Radio InSights

Is Radio Chasing Newspaper to the Bottom?

By every measure digital has been a disaster for newspaper.

Newspaper was the first legacy medium to take a serious hit from digital alternatives. Revenue peaked in 2006 and has dropped virtually every year since.

Take a look below at the last 10 years of newspaper’s revenue and circulation performance. (Click on it to enlarge.)

Pretty ugly, isn’t it?

It wasn’t that long ago that newspaper revenue was nearly three times that of radio. Today it’s just slightly ahead and at the rate its falling, newspaper revenue may fall behind radio in the not too distant future.

Given newspaper’s miserable failure to remake itself as a digital medium, why is it that radio is following a similar path as it evolves into a digital medium?

With revenue declining newspapers took the easy way out. They cut expenses.

Newspaper companies placed a higher priority on protecting profits than defending revenue.

They bastardized content firing newsroom people, replacing local stories with syndicate content, eliminating pages and even whole sections.

Some papers are not even printing seven days of the week.

At a time when newspapers needed to reinvent themselves, they made little more than token efforts to better compete with digital alternatives.

Circulation and revenue declines moving in lock-step confirm the folly of their efforts.

Yes, newspapers are selling more digital space, but while giving up print dollars, they are recouping digital dimes.

Take a look at the graph below. It shows newspaper newsroom employment from a yearly survey conducted by the American Society of News Editors.

Newspapers started cutting staff going into the recession, but have since continued cutting staff. Today newsrooms are 40% smaller than just eight years ago.

Do those numbers give you the impression that newspapers are working hard to develop more compelling print products, products designed for tomorrow’s readers?

Do those numbers give you the impression that newspapers are developing new digital products to compliment their print editions and effectively compete against pure-play digital products?

Gutting content to protect profits hasn’t worked.

Gutting content may be looked back upon as newspaper’s fatal mistake from which it never recovered.

Radio is following a similar course.

Cut expenses to protect profits. Bastardize the on-air product and make token digital efforts that are neither innovative nor effective.

We know how it turned out for newspaper.

Should we really wonder how it will turn out for radio?

 

The Lie Behind Live and Local

Live and Local!

It is radio’s greatest strength. It is the single most important advantage that local radio has over its digital challengers.

That’s what we’re told.

Invariably Live and Local is the battle cry of industry leaders and broadcast CEOs when they defend local radio against radio’s critics.

How can it be that these same leaders are the ones aggressively stripping radio of both?

Live local shows are disappearing with voice tracking (often with out-of-market voices) replacing them.

Untested inexperienced hosts are replacing successful experienced (but expensive) personalities.

Popular teams are broken up with (less expensive) side-kicks doing solo shows.

Various excuses are given for the cut-backs, but we all know that these are cost-cutting moves.

The sole motivation is to maintain profitability in the face of declining revenue.

How do we reconcile the rhetoric surrounding Live and Local with these actions?

As we recently noted, television seems to be weathering digital assaults better than radio.

Perhaps one reason is because television continues to invest in its people while radio is aggressively shedding people.

Randy Stine writing in Radio World recently highlighted the difference by noting that while television has steadily added jobs since the Great Recession, radio has continued to eliminate jobs. See graph at left. (Click on graph to enlarge.)

When will radio acknowledge the hypocrisy of claiming the importance of Live and Local and then taking actions that undermine it?

At this year’s NAB Show Gordon Smith declared:

There is no other industry in the world like broadcasting... ...no other industry has, at its core, such an overarching focus on bringing communities together and serving the public good.

Perhaps he was talking about local television.

 

Is Television Smarter Than Radio?

Are television people smarter than radio people?

Both television and radio face aggressive challenges from digital alternatives. Both media have seen a loss of audience as well as a decline in revenue.

The arc of the decline, however, differs between radio and television.

Over the past few years television has seen a greater decline in audience, but a smaller decline in revenue, which begs the question: Do television people understand the digital threat better than radio people?

The graph below encapsulates what’s been happening over the past few years. (Click to enlarge.)

We’ve indexed the latest numbers to comparable numbers in 2011. The current index for daily time spent for radio and television is shown on the left in red.

Radio stands at 95, which means that listeners are spending 5% less time listening to radio compared to 2011. Television stands at 90, which means television has lost 10% of viewing time over the same period.

In other words, television has lost twice as much “time spent” (think of it as consumption) as radio has.

Relatively speaking, good news for radio.

The right hand blue bars show the change in revenue over the same period of time. Radio indexes at 93 compared to television’s 96.

It means that while television has seen its audience decline twice as much as radio, radio has seen its revenue drop nearly twice as much as television.

We're only looking at the past four years, but television’s resiliency is nothing new.

It is a phenomenon that we've been discussing as far back as 2009 on Radio Insights. Here are two posts from 2011 here and here that illustrate that television’s defense against digital has been more effective than radio’s for quite some time.

What is television doing better than radio?

Both legacy media face growing competition from pure-play digital alternatives. Both are witnessing declines in audience.

And one can make the argument that local radio ought to be more nimble able to more quickly respond to digital threats.

Yet television, already a medium three times as large as radio has seemed to manage digital assaults better.

It’s an important issue for both media, so Radio Insights is going to explore this issue in greater detail in future posts.

We’ll identify differences between the two media’s responses to digital’s threats, and what it says about how best to minimize the negative impact of digital.

Stay tuned.

 

Nielsen's Narrative Hurts Radio

It’s no secret that Nielsen N.V. is trying to get into the business of measuring online listening. Word has it that the company will reveal its streaming product later this year.

How is it then, that Nielsen can seemingly pretend that streaming metrics don’t matter? How is it that Nielsen ignores streaming in its estimates?

Look at any Nielsen ranker and you’ll find pages of blank numbers next to the streams of top ranked stations.

Can it really be true that top ranked stations have no streaming listeners?

Theoretically, the stream listenership of a station ought to show up in PPM. Streams are uniquely encoded so PPM should be able to detect streaming listenership, yet only a handful of streaming stations show up on PPM rankers with tenths of shares, and only occasionally.

Either no one is listening to the streams of top ranked stations, or PPM has a serious technological or methodological flaw. Maybe in years past it didn’t matter that much. Not that many people listened to local streams then.

Today however, a majority of listeners are willing and able to listen to streams. If Nielsen really is radio’s rating currency, then failing to include streaming in listening estimates is a serious problem for radio.

To our knowledge, Nielsen has never addressed the absence of any significant stream numbers in the ratings. Not a word.

If we accept the likelihood that an unknown amount of broadcast listening is migrating to the streams of broadcast stations--and that it is probably growing, Nielsen’s estimates become more and more suspect.

