Radio InSights

Radio Rolls the Dice...Again.

Critics complain that broadcast radio leaders are timid and unwilling to take chances.

Quite the contrary, history shows that broadcasters have been more than willing to roll the dice in search of the big score.

The latest example is the consolidation of programming, with stations in multiple markets carrying essentially the same product.

Major groups are in the midst of consolidating programming to an extent not seen in radio.

The most extreme efforts essentially eliminate programming decisions at the local level. All programming decisions are made at the corporate level.

Even groups that continue to allow local stations to make some programming decisions are making more corporate decisions. Corporate people may not be dictating programming decisions, but they are heavily influencing them.

Never have so few individuals had such an influence on the programming of such a large proportion of radio stations.

We call this process the nationalization of radio.

The goal is to create a consistent radio product across stations in the same way McDonald’s makes Big Macs and Starbucks makes Frappuccinos.

While today’s nationalization of radio has been the focus of a great deal of discussion, nervous hand-ringing, and criticism, radio has embraced nationalism in the past.

The last attempt was in the 1970s.

National programmers like Jim Schulke in Beautiful Music and Paul Drew in Top 40 called the programming shots for dozens of stations insisting on a consistent product across all stations.

Music was chosen, liners written and produced, and air staff hires approved. No major decision was made without their approval.

FM embraced automation, with entire staffs replaced with machines. Programming decisions were handed off to syndicators who provided canned formats on tape.

No air staff, no Program Director, just people to change the tapes. (This writer’s first job in radio was changing 14" reels of tape on a bank of Scully tape machines for a Beautiful Music station.)

Ironically in the 1970s, the dictatorial manner in which corporate decisions were handed down didn’t raise many eyebrows. Perhaps because it produced winners.

Jim Schulke stations were consistent ratings winners, more often than not ranked number one in their market. RKO under Paul Drew’s direction had the leading Top 40 station in virtually every major market in which they competed (during a time when all markets had at least two Top 40 stations).

But radio prior to consolidation was very different. Radio groups could only own a handful of stations.

RKO’s success may have heavily influenced the direction of Top 40 at the time, but there were proportionately far more independent Top 40 stations that didn’t have to follow Paul Drew’s instructions.

Consultants like Jim Schulke and Bill Drake programmed dozens of stations, but there were far more independent stations competing against them that continued to be programmed at the local level.

Today’s much larger groups may seem to be following in the path of 1970s innovators. However, consolidation has changed everything.

Consolidation has reduced the number of independent broadcasters creating fewer more powerful groups with many more stations.

Today the actions of just a few corporate programmers has a much greater impact on the industry as a whole than did the legendary programmers of the 1970s.

Consolidation combined with corporate driven programming puts radio in new uncharted territory.

Perhaps central control will take radio to a new level of sophistication.

Perhaps nearly identical corporate-wide products will enable radio to compete with digital alternatives that offer a consistent national product.

But product homogenization will only drive audience growth if those corporate decisions made by a handful of people are the right decisions.

It’s like putting all your money on one roll of the dice. If you win, you win big. If you lose, you lose everything.

The outcome has enormous consequences for radio. With digital alternatives gunning for broadcast radio’s dollars, the fate of radio may rest on that single roll.

In our next post we’ll explore the reasons why radio moved from the iron-fisted control of the 1970s to more decentralized control, and the implications for today’s consolidation of programming decisions.

Stay tuned.

Pandora’s Home-Grown Ratings: Methods & Motives

Pandora claims it has more young listeners than any local broadcast radio station. If 11 million Google hits are any indication, the world seems to believe it.

But is the claim a valid comparison, and is it a trustworthy claim?

The answer is no on both questions. The comparison is meaningless, and worse, the numbers supporting the claim are shaky.

And despite Pandora’s assertion that their efforts are to provide a useful comparison for media buyers, the exercise seems designed to do just the opposite.

