Robert Maccini

CES- RADIO DASHBOARD FRAGMENTATION (PART II)

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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.

Robert Maccini

CES- RADIO DASHBOARD FRAGMENTATION (PART I)

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We just returned from the Consumer Electronics Show in Las Vegas.  The primary theme was Internet radio in the car.   One of our portfolio companies, Livio Radio, announced FMConnect which allows terrestrial radio stations the ability to now take advantage of two-way communication (read; digital) utilizing the cell phone connected to your car’s entertainment system.   Also Kudos to Fred and Paul Jacobs for inking a deal with Ford for their Ford Sync product.  Unfortunately the car ecosystem is fragmented and confusing to a degree that is frightening.  While developing an app for Ford is an attractive idea, keep in mind that this app will not work with all the other car companies’ entertainment systems. As currently stands a station would have to develop a different app for each car platform which is what Livio Connect is trying to eliminate.  Livio is integrating with all car companies and their suppliers.  Internet radio in the car can be achieved by many means as follows:

1)  physical cable

2) Blue tooth

3) Wi-Fi

Some systems just mirror the phone with navigation still done on the phone.  Others such as provided by Livio Connect  allow listeners to control access to streams from the cars control.  This makes controlling audio options much safer.  This is also true of Ford Sync’s product but it of course is one of many in the car ecosystem and I don’t think that Chrysler is going to allow the Ford platform into their cars.  Thus the need for a company like Livio which can work with all car companies because it has integrated into the chipsets of major suppliers of the in-car entertainment systems.  Radio companies should leave getting connected in the car to auto industry experts given the vast, confusing world it represents and should partner with a company like Livio to deal with integration.

Robert Maccini

INTERNET RADIO AD TARGETING

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Ad targeting in Internet radio does not deliver for advertisers at the local level.  No it is not rooted in a problem with technology.  As recent announcements from Triton Digital and Abacast make clear, the technology exists.  However, since most station’s audiences are small and a significant amount is out of market listening (often over 40%) targeting will not yield impressions needed to generate significant revenue.  As a result targeting at the station level makes little sense other than possibly to guarantee to an advertiser an ad won’t be heard out of the metro.  Targeting is useful on a national basis as a combination of stations on a network can deliver results as long as the target is not too narrowly defined.  Pandora is probably the only service that can target locally without aggregation due to the size of its network.

Most radio stations do not collect listener data for their streams so the only targeting that can be done is geographic based off of an IP address.  Listeners will give up this data for something they value if it cannot be obtained from other sources, e.g. Facebook.  Some targeting is done based on station format, e.g. an AC station’s audience is primarily 25-54.  This is not always accurate.  IP addresses are not always correct as well which can result in lack of delivery of the campaign.

Mobile targeting is perhaps the holy grail as you can reach consumers closer to the point of purchase.  As with targeting to desktops the problem of scale is even a greater issue in mobile.  We have heard that Pandora is having difficulty monetizing its mobile audience which is 70% of  their total audience.  I don’t quite understand this as I would argue that engagement is greater with a mobile phone than on a desktop (you may leave your desk but typically you don’t leave your phone).  I believe that longer term we will see premium CPM’s for mobile.  Effective ad creative and proper delivery  will help.

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

RADIO – “CANNIBALIZE YOURSELF OR SOMEONE ELSE WILL”

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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.

Robert Maccini

ANGEL STREET CAPITAL INVESTS IN LIVIO RADIO

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Angel Street Capital recently completed an investment in Livio Radio. Livio Radio, a Detroit-based team of auto infotainment and digital audio veterans, has established relationships with key content providers, automotive companies and retail players and has a validated, scalable business model that addresses a large, global market.
Specifically, with the car being the final frontier of the rapidly growing internet radio market, Livio Radio has developed a suite of hardware products & middleware/software solutions that enables full in-car audio experience via smartphone for nearly any car – new or old.  Put simply, Livio has enable Internet radio in the car.  I recently wrote a post on Livio which can be accessed here.


Robert Maccini

INTERNET RADIO IN THE CAR

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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.

Robert Maccini

INTERNET RADIO MOBILE BANDWIDTH CONSUMPTION

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Recently concern has arisen surrounding the cost of mobile streaming.  AT&T offers the following monthly data plans.

