Radio InSights

Slacker: Mobile's Double-Edged Sword

It’s not often that we get a chance to see the impact of mobile listening up close. The latest Triton Digital numbers offers us one of those rare opportunities.

Slacker signed-on to Ando Media in July of last year.

For the first few months, only Slacker’s computer-based listeners were counted.

Then sometime around November, Ando began including mobile listeners in the service’s count.

The graph above shows what happened.

The orange line shows the session TSL trend. When only computers were counted, average sessions lasted about 1:45. Now with mobile added, average session length has plummeted to less than 45 minutes.

The green line shows Session Starts in millions. After several months hovering in the mid four million range, Slacker “took off” in November, settling over the 20 million mark.

While some portrayed the 4.5 million to 20 million Session Start gain as growth, it's likely there was very little real growth.

The “spurt” beginning in November simply shows that mobile listening makes up a great deal of Slacker listening. Before November Ando didn’t count it. Beginning sometime in November Ando started.

The warning for those who believe that mobile will be the real breakthrough for streaming is the precipitous decline in Slacker’s TSL once mobile listening was counted.

You can see it in Slacker total consumption measured in hours-tuned.

While Slacker’s Session Starts increased more than four-fold (+355%), total hours-tuned grew less than two-fold (+84%).

What it tells us is that Slacker’s 15+ million mobile users are spending virtually no time with the service. Slacker’s TSL is coming from the service’s computer-based users.

Most agree that streaming growth is going to come from a wave of new mobile users. If that is the case, we will see more Slacker-type growth, lots of new sessions spending little more than a few minutes of drive-by listening.

For subscription-based services, that’s no big deal. A paying subscriber is a paying subscriber no matter how little she listens.

For advertising-based services, it’s a much bigger deal. Very short listening spans are problematic when you’re trying to sell advertisers.

Advertisers want to have some confidence that users are going to see or hear their commercials. The most common way to do this online is to have a pre-roll position, one or more commercials that users have to sit through to hear the service.

The problem is that with short listening spans, all the user will hear is the pre-roll--not a good way to build an audience, or a business.

Where Did the Streaming Numbers Go?

 

 

Where did the listening go?

The February streaming numbers are out, and they raise a great many questions.

As the graph at left illustrates, listening is off for the second month in a row. This is the first time this has happened.

Some of the declines might be the result of a technical glitch, but declines hit the majority of services.

The leading service, Pandora is down for the second month in a row, 17% in two months. The ratings, however, are accompanied by this footnote:

the code that measures audience and time spent listening was inadvertently omitted by Pandora in some versions of their mobile applications. Therefore, not all of Pandora’s mobile listening is captured in this report.

The glitch comes at an awkward time, as Pandora prepares to go public. The footnote adds that the technical problem will also affect the next two months’ ratings.

It means we won’t have reliable ratings again for Pandora probably until after the service has gone public.

But how do we account for the fact that 16 of the other top 19 services also declined?

Did listening actually decline, or is there another explanation?

If these were Arbitron estimates, we might write it off to bad sampling. Wobbles do happen, which is why Arbitron ratings are called estimates.

When Arbitron numbers decline, we can’t be sure whether the decline means fewer people were listening or whether there was just a sampling wobble.

Wobbles don’t happen with streaming numbers, however. Streaming numbers are not estimates. IP addresses are actually counted, so we can eliminate a wobble as the source of the problem.

Assuming there is no undetected measurement problem, the only possible explanation is that consumption of measured online listening declined two months in a row.

Last year we speculated that streaming listenership growth would slow and ultimately stop at some point, well before anyone expected it.

It is too early to conclude that streaming growth is slowing, but the fact that listenership contracted in January and February should be a reminder to radio’s critics that relentless growth and ultimate dominance is far from assured for streaming services.

Battle for Digital Dashboard Heats Up

Take a close look at this shot of Toyota’s Entune infotainment screen courtesy of engadget (click to enlarge). Of course Pandora is there, but look just above it. You’ll see iheartradio.

As reported some time ago, when Toyota rolled out Entune, all the headlines were about Pandora's coup. Few stories bothered to mention that Clear Channel had also cut a deal, and iheartradio would be on the screen as well.

At the time we observed that:

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.

As the screen shot illustrates, Pandora’s lead in securing screen real estate will fade as mobile streaming becomes more common and more apps compete for space.

The digital dashboard will open up opportunities for all streaming radio stations including local radio stations.

As we pointed out in January:

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.

And don't forget, the tortoise won that one.

Pandora is Watching You.

How much privacy are you prepared to give up to listen to Pandora? Without knowing it, you are giving up a lot.

