Google has finally arrived at the Internet Radio table although I must say the name of its service, “Google Play Music All Access” leaves something to be desired. Apple will most likely follow by the end of the year. There are still a lot of unknown details especially if any free ad-supported models will be forthcoming. One thing is for sure, there are only so many hours in a day to listen so most likely everyone’s share will decrease. This includes terrestrial radio. Terrestrial radio appears too busy trying to bail out the waning AM radio service and make non interactive HD radio work to attack IP audio. CBS was an early leader but their bets did not pay off. Clear Channel has now grown an impressive Internet radio service with over 30 Million registered users. However, we have gotten to the point where Clear Channel’s future interests may not fully align with the rest of the radio industry.
Social Media is a key indicator of audience engagement and what is resonating in the social media ecosphere. While there are a number of social media channels for purposes of this analysis I chose Twitter. I utilized the services of Socialping, a company that specializes in Twitter audience metrics. Socialping provides twitter analysis including monitoring key words. I decided that I would apply Socialping measurement to Internet Radio. I created watch lists for key words for the following;, iHeartradio, Pandora, TuneIn, KROQ, Rdio, WBLS and Spotify. The measurement period is for one week beginning 2/25 – 3/3.
The above data reveals several key findings;
1) Spotify is the leader in followers with almost 3x that of Pandora. This is probably due to its more international offerings. However, Pandora and Spotify have approximately the same reach.
2) iHeart radio has more followers than Pandora. However, the # of tweets is only 3% of that for Pandora (Note: iHeart’s radio audience as reported by Triton Digital is 15.9% of Pandora’s). Has Clear Channel driven people to follow but they are not engaging with the service?
3) One of the top single stations in the country, KROQ has roughly half the followers of iHeart Radio.
4) While Tunein has less than one third the number of followers as iHeart they have 3x the reach.
Today Pandora announced audience metrics for June 2012. While these stats represent significant growth over the prior year, June results were lower than May except for share of total radio listening as can be seen below:
Listener Hours – 1.08 Billion (- 1.8% May to June)
Share of Total U.S. radio listening ( +3.1% May to June)
Active Listeners (- 2.2% May to June)
May also includes the Memorial day holiday (listening is often lower during such periods) which makes the decline worth noting.
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.
For the most part there is nothing compelling on radio station websites. The primary reason that most people visit is to start the station’s stream or find information about what a station is playing. In a just released survey by The Media Audit, visits to station websites declined YOY from 17.7% of U.S. adults to 17.6%. As more and more options exist for listening to a station’s stream off website (through mobile app, Facebook, etc.) traffic will continue to decline. Most stations don’t promote their website because there is no original content and when the station’s website is mentioned it’s usually due to a contest which in my view artificially drives traffic to a site. Tweets and posts show up in a listener’s stream in many cases so no need to access the website. So how can radio develop unique content? Without investing a considerable amount of funds I don’t think there is much that can be done. However, I do believe there are other opportunities to create content and develop other brands. For example, one company I am working with Inner City, has for many years put on a weekend event in New York City called Circle of Sisters where over 40,000 people attended. There is an opportunity to further develop this well known brand apart from the radio station.
At Angel Street Capital we have invested in a local news site called GoLocal Providence (www.golocalprov.net) and they are in the process of rolling this same platform out to Worcester, MA. The site has been incredibly successful in challenging the local newspaper. Initially GoLocal launched in Providence with a local radio station partner. This opportunity exists for radio companies but I would suggest partnering rather than trying to develop it internally. Radio stations have a giant megaphone to launch other brands as they have been doing for their advertisers for many years. It’s time to use this megaphone themselves to develop brands they have an equity stake in.
As one of the founders of Ando Media I keenly follow developments in measuring Internet radio audience. As can be seen in the following graph, terrestrial radio’s Internet radio audience has flatlined for some time, no pulse, no signs of life.
This data is taken from Triton Digital’s monthly audience ranker (formerly Ando Media). The slight dip in July 2011 represents a summer seasonal decline as this same listening pattern happened in 2010. Of course Pandora stands out on this graph. The top 5 broadcasters include Clear Channel and CBS. They have a long way to go to catch Pandora. I am hopeful that Clear Channel will close at least some of the gap due to its elimination of all ads in its streams and new customization options announced 9/8/11. The most recent Triton Digital ranker for September is too soon so reflect any impact these moves may have.
I have just read Steve Jobs biography. He stated that “if you don’t cannibalize yourself, someone else will.” This is the position the radio industry is in. Many broadcasters are afraid that promoting their stream will result in declines in their over the air audience. Yes it may in the short term but long term it’s either offer the listener what they want or they will go elsewhere. Where did all of that Pandora listening come from?
This is the position the radio industry is in. All stations should cut back substantially on their ad units. This is one tactic that stations can take immediately and increase their audience. Sell two spots per hour make it a premium offering to advertisers. These two advertisers get audio, preroll and display opportunities. Make sure there are a number of different creatives for each ad type to avoid listener fatigue. This is only step one in what terrestrial radio stations that are streaming need to accomplish. Personalization and customization are next.