200 MB – $15.00

2 GB – $25.00

4 GB – $45.00

Each of these plans charge $10.00 for an additional 1 GB

Currently Verizon Wireless offers unlimited data usage for $30.00.  However, their CEO during a telecom conference in March stated Verizon will move to a tiered pricing model during the summer.  So what bandwidth is consumed when streaming?  Let’s do some math.  Bandwidth consumption depends on the quality of the stream typically expressed in kilobytes (“KB”) per second. Many stations stream at 32 KB per second so a user would consume 14 megabytes (“MB”) per hour ( 32 KB x 60 x 60 = 115,200 KB per hour, there are 8 bits in 1 byte so (32 x 6,600)/8 = 14,400 KB so 115,200 KB / 1,024 = 14.06 MB per hour).  Let’s assume a listener spends 2 hours per day streaming music so this would consume 28 MB per day or 840 MB per month.  There may be other data being transmitted which would increase the amount of bandwidth consumed.  The average time spent per session listening to Internet radio on average is approximately 2 hours.  However I believe time spent listening is lower on mobile devices.  To be conservative we’ll keep the 2 hour per day assumption.  Some wireless company websites actually has a calculator for determining data usage for various activities.  AT&T assumes a streaming rate of 64 KB per second.  Assuming 2 hours of listening per day resulted in consumption of approximately 2 GB.

T-Mobile’s data calculator computes streaming audio data consumption to be much greater:

T-Mobile does not state what bitrate was assumed.  Obviously mobile users also consume bandwidth for other purposes.  I believe most mobile users are comfortable with paying $25.00 per month for 2 GB of data.  So it appears that the cost of a monthly mobile phone bill is going to go up for Internet radio users.  Most will need at least a 4 GB plan which would add another $20.00 per month.  While cell companies lost the battle for control of content they do have pricing power and leverage.  The combination of Verizon and T-Mobile, if allowed to occur by regulatory agencies will lessen competition and could lead to higher costs.  I am rooting for more competition from the likes of Clearwire and LightSquared.

Robert Maccini

Angel Street Capital Invests in Mofuse, Inc.

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Angel Street Capital has participated in Mofuse’s recent completion of a Series A preferred stock offering.  Mofuse provides a DIY solution for the creation of mobile websites.  Angel Street Capital believes that Mofuse provides a much needed service.  While much hype has been garnered around mobile applications, the bulk of mobile web interaction occurs in a browser and most websites do not display well on mobile phones.  Not every one needs an app as I wrote in a recent blog.  While there is a great degree of competition in this area we also believe the opportunity is large enough to support many competitors.

The Mofuse management team is led by CEO Annette Tonti and its founder David Berube.  We believe David has an excellent vision regarding the development path of the platform and Annette is a seasoned team leader and energetic new business maven.

Robert Maccini

MOBILE WEB VS. APPS

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Not everyone needs an app.  Given the success of Apples App Store and now the launch of Google Chrome’s app store the buzz has created a feeling of needing an app in a mobile world.  There has been such a rush to keep up with the cool factor that many have lost site of a consumer’s more typical means of accessing your content – via the web.  Most are aware that if we try and access a regular website on a mobile device frustration inevitably is the outcome.  The font is so small it can’t be read or you have to scroll across or down repeatedly or images don’t render correctly (if the page will even load) leaving large gaping holes on the page.  I tried to access CBS’ KROQ-FM on my phone.  Here is a screen shot on my iPhone.

I clicked on the “Listen Live” button on their website accessed via my phone (can you even read it?).  Yes Apple does not support flash but this did not have to happen if a mobile web site was created note: even though the player stated I could access an older version it was still flash based and would not load.  Am I the only one who as ever tried doing this?  Do you think audience has been reduced due to these types of issues?  This problem can be resolved by developing a mobile web application that automatically redirects a user to the mobile site.

Apps are static and for the most part you need to return to the developer to make changes.  Apps are much more costly to develop especially considering the need for a different version for the three major operating systems.  They also involve approval in whatever store they are being listed in which takes time.

One of the reasons apps have been popular is that someone actually took time to think about how content would be rendered on a mobile platform.  Being mobile adds another dimension to what consumers need in a website.  Not every business needs an app and soon I am going to need an apps manager to manage all my apps.  There are a number of platforms that allow the user to create a mobile web site.  They are significantly more cost effective than developing an app and changes can easily be made and published immediately.  Creating a mobile website also involves thinking about the small screen size and important features someone in a mobile environment needs.

Angel Street Capital is currently considering an investment in one such company, MoFuse, Inc.  MoFuse is a DIY platform and is easy to use.  I will be covering MoFuse in more depth in a later post.