Earlier this week the Wall Street Journal broke the story that federal prosecutors were investigating whether smartphone apps have been illegally collecting information about handset users without proper disclosures.

In the midst of going public, Pandora mentioned the subpoena in a revised SEC filing. Pandora noted that it received a subpoena in the matter and believed other app providers had also.

It turns out the issue is a little more serious than first reported, in part because Pandora may have violated the law, but also because the gathering of user information is central to Pandora’s pitch to advertisers.

Information Week quotes Tyler Shields of Veracode as calling the data collection Orwellian:

How much personal information does a user trade for access to a "free" smartphone application? It depends on the application, but the type of data collected can seem "Orwellian," according to Tyler Shields, a senior researcher for application security testing firm Veracode.

"Your personal information is being transmitted to advertising agencies in mass quantities,"

According to a story in The Register:

Veracode, found that Pandora's app tracked users' age, sex, zip code and precise geographic location, which in many cases was updated in a continuous loop.

The app then sent the information to servers operated by advertising services including comScore. Other information that was shared included the phone's device ID and the user's birth date.

While attempting to minimize the significance of the subpoena, Pandora also admits that the gathering of its Orwellian data was critical to its success:

Restrictions on our ability to collect, access, and harness listener data, or to use or disclose listener data or any profiles that we develop using such data, would in turn limit our ability to stream personalized music content to our listeners and offer targeted advertising opportunities to our advertising customers, each of which are critical to the success of our business.

The claim that Pandora needs to spy on its users to personalize its music streams seems somewhat disingenuous. The user’s seed songs combined with Music Genome Project data, and “thumbs up” ought to be enough to personalize a stream.

Claiming that Pandora needs the user’s location, phone ID, age, and sex to enhance the user’s experience seems a bit of a stretch.

However, from the standpoint of selling advertising the benefits are obvious.

Most advertisers are willing to pay dearly to have such detailed personal information. The only reason advertisers don’t know more about their customers is that failing to gain the consent of customers and gathering it without their knowledge is illegal. Hence the investigation.

Maybe the RAB can develop a marketing campaign surrounding Pandora’s undisclosed spying on its users. How about: Real Radio Stations Respect Your Privacy.

Has HD Radio Reached a Tipping Point?

From time to time we hear word that HD Radio is near a tipping point, a point where awareness and interest in HD Radio reaches critical mass and the medium takes off.

If Google is any indication, HD Radio has already reached a tipping point, a tip not toward success, but instead toward oblivion.

Google Insights is a tool to track interest in a topic or product using search activity as the metric. Type in Charlie Sheen, and you’ll find that interest in Sheen started taking off on February 25th, and exploded on March 2nd. Aside from a secondary peak on March 8th, interest has steadily declined since.

 
The chart above shows interest in Pandora radio. Pandora is an interesting study because despite continued growth over the last few years, interest actually peaked in early 2009. Since then, interest has fallen off 50%.

With registered users topping 80 million, maybe everyone knows about Pandora by now and there’s no need to search for it.

 
HD Radio is in a very different place. With limited awareness of HD and very slow set sales, HD needs to be in a growth mode when it comes to search.

If we saw growing numbers of listeners using Google to learn more about HD Radio, it might mean HD Radio is gaining momentum, and it is just a matter of time before people start buying HD radios.

Unfortunately, interest in HD is declining, not growing. Interest peaked in December 2007, and has been steadily declining since. Each December there is a seasonal peak, as there is for most tech gifts, but interest in each subsequent Christmas season has dropped.

Interest in HD has fallen by two-thirds since its 2007 peak.

 
Graphing Pandora and HD Radio against one another shows the dramatic difference between the two service’s arc of interest. The tipping point for HD Radio actually occurred in 2007. It was the year that interest in Pandora exceeded interest in HD, and since then HD interest has steadily eroded.

While search interest is just one metric, declining interest is one more negative sign of HD Radio's struggle to gain traction.

As an aside, HD channels are showing some signs of life in Arbitron, apparently fueled by 250 watt FM translator simulcasts. Maybe AM broadcasters should lobby for commercial low power FM allocations rather than more HD power!

Want to Build Your Own Pandora?

Want to build your own music discovery platform? Work at Columbia University may soon help. According to the Chronicle of Higher Education:

A new collaboration between Columbia University researchers and The Echo Nest, a company that tracks online music and delivers listening suggestions to users, hopes to take the human element out of Internet radio. One goal is to deliver better recommendations and more songs through improved artificial intelligence.

To get started, download the app Discovr. Here’s what Discovr does:

Discovr lets you see how the music you love is connected, and makes it easy to find great new bands and artists that are similar to what you like.

