Radio InSights

Speed-Bump on Digital Dashboard Highway

Last month radio trades and blogs were filled with ominous stories about how Pandora and the Internet were invading broadcast’s last sanctuary, the car.

Inside Radio solemnly declared:

The Consumer Electronics Show signaled the imminent arrival of the mobile broadband car. For radio to remain competitive in tomorrow’s digital dashboard, a faster industry-wide push towards digital is needed.

Yes, coverage of CES focused the digital dashboard, as bacchalian boosters celebrated the announcements by Ford, Mercedes, Hyundai, BMW, Buick, and Toyota that at least some of their cars would be wired for broadband.

Once again Pandora ran promotional circles around its competitors by grabbing all the headlines. While Clear Channel’s iheartradio will be a featured app in Toyotas along side Pandora, you wouldn’t know it from the press coverage.

A recent USAToday press release story gushed about Pandora’s success and goals:

Westergren's goal: Pandora in every vehicle. "We think that 50% of music listening is done in the car," he says. "That's a huge market that we haven't been able to be part of." Westergren says half the company now is focused on advertising and expansion to autos and other devices.

Apparently it hasn’t occurred to writers that an Internet equipped car means that drivers can also listen to alternatives to Pandora including the streams of local radio stations.

How else explain this feeble Forbes analysis of Pandora’s impact on CBS:

Pandora is now pushing into the drive-time radio market. Traditionally, this market has been dominated by larger radio services like CBS. But can the stalwarts withstand Pandora's push?

From reading all the stories, you’d think there’s only blue-skies and smooth sailing ahead for Pandora and others that are counting on the digital dashboard. Think again.

Here’s Consumer Reports’ reaction to Ford’s MyFord Touch system:

None of the options works as well or is as easy to use as old-fashioned knobs and switches, and they can be more time-consuming and distracting to operate. First time users might find it impossible to comprehend.

The center screen’s cluttered pages, tiny buttons, and small fonts make choosing the right spot to touch difficult. (Speaking of voice control) Synch isn’t perfect, so you might find yourself uttering some words not found in the system’s vocabulary.

Apparently things are so bad that Ford has begun offering 45 minute sessions on how to operate the system. This from Engadget:

Some folks, folks who apparently didn't spend their childhoods mashing thumbs into D-pads, are finding it all a little confusing. Many dealers now offer tutorial sessions that owners of Touch-equipped cars can attend, a 45 minute thrill ride that'll let you and your salesman get just that much closer.

As we recently wrote, people adopt a new technology only when they find it solves a problem. The Ford story shows that it is also true that people resist a new technology when it creates bigger problems than it solves.

Noting Pandora’s push for in-car listeners:

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.

Ford’s MyFord makes listening to streams even more complicated than just plugging your iPod into an auxiliary jack.

One day voice controls will work better, the screens will be easier to use, and people will get used to digital dashboards. However, it will take years for this to happen.

By that time, the entire Internet radio landscape could change.

Broadcast groups are not standing still. Inside Radio today quotes Bob Pittman declaring, “The whole digital world is an untapped opportunity for explosive growth.” He notes, “You’re going to find adaptive radio becoming a feature on a lot of streaming properties.”

We have repeatedly noted that broadcast radio groups are well positioned to capitalize on Internet radio’s development. Pandora might seem to have a tremendous lead in mobile streaming right now, but this will turn out to be another tortoise and hare story.

Verizon to Sell iPhones. What it Means for Radio.

The announcement that Verizon will begin selling Apple’s iPhone has created consider buzz, but most pundits missed the bigger story.

Take a look at a graph put together by the New York Times. It shows the penetration of Android (shown in yellow) and Apple (shown in salmon). Click to enlarge:

                                                                             
 
Follow-up stories citing the Times article mostly focused on the Android/Apple or Verison/ATT&T battles. Few noted the much larger bands of blue representing the overwhelming majority of mobile phone subscribers.

Those large swaths of blue on the graph tell us that the vast majority of mobile subscribers still do not own either Android or Apple phones.

This notion that vast numbers of people are listening to Pandora or Slacker or even broadcast streams on their mobile phones is pure fantasy because most people can't.

Maybe one day it will come true, but right now only a small fraction of mobile phone subscribers can listen to Internet radio on their phones, and an even smaller fraction actually do.