Nielsen just released its latest State of the Media: Audio Today, subtitled "How America Listens."

It is fifteen pages of radio listening data without a single word about broadcast streaming. Not a word.

Nielsen claims that radio’s reach declined 0.6% last year, but the figure counts only reach that Nielsen can measure.

It isn’t accurate. It isn’t useful because it only includes broadcast radio as measured by Nielsen.

 Twenty years ago counting only over-the-air broadcast listening it might have reflected the state of the medium, but today it is out of touch with what’s really going on with radio.

Why is Nielsen’s head in the sand regarding streaming?

The reason is obvious: Nielsen does not yet measure streaming (at least not in a manner that captures what’s really happening). Why draw attention to a service that Nielsen measures poorly?

So radio is portrayed by Nielsen as a medium pretty much unchanged since Marconi.

It might be the right business decision for Nielsen, but a bad decision for its radio clients.

　

Radio Needs to Rethink Streaming

Radio needs to Rethink Streaming

Clear Channel just announced second quarter results including this comment:

At iHeartRadio, we introduced an even more personalized listener experience with the release of iHeartRadio 5.0 and grew our registered users by 50% year over year.

Oddly enough, while numbers of registered users may be higher, consumption of Clear Channel streams has been treading water for the past year, and in May actually declined from the previous year as measured by Triton Digital.

But it isn’t just Clear Channel. There’s clear evidence that over all on-line listening to broadcast streams is peaking.

Take a look at the graph. It illustrates what’s going on.

We’ve totaled the Hours Tuned for Triton Digital’s Top 20 and plotted each month’s change from the same month of the previous year. The red line shows the combined trend for all services. The green line shows the trend of the Top 20 less Pandora.

Pandora makes up 78% of all listening in the Top 20, so the red line is a good proxy for Pandora.

Total streaming growth, as measured by Triton, peaked in July 2012 as listening doubled over 2011, up by 102%. Pandora listenership alone increased 151% over July 2011.

Since then the rate of growth of the top 20 services has steadily declined except for up-ticks in March, April, and May. Growth bottomed out at 9.6% in February, and even with the up-ticks, growth stands at 18% year-over-year. That’s including Pandora.

Without Pandora to prop it up, the Triton Digital trends look even worse. As the green line shows, in March of this year growth for the other 19 services stopped completely, and in the past two months listenership has actually declined.

That bears repeating. Growth for streaming services ranked two through twenty combined have less consumption today than they did one year ago. And it isn’t a fluke. The group has been in a steady decline since April of last year.

From May of last year consumption for Cumulus streaming is -26%, CBS -15%, Entercom -6%, and Clear Channel -1%.

Of course, Triton Digital measures many streams but only publicly releases the ratings of the Top 20 services. Is there perhaps a more positive story looking beyond these twenty?

Triton’s May report includes a graph of total listening hours comparing the last three years. Total listening is near 1.8 billion hours compared to slightly over 1.4 billion hours last year.

Most of the gains, however, can be attributed to Pandora’s spring spike. Earlier in the year 2014 gains were trailing previous years by a significant margin.

So the malaise we see in the Top 20 appears to extend to Triton’s weaker clients.

Taken as a whole, the numbers strongly suggest that streaming as measured by Triton Digital is reaching a peak. Even Pandora as dominant as it is appears to be maxing out.

How can it be that both broadcast over-the-air Nielsen numbers and Triton’s broadcast stream numbers are both eroding? Where are listeners going?

Triton only measures the streams of clients. There are many other streaming services that Triton does not measure.

The best guess is that unmeasured services like Spotify, iRadio, AOL, Rhapsody, and others are luring listeners away from both Nielsen measured broadcast stations and Triton Digital measured streaming stations.

If that’s the case, maybe just porting our stations onto the Internet isn’t the answer.

If people are looking for on-demand services, perhaps local broadcast stations need to develop distinctively different products for the Internet that combine local elements with on-demand elements.

Maybe the sweet-spot for local radio is a local Spotify-like station where listeners can create their own personalized local station?

The anemic performance of broadcast streams combined with Pandora and Slacker flame-outs suggest that we are far from determining what 21st century radio will look like.

The only thing we can safely conclude is that it won’t look anything like what we’re doing.

Lessons from New York and LA: Content Matters

Content matters.

It ought to go without saying that people choose a radio station based on the quality of its content. History has shown that radio stations with better content beat stations with poorer content.

If you had any doubt, recent rating trends should erase any question.

And the implication is clear: Stations that have cut programming costs by cheapening their product will ultimately pay a significant price for their actions.

In January of this year Rush Limbaugh switched affiliates in New York and Los Angeles. In each case, Limbaugh left the leading News-Talk station and moved to a much weaker competitor.

Now with six months of PPM data we can see what happened. In both instances the stations that added Limbaugh benefited, and the stations that lost Limbaugh took major ratings hits.

Content matters.

Lose an important programming element that draws listeners to the station and you’ll likely lose listeners. If your competitor capitalizes on the change, perhaps by hiring a key personality you let go, you could ulitimately pay for it.

The graph illustrates what’s happened in New York and Los Angeles over the past few months.

We created an 6+ share index based on station ratings in the fourth quarter of 2013 before the switch. We then calculated how ratings have changed since Limbaugh switched.

Indexing this way enables us to easily compare rating trends across markets. All stations start at 100. An increase to 200 means a station’s share has doubled, 300 tripled, and so on.

An index that moves below 100 means the station has lost share. An index of 33 means that the station only has a third of its original audience. Put another way, an index of 33 means the station has lost two thirds of its listeners.

In Los Angeles, KFI has drifted down and stands at an idex of 78. That tranlates into a loss of about half a share point. The station has been a dominant News-Talk station for years, and it remains so, but even it took a hit from the departure of Limbaugh.

Given PPM’s rating compression, a half share loss can add up to a three or four station rank decline.

KEIB, Limbaugh’s new home, saw immediate gains. The station now indexes at 265. While it still ranked well below KFI,  KEIB has seen its full week AQH nearly double, and Limbaugh’s time-slot numbers nearly triple. (All comparisons are based on three month averages to smooth out wobbles.)

We should note that Clear Channel owns both KFI and KEIB, so the move was made for strategic reasons. The fact remains, however, that the group's flag-ship News-Talk station took a hit.

In New York the changes have been much more dramatic.

WABC lost a quarter of its 6+ AQH in the first month without Limbaugh, and has continued to lose listeners virtually every month since.

Today the station indexes at 35, indicating that two thirds of the station's quarter-hours have evaporated since the beginning of 2014.