Explaining why Pandora created their own ratings, Pandora CRO John Trimble claimed:

Accurately reflecting our audience listenership is critical to our clients....AQH, is the industry standard for buying radio advertising providing buyers with an apples-to-apples metric....AQH comparisons enable advertisers to fully understand the scope and scale of Pandora’s audience. (See here and here.)

But it seems the effort is more for Wall Street than Madison Avenue.

When Pandora first released its AQH numbers inviting comparisons to local broadcast ratings, we pointed out that comparing millions of streams to a single local broadcast signal is meaningless.

An honest apples-to-apples comparison is comparing one corporate audio service to other corporate audio services in the same area.

According to Pandora’s own home-grown ratings, the service has just a fraction of the local audiences of broadcast companies like Clear Channel, Cumulus, Univision, or CBS in any market.

And that is assuming the Pandora numbers are accurate.

The more troubling question is the reliability and comparability of Pandora’s local numbers.

Pandora invites comparisons to Arbitron numbers by using the same terminology, but how comparable are its numbers?

Arbitron weighed in with a carefully worded critique of “recent releases of audience estimates” raising numerous doubts about Pandora’s methods of calculating audience.

Rather than use Triton Digital, Pandora's own ratings provider, and the Media Rating Council (MRC) accredited leader in measuring audio streaming, the service hired a company without ratings experience.

Why didn’t Pandora use the leader in streaming measurement, especially after Triton announced that it would be offering its own local ratings?

On top of that, the company that produced the ratings used a method that is undocumented, and to our knowledge never tested against traditional measurement.

It is not used by Triton nor comScore, the two MRC accredited Internet measurement providers.

The data used to create the ratings came from music logs used by SoundExchange to determine Pandora’s royalty payments.

Perhaps this approach will ultimately prove to be an acceptable method of generating ratings, but what testing has been done? How has it been validated?

Rating providers go through a lengthy and laborious process to gain MRC accreditation. Just ask Arbitron.

The MRC checkmarks tell media buyers that they can trust the numbers media companies provide them.

Cavalierly releasing unaccredited ratings may have created great headlines for Pandora, but with so little known about the reliability and comparability of these ratings, the company has done a disservice to media buyers.

If Pandora is going to get into the home-grown ratings business, it needs to offer greater transparency about the reliability and validity of the numbers it releases.

Otherwise, it ought to leave the ratings business to Triton Digital, comScore, and the other experts.

Pandora Ratchets Up Assault: The Fix is In

Pandora has a long history of confusing its aspirations with reality, presenting guesstimates as fact.

Two years ago we noted Tim Westergren’s seemingly pathological need to denigrate local radio using unsubstantiated unverifiable statistical factoids, confident that no one would question his numbers.

Since going public, Pandora executives have pursued the same wink-filled PR path, offering upbeat predictions backed by shaky statistics nearly always coupled with a solemn reference to broadcast radio’s imminent death.

The pitch of Pandora’s PR drone has recently kicked up a full octave, perhaps a consequence of Wall Street’s skeptical response to the service’s prediction of a bright future.

Pandora’s stock price is stuck below it’s June 15, 2011 debut, barely half of its first day’s high.

Over 40 million shares traded hands that grand day, and all those people who bought the future of radio at $26 can’t be too pleased seeing their investment chopped in half.

So Pandora’s PR machine has changed gears.

The service’s exponential growth in Triton Media ratings is old news. New month, new record numbers. The story has been told with numbing frequency.

Pandora is like the school yard bully that has already beaten up all the kids at school. The bully needs somebody bigger to beat up.

So Pandora has stopped picking on its weenie streaming competitors and instead is taking aim at someone considerably bigger: local broadcast radio.

In July the service released numbers it purported were AQH ratings, for the first time enabling the service to claim it is just as big as broadcast radio.

Pandora’s accomplis in this assault on local radio claimed, “this data demonstrates the significance and scope of Pandora’s audience.”

Like most of the other statistics Pandora releases, the AQH release had a thin shell of credibility.