Broadcast Radio Keeps Growing. Critics Confused.

Tell a media pundit that broadcast radio is growing and you’ll be met with howling laughter. You’ll be dismissively told that everyone knows that broadcast is on the ropes, that no one listens to radio anymore.

Then insist you have proof and the laughter will turn to hostile derision. It can't be true! Yet the true picture is clear and unequivocal:

Total broadcast radio listening is growing.

As surprising as it might sound, it is true and easy to prove. It is also easy to explain why so many pundits believe the opposite.

People listen to broadcast radio stations two ways. The majority listen the traditional way, tuning to the terrestrial signal. A small but growing number of people listen to the Internet streams of these same stations.

To determine the real strength of broadcast radio, we have to combine these two audiences. Unfortunately, it turns out to be harder than you might think. The two audiences are measured by two companies and reported differently.

Terrestrial radio is measured by Arbitron. The company ranks individual terrestrial broadcast stations by share in separate distinct geographic metro areas.

Streaming radio is measured by Ando Media. The company measures streams by counting IP addresses "tuned" to the Internet streams of these same stations. The company aggregates the data across stations within groups irrespective of the location of the station or the IP address of the user.

As a result, we have national numbers for broadcast group streams, but local numbers for the broadcast signals of the individual stations that make up the broadcast streams.

For example, if you want to know how Citadel Broadcasting radio stations are doing, you can go on the Arbitron web site and find market shares for each of the company’s radio stations. Unfortunately, it won’t tell you anything about how large the company’s national audience is, and there’s no way to convert the local numbers to national numbers using the web site.

If you go on the Ando Media web site you’ll find Citadel radio station streams listed in a monthly domestic ranker as one group.

There are no publically released ratings that show how Citadel radio stations are really doing nationally taking into account both the terrestrial and streaming numbers.

The lack of publicly released national broadcast radio ratings is true for all radio groups, but more critically extends to the broadcast industry as a whole.

The absence of a single national measure of broadcast radio usage guarantees that broadcast listenership will look much weaker than it actually is. It also means that if and when listeners replace their terrestrial listening with Internet listening, the transition will be interpreted as a decline in broadcast listening.

The lack of a single national measure also allows pundits to cite faulty and fatally flawed research to support their claim that broadcast radio is in decline. Combine that with a steady stream of self-serving press releases from new media stakeholders who selectively report misleading listenership numbers, and it is easy to understand why so many people believe broadcast is declining.

Arbitron recently looked at listening trends in the largest US markets and concluded that broadcast radio listening was steady, even growing in some demographics. And that’s just looking at the terrestrial signals of broadcast stations. This is consistent with a Harker Research analysis.

Ando Media rating trends show that broadcast radio’s streaming audience is growing, nearly 20% in just the past six months.

If terrestrial broadcast listenership is at worst flat and listenership to broadcast group streams is growing, total broadcast listenership has to be growing, even if we don’t have the actual combined numbers.

The reason we need a single combined number is that it tells us how much it is growing, and gives us a useful metric to compare broadcast to pure-play Internet streaming services.

We’ve shown in previous posts that both Arbitron and Ando Media audience ratings can be converted into hours of consumption. We could use this calculation to create a national "rating" for broadcast radio if we could get both company’s cooperation.

First, we need Arbitron to publish national numbers like they once did. Prior to PPM, Arbitron published national ratings each quarter, and promised to resume once PPM was rolled out. So far, they haven’t done so.

Then we need Ando Media’s cooperation.

The company needs to publish a combined broadcast stream rating consistent with Arbitron’s so we can see how much more listening the streams adds to broadcast listening.

The streaming numbers will be incomplete because unlike Arbitron that publishes ratings of all radio stations regardless of whether they subscribe (pay money) to Arbitron, streaming services have to pay Ando Media to be included in the ratings. It means that some broadcast streams would not be included, but at least the major groups would be.

If this were done, it would quickly silence broadcast radio’s critics and new media pundits because we would then be able to see the size of broadcast’s total audience--and its lead over pure-play streaming services–even Pandora.

So it is up to Arbitron and Ando Media to collaborate and finally answer the question: How fast is broadcast radio growing?