WOR closed out 2013 with about half the quarter-hour persons of WABC. Today the station indexes at 370, suggesting that the station share is nearly four times its pre-Limbaugh level.

After years of consistently trailing WABC, WOR is now essentially tied with WABC in full-week AQH. During Limbaugh’s time-slot WOR has tripled its numbers and bests WABC by a significant margin.

Of course WOR also acquired Sean Hannity, and WABC made several personality changes in addition to adding Limbaugh, but these additional factors do not change the lesson:

Content matters.

It matters in every format, in every competitive situation. Listeners have options, more than ever. They will not remain loyal to stations that stop delivering on expectations.

 Too many broadcast leaders have decided that cheaper trumps better, that downgrading the product to squeeze a little more profit out of local radio is good business.

The next quarter’s bottom line might look a little better, but the lessons of what’s happened in New York and Los Angeles suggest that the gains are short lived. The negative long term implications will long remain after the momentary bump in profit is forgotten.

 

NPR: Canary in Radio's Coal Mine?

Digital. That’s the future.

Over-the-air radio is sooo 20^th century. Broadcasters must shake-off their rear-view-mirror attitudes and nostalgic musings, and get on with digital!

That’s what broadcast critics tell us. "The future doesn’t care who the winners are, and listeners don’t care about your margins," we’re told.

Listeners might not, but you probably care about your margins, and revenue too.

All this locker-room pep-talk punditry about digital might be inspiring if it didn’t fly in the face of the financial facts of digital.

Local broadcast radio generated $889 Million in digital revenue last year. Pandora, the music service that claims to have more listeners than most radio stations had advertising revenue of $521 Million.

In other words, this backward-thinking ludditious industry did 70% more digital business than the darling of every radio critic, Pandora.

Let that sink in a little.

In a 2010 post entitled Radio’s Digital Future Revealed Radio Insights noted NPR’s aggressive digital initiatives. According to then NPR CEO Vivian Schiller:

We are agnostic about whether somebody listens over broadcast or listens to the exact same radio stream on the Internet. As younger generations are consuming content on their cellphones or on their iPhones or on their iPads or on their Android phones or whatever, we want to make sure that we're there.

As we noted at the time NPR was following the game-plan of those who declared that radio must move faster, lest it miss the digital revolution all together.

Ms. Schiller went on to predict that in the next five to ten years Internet radio would take the place of over-the-air broadcast radio.

Four years later, Ms. Schiller is no longer with NPR, and 93.6% of NPR listening is still done the old fashion way, on broadcast AM and FM stations.

There’s still time for Ms. Schiller’s prediction to come true, but online listening trends for NPR are not encouraging. As the graph at left illustrates, Triton Digital shows a steady decline in the rate of streaming growth for NPR stations.

In an analysis of NPR streaming Steve Mulder, director of user experience and analytics at NPR Digital Services noted:

In a comparison of the year-to-year data, the cumulative audience for pubradio streams dropped 9 percent. And while visitors were listening to a wider variety of content, the total amount of listening time per streaming session remained flat, at about an hour.

Live streams total only 6.4% of NPR consumption. That, after four years of an all-out digital effort.

NPR is radio’s canary in the digital coal mine.

If a multi-million dollar attempt to transform (don’t call it radio) NPR into a digital product is already sputtering, what’s the likelihood we’ll be melting down broadcast towers and turning them into wind turbines anytime soon?

Broadcast spots brought in $14 Billion (that’s with a B) last year. Yes, its not as much as the in the past, but then again what is radio doing to protect its share, let alone grow it?

How much innovation have you seen on the broadcast side of the business?

Sorry, talking about Twitter and Facebook on the air is not tranformational. Where are the new formats? Where are the new morning shows?

Name one thing that local radio has done in the past five years that we’ll still be talking about five years from now.

Where would Clear Channel be today if they put as much energy into their radio stations as they do with iHeartRadio?

Too many broadcast leaders share Ms. Schiller’s view of the future of broadcast radio. They have given up on local radio.

And they have no idea on how they are going to replace that $14 Billion of revenue.

Are Radio’s Leaders Waking Up?

First quarter revenues were flat again, further evidence that radio is stuck in neutral.

Yes, digital revenue grew, but broadcast spot sales continued to erode.

Digital’s growth was a hollow victory: Digital contributes a mere 3% of radio’s revenue.

Broadcast spots contribute over 90%. If spot sales decline by a mere 1%, $140 Million in spots is wiped off the books. Given digital’s meager contribution, it has to increase 15% just to stay even, let alone jump-start sales.

As we pointed out in our previous post, digital grew by 16% last year, but growth is on a downward trajectory. It is increasingly likely that digital sales growth won’t be able to make up for even modest declines in broadcast spot sales.

What should broadcasters do?

The only practical solution is to put a stop to the decline in spot radio sales. Radio has to put considerably greater effort into growing the broadcast product, continuing to develop compelling programming, then selling it better.

If radio has any hope of growing revenue in today’s environment, it is going to come from increasing the value of broadcast spots, then selling more.

The arithmetic is obvious, but actions of the major groups suggest they don’t get it. They are still of a mind-set that digital will save the day.

That’s why the major groups are continuing to increase digital funding at the expense of their broadcast products.

Major cut backs in broadcast station staffs. No programming innovation. No marketing budgets, no research. Degraded morning shows to save money, and half-hearted efforts to sell time on these gutted radio stations.

If radio is cutting costs, telegraphing that it believes broadcast radio can’t successfully compete against digital competitors, why should we be surprised that spot sales are declining? If radio isn’t prepared to invest in broadcast, why should advertisers?

If radio continues on its current path, flat revenue is just a brief pause in broadcast’s rush towards self-destruction.

The good news is that maybe, just maybe broadcast leaders are waking up.

After years of touting digital initiatives and ignoring local radio, broadcasters rolled out three new projects spotlighting broadcast radio’s strengths.

Last month Nielsen and CBS collaborated on a study showing local radio’s ability to boost the effectiveness of television campaigns. According to the study, using local television and radio together can double the reach of TV alone.

(The study found that) an advertiser could reach anywhere from 84% to as high as 93% of all adults 18+ within a month by leveraging local television and radio together.

The CBS announcement was quickly followed by an Advertising Research Foundation hosted presentation on new research looking at radio’s impact on retail sales. The study found that for every dollar spent on radio advertising, there was a sales return of six dollars.

Clear Channel’s Insights and Analytics EVP Rada Subramanyam noted:

We have always known that radio delivers big returns for advertisers and these studies provide the much needed support of that return. The deep personal connection and trust that consumers have to their radio stations and on air personalities generates significant value for advertisers.