Citing AQH invites, even begs one to compare Pandora’s numbers to Arbitron’s station ratings. And lest anyone miss the point, Pandora’s CRO John Trimble notes:

AQH is the industry standard for buying radio advertising and providing buyers with an apples-to-apples metric is just one of the things we do to help advertisers.

It didn’t help that Arbitron abetted the crime by allowing the release of broadcast station AQH ratings (KIIS 0.7 Pandora 0.9, WHTZ 0.6 Pandora 0.7, etc), a clear violation of the company’s “fair use” guidelines but then blocked our attempt to provide more meaningful comparisons.

With the duplicity of Pandora sycophants, the announcement and release ricocheted around mainstream media, radio trades, blogs, and then back to mainstream media so that today everyone just accepts the “fact” that Pandora is bigger than any local radio station.

If you Google Pandora beats local radio, you’ll find close to 11 million links. Yet Pandora's number-crunchers indignatly claim with a straight face that they had nothing to do with attempts to compare Pandora numbers to terrestrial radio stations. 

Radio’s giant flywheel of a ratings service finally got around to releasing a well-written thinly veiled response to Pandora’s scribbles, but long after the damage was done.

Arbitron’s paper (PDF) should be required reading by pundits who gush over Pandora, but we doubt few will bother. The fix is in.

Radio, showing vigilance that would make the guardians of Troy blush has finally gotten indignant about Pandora’s made up numbers now that Pandora has announced 13-25% gains in their made-up ratings.

And radio’s slow-motion push-back led to some defensive back-peddling on the part of Pandora’s enablers, but too late.

There’s blood in the water. Pandora’s fix is in.

CRO Trimble once declared that, “accurately reflecting our audience listenership is critical to our clients,” but that isn't going to stop Pandora from continuing to release their home-brew ratings.

And we bet they will show dramatic growth.

Did we mention the service is now releasing cume numbers?

Next post we’ll look a little more closely at the back of the envelope Pandora uses to calculate their numbers.

We’ll also explain why radio’s response has so completely missed the mark.

Pandora vs. Local Radio: Second is the First Loser

Have you seen research that says listeners love Pandora more than local radio?

It’s wrong.

Not the answer. The question is wrong–-and misleading.

It’s wrong because people don’t listen to local radio. They listen to local radio stations. The difference is critically important in how listeners answer the question.

If you want to know whether a person prefers Pandora to local radio stations, you have to ask the listener about the specific radio stations he or she listens to.

People only listen to a few local radio stations, and they feel most strongly about just one or two.

Listeners don’t think much of local radio because they don’t like most local radio stations. In fact, even before Pandora and on-line alternatives, listeners thought most local radio sucked.

But a person’s favorite local radio station isn’t like all the others he or she doesn’t listen to. It’s special–-and to that listener much better.

That’s the problem with research comparing local radio to Pandora.

Lump all of local radio together, and of course Pandora is going to look better.

A much fairer comparison is to ask a listener to compare his or her favorite local radio station to Pandora.

Harker Research recently did that, and Pandora didn’t look nearly as strong as the headlines suggest.

We found that listeners rate their favorite local radio station higher than Pandora. And more importantly, one’s favorite radio station would be harder to replace than Pandora.

But that only applies to a listener’s favorite station. While a person’s P-1 station is better than Pandora, Pandora beats a listener’s second favorite. And not by a little, but a lot.

A listener has one local radio station that he or she can't live without, but Pandora does a pretty good job of replacing the rest.

So the good news is that Pandora isn’t better than a person’s favorite local station. The bad news is that it is better than all the others.

There’s been a lot of talk about how PPM is all about cume, that being a listener’s P-1 is less important with PPM.

Even if that were true (and we don’t think it is), it clearly isn’t true if we factor in future competition from personalized Internet radio.

Pandora isn’t going to replace local broadcast radio, but it will make it harder to survive as a mediocre station.

Facebook versus Radio. Which is More Important?

Which plays a greater importance in people’s lives: Facebook or local radio?

