CES- RADIO DASHBOARD FRAGMENTATION (PART II)

As discussed in my prior post the technical side of car integration for Internet radio is difficult due to the many car companies, their suppliers and in dash systems.  Pandora, Tunein, NPR and iHeart radio have an amazing lead on the terrestrial radio industry for real estate on the car entertainment systems.  Pandora was integrated with every car company we visited at CES and claims to be integrated with 1,000 different devices.  These integrated applications appear prominently as listening options.  The rest of terrestrial radio streaming is for the  most part not represented except as embedded in Tunein, Aha or iHeart.  This is a major factor as to why many other radio stations have agreed to be included in the Tunein and iHeart platforms as it give them access to these distribution systems which also have in car access.  However, in a point I made in an earlier post they are lost in a multitude of options.

Yes there is still a radio button in the car and this will not disappear any time soon.  However, it is now just one of a multitude of choices.  As we know people typically have about 6 presets (their favorites) and scroll among them.  How will terrestrial radio compete in a fragmented dashboard.  In my view it will not be based on music but other unique and local content.  Unfortunately radio has reduced its investment over the last several years in its product.  Very little programming is local and unique.  Competition for other information such as news and weather is readily available from other sources.  Those that do invest and have a multi-pronged distribution approach will be the winners.

iHEART RADIO FOLLOW UP

I have received numerous comments about the post I wrote last week entitled “What do Broadcasters’s see in iHeartRadio”.  My post has been interpreted in a number of different ways.  Let me first state that iHeartRadio is a great service and one that I have loaded on my iPhone.  Clear Channel has markedly improved the user experience, especially on a mobile device.  In order for terrestrial radio to continue to be successful I believe these elements are key:

1) Reduction in number and length of ad breaks – iHeartRadio’s decision to run no ads was a great decision. When ads are introduced hopefully the spot load will be low.

2) Customization – With its newly designed customized listening experience iHeartRadio is on the same playing field with other services such as Pandora and Spotify for the first time.

I would like to highlight one reader’s excellent point. For smaller stations that can’t afford to invest in a mobile platform iHeartRadio is a way to for their listener’s to access their streams on mobile devices.  Also integration with Facebook may be beyond smaller broadcasters capabilities. Further, due to its larger scale, iHeartRadio’s potential access to in-car systems would give smaller stations in-car  presence.

My intention with last week’s post was to have readers take away that stations looking for monetization should not rely on iHeartRadio’s platform to deliver meaningful revenue.

 More and more audio will be consumed via the IP channel.  For any station to be successful it must provide a well thought out functional interface as well as desirable content.  The listening experience with Internet radio can be active in that a listener can interact with the service while audio is streaming.  iHeartRadio can provide such an interface for terrestrial broadcasters who may find it difficult to compete on a sheer music jukebox basis with such services.  Terrestrial radio can capitalize on its unique content such as sports, news, local information, music curation etc. so, it does have this advantage.  Their challenge will be to continue to provide such content in an environment where ad revenues are declining and those dollars that are invested are increasingly going to digital media.  My hope is that terrestrial radio will rise to the challenge.

WHAT DO BROADCASTERS SEE IN iHEARTRADIO?

Is it extension of their brands? Is it increased advertising revenue?  A new distribution platform?  A number of broadcasters have agreed to have their internet streams added to Clear Channel’s iHeartRadio platform.  Even though I believe in added distribution channels, there simply is very little benefit for stations to join and distribute their programming via this platform.  Being added just means that you are one of more and more stations/channels on this increasingly fragmented platform.  While stations may get to keep their in-stream audio ad revenue I’m sure Clear Channel is keeping all pre-roll and display revenue.  Will this platform result in some added ad impressions and therefore revenue?  Yes but not enough to buy a cup of coffee.  Of the five featured stations today, all were owned by Clear Channel.

For Clear Channel this is a beautiful thing.  They get content for free to add to the offerings on their platform to the consumer and take advantage of the effects of “the long tail” (No one broadcaster will benefit dramatically but Clear Channel may in the aggregate).

It appears that this is more a feel good strategy that terrestrial radio is doing something in digital.  As I have noted before, Clear Channel is tiny compared with Pandora’s audience (about 15%).  Based on Triton Digital December 2011 Internet Audio ranker, even if you added all of the top 20 terrestrial stations’ audience including Clear Channel it would still only be 42% of Pandora’s audience .  What’s more, Pandora’s audience is increasing rapidly while the terrestrial stations audience has not increased over time.