Robert Maccini

iHEART RADIO FOLLOW UP

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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.

Robert Maccini

WHAT DO BROADCASTERS SEE IN iHEARTRADIO?

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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.

Robert Maccini

RADIO STATION WEBSITES

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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.