Must be Facebook, you’re thinking.

Everyone’s a member, it’s in the news all the time, and people seem to be obsessed with posting, playing games, or just finding out what friends are doing.

Facebook top line numbers are pretty impressive. Facebook claims something like 200 million active US members. ComScore says the monthly traffic for Facebook is a little over 150 million people.

That’s a lot of people, but radio “membership” is even higher. Arbitron says there are about 200 million people listening to local radio just in the 290 markets they survey. And that is just on radios.

We don’t have an accurate count of the number of people listening to broadcast streams, but according to Triton Digital, subscribing broadcast groups have over 150 million session starts each month and on average have over one-quarter million sessions going.

So we can’t be sure how many people listen to broadcast radio in a month, but it is well over the number of active Facebook members.

But what about time spent with each? Surely people must spend more time with Facebook. The company claims that people spend 6.8 hours on Facebook each month, about 1:35 a week. ComScore puts it at 1:24.

How much time do people spend with local radio stations?

Listeners spend 15:45 a week listening to local radio on the radio. In other words, not counting streams, people spend 10 times as much time listening to broadcast than reading their Facebook page.

Maybe reach and TSL aren’t the best metrics to judge how important a service is. Maybe Facebook is more important to people than the numbers suggest.

Or maybe the significance of Facebook has been inflated by stakeholders dreaming of a billion dollar IPO, pundits who are riding Facebook’s coattails, and a naive press that uncritically believes every new-media press release that shows up in their email.

What About Sports-Talk Radio? How’s That Doing?

Sports-Talk radio along with the rest of Spoken Word has been in the news quite a bit lately.

More and more Sports-Talk stations are migrating from AM to FM with Clear Channel's KJR and Entercom's WEEI just the latest in an accelerating trend.

What impact is FM having on Sports-Talk? So far, in a positive way but less than you might think.

There are a total of 51 AM and FM Sports stations now measured by PPM, eleven more than a year ago. Of those, nearly two-thirds (61%) are still on AM.

The median share for all Sports-Talk stations is 2.1. Half of Sports stations have a share higher than this, while half have a lower share. (This is based on stations in all markets now measured by PPM that have at least a one share in the latest three months.)

This places Sports-Talk dead last of the formats we’ve looked at so far. Click on chart at left.

Perhaps even more interesting is that FM Sports stations are not out-performing their AM brethren by much. Median share for FM Sports stations is 2.2 compared to AM’s 2.1.

New PPM markets coming on-line make it difficult to compare current median shares to last year’s numbers because the newest markets tend to be smaller than the first PPM markets.

To look at median share trends, we calculate median shares for just the stations that have been in the format and measured by PPM for at least a year.

Looking at just these stations, AM shares are steady at 2.2, while the median share for FM stations has gone from 1.8 to 2.3.

That means all of Sport radio’s growth has come from the FM side. This is clear if we look at format momentum.

If you’ve read our other format analyses, you know that we calculate momentum by comparing each station’s share today to what it was last year at this time, using a three month average.

Positive format momentum means that more stations are higher today than they were a year ago.

Momentum for the format is slightly positive at 52.5%, but this over-all performance conceals considerable differences between AM and FM stations in the format.

Fewer than half (46.2%) of AM Sports stations in the format are up over their 2010 numbers. In contrast, nearly two-thirds (64.3%) of FM Sports stations are higher today than comparable months in 2010.

Keep in mind that there were only 14 FM Sports-Talk stations in PPM markets last year, so FM’s positive momentum is based on a limited number of stations.

That said, the modest gains thus far may just be a hint of why lies ahead as more stations make the switch. Stay tuned.

 

How Are Gold Formats Doing?

Format labels are slippery things. We all understand a format label like Country. Country is County.

With a format like Adult Contemporary things get a little more complicated with the lines between Mainstream, Hot, and Modern AC somewhat blurred, but reasonably differentiated.

In the case of Gold-based formats, labels confuse as much as they clarify.