The latest defense of broadcast radio comes courtesy of Southern California Broadcasters Association. Earlier this month the group released a report making the case that some television money ought to be reallocated to radio. The bottom line (PDF):

We are urging advertisers to make a 39% adjustment in TV budgets from TV to Radio based on these findings and the growing DVR use/ownership in the LA DMA. Weekend sales events, limited offers, and expiring special offers are being compromised by delayed or no viewership from DVR usage for TV advertisers.

Three studies in the span of two months. And this after years of nothing of substance coming from local radio’s leaders defending the medium from relentless attacks from radio’s critics.

Maybe this is a turning point in the battle to get radio’s fair share of advertising dollars.

But broadcast leaders have to also recognize that radio can’t gut its product without ultimately hurting radio’s adverting effectiveness, and ultimately revenue.

We applaud these three efforts. They are long over-due. However, now these leaders have to reinvest in their radio stations if they have any hope of having this work impact their revenue numbers.

Is the Digital Basket the Wrong Place for Radio’s Eggs?

Spot revenue flat-lined again in 2013. Radio can’t seem to move the needle when it comes to selling spots on the radio. Thank God for digital.

Digital is the one bright spot for local radio revenue. It was up again in 2013, so it is understandable that everyone from the Radio Advertising Bureau on down would crow about digital:

"Digital continues to gain momentum among advertisers looking to maximize their use of all Radio platforms," states Erica Farber, President and CEO of RAB. "Based on the recent Borrell Associates forecast of a 22% rise in Digital spending on Radio in 2014, this category is poised to surpass the $1B mark."

Everyone seems to agree that digital is the bright spot in radio’s future. Unfortunately, while a digital future may be inevitable, economic success for radio in a digital world is by no means inevitable. Quite the opposite is possible, an issue we raised back in 2009.

Putting all of radio’s eggs in the digital basket may be a trap. Instead of securing radio’s future, it may sacrifice broadcast’s enormous advantage over its digital competitors, leveling a playing field on which radio has always won.

The RAB press release to which Farber alluded in the above quote predicts a bright digital future for radio noting that digital grew 15.9% in 2013, and projecting another 22% growth in 2014.

That might sound like a lot, but as noted in the release digital contributes an anemic 3% to radio’s revenue. Take a look at the graph at left. It illustrates how little digital contributes to local radio’s revenue. That tiny sliver at the top is digital’s contribution.

Even if digital revenue continues to grow at the RAB’s wishful double digit pace, it will take over a decade for digital to approach even half of spot radio’s contribution.

And the RAB’s projections are extremely optimistic verging on the delusional. We need only look at newspaper’s attempt to cross over to the digital world to understand.

Facing precipitous declines in print revenue, the newspaper industry pinned all its hopes on digital. The major newspaper chains predicted that digital would save the medium. We questioned their strategy, and the wisdom of radio following a similar path in 2011.

What’s happened since?

In 2010, newspaper digital revenue grew by 10.9%. However, every year since the rate of growth has declined. Digital newspaper revenue barely grew at all in 2013.

Compare that to radio’s digital growth over the same period. The good news was that radio’s growth rate coming out of the recession was nearly triple that of newspaper. The bad news is that radio’s growth rate like newspaper’s immediately began to slow.

As the table at left shows, after growing 28.1% in 2010, growth fell in each of the next two years. Growth rebounded last year, but still failed to achieve the growth rate of 2010.

The graph at left shows each medium’s digital growth rate indexed to their 2010 rate. Note that with the exception of 2013, the growth rate declines of radio and newspaper seem to be following the same pattern.

Radio critics claim that the industry isn’t moving quickly enough. We’re told that digital revenues will grow faster if only broadcasters tried harder. But what evidence do we have?

Newspapers have been developing a digital strategy much longer than radio. The major chains have reallocated more resources to their digital product than radio has. And the end result appears to be only an accelerated pattern of growth then decline, not a stronger one.

If radio is following the same arc of rapidly diminishing growth in digital revenue that newspaper is tracing, then radio has to rethink its strategy of pinning its hope for growth on digital.

So if digital isn’t the right basket to put all of radio’s eggs, what’s the alternative? That’s the subject of the next Radio Insights post.

Admitting Internet Radio's Failure

After nearly a decade of declaring broadcast radio near death, a touch of reality is beginning to seep into the internet radio discussion.

Digital pundits now admit that local radio is far from dead. And you won’t believe what they think will save internet radio.

Writing at Engadget.com, Brad Hill, former VP of AOL, admits that American use of local AM/FM radio hardly budged between 2001 and 2011:

So it’s evident that people are dipping their toes into various forms of internet radio without abandoning their terrestrial stations.

Dipping their toes?

Mr. Hill is way too kind to internet radio.

As we have repeatedly shown here at Radio Insights, large numbers of people have sampled various streaming services, but the numbers are tiny compared to American consumption of local radio.

But in the digital world, hope springs eternal.

In the digital world, pundits believe a major disruption is always just around the corner, just one gadget, one line of code, one algorithm short of a major breakthrough.

The latest digital straw pundits are grasping at is Apple’s iRadio.

While admitting that internet radio hadn’t hurt local radio much yet, he notes that Michael Robertson CEO of DAR.fm, feels that Apple’s recently announced iTunes radio service will accelerate consumer adoption of internet radio:

There’s no question that it will change from 10/90 (digital/analog) to 90/10 because FM cannot compete with the benefits of internet-delivered music.

What’s odd about quoting Robertson is that DAR.fm is a broadcast radio time-shifter. According to the website:

DAR.fm is a service that lets you record radio stations and shows so you can listen whenever you like. Please browse the site to find some radio to record.

The home page lists suggestions that include Rush Limbaugh, Rachel Maddow, Glenn Beck, Sean Hannity, Stephanie Miller, and many other broadcast talk shows.

Noticeably absent are internet originated shows.

Apparently Robertson hasn’t found any internet content worth recording, so he has built a business model around recording AM and FM shows.

After declaring Internet radio flawed, flailing, and failing, Hill finally gets around to the point of his piece. Internet radio can succeed only if it has compelling content!

Yes, Internet radio needs content!

After a decade of watching Internet radio sputter and stall, at least one digital pundit has finally admitted the problem: Internet radio doesn’t have compelling original content! Local radio continues to succeed because of it does.

And Hill has a solution:

It is up to Apple, or Google, or Rhapsody, or Spotify, or Pandora, or Amazon, or another internet player to break down the perceptual walls within which internet radio is trapped, developing content or importing stars that will compel users to commit more of their attention to the platform.