Music and Program directors take note: For $2.99, your listeners can learn more about your music than you know. That should be a sobering thought.

 

Continuing developments in music discovery only reinforces the point we’ve been making. Pandora may have been the first to market artist linkage as a means to discover new music, but they are not alone, and in some respects they are already behind the state of the art.

Adapting to Radio's Lost Grip on Music Discovery

It wasn’t that long ago that listeners needed radio to find out about music. Unless radio played a song, people didn’t know about it.

Television variety shows like Ed Sullivan had the occasional pop artist on, but they only booked the superstars, the artists that radio had made popular (think of Elvis and the Beatles). American Bandstand might play a couple of new songs for Rate-a-Record, but most of what they played were also already radio’s Top 40 hits.

Then in 1981, MTV signed on. As a video jukebox, MTV was the first serious threat to radio’s status as the main way people discovered new music.

It was a warning shot for radio. It warned that radio’s unchallenged status as arbiter of new music was not assured. Another medium could break its own artists and create its own stars.

Fortunately for radio, MTV found it could make more money discovering the next Beavis & Butthead than the next Michael Jackson. Radio regained the music discovery crown, and held it for another 18 years.

Napster changed all that in 1999. At its peak nearly 15 million users a month were sharing and discovering music on the web.

Today people are immersed in music discovery. The process of music discovery is diffused across a plethora of options including computer games, movie soundtracks, streaming, playlist sharing, social media, Rhapsody, Mog, YouTube, and on and on.

Oh, and radio too.

Radio still commands a special place for music discovery. Depending on the research, radio is either number one or close to it, but it no longer has a monopoly.

These facts are well known. Most broadcasters realize radio has lost its exclusivity. However, there’s been little discussion about what this development means for choosing what songs to play.

Picking music hasn’t much changed from the days when radio stations relied primarily on the back page of R&R. The trades have changed, but the process hasn’t.

It made sense then, but does this insular approach make sense now with people exposed to so much more new music, in many cases songs radio isn’t playing?

In today’s Call-Out songs with virtually no local radio airplay can make it into the top 10. Familiarity can reach nearly 100% for songs that no one in town is playing.

Yet most stations test and play the same predictable songs over and over.

Radio continues to differentiate music according to obsolete definitions of formats. The typical iPod owner might have hundreds of songs that cross all format lines. A person might listen to country, hip-hop, alternative, and AC songs all in the same session.

To appeal to today’s media-immersed listener, radio has to pay less attention to whether a song fits the format, and more to what the listener wants to hear NOW, regardless of format.

Music directors and programmers must take off the blinders and realize that hits now come from every direction from video games, movies, television award shows, as well as radio play.

No longer should radio play be the only thing that matters. Adds might be important, but only in the broader context of what’s happening across social media, YouTube, and other equally important pop cross-currents.

Arcade Fire’s Suburbs video has been viewed nearly three million times on YouTube alone in the three months since posting. Their older videos have had up to six million views.

Despite their success in other media, many in radio seem surprised the group won a Grammy, and broadcast has been slow to add the group’s music.

Is it any wonder that listener complaints about radio’s predictability and lack of variety are growing? It isn’t that radio is worse than it once was. It’s because today’s listener has different expectations.

Today’s listener is looking beyond formats. She has greater awareness and access to new music and it has raised her radio station expectations. And radio has yet to rise to the occasion.

Programmers can no longer act like radio is still in charge. Today the listener is in charge of music discovery. Time to adapt.

Bob Pittman's Rational Digital Strategy

Bob Pittman has done a better job shining a light on broadcast’s continued strength and relevance than the NAB, RAB, pundits, and leaders of all the large groups combined.

We noted his quick start last month asking Does Radio Finally Have a Leader? The answer appears to be yes.

After scoring interviews with the Wall Street Journal, Variety, Bloomberg, and others he quickly made his first digital acquisition, Thumbplay. The acquisition again put broadcast radio in coast to coast headlines from the Los Angeles Times to the New York Times.

Ad Age, a magazine that has had some pretty unkind words to say regarding radio the last few years, interviewed Pittman last week on the Thumbplay purchase with the title Bob Pittman’s Old-School Approach to New Radio Success.

Once again he comes off as a confident believer in radio, spelling out Clear Channel’s rational approach to digital, all the while emphasizing radio’s strengths. He notes that:

Clear Channel is a company of radio stations that have very powerful local brands, 850 stations in 150 cities. Everybody who's doing national is trying to figure out how to do local. We already have that kind of scope by having national and local reach.

