

Consumption of online audio has exploded over the past decade — from podcasts to music to live sports — but few providers make any money. TuneIn isn’t yet profitable, though it’s not far off, Donham said. The 16-year-old company, which has raised money four times in six years, could try to find a path to profitability without any additional capital, he said.

TuneIn has carved out a niche for itself as a top online radio service, alongside Pandora Media. Unlike Pandora, which is primarily a music service, TuneIn also offers sports talk and news. The service streams tens of thousands of radio stations and millions of podcasts for free.

But the money flowing into subscription-based audio services dwarfs the market for advertising-supported Internet radio. Spotify is a case in point. It generates more than 90% of its sales from premium music subscriptions, even though the majority of its users listen for free.

Subscriptions

That’s why TuneIn has spent the past few years building a subscription service modelled after satellite radio leader Sirius XM Holdings, which charges a subscription for hundreds of channels.

The business model for satellite radio is more profitable than that of a streaming music service. While Spotify must pay music rights holders every time it signs up a new customers, satellite radio companies pay a flat fee for most rights upfront.

TuneIn can make money so long as it signs up millions of subscribers. Luring those customers is expensive, however. TuneIn has paid millions of dollars for rights to offer live games from the National Football League, National Basketball Association and Major League Baseball. The company also added audio books, and it started commissioning its own shows.

Only some of the programming has been successful. TuneIn dropped the audio books from its service in January because they were unprofitable. Unlike Amazon.com’s Audible, which charges customers per book, TuneIn allowed customers to listen to any number of books so long as they paid the $9.99 monthly free.

Live sports has been popular, and the company recently renewed its deal with the NFL. TuneIn now gets about 50% of its sales from subscriptions, Donham said.

“I wouldn’t want to portray to you that everything is perfect,” Donham said. “We want to make sure we’re not just a leader in live audio today, but four to six years from now.” — Reported by Lucas Shaw, (c) 2018 Bloomberg LP