There was a time when there was one Oldies format, and stations were proud to call themselves Oldies. More recently, however, many gold-based stations have embraced the term Classic Hits or Adult Hits in an effort to distance themselves from Doo-Wop based Oldies.

While Classic Hit stations are generally a little more contemporary than stations still calling themselves Oldies, the dividing line is rather arbitrary.

There are 89 Gold-based general market stations in PPM markets. Seventy of those, nearly 80%, call themselves Classic Hits.

With so few stations still embracing the Oldies label, we’ve combined Oldies with the larger number of Classic Hits stations into a single category called Gold.

Gold stations have a median 6+ share of 4.1 in PPM markets. This ties the format with Country and Hot AC for fourth place among the formats examined thus far.

You can get more background on the other formats we’ve examined by clicking on one of these format links: AC CHR Rock Country Talk.

As an aside, Classic Rock and Classic Hits have an identical median share of 4.2 suggesting that the two formats are more fraternal twins than two separate formats.

While the median share tells us how popular a format is, a more useful metric for indicating the future prospects of a format is momentum, comparing past performance to the present.

Gold is essentially holding its own. Shares are pretty much flat compared to 2010, with as many stations ahead as behind last year’s numbers. This puts the format fourth of the ten formats analyzed so far. See second graph at left.

Interestingly, the few remaining Oldies stations actually have more positive momentum than their Classic Hit brethren. While only 45.8% of Classic Hit stations are higher than last year, 71% of Oldies are up.

All the caveats we’ve offered in earlier rating analyses apply here. PPM is still very new and we still don’t have a year’s worth of numbers for many stations. The coming months will tell us much more about the direction of formats with PPM.

How's News-Talk Doing?

Of the many formats we track, analyzing News-Talk presents the greatest challenge.

News-Talk is slowly migrating to FM. While most News-Talk stations are still AM only, there are a growing number of FM stand-alones as well as AM-FM simulcasts.

This transition has the potential to impact ratings in unpredictable ways. An AM station that adds an FM simulcast may get a bounce just due to the initial novelty. Stations that migrate from AM to FM may temporarily lose listeners. 

Because these transitory changes may create misleading patterns, we’ve decided during this transition period when not all PPM markets have a full year of data to analyze AM Talk stations seperately from FM and simulcast stations.

We’ll first analyze AM stations. We’ll explore FM talk in a later post.

News-Talk has the distinction of being one of the worst performing format we’ve examined thus far. The median share for News-Talk is 3.1. This places the format next to last among the formats we’ve analyzed, just ahead of Alternative Rock.

A year ago News-Talk’s median share was 3.6. That translates into a 14% decline.

More telling is the high proportion of News-Talk stations that have lost ground over the past year. Of the 52 AM News-Talk stations in the format at least a year, 61.5% have declined.

That’s one of the steepest declines we’ve seen in any format.

As we mentioned in earlier format analyses, PPM is still relatively new. Seventeen additional News-Talk stations don’t yet have even one year’s worth of trends, so we have to be cautious about over-analyzing PPM trends this early in the game.

Perhaps News-Talk has reached a ratings inflection point. Perhaps the normal random bounces we see all bounced against the format.

Whatever is behind this trend, we’ll be watching News-Talk closely in the coming months.

Arbitron Rating Analysis Face-Plant

As if on cue, in the midst of our ratings analysis, the “most trusted news in radio” inadvertently illustrated why analyzing Arbitron numbers can be so treacherous.

And how even a leading trade publication can get things so wrong.

Each year Arbitron releases Radio Today, a look at how the top formats are doing across Arbitron’s 290 markets. This is an analysis that only Arbitron can do because it is like running the Programmer’s Package combining every market in the country.

Because shares differ between PPM and diary markets, Arbitron now releases two estimates for each format, one showing how the format is doing in PPM markets, and a second for the format in diary markets.