Regarding the purchase of Thumbplay:

Thumbplay is really not radio, it's a playlist maker like a Pandora. It finds a bunch of songs and puts those on perpetual shuffle. We know people like (dynamic curation) so we want to deliver that as well. Thumbplay has already developed a great product, so we wanted to quickly add it to what we're doing with iHeartRadio.

Last November we suggested that:

Pandora may have a tremendous lead over its competition, but it remains to be seen whether the service can sustain its lead. As countless Internet companies have discovered, there is no “first-mover” advantage when it comes to new-media.

Nothing that Pandora does is proprietary. Every aspect of Pandora can be replicated, and ultimately improved upon.

The title of the post was Thanks Pandora, We’ll Take it From Here. It could well have been the title of the Ad Age interview.

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.

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?

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.

Thanks Pandora, We'll Take it From Here.

Pandora is the face of Internet radio. By every measure it has achieved far more than any other Internet audio service. The company has over 65 million registered users, generates one-quarter billion listening sessions every week, and even generates a modest profit.

For most consumers, Pandora defines the entire category of Internet radio. There’s Pandora and the rest. You can listen to Pandora on your computer, your iPhone, Android, Blackberry, Tivo, and soon probably most Internet connected toasters.

Tim Westergren is an icon in Internet media circles. As the creator and face of Pandora he has scored interviews in mainstream media including the New York Times and Wall Street Journal.

And none of this will ultimately matter.

Pandora may have a tremendous lead over its competition, but it remains to be seen whether the service can sustain its lead. As countless Internet companies have discovered, there is no “first-mover” advantage when it comes to new-media.

Nothing that Pandora does is proprietary. Every aspect of Pandora can be replicated, and ultimately improved upon.

We are in the first inning of Internet radio. This is why Harker Research suggested that it was better for broadcasters to watch and wait for Internet radio to mature. Better to continue to invest in the broadcast product while Internet radio evolves.

Now that an Internet radio leader has emerged, broadcasters can develop a competitive strategy to defend against Pandora, and the services that might overtake it.

Broadcasters owe Pandora their thanks. Pandora’s success is a textbook example of doing a lot of things a little better than the competition, something broadcast once knew, but seems to have forgotten.

The company's success also proves that caring about listeners still matters. A fact broadcast has also forgotten.

Fortunately, even with Pandora’s tremendous on-line lead broadcasters can close the gap by adapting key elements of the company’s success.

Lesson 1: Marketing is key.

Pandora has out-marketed everybody, broadcast and on-line competitors alike.

The company has a cool laid-back persona from its logo and website to the folksy emails it sends out. It solicits user input, and takes every opportunity to thank their users for listening.

The company’s Music Genome Project has given Pandora a unique position. It is little more than a marketing gimmick, but it has effectively created the appearance of a listener benefit not found elsewhere.

Arbitron's PPM focus on exposure rather than listening has deflected broadcast’s priorities away from marketing and positioning. The importance of differentiating a radio station will play an increasingly important role as broadcasts transits to digital.

Lesson 2: Make radio personal (again).

Tim Westergren, founder and chief strategy officer, has been a tireless booster of Pandora. Like a general personally leading his troops into battle, Westergren has traveled the country meeting with users and promoting his product.

At every stop, in every interview he takes the opportunity to position Pandora as the future of radio, taking every shot at broadcast he can.

What is the face of broadcast? Too many listeners see broadcast as a business full of large corporations run by greedy suits who see listeners as a commodity.

Broadcast radio needs to understand that it has an image problem, one that the NAB and RAB efforts have only worsened (think Radio 2020).

Broadcast needs to rethink its image as a product catagory. Broadcast needs a positive face and image.

Lesson 3: Listeners want a sense of control.

Pandora claims the Music Genome Project (MGP) creates the perfect personalized radio experience. Type in an artist, and Pandora will start streaming songs by that artist along with similar artists.

Harker Research found that MGP had little to do with Pandora’s appeal. Listeners just want the ability to listen to an artist when they want to.

The message for broadcasters is that listeners want some control and the ability to listen to specific artists. This can easily be added to a broadcast group’s streaming package.

Lesson 4: Radio needs to be everywhere.

Pandora has been aggressive in making its service available on many devices. Users can stream the service on every mobile platform as well as Google TV, Tivo, and several Blu-ray players. NPR has pursued a similar strategy quickly developing apps for every device.

Broadcast streams must be available everywhere and on every device people use to listen to audio.

Lesson 5: Make it easy to listen.

People want easy access to their stations, not tens of thousands of stations they will never listen to.

The Pandora player is elegantly simple. Users can quickly find their custom streams with a minimum of distractions and clutter.

