Posts

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

Tunein – Developing a Revenue Model

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  Tunein is perhaps one of the largest directories of Internet radio stations with over 50,000 stations listed with most available to be      streamed.  The company has been signing up stations to be part of their directory although we do not know the business terms of these deals.  I think it is safe to assume that they are not exclusive.  Tunein was created by the merger of RadioTime (on line station guide) and TuneIn (mobile Internet radio app).  While Tunein provides information about radio programs and can stream your favorite station, for many years they allowed users to connect to a station’s stream through their guide without having the station’s explicit approval.  Some radio station companies such as CBS have asked Tunein not to carry their streams.  Although obtaining a $6 Million investment from Sequoia, they struggled for many years on how to monetize the service.  Since they did not have a relationship with the underlying station they had no way to insert audio ads.  The revenue component could only come from preroll ads (audio or video), display ads, and featured listings.  Even preroll ads are questionable as many stations insert preroll video so Tunein would have to insert a preroll video ad in front of another preroll video ad,  something that would not make for a great user experience.  They appear to be running only ad network display ads.  There were preroll videos in front of some streams but again these are most likely the ones inserted by the stations themselves.

While no public data exists on the size of the Tunein network in a press release dated 3/22/12 announcing the carriage of The Wall Street Journal Radio Network, Tunein claimed to have 30 million listeners and be in the top five in Apple’s App Store’s music category.  It would be great if Tunein would release more audience metrics but I can only surmise that they need to develop their business model first by entering into an agreement with stations whereby they can obtain part of the ad inventory or solidify premium placement for accessing streams.  Any measurement would a duplicate of that also measured at the individual station level but at least we would have a better feeling for the use of the Tunein platform.  Tunein is a great service and one that we watched the founder, Bill Moore, develop and where we came close to investing on several occasions.  Whether we made the right decision or not remains to be seen.

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

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 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.

Robert Maccini

In Car Radio

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Many have debated what the in car audio solution will be.  My vision is shaped by the device we all carry today that has so many functions.  It’s hard to think about creating a new system to manage our audio in car experience.  As a result my vote is for better integration with a car stereo system and display.  Several auto manufacturers have taken this approach including Ford’s Sync which connects via Blue tooth.   The way content is organized and displayed is the key.  In car listening represents approximately 40% of all radio listening.  Rather than the 20 choices you may have today (terrestrial radio) in your local market, with Internet radio you can now listen to thousands of different station or through services like Pandora, create your own station.  Obviously this is going to have a significant effect on terrestrial radio listening and why pay for satellite radio (except where there is exclusive content).  Terrestrial radio, given its fragmented nature (do most people know who Citadel or Saga is?) does not have a brand while Pandora has almost become the generic name for Internet radio.  So while terrestrial radio will certainly be present both over the air and through streaming there are going to be many more options.

Given the risk of distraction while driving there are some companies such as Radio Time that are trying to make the enormous world of choice in Internet radio listening more organized in an easy to use guide.  Radio Time has been working quietly behinds the scenes for many years to get their guide established in consumer devices.  They are now gaining some traction in-car as well.  Another company working to make the in-car audio experience better is Livio Radio.  Livio has built devices and mobile applications where the display is customized for this environment.  Livio has teamed with Pandora and Radio time to bring an enormous selection of Internet radio station including both Internet only and terrestrial stations that are streaming.

Within the next year we should see the future of in-car audio much more clearly.