Devoting the entire front page to Country’s performance,“the most trusted news in radio” declared:

The format ranked first among all formats in diary markets with a 14.5 but finished fourth in PPM markets with a 7.1. Put another way, Country’s average diary share is more than double its PPM share.

The statement is factually accurate, the ciphering flawless, but in the end meaningless.

A few lines later we learn the purpose of this expose' when the author asks rhetorically, “Why do some formats perform better under one ratings system than under another?”

It's perhaps a fair question, but using Radio Today Country numbers suggests that the author really doesn't understand how to go about answering the question.

Radio Today shares are calculated just like you’d do for a single market. Share is just a format’s AQH divided by the market’s AQH. To calculate a national format share, add the AQH of all the stations, then divide by the total AQH of all the markets.

Simple, right?

But what happens when there’s no full market Country station in New York or Los Angeles? The two largest markets in the country don’t contribute any AQH to the format tally. Consequently, the format's share is much lower.

Radio Today is not designed to compare formats the way the author has tried to do.

Compounding the problems of the wayward analysis is its conclusion:

One reason why Country comes up short in PPM markets is that it often lags in cume compared to other major formats.

The analysis ignores the fact that one of radio's biggest cuming formats, CHR, also does better in diary markets. There goes that theory.

The Radio Insights analysis of Country showed that the median share for Country in PPM markets was 4.1, behind only AC and Classic Rock. More importantly, Country is one of the few formats showing significant growth.

Two-thirds of Country stations in PPM markets are ahead of where they were last year.

The bottom-line is that Country is doing quite well in PPM markets, just the opposite of what the front page story suggests.

The subtitle of Radio Today is “How America Listens to Radio.” It’s an important distinction that the author of the front page story failed to understand. 

Radio Today is not a measure of the success of formats. It is a measure of what Americans are listening to.

Admittedly, ratings analysis is not easy. Most published conclusions about ratings are misleading for one reason or another. For more on the subject, check out our discussion on how to analyze ratings here.

How's Contemporary Hits Doing?

Radio Insights analysis of PPM format performances has looked at AC, Country, and Rock so far. Today we turn our attention to Contemporary Hit Radio.

To assess the health of each format we look at two key metrics, median station performance and momentum.

The median station is the one in the middle. Half of the stations in the format have a larger share, half have a smaller share.

The median tells us how the format is trending. If we see the median rising, it means mid-pack stations, the majority in the format, are gaining share.

Tracking the median station is more useful than calculating an average share because averages can be distorted by what are called outliers, stations that dramatically outperform other stations in the format.

WPRO-FM had an eleven share in August, yet few CHR stations can crack a six share. Using median rather than average takes that into account in determining the over-all health of a format.

Momentum measures where the format is headed. We look at a station’s latest three months and compare the average share for those months to how the station was doing those same months the previous year.

If more stations are growing than declining, the format has positive momentum.

We found that only 46% of Classic Rock stations are ahead of their last year numbers, but 51% of Alternative stations have grown. In contrast, 52% of Mainstream AC stations are ahead of last year, while only 44% of Hot AC stations have advanced.

The big winner so far has been Country. Nearly two-thirds (63.3%) of Country stations are ahead of last year.

So how’s CHR doing?

Of the 62 CHR stations now in PPM markets, about two-thirds have a year’s worth of numbers. The other one-third rolled out PPM towards the end of 2010.

The median 6+ share for all PPM CHR stations is 4.7, narrowly edging out Mainstream AC for top honors. See the format ranker above. Click to enlarge.

Momentum for CHR is slightly negative, with only 46.5% of CHR stations ahead of where they were last year.

As we pointed out in a 2010 post called Arbitron PPM Trends vs. a Coin Toss, most of the month to month movement of PPM is random. Stations go up and down for no other reason than luck of the draw:

Share estimates always have two components. The first is the actual number, the share you would find if you could ask everybody what they were listening to, instead of just a small number of panelists.

The second component is statistical noise. It is interference like static drowning out the signal from a distant AM station.