In car listening is going to drive significant growth in Internet radio listening. In car listening to terrestrial radio represents the largest percentage of total listening and I believe the same will be true for Internet radio. Internet radio in-car listening is already occurring by connecting your mobile phone in various ways to your car’s stereo/entertainment system. I have always thought that it would be the phone that ends up being the device that serves as the conduit for in-car Internet radio listening. No one wants to set up yet another interface for listening and smart phones have now become practically ubiquitous. The collection of wires, adapters, bluetooth devices all deal with what is termed the auto after market (making a system work given what is already installed in your car).
One of the companies focused on in-car Internet radio listening is Livio Radio. Livio has many systems for making in-car Internet radio listening a possibility. The one I like the best is called “The Kit” which works with Blue Tooth. You download the Livio Radio app (which has 45,000 internet radio stations) and plug the nice looking compact device into your 12 volt lighter port. Via bluetooth the Livio phone app starts and your choice of Internet radio station plays via your car speakers. This approach works for the auto aftermarket but I would rather not have to insert the Livio device into the lighter port. The after market solutions will continue to be utilized for several years given the millions of vehicles already on the road today.
Only major Internet radio brands such as Pandora will be able to integrate with car manufacturers so that they are built in. There is a multi-year lead time and Pandora has been working on car company integration for some time. Car companies will not deal with a multitude of Internet radio providers. However, Livio Radio will make it possible for all Internet radio brands to participate. Livio has developed an API (think interface) that allows this seamless integration between internet radio stations and a cars entertainment system. The ease of use which terrestrial radio has had in the car for decades has to be present for large scale consumer adoption.
Terrestrial radio has a hard time understanding that in the end the consumer will decide what, where and how they would like to consume audio content. I believe consumers want Internet radio in their cars.
We just returned from the NAB Convention in Las Vegas having attended RAIN Summit and numerous meetings with industry leaders and firms involved in Internet radio. 2011 is shaping up to be the year of Internet radio especially given the IPO filing by Pandora. However there are some new partnerships and entries on the services side of the business which I have highlighted below:
- Liquid Compass has announced a partnership with ADSWIZZ where ADSWIZZ will provide ad insertion and impression measurement services for Liquid Compass customers. ADSWIZZ is a Belgium based company that has been operating in Europe and has been eyeing entry into the U.S. market.
- ABACAST has secured new funding and has launched a new Ad insertion system, Abacast Clarity. Additional partnerships have been announced with firms to assist in monetizing station ad inventory including Citadel Media and AdLarge. ABACAST also provides audience measurement services.
- A new company providing audience measurement has launched in the U.S., Touchcast. Touchcast based in Belgium has launched it Casterstats product.
- Ando Media (now known as Triton Digital) has secured Media Rating Council (“MRC”) accreditation for its Internet radio measurement service, Webcast Metrics
- Arbitron has announced that it is going to provide audience measurement services for Internet Radio
These developments should lead to a very interesting year in the Internet Radio industry. Given Arbitron’s dominance in measuring terrestrial radio it would be hard to bet against whatever platform they release not being the eventual winner. Will they buy or build?
Ando Media (a company we founded in 2004) has been the dominant ad insertion and audience measurement company serving the Internet radio industry. Triton faces heightened competition on the ad insertion side of their business and now audience measurement as well. As in all industries, now that the market has grown competitors are emerging.
There have been a number of recent developments in Internet Radio:
- Pandora has filed to go public and raise $100 million
- Spotify has concluded deals with leading U.S. record labels and announced a $100 Million equity raise
- Rdio announced it had received $17.5 million in funding.
- Slacker raised $3 Million in additional financing
- Clear Channel Radio acquired cloud based music system Thumbplay
- 2/26/10 MOG raised $9.5 Million
- Grooveshark raised $3.5 Million
Internet radio takes two forms, subscription model (all you can eat for low monthly fee or pay for no ads) and advertiser supported. There are pros and cons to both the consumer and the business model for both forms. In general I would favor the ad supported model but Internet radio companies such as Pandora pay a significant amount in music royalties thus making the business model less attractive.
I find it ridiculous that terrestrial radio executives and Sirius/XM don’t believe that they are in competition with Internet radio or that listeners don’t want a personalized experience. Customization can be actively managed (Pandora) or derived from one’s social media graph. I do understand that radio groups still derive 95% of their revenue from terrestrial and this is where they need to devote the bulk of their resources. However, they must be prepared (literally) for what is coming down the road.
When talking about music with my 16 year old son, I asked him how he learns about new music. He had two responses; 1) Facebook (when his friends “like” a song or artist and 2) www. thissongissick.com. The later is a site containing new artists or mixes/mashes curated by an individual. A shift from professional curation (the PD) to crowd sourcing and opinion molders has taken place. My son does listen to terrestrial radio in the car but he seems to already know just about every song that is being played and on only two occasions can I remember when he was excited about something he did not immediately recognize. Of course terrestrial radio playlists are extensively tested to weed out anything he would not recognize and like. On the way to school this morning (a 20 minute ride) I counted 72 changes of radio frequency due to commercials or monotonous jock talk. He was searching for music. This is a broken search function model which will be fixed in car dashboard 2.0.
XM/Sirius does have some unique content not available elsewhere (e.g. Howard Stern) that consumers are going to continue to want. XM/Sirius is a different distribution system with the advantage being ubiquitous across the U.S. I question whether their all-music channels can compete unless of course there is no Internet connectivity.