Radio InSights

Broadcast Streams? A Lot Stronger Than You Think.

From time to time Ando Media publishes Internet streaming ratings. Each release incites a riot of stories about how big Pandora is, how much of a lead it has over all the other services, and how anemic the broadcast stream numbers are.

Now with Pandora’s IPO announcment, all those pundits who swoon over each new achievement have the company’s S-1 registration to tout. The announcement alone has generated over 700 Pandora news stories and blog posts.

The lock-stepped narrative of Pandora's near death and phoenix-like recovery to unstoppable dominance could have come from Joseph Goebbels' typewriter. In the midst of all the celebration, most writers missed the bigger story, the continued strength of broadcast radio, and the strength of broadcast streaming.

You’ve heard all the Pandora numbers before: 80 million registered users, growing by one per second. Over 1.4 billion stations, and over two billion listener-hours in 2010.

Pandora may have 80 million registered users, but how many regularly use the service? Now we know. According to Pandora, about 30 million users listen at least once per month. Apparently, listening to the service as little as once a month is considered regular.

Over a month’s time, something like 50 million users never log in. So much for loyalty.The users that do listen spend about nine hours a week with the service.

The numbers sound impressive, but without context they don’t mean a lot. Since Pandora claims to be redefining radio, we have to examine the numbers in the context of radio as it is.

There are about 10,000 commercial broadcast radio stations in the US. Each week over 240 million people listen to these commercial broadcast radio stations, and they listen for fifteen and a half hours.

Pandora's S-1 charts the company's meteoric growth using what they call Listener-Hours, an odd choice since they had never reported the metric in the past.

Perhaps they got the idea from Radio Insights after we introduced the metric last June. (We call it Hours-Tuned.) The advantage of using hours-tuned is that it enables us to compare Internet services to broadcast radio.The graph at the left puts Pandora's strength into perspective.

The most striking feature is the strength of commercial broadcast radio. Over 3.7 billion listener hours goes to commercial radio each week. In an average week commercial radio has twice the listener-hours that Pandora generated in all of 2010.

The broadcast listening-hours for just 187 New York, Los Angeles, and Chicago stations equals 284 million listener-hours, a little more than Pandora’s weekly national count.

So only 187 broadcast stations generate as much radio consumption as Pandora’s 1.8 million stations.

Perhaps the most under-appreciated showing is for the top broadcast streams. The 14 top broadcast streams total more than 100 million listener-hours per week, excluding CBS. (We didn’t add in CBS because its 60 million listener-hours include AOL Radio and Yahoo.)

The streams add about 3% to broadcast’s total, and that’s just the 14 top groups subscribing to Ando Media. Add CBS along with non-subscribing broadcast stations and streaming could total nearly 10% additional broadcast radio listening.

Of course the total is small compared to Pandora, but these hours are what Wall Street calls accretive, growth from the outside.

The bottom line is that broadcast streams should be judged in the context of the enormous size of broadcast numbers. The broadcast streaming audience is growing, and it is enlarging the total broadcast audience–-even as Pandora grows bigger.

Sun Rotates 'Round Earth! Pandora Devours Broadcast!

Anyone who has watched the sun rise in the east knows that the sun rotates around the earth. No need for scientific experiments or proof. What can be more conclusive than one’s own observation?

That was the prevailing thought when Galileo challenged the views of most 16th century intellectuals and asserted that the earth circled the sun. For questioning what everyone took for granted, Galileo was persecuted, tortured, and forced to recant his heretical ideas.

Judging the impact of Pandora on broadcast radio is another example where people don’t seem concerned about facts or evidential proof. They just know in their heart that Pandora will devour broadcast.

Radio’s Galileo is Mary Beth Garber, president of the Southern California Broadcasters Association (SCBA). While most broadcast leaders seem uncomfortable challenging the self-serving assertions of new-media pundits, Ms. Garber has been a lone voice defending broadcast radio, first against satellite radio, and now against Internet radio.

In 2005 at a time when The New York Times was gushing on about satellite radio’s threat to broadcast, Ms. Garber rose up to question all the happy-talk about satellite radio. The Times predicted satellite would hurt broadcast badly. Ms. Garber was brave enough to disagree publically.

The Times (along with most pundits) predicted up to 45 million subscribers by 2010. The actual number turned out to be less than half that.

At the time she took a lot of heat for questioning the threat of satellite (‘the fastest-growing technologies ever”!), but it turned out she was right and The New York Times was wrong.

Now the headlines are about Pandora. A Google news search finds nearly 600 stories on Pandora’s IPO.