The noise is completely random and unpredictable. Sometimes it adds to the actual share, inflating it. Sometimes it subtracts from the actual share, deflating it.

Both monthly PPM share estimates and quarterly diary share estimates have so much statistical noise in them that it drowns out genuine changes in month to month ratings.

This is why we average three months.

Even with a three month average most formats hover around the 50% positive momentum mark, which means most stations in all formats are essentially churning, neither growing, nor declining.

That’s why it is important to watch momentum over time. Formats that are really growing show positive momentum month after month. Next up, Spoken Word.

Did Radio Get Its Mojo Back?

Last week’s RAB/NAB Radio Show could well be remembered as the moment that radio got it’s mojo back.

The mood at this year's convention was several notches above the apocalyptic doom of the last few years. Determination and steely resolve have replaced fear and anxiety of the recent past.

RAB President Jeff Haley's upbeat keynote address set the tone, and that tone echoed throughout the meetings that followed.

The previous fatalistic attitude regarding the threat of new-media was replaced with an upbeat assessment of broadcast’s ability to match and even better the digital initiatives of digital pure-plays.

Broadcasters seem to have found a mental sweet spot rejecting both a nostalgic hope that the happy days of the past will return, and the belief that radio’s digital evolution will be pain-free.

Discussions focused less on the threat of digital, and more on practical ways to exploit digital.

The zealous new-media true-believer panelists of previous conventions were replaced by more practical realists willing to acknowledge new-media’s challenges and limitations.

In past broadcast gatherings, any talk about radio’s ability to survive digital's onslaught was met with skepticism and derision. This Radio Show showed more balance, without either pollyannasim or chicken-littleism regarding broadcast radio’s future.

It was refreshing to see the industry emerge from the bunker.  Looks like broadcast radio has its mojo back.

Rock Dying? Wrong Question. Wronger Answers.

 Is Rock Dying???

That was the Molotov cocktail recently thrown by a trolling editor apparently in search of combustible material (link not provided–no sense encouraging trolls).

He found it in the form of a rock consultant, who predictably wanted to defend rock’s reputation along with the sizeable cash flow it provides.

Unfortunately, two wrongs don’t make a right.

The question was silly, only posed to serve as an ignition source. Worse yet, the defense was misguided, failing to answer the question, or the more meaningful question behind the question.

No format has ever died.

Formats are like bacteria. They evolve faster than they can be killed.

Each format can be traced back through a series of prototypical formats that preceded it. Formats continually evolve while retaining a good bit of the previous formats’ DNA.

It’s just like natural evolution. We all can be traced back to the original primordial ooze, and some like consultants can be traced back with very few intermediate steps.

The only reason we distinguish between bacteria, cheetahs, and ourselves is so paleontologists know what drawer to store the bones in.

They even invented a fancy name: taxonomy. Taxonomy, the Dewey Decimal System of life, divides the natural world into arbitrary unnatural categories.

Not to be outdone, radio divides programming into arbitrary formats.

As far as we can tell, the original purpose of format labels was to help record companies decide which stations to call to work a record.

Format labels don’t help radio stations or listeners. We’ve yet to find a listener who decides to listen (or not) based on what R&R (R.I.P.) called the station.

As an aside, the fluid amoeba-like nature of formats makes the notion that people “create” formats a slippery one. One can author a label (think Mix, Hot Hits, or Jack), but only God can create a format.

Mere humans and consultants can only make Recombinant DNA and give it a name.

In the days before Mr. Mike translators counted, there were 10,000 program directors, all independent, virtually uncontrollable, programming 10,000 fire-breathing RF emitting entities all providing entertainment. At least the PDs thought they were entertaining.

That PD independence meant there were something like 9,999 different sounding radio stations.

Anyone in radio back in the 1960s and out of rehab will back us up on that.

Like taxonomists who worry about what drawer to put the bones in, people like Bill Gavin tried to herd these cats into a few broad format categories.