Well that’s simple enough.

Of course, internet radio is now twenty years old. Internet radio isn’t new. It’s not novel any longer.

If any major internet company knew how to create compelling content, it would have already tried.

Remember how Google was going to create original content for YouTube? How’s that going?

Hill’s alma mater, AOL, has been trying to create compelling product for years. So has Yahoo.

Internet companies are brilliant at creating new technologies to steal and repurpose content created by others (like DAR.fm), but they are really lousy at creating original content.

Amazon create original content? Not likely. Apple? Forget about it. iRadio is about selling more tunes on iTunes, not creating original content.

Hill reveals the depth of his naivete when he closes with this:

Technology alone might not be enough to disrupt the nearly 100-year-old technology of terrestrial radio. But technology plus killer content can do it.

Technology has nothing to do with success. It's all about content.

The continuing success of local radio proves that compelling content  trumps technology.

The danger is that local radio is starting to pay more attention to delivery systems than content. Radio is distracted and somewhat intimidated by digital competitors, and is responding in the wrong way.

Too much energy and attention is focusing on platforms. Meanwhile, product innovation is lagging. Radio hasn’t created a new format in decades.

In that sense, Hill has a point. If local radio stops innovating and creating compelling programming, it opens the door for internet radio.

If local radio falls into this trap, broadcast will have lost a tremendous advantage.

Humpty Dumpty & the Meaning of Local Radio

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean--neither more nor less.”

With that attitude, Humpty Dumpty might have been the first new-media pundit. Like Humpty Dumpty, new-media types take delight in twisting the meanings of words to illustrate their more evolved view of the world.

An example is the word local as in local radio.

Three years ago one pundit proclaimed:

There is no longer any such thing as "local" as we traditionally use the term....The definition of "local" is both expanding and shrinking at the same time.

At the time we declared it new-media rubbish.

Now Seth Godin has essentially rewritten the piece, writing:

We're discovering that when given the chance, people are a lot more interested in what they're interested in, as opposed to what their physical neighbors are doing. Going forward, then, the real kings of media will be local in a totally different sense.

Humpty Dumpty would be proud.

Godin first fabricates a past, and then declares that the future will be different from this fabricated past. And finally he redefines the word local based on this fiction.

Seth has essentially doubled-down on the original new-media rubbish about local changing, not only redefining local radio, but also distorting the notion of community.

Both the original and this copy-cat post are committing the biggest mistake that new media pundits make.

They believe that delivery systems are more important than content. They then compound the mistake by believing that new delivery systems will change what people want and value.

None of the new-media delivery systems have replaced local radio because local radio is local because of its content, not the location of its transmitter.
 
Yes, today it is primarily delivered through local broadcast facilities, but that is because broadcast is the means by which the majority of local media consumers want it delivered.

One day a majority of listeners may want it delivered a different way, and local radio will have to change the way its content is delivered.

Radio critics keep claiming that the latest new media product whether Twitter, Pandora, Facebook, Craig’s List, or some other new product will make local radio less relevant and ultimately render local radio obsolete.

Yet radio keeps hanging in there defying a decade’s worth of new-media death notices.

And local radio will continue to defy the critics’ predictions as long as it ignores these self-serving criticisms.

The only way that local radio could become less relevant is if radio lets it happen.

Those within the radio business who advocate homogenized centralized voice-tracked radio in the belief that local no longer matters will pay a price as long as there remains broadcasters who understand the value of real local radio.

This latest Godin effort only serves to illustrate how little new-media pundits understand about traditional media’s strengths.

But then again, why should we be surprised? He doesn’t even understand his own business.

 

Will iHeartRadio Kill Radio?

Is iHeartRadio an apocalyptic doomsday machine that will ultimately destroy broadcast radio as we know it?

Or is iHeartRadio a gateway to radio’s salvation, radio’s best chance to remain relevant in a digital world?

The rate at which Clear Channel is signing up new radio groups suggests that many believe the latter.

But is iHeartRadio really the answer?

Broadcast radio’s greatest strength is a station's strong link to its community.

Radio’s local link is the medium’s most potent weapon in the battle for a listener’s heart and soul.

That  personal connection between a listener and her radio station is something that national radio (both digital and analog) fails to understand, and can’t duplicate.

Yet iHeartRadio’s very essence diminishes radio’s local roots.

The service neuters local radio, homogenizing radio into interchangeable undifferentiated lumps of similarly formatted radio stations.

Don’t want to listen to New York’s Z100? We’ve got another dozen stations just like it a click away.

Were these choices really different, it might mean something, but the service offers choice without distinction.

Too often one hears the same national playlists, and the same national personalities talking about the same national contests with the same national promos.

The growing interchangeability of stations across the country is all that more apparent with the convenience of iHeartRadio. A listener is just a couple clicks away from hearing the same thing on dozens of stations.

The message of iHeartRadio is that unique local radio is dead. All local radio stations are interchangeable.

The impact of iHeartRadio is to take local radio’s insurmountable advantage, its local connection, and destroy it.

The message to listeners is that local radio is no better than anonymous generic national radio dispensed by an algorithmic driven computer.

In an effort to demonstrate that an aggregation of local stations is just as good as a national service, iHeartRadio inadvertently proves that local radio is just as bad as a national service.

Why else offer a Pandora look-a-like?

Yes, Pandora is the darling of new-media pundits, those people who can’t understand why anyone still listens to local radio.

Yes, Pandora has been growing exponentially armed with an endless array of metrics that suggest seemingly unstoppable momentum.

But the truth is that Pandora is losing money, and shows signs that it might be incapable of making money.

Last year Pandora proudly generated $240 million is sales. Broadcast radio stations generated over $400 million--in digital sales alone.

Why would a leader in an industry currently billing nearly twice the digital revenue of Pandora want to promote a Pandora-like feature, and do it on local broadcast stations at saturation levels?

iHeartRadio is just one of a number of industry actions that claim to be an effort to save radio, but instead may have the opposite effect.

Radio Insights believes this is an important issue that potentially impacts every radio station, and ultimately how local radio is viewed.

We question the wisdom of radio’s obsessive rush to focus on digital platforms, especially when they emulate trendy but failed and failing business models.

The growth of iHeartRadio could metastasize into something quite deadly for broadcast, a possibility that every broadcaster should understand.

That’s why we’ll have more on iHeartRadio and what it says about radio in the coming weeks.

Stay tuned.

Dance With the One That Brung Ya

If you ran a company that produced two products, one that delivered more than 95% of your revenue, and a second that delivered less than 5%, which would you give more attention to?