Nearly all of them tell the same story about the near death of the company, the phoenix-like return, and how Pandora has severely hurt broadcast radio. Take the 2005 NYT satellite story, replace the word satellite with Pandora, and it could pass as a Pandora story.

That’s perhaps why Ms. Garber once again stood alone to defend radio when Radio Ink decided to weigh in on the Pandora story. Her reward was a dismissive ad hominem attack that completely ignored her points.

If anything, Ms Garber was too kind to Radio Ink. The author showed no evidence of uncertainty or ambivalence. He appeared to have drunk deeply from the Pandora punch bowl essentially declaring Pandora the victor over radio.

Cutting and pasting 400 words from the Pandora S-1 (no sense writing anything original when it’s all there in the document), the writer laid out a withering attack on broadcast radio.

Many of the 600 IPO stories saw through the fluff and puffery of the S-1, and recognized the battle is just beginning. Not so Radio Ink. No other source led the Pandora cheerleading like Radio Ink did.

In the end, the story simply exposed the extent of Radio Ink’s naivete. It reads like a Justin Bieber fan club letter, showing no critical thinking, or for that matter much thinking at all.

For every consolidation horror story, there’s a broadcaster doing good radio. For every complaint about commercial radio’s vacuousness, there’s a radio station fan who wakes up every day to radio.

Sure there’s bad radio out there. There always has been. But there’s also a lot of good radio being done.

Maybe Radio Ink could spend a little less time leading cheers for the other team and more time better understanding and highlighting the good radio that keeps broadcasting on top.

Satellite Radio on your next iPhone?

Most reports on Pandora’s proposed initial public offer (IPO) have focused on the upbeat first few pages of the company’s S-1. Few have mentioned the risk factors listed in the pages that follow.

One exception is the Huffington Post story Pandora’s Big Challenges: Fees and Foes by Bianca Bosker. She acknowledges the service’s considerable lead, but warns that:

While confronting its considerable content costs, Pandora must also face a growing number of competitors for the advertising dollars on which it relies.

Bosker notes:

Pandora has long touted its Music Genome Project engine as unparalleled in its ability to deliver playlists personalized to each users' taste –“the most sophisticated taxonomy of musical information ever collected,”the company brags.

But experts counter that besides good marketing and buzzwords, there is little to distinguish Pandora's recommendation engine from other services. (Quoting Steve Gordon, author of The Future of the Music Business) “There's been a lot of publicity given to Pandora’s ‘secret formula,’ but I don't think that's the key to its success.”

Bosker quotes Aram Sinnreich, an assistant professor at Rutgers University's School of Communication and Information, who sees growing challenges for Pandora:

The differences between Pandora, a social media site on which people post links, and a music blog will continue to erode, and Pandora will continue to have to find ways to differentiate itself from the myriad other avenues through which online consumers will get music. The domain which Pandora currently rules is going to become much larger and much more competitive.

As if on cue, this week it was announced that Verizon was granted patent 20110003544, entitled A System for and Method of Receiving Internet Radio Broadcast via Satellite Radio.

You might ask why a mobile phone company would be interested in satellite radio. As explained on the investment website Seeking Alpha:

Cell carriers are faced with a crisis of sorts, which stems from bandwidth hogging applications such as internet radio. Auto manufacturers are now including these types of offerings in their vehicles. The strain on bandwidth can only increase.

If a satellite service, however, could deliver audio entertainment options to a cell phone through the use of its own satellites, the cell carriers could free up more of their existing bandwidth.

Apple's iPhone patent gave us a first glimpse of this idea. This new Verizon (VZ) patent, conversely, proves that the speculation of what Sirius XM's SATRAD 2.0 offers is worthy of excitement.

It turns out that while everyone has been assuming that mobile bandwidth will expand as demand grows, the mobile companies themselves are working on alternatives.

While it might solve Verizon and AT&T bandwidth problems, it also creates new opportunities for satellite itself. The system would allow Sirius to feed customized content such as Pandora-like playlists to a Sirius receiver.

These developments illustrate the challenge of predicting the future. Innovation rarely moves in a straight line. Satellite radio, whose future looked dim, may one day be an app on Droid and Apple mobile phones.

We’re also probably not too far away from the day when HD radio channels are repurposed to deliver customized content.

We have repeatedly suggested that Internet radio is in its infancy and no one knows what it will ultimately look like. Rather than a single broadband delivery system from companies like Comcast and AT&T, it may turn out that broadcasters (maybe even satellite broadcasters) play a central role.

Regardless of how it is delivered, content will always be key. And broadcast radio has a tremendous advantage.

