Radio InSights

Can We Call Internet Radio Mainstream Yet?

“So can we call Internet radio mainstream yet?” The question, recently posed by an internet radio supporter, is an interesting one. Has internet radio become mainstream?

Maybe one day, but it looks a long ways off.

Internet radio claims to be the future of radio. According to its supporters, one day soon few people will be listening to traditional radio. They will be listening to new personalized streams of Internet companies like Pandora, Slacker, and others yet to be created.

The gold standard then is broadcast radio. If the goal is to replace broadcast radio, then Internet radio should be measured against broadcast radio.

The comparison is somewhat complicated by the fact that internet and broadcast radio ratings are not directly comparable. Internet radio measurement counts IP addresses and reports things like sessions, while broadcast radio measurement counts listeners and reports things like quarter-hours.

Fortunately, with a little math, the two can be compared. In a June post we showed that both broadcast and online ratings can be converted into Hours-Tuned, a metric that tells us how many hours people spend “consuming” radio.

For example, people in just New York and Los Angeles consume about 334 million hours a week listening to local radio stations in the two markets. Nearly half of the hours are spent listening to just the top 20 radio stations.

The latest national Arbitron estimate puts total broadcast consumption at over 3.5 billion hours a week.

How does that compare to Internet services?

The top 20 Internet streams generate 377 million hours of consumption. The number is somewhat misleading, however. Over 200 million of those hours go to Pandora alone.

This means that the consumption of broadcast radio in just two markets nearly equals the national consumption of the top 20 Internet radio services even when we include Pandora. Back out Pandora and New York broadcast consumption alone is greater than the remaining national Internet services.

There’s really no comparison between broadcast listening and Internet listening. For example, consumption of just the Clear Channel stations in New York exceeds the total national Clear Channel streaming consumption.

Nine New York broadcast stations have greater hours-tuned than Slacker’s national numbers.

Were it not for Pandora, Internet radio would barely exist. The graph above shows weekly consumption in millions of hours according to Ando Media’s July domestic full week ranker. For scale, we’ve included the leading station in New York and Los Angeles (in bright red) for comparison. (Click to enlarge.)

So can we call internet radio mainstream yet?

For a business that hopes one day to be broadcast’s successor, Internet radio is falling well short of being a serious threat. Yes, Pandora is a phenom, but its success is the exception, not the rule.

There are no other break-out successes that suggest Internet radio has gone mainstream. Maybe one day, but not this day.

 

Dashboard Confession: Pandora Wants Your Listeners

Two new Pandora press releases stories outline the company’s latest assault on broadcast radio, in-car listening.

“(In-car listening) is the holy grail for us,” says pandora founder Tim Westergren. “We just have to figure out a solution to get Pandora into cars that’s as easy as radio is now.”

Bloomberg declares: Pandora needs a foothold in cars to challenge traditional radio and attract more advertisers.

Variety warns us that:

The attempt to break onto car dashboards is a stab at the heart of AM/FM radio, which, while still dominant in the field to the tune of 90% share of all radio listening, has seen troubling signs in the behavior of young consumers.

(The author then goes on to cite the discredited Edison Research study that Arbitron and the Southern California Broadcaster’s Association showed is just plain wrong.)

These two new articles join a growing pile of speculative stories on how Pandora might now finally be ready to put a dent in broadcast listening.

While these stories are PR disguised as news, they inadvertently reveal that while Pandora is a spectacular success in the context of streaming services, it is a minor player in the broader context of radio listening.

Will Pandora’s assault on in-car listening hurt broadcast?

Radio’s dominance in the car has been under assault since the 8-track tape. Each new addition to in-car entertainment has had the potential to hurt broadcast listening, yet none has had much of an impact.

Satellite radio was designed to challenge broadcast for in-car listening. After a near bankruptcy and bale-out, merger, and countless upbeat predictions by Mel Karmazin, Sirius XM finally passed 10 million subscribers, less than 4% of the registered vehicles on the road. 

While Sirius doesn't PPM encode and therefore cannot be measured by Arbitron in large markets, in diary markets where listeners can still report their satellite listening, there’s hardly any.

Pandora is already on after-market Pioneer and Alpine car radios. Ford’s Sync features Pandora. Mercedes is rolling out an iPhone app that will one day enable Mercedes drivers to cordlessly listen to their iPhone through the car’s entertainment center.

The problem for Pandora is that these systems are more expensive and complicated than radios. Today a driver can hop in the car, flip on the radio, and within seconds be listening to information and music coming out of the speakers.

Need the latest traffic report? Turn on a news-talk station. Bumper to bumper traffic? Hit the scan and find some music while you’re staring at the brake-lights ahead of you.

The majority of drivers place a higher value on convenience than capability in a car. The average commute is less than an hour, the average errand by car considerably less.

The likelihood that you are going to plug in your iPhone, navigate to the app of your favorite music service, launch it, and then select a stream in the 15 minutes it takes to drive to the grocery store to buy milk is small.

But fast-forward a few decades to the future envisioned by new-media boosters when most cars will have a high speed internet connection, and radio apps reside on the built in entertainment console of most cars.

Do you really think Pandora is going to be the only app on the dashboard? Not a chance.

We have frequently pointed out that broadcast groups are the best positioned to capitalize on the migration of listeners to online listening. By the time a significant number of drivers begin listening to radio streams in their car, broadcasters will be there.

In fact, it is already happening. Toyota just announced a mobile deal with Clear Channel to integrate iheartradio with some Toyota vehicles beginning next year.

Game on.