Probably the one that produced nearly all the company’s revenue. Right?

And which product would you invest in more heavily? The one that makes all the money, or the one that doesn’t?

You’d want to invest in the product that makes 95% of your revenue, wouldn’t you?

Then why is radio cutting broadcast budgets to finance its digital follies? Why is the cash cow being sacrificed to compete with digital services that make no money and probably never will?

Revenue figures for the first half of 2012 are in and they look pretty much like the hypothetical company we’ve described. The graph below shows first half revenue.

Broadcast spot revenue came in at $6.8 billion, while digital, that tiny orange sliver on the graph, totaled less than $400 million.

In other words, running broadcast spots generated nineteen times the money radio got from digital.

(And rumors persist that groups are fudging the digital numbers to make streaming look more successful than it is.)

On top of that, digital growth has slowed. Digital only increased an anemic $22 million over the same period in 2011, an increase of only 4.7%.

At this growth rate, digital won’t surpass broadcast spot revenue until well into the 22nd century!

Compare those number to the darling of digital radio, Pandora.

Pandora closed its 2012 fiscal year proudly bragging about its advertising revenue of $240 million. Last year broadcast radio stations generated $709 million in digital sales, nearly three times as much.

Broadcast radio continues to be a huge financial success, generating margins that the NAB’s former president David Rehr once declared obscene.

Pandora, the focus of digital boosters, the subject of countless new-media success stories, has yet to make a profit, and admits it may never make a profit.

Yet broadcast radio is obsessed with growing digital dollars to prove it is just as good as Pandora.

And radio is financing this Don Quixote-worthy effort by diverting dollars that should be invested in the local broadcast product.

Yes, radio may ultimately become a product primarily delivered via computer and smartphone, but if its product is debased in a rush to be just as good as Pandora, then no one will listen to it no matter how it is delivered.

Dance with the one that brung ya is a reminder that no matter how tempting a new alternative might look, one shouldn’t forget the thing that got you there in the first place.

Radio makes those obscene profits by delivering a local product that meets the wants and needs of listeners who live in the same community.

If radio starts to ignore its local roots and historical connection to the communities it serves, then it may succeed in equaling Pandora-–as a failure.

Radio’s Great Schism: Two Visions of Radio’s Future.

There was a time not long ago when radio broadcasters were united sharing a vision of a vibrant industry full of opportunity and potential.

The recession and new-media’s growing threat has fractured this shared confidence, creating radio’s Great Schism. Today radio’s leaders are deeply divided by dramatically different visions of radio’s future.

One vision sees broadcast radio entering its sunset years. This mind-set believes that new media’s assault will prevent radio from ever recovering its former glory.

Those who share this vision believe the best is behind radio.

With a dark foreboding future facing the industry, they believe that radio’s past necessities are today’s luxuries.

Local program directors, live announcers, marketing budgets, and the other tools that every station once used to drive ratings are expenses that this faltering business can no longer afford.

Every traditional medium making the transition to digital has seen significant declines in revenue, so why would radio be any different?

As we noted in 2010 in the post Digital Dimes for Broadcast Dollars:

Even if we use the most optimistic newspaper numbers to estimate radio's future digital revenue outlook, there's still a good chance that local radio, once a $20 billion industry, will become a $6 billion industry.

If one believes that streaming will ultimately replace broadcast radio, then there’s no choice but to dramatically lower costs.

This realization is perhaps why large public groups in particular have chosen to cut expenses by abandoning radio’s unique historical strength as a personal local medium.

They believe radio’s economic survival depends on it.

But what if this pessimistic vision of radio’s future is wrong?

There are those who see radio entering a new transformational phase. While radio has faced challenges from new media in the past (and predictions of its imminent demise), it has survived by creating new products that revolutionized radio.

Believing that radio’s past is its prologue, broadcasters who hold this more upbeat view of radio’s future continue to invest in the broadcast product, with local talent, entitled local program directors, and respectable marketing budgets.

The hope is that good local programming will enable radio to hold on to its broadcast audience (along with their much higher cost per point value), while at the same time giving the industry time (and money) to develop new digital products.

We were reminded of these differing visions as we surveyed the results of a Harker Research ratings analysis looking at radio group ratings success rates.

As we reported in the post Does Radio Group Size Help or Hurt Ratings?, taking into account group size, the most successful groups are not the largest.

Presumably with greater resources, one would expect the largest groups to have the highest proportion of winners, but that isn’t the case. Smaller groups with more limited resources are outperforming some of the largest groups.

Companies like Hubbard and Cox manage to win in more markets, despite competing against much larger groups.

Obviously there are many factors that go into a radio group’s ratings performance, but could it be that smaller groups are approaching radio’s challenges differently? Are they more optimistic that radio can remain masters of its own future? More willing to invest?

It will be years before we know which vision of radio’s future is the right one. The tell-tale sign will be whether future rating winners are the homogenized products of central planning, or local radio stations that take the slogan live and local seriously.

If radio’s optimists are right, and the pessimists preparing for radio’s sunset years are wrong, the pessimists will have done irreparable harm to their companies.

Stripping stations of the tools necessary to grow audience will ultimately back-fire, driving listeners into the arms of stations that continue to evolve and improve the product.

Stay tuned.

Group Size & Ratings: What about 25-54?

But what about 25-54?

We knew before posting Does Group Size Help or Hurt Ratings? that we’d hear complaints about using 6+ numbers.

Maybe the largest radio groups don’t dominate 6+ because they are too smart to worry about the 6+ beauty contest.

Maybe the big guys know that the real money is in 25-54, so that’s the demo they focus on. Maybe 25-54 is the metric by which they should be measured.

The problem is that publishing a 25-54 analysis similar to the 6+ shown below runs afoul of  Arbitron restrictions on the use of their numbers. Were we or any other organization to release the results, an Arbitron Cease and Desist order would quickly follow.

But we have seen the data.

If you want to know what 25-54 looks like, just take another look at the 6+ chart and visualize the largest groups slightly weaker than they look now.

Yes, the biggest groups perform no better when looking at the money demo.

So there’s no hiding behind the “6+ doesn’t matter” argument.

The edge that smaller groups hold is there even with 25-54.

Then there’s the argument that revenue and profit are better metrics to compare competing radio companies. Admittedly, profit is the ultimate goal of every company, so perhaps it is a better metric.

The problem is the availability of the data. It does not exist in any form that enable us to compare all radio groups.

Using share and rank to compare radio groups may not be ideal, but it uses the most complete set of comparable data available, so it serves as a useful proxy for the more telling data we can’t get at.