Listeners Can Smell a Loser

Listeners are like animals. They can smell fear.

With today’s large consolidated radio groups, most radio stations have people with equal marketing and programming skills and similar resources. As a result of consolidation, radio’s playing field is more even than it ever was.

Yet a more level playing field hasn’t tightened battles, or made for fewer losers.

Look at any ranker and you’ll find that shares of stations outside the top two or three drop rapidly. Every market has a few stations with large audiences, but most have a fraction of the leader's listeners.

No format is a guaranteed winner. Every format has its share of losers. As of last Fall, winners in the 36 non-embedded PPM markets came from sixteen different formats.

Head to head battles are nearly always lopsided. As a rule, the second station in a format battle has a third fewer listeners than the leader. And these battles don’t seem to favor any one company over another.

It doesn't matter who owns the station. Clear Channel, CBS, Citadel, Cumulus, Emmis and Entercom all have winners and losers. No group has a lock on winning.

If every format has winners and losers. If every radio group has winners and losers. And if even within a market cluster there are winners and losers, then there must be some quality, some element that no brain-trust or deep pocket can replicate time after time.

What is it?

Winners possess an intangible quality, a winner's aura that transcends ownership, resources, and all the other tangible differences we tend to focus on when judging a radio station.

It is the winning aura that attracts listeners. Listeners sense a winner. They recognize it when they hear it.

And listeners can smell a loser. They sense when a station is faltering. People don’t like listening to a loser.

A station can play the best testing music, have the best jocks, and give away bigger prizes and still lose if it sounds like a loser.

Losers sound like they are going through the motions. Jocks sleep-walk through their shifts, sounding like they’d like to be anywhere other than the studio. Promos sound tired and repetitious, promoting the same recycled contests and events.

The music is predictable, the song choices uninspired. The music is scheduled with a similar lack of inspiration.

These things tell listeners that the station is a loser even when by every objective measure, radio people think the station sounds great.

How many times has a radio group taken the format of a successful station to another market and had it fail miserably? The second station may be a perfect formatic clone of the first, but unless the clone captures the aura of the first, it will fail.

Listeners know a winning station when they hear it. A winner draws them in. It lures them to listen longer.

The jocks sound like a neighbor. They live in the same town, have the same local experiences, and share them on-air. They sound like they want to be on the radio, they want to share with the listener, whether it is a song, a contest, promotion, or even just the weather.

The music of a winner is both familiar and yet a bit of an adventure. There’s a balance between the new and the known, a comfortable but wearing-well mix of music. There’s a natural flow to the music, like a mix tape made for a friend.

The marketing for a winner is an extension of the winner’s programming. It doesn’t try too hard. It is more a subtle inducement rather than bribe. It reinforces the feeling that the station is a winner, conveying the same confidence that the station effuses.

A local programmer and local talent are key to a radio station’s success not because they are smarter than anybody else. It is because they are local. Only local people can really care about the station and its listeners. Only local people can create a winner’s aura that draws people in.

Even as local radio’s competitors grow, competition is not local radio's greatest threat. It is consolidation and the nationalization of radio. If local radio ceases to be local and loses its aura, it will be consumed by the coming tsunami of national alternatives.

However, if broadcasters invest in local radio, leveraging local talent to create and enhance local radio's aura, no national service can prevail.

Does Radio Finally Have a Leader?

Does radio finally have a leader?

In the past we’ve lamented radio’s lack of visible leadership. Two years ago we wrote:

Where is the leadership? Who speaks for radio? We need someone willing to defend radio and put it back on the radar screen.

Leadership for us is showing a sincere belief in radio and its future. Leadership is understanding radio’s strengths. Leadership is defending radio against baseless self-serving attacks from new-media stakeholders and radio critics.

Leadership is understanding that the Internet is an opportunity for radio, not a threat.

In the brief time since joining Clear Channel Pittman has demonstrated those skills, managing to appear in the Wall Street Journal, Bloomberg, Variety, and Yahoo finance with an upbeat and positive outlook for radio.

Pittman has the credibility to say that radio has a future and back it up, having come full circle from radio to new media, and back to radio.

Pittman’s message is that broadcast radio listenership continues to be strong, but it has an image problem, a belief held by many people that radio is in decline:

Half the story is telling the story. We’ve got the consumer base. We just have to offer them the features.

In barely a month Bob Pittman has accomplished more than the NAB, RAB, and CEO’s of the major groups have done in the past three years in pushing back against the digital cabal and their attempt to misrepresent broadcast radio’s continued strength.

Maybe radio finally does have a leader.