Broadcast has gone the other way, aggregating dozens and even hundreds of station on websites and applications that make it difficult to find particular stations.

Compare the simplicity of Pandora’s iPhone app to Clear Channel’s iheartradio. Pandora users hear music the moment the app launches. One has to go three pages deep in search of a radio station to listen on iheartradio.

Lesson 6: Radio is still a local medium.

Broadcast’s most powerful strength is its localism. Pandora understands this and is trying to develop a local sales strategy.

As broadcast migrates to the Internet, radio needs to remain a local medium. Services like iheartradio and AOL Music downplay broadcast’s most powerful tool, localism.

As the migration proceeds, large groups may have a more difficult time than small local groups making the transition. Small groups will feel no need to aggregate hundreds of stations into a single Internet service.

A small radio group with a single smartphone app will offer listeners a simple gateway to hear their local radio stations.

If broadcasters take to heart the lessons learned from Pandora’s success and apply them, broadcasting will prevail in the digital frontier. Thanks Pandora. We’ll take it from here.

Giving Aid & Comfort to Radio's Enemies

It is a sign of broadcast radio’s self-loathing that a session at the NAB Radio Show was devoted to statistical flagellation. 

In a masochistic mood, the Radio Show program committee decided to highlight research purporting to show plunging usage of radio among young listeners.

The research results were duly reported by the trades with little comment and even less analysis. The dramatic decline was accepted as fact.

The study claims that in the past decade daily radio listenership among 12-24 year olds has fallen from two hours forty-three minutes to one hour twenty four minutes today. So according to the study daily TSL has fallen 49%.

Has young listening really dropped 49%? And if it hasn’t, can we trust the rest of the study findings?

The biggest problem with this study is that it is comparing apples and oranges. In fact, virtually every listening trend analysis published today is comparing apples and oranges.

To assess listening changes over time, we have to use a sound consistent research strategy. We have to be sure that listenership is measured the same way each time.

The 49% decline compares self-estimated listenership in a 2000 telephone-based study to the responses of a 2010 online panel of participants.

There are two problems with this approach.

Trending telephone study responses to online responses exaggerates radio listenership declines.

Research has confirmed what should be obvious: The apparent strength and popularity of digital media is higher in online research, while traditional media like radio tend to look comparatively worse.

There is nothing wrong with using an online panel to understand media usage today, but we can’t trend the information unless the prior study was also done online. 

The second well understood problem with the study is that it asks the online panelists to estimate the amount of time they use each medium.

As we reported some time ago, research shows that people tend to over-estimate their digital consumption, while at the same time under-estimating their traditional media consumption.

For example, Nielsen puts teen television viewership at nearly four hours a day while the study’s self-reported viewership is less than three hours, a major difference. Nielsen puts young radio listening at nearly three hours a day, twice the study’s claim.

So we have two factors that both exaggerate radio listening declines while overstating digital usage.

Then there’s the sniff test. Is the estimate consistent with directly measured listening estimates?

We have a decade of Arbitron trends along with two years of Nielsen estimates to judge the reasonableness of the study’s 49% drop in listening.

In a methodological sound analysis of Arbitron and Nielsen listening trends, Harker Research found that 12+ TSL had declined just 1% in the past year. 

Using a similar approach, our analysis suggests that 12-24 TSL in diary markets declined less than 20% in the first eight years of the decade before most large markets had made the transition to PPM.

Arbitron’s yearly Radio Today has become an odd amalgam of diary and PPM based estimates, which compromises its value. However, despite the addition of lower PPM estimates, even Arbitron shows a much smaller decline in young listening.

Isolating PPM trends as we did in our earlier analysis raises further questions about the purported 49% decline. Some established PPM markets actually show 12-24 TSL increases coinciding with new CHR stations in large markets!

UPDATE: The Southern California Broadcasters Association just released an analysis of PPM showing 12-34 TSL up slightly in the past two years to 10:09. See the analysis here.

Many people in and outside of radio want to believe the 49% loss. They want to believe that broadcast has become irrelevant to young listeners.

Research that exaggerates radio’s decline is red meat for new-media bloggers and pundits. Studies like this give aid and comfort to broadcast’s enemies, those who delight in finding any factoid or tidbit that shows radio on the ropes. 

We do not deny that radio faces challenges. We are not attempting to conceal the truth in an effort to gloss over radio’s challenges. Radio listening has declined over the past decade, but at a much smaller rate than new-media stakeholders want you to believe.

We believe misguided research that portrays radio far worse-off than it really is does a disservice to radio. We wonder why the NAB would give its blessing to research that distorts radio health.

We believe that both radio’s supporters as well as detractors should know the real story-–even when many don’t want to believe it.