Besides, no company regardless of size ignores potential revenue, margins, or power ratios when choosing a format. Formats are chosen expressly because their advocates believe they can become successful and generate above-average profits.

And taking into account demo differences, there is a very strong correlation between a station’s rank and the revenue it brings in–particularly in PPM markets.

But all this is beside the point.

The contrast in performance between the large national groups and the smaller groups suggests that companies are responding to radio’s new challenges in different ways. And those different ways are producing different results.

Jerry Del Colliano in Inside Music Media (paywall) suggests that radio is evolving into two industries, monopolies and local operators.

We can debate the nature of the division, but the divergence is clear.

Radio groups are reaching starkly different conclusions about radio’s future, and in many ways those contrasting visions are reshaping radio today.

And one vision seems to be producing better results today than the other. The subject of our next post.

 

Does Radio Group Size Help or Hurt Ratings?

Are you more likely to hit the bull’s eye throwing one dart or a thousand?

A thousand, of course. The more times you try something, the more likely you’ll succeed.

You’d think it would be the case with ratings success, but it's not always true.

Harker Research looked at winner’s in Arbitron’s PPM markets and found that companies that own a lot of stations do win often, but not as often as you might expect.

Clear Channel is the largest radio group with over two hundred stations in PPM measured markets.

CBS, the second largest group in PPM markets, has half as many stations as Clear Channel. Cumulus is the third largest group with less than a third of Clear Channel’s count.

What impact does this size difference have on the number of each group’s successes?

Clear Channel has a total of 47 stations that rank first, second, or third--more than any other company.

CBS has 18, while Cumulus has only 5.

The graph at left illustrates this. It shows the number of stations ranked first, second, or third in PPM markets for eleven groups who compete in at least two PPM markets and have at least one winner.

If stations were radio darts, we would expect Clear Channel to have more winners than any other group because they have more stations. However, as it turns out, the dart analogy isn’t completely accurate for radio.

While size does matter, a few smaller groups outperform their larger competitors.

The second graph below shows how well the groups perform when we take into account the size of each group. It shows the number of winners expressed as a percentage of stations each company has in PPM markets.

Note that Clear Channel falls from first in absolute terms to third when we take into account the size of the group.

CBS falls even further, ending up 6th. Cumulus, though third in the number of stations in PPM markets, ranks sixth in absolute terms, and falls to dead last in its percentage of winners.

The two stand-out groups are Hubbard and Cox. Each group is considerably smaller than Clear Channel, CBS, or Cumulus, yet each has a better “hit rate” than their larger competitors.

Four smaller groups out-perform CBS, and eight smaller groups out-perform Cumulus.

The success of these smaller groups competing against much larger groups suggests that when it comes to local radio, smaller groups may have an under-appreciated advantage–-a topic that we’ll explore in a follow-up post.

Note: The analysis is based on the June 2012 full week total person results in 44 PPM markets using Arbitron’s publicly released data. We’ve excluded embedded markets and those with substantial out-of-market listening. Station counts are based on number of in-market stations only.

Pandora: Be Careful What You Wish For.

Pandora, be careful what you wish for.

Last year Pandora created a fire-storm by releasing its own home-grown average quarter-hour (AQH) ratings.

The company defended itself by claiming its amateurish effort was the first step in providing media buyers an apples to apples metric, “to help advertisers determine the value of running campaigns on Pandora.”

Now that Triton Digital, a reputable ratings company, has gotten involved, Pandora has finally achieved its goal of having credible listening metrics comparable to broadcast radio.

And the company may come to regret its efforts.

When the company rolled out its first AQH numbers generated by re-purposing music logs, their press release declared:

Radio is radio. Pandora is simply a smart buy for local advertisers as well as national ones.

But the numbers suggest otherwise.

It turns out that the company’s ratings confirm that Pandora isn’t a serious challenger to local radio sales.

The ratings reinforce previous Radio Insights estimates that show despite the service’s dominance in streaming, it is little more than a niche player when compared to local radio.

The first graph at the left compares Adult 25-54 Pandora AQH to the comparable leading station in each of the eleven markets for which we have Pandora numbers.

Local radio beats Pandora in six markets and ties it in a seventh. In A18-49 it's a split decision. Local radio wins in three markets, and ties in two.

Pandora easily wins A18-34, winning in nine out of eleven, and tying in the remaining two markets.

Pandora's near sweep in A18-34 AQH has gotten all the headlines, but tells only half the story.

The purpose of Pandora's local ratings was ostensibly to show why the service is a great advertising vehicle, but when it comes to media buying, AQH is only one component.

Decades of academic research has shown that an effective media buy has two components, reach and frequency.

Reach is the number of consumers who hear a message. Frequency is how often they hear it.

Reach without frequency is ineffective, but frequency without reach is even worse.

Local radio is an effective advertising medium because a buyer can easily place a buy that maximizes reach while minimizing wasted frequency.

The second graph above shows Pandora’s reach (cumulative audience) compared to the same stations shown in the AQH graph.

Note that Pandora has one-half to one-third the reach of leading local stations.

And while the graph is for A25-54, local radio stations beat Pandora in every demo in every market-–even 18-34.

So what? What does it mean?

It means that Pandora is not a good advertising vehicle. It falls well short of local radio when it comes to balancing reach and frequency. The third graph illustrates why.

The graph shows what happens when a local radio station and Pandora run a similar commercial schedule. As Pandora continues running spots, reach climbs until it hits the service’s cume, generally in the mid to high 20s.

In other words, no matter how many times Pandora plays a spot, no more than 30% of consumers will hear the spot even once.

Once the service's cume is reached, the only thing that will happen is that the same people will hear the spot over and over.

(It should not come as a surprise that the number one complaint about Pandora by its users is that they hear the same commercials over and over.)

In contrast to Pandora, as a spot schedule continues to run on a local radio station, both reach and frequency continue to grow until the station’s much higher cume is reached.

It is the relationship between reach and frequency that makes local radio a much more effective vehicle than Pandora.

Despite Pandora’s millions of users, the seemingly competitive AQH rating is a consequence of a relatively small number of heavy users spending a great deal of time listening to it.

For this reason, Pandora isn’t a good advertising alternative to popular local radio stations--unless you’re Kyle Taylor proposing to Maggie.

Pandora & Arbitron: Co-Conspirators in a Lie

Joe Kennedy, CEO of Pandora, recently bragged that virtually all of Pandora’s growth came at the expense of AM/FM listening.

He reasoned that since listening to CDs, iPods, and MP3 players had increased, Pandora listening had to come from broadcast radio.

Pandora has a propensity to twist facts in the company’s favor that verges on the pathological. However in this case, the key twist should be laid at Arbitron’s feet.

Kennedy pointed to an apparent 5% decline in TSL between Arbitron’s Radio Today 2010 and 2011 reports as proof of his claim.

The problem is that it’s a lie.

Arbitron started changing the way radio is measured in 2008, and the roll-out continued through 2010.

During this period, Arbitron was forced to mingle audience data from two very different methodologies that produce very different estimates.

National estimates during this period are essentially statistical gibberish.

Arbitron pretty much admits it, declaring: Different measurement methodologies can and do produce different results.

Arbitron analyses at the time showed that TSL drops as much as 30% in markets that switch to PPM.

The first TSL number Kennedy cites is based on mostly diary estimates while the second number is based mostly on PPM estimates. He is comparing apples and oranges.

The fact that TSL declined only 5% during radio's transition to PPM suggests just the opposite of what Kennedy claims. 

His assertion that Pandora's gains came at broadcast radio's expense is just wishful thinking. 

If anything, research shows just the opposite. Pandora's growth seems to have little impact on local radio listening. Online listening appears to be additive radio consumption, not a replacement for broadcast radio listening.

Kennedy's claim that time spent with other audio entertainment is increasing is also demonstrably false, but we’ll save that discussion for another time.

We noted in 2009 that the transition to PPM couldn’t come at a worse time because new-media stakeholders would use the apparent losses as “proof” that broadcast radio is in decline.

Since then, our prediction has become all too true.

Arbitron’s Scorched Earth Strategy Reaches Market #190

In an effort to extract even more money from radio broadcasters, Arbitron has followed through with its threat to banish non-subscribers from publicly available rankers.

Now pay Arbitron or you don’t exist.

But Arbitron’s scorched earth strategy has another more ominous component: terrorizing small broadcasters.

An Arbitron lawsuit filed last year against a Dothan, Alabama station illustrates the company’s increasingly aggressive effort.

Dothan is a small southern Alabama town near the Florida panhandle border. Arbitron ranks the metro number 190 out of the 300 markets the company measures.

The town’s most prominent landmark is a giant golden peanut in front of the chamber of commerce.

Serving a population of little more than 200,000 people, you’d think WKMX, the town’s CHR, wouldn’t find itself in the cross-hairs of Arbitron’s lawyers.

Think again.

In a lawsuit winding its way through Gotham City’s courts, Arbitron is suing the station for $350,000 alleging copyright violations and breach of contract.

What transgressions did WKMX commit to warrant Arbitron’s wrath and a potential six figure penalty?

Apparently a radio trade story on Program Director Billy Sexauer’s morning show success caught the attention of Arbitron’s legal vultures eagles.

It is alleged that said PD mentioned taking the morning show from 7th to 1st in women 18-49.

Not only that, the station had the chutzpah to brag on the air that it was the most listened to station in Wiregrass! (Wiregrass is a reference to the area.)

Apparently, a station can’t shout “We’re Number One!” without paying Arbitron.

Apparently a Program Director can’t brag about his/her station’s success without first checking to see if the Arbitron bill has been paid.

You see, you don’t own your numbers. You rent them. It’s like that beer joke.

Arbitron rents them to you, controls how you use them, and controls when you use them.

And if you stop paying Arb, you lose the right to even mention the ratings that you’ve already paid for.

Actions like delisting non-subscribers and suing small market ex-clients are all about intimidation, making stations think twice about cancelling Arbitron.

Radio's growth is slowing. Budgets continue to tighten.

Growing numbers of broadcasters are questioning the value of Arbitron ratings, particularly when Arbitron's revenues are growing faster than radio's.

Broadcasters are turning their backs on Arbitron's carrots, and the company has responded with sticks.

Last year Bill Kerr, Arbitron’s CEO, declared that Arbitron wanted to be an advocate for radio, a friend of the medium.

Apparently his friendship was short-lived.

Streaming's Winners or Losers? MOG, Spotify, & Pandora

So much for the predictions that pure-play digital alternatives will come to dominate radio’s future.

After several years of hot money pouring into streaming and Internet radio, the reality is finally sinking in.

First, MOG is in play. Rumor has it that Beats Audio, a division of smartphone maker HTC, has either bought MOG or is in the late stages of buying the service.

Venture capitalists have already invested more than $33 million into the service. MOG claims a half million users, of which perhaps no more than 100,000 actually pay to use the service. (That compares to Spotify’s 3 million paying customers.)

The fact that MOG’s investors are looking to get out isn’t a positive sign.

VC companies invest in a start-up hoping to hit pay-dirt when the company goes public. They only unload a company after they’ve made a tidy profit, or when they realize that there will be no profit.

Ironically, MOG still has a lot of fans. Forbes recently declared: MOG blows Spotify away, but obviously its investors have a different view of the company.

HTC may see value in MOG as the handset’s “in-house” music service, the same way Microsoft packages Zune with its smartphones.

And while Spotify, streaming’s 2011 glamour-boy, is well ahead of MOG in subscriptions and revenue, there are growing questions of even its financial viability.

Michael Robertson, the man behind DAR.fm recently made this point:

I think Spotify is a tremendous service. Their technology is outstanding, their speed to stream is terrific, and users love it. It's just a math problem. Under the math (royalty payments to labels) they're forced to agree to, they will never generate a profit.

Remember this isn't the first wave. Go look at the archive from 3 years ago, 6 years ago, 9 years ago, you will find the iLikes, MySpace Music, Napster. They all paid up front and did the same deals, and they've all gone to heaven.

Pandora is another tremendous service that people love and yet may never make a profit.

The company’s stock got hammered after Pandora announced another losing year and predicted future losses.

The service’s loss widened to $16.1 million from a previous loss of $1.8 million despite nearly doubling revenue.

You’d think that doubling revenue would be good news, but Wall Street was expecting even higher revenue.

More troubling was the similar trajectory of expenses. Expenses increased at an even faster rate than revenues. On top of that, Pandora admitted to a 23% drop in active user growth.

Now analysts are questioning whether Pandora can even get its stock back up to its IPO price, let alone beyond.

Despite rosy predictions for the future of Internet radio and streaming services, the inevitability of pure-play success over local radio seems less certain than ever.

It is becoming even more obvious that broadcast radio is far from dead. Quite the opposite.

Radio groups continue to attract the majority of listeners and consequently the majority of radio dollars.

It is this continuing flow of advertising dollars that will enable broadcast to prevail over pure-plays on the Internet. Broadcast radio simply has much deeper pockets.

And all the hot money chasing radio dreams can't beat that.