He never fully succeeded, and as others reversed his efforts, radio started getting more and more formats, perhaps to help create more record rep jobs...and more lavish conventions.

While radio is now down to about five program directors, and an equal number of record reps, we now have 13,000 emitters, even 13,003 if you count successful HD stations, so the taxonomic task remains unsolved. Perhaps unsolvable.

Which brings us back to our bomb thrower and Rock.

First, Rock is not a format. It is a convenient–-some might even say lazy label that loosely describes a body of music lacking a meat-wearing lead singer.

Rock is to a listener what pornography was to Supreme Court Justice Potter Stewart, they know it when they hear it.

More specifically, people know Hard Rock with the emphasis on hard when they hear it.

This notion that we can lump the Eagles, Alternative, and Metal all together, call it Rock, and then debate whether it is dying is as arbitrary as calling Archaeopteryx lithographica the first bird.

The second problem is using Arbitron ratings to assess the health of a format.

How can both stations soaring in the troposphere with double digits and stations clinging to the right side of a one share be assigned the same format? And be given the same health status?

Its like creating an “average” injury report for a bus accident with a couple of deaths, a few people with serious injuries, and many minor injuries.

“How’s everybody on board doing?”

This is the problem with the response of Rock’s defenders. To “prove” that Rock is far from dead, they point to a few highly successful Rock stations:

But if Rock is dead, you're going to have to explain that to Greater Media in Detroit and Philly where their two Rock stations are usually Top 5 25-54 adults and often higher.

A factually accurate statement that says absolutely nothing about the health of Rock-–like highlighting the bus accident’s minor injuries and ignoring the deaths.

Last month WCSX had a 5.1 and WRIF had a 4.5 share (insert Arbitron disclaimers here).

A total of 84 other Rock stations didn’t fare as well. The average station scored a 3.7, and half of the field were below a 3.6. Seventeen stations couldn’t crack a 2 share.

Hell, the leading Classical station beat 39 Rock stations, and the Classical station is found on the left side of the few remaining analog dials!

Ah, the warm glow.

Other rock defenders channeling Mark Twain reminded us that there has always been talk of formats dying. (You post-literates need to Google: “Reports of my death are greatly”)

That defense misses the mark as well. Like Mel Gibson, all formats go in and out of fashion. Even if formats never die, debating the health of a format is legitimate and something the industry should do more often.

To really assess the health of Rock or any other format, we can’t just point to a few highly successful stations. It take a much more thorough examination of all the stations in a format, and over time.

An exercise that we will illustrate in our next post.  

“Mr. Broadcaster You’re Screwed!”

“Mister Broadcaster, you’re screwed!” That’s the message of a post breathlessly announcing a new WiFi standard:

Pundits scoffed at the idea that the Internet could ever live in cars (but) the just-released new Wi-Fi standard has a total range of 12,000 square miles – from a single base station.

Lest the potential impact on radio be missed, the poster added:

Do you think this will affect radio, Mr. Broadcaster?  What about you, Mr. NAB? What it certainly will mean is that the exclusivity rendered by broadcast signals will cease to exist.

Well, Mr. Broadcaster, before you get too concerned, read on.

Yes, indeed there is a new WiFi standard, and in theory it might cover such an area, but it has nothing to do with cars, and it’s implementation won’t have any impact on the vast majority of Americans--or radio for that matter.

Read a much more balanced description of the new standard here.

The actual coverage will probably be far less than the theoretical maximum. It uses line-of-sight UHF broadcast frequencies and requires powerful transmitters and tall towers to maximize coverage.

Most importantly, it is not designed for mobile reception (unless you equip your Prius as shown above...and leave it parked).

The new standard is designed to provide point-to-point Internet service for remote areas under-served by traditional telephone and Internet providers.

Despite the author’s all-too-apparent delight that Mr. Broadcaster will finally get what’s due, the post is a pipe dream, and we think we know what’s in the pipe.

New-media zealots have been predicting the imminent arrival of everywhere-Internet for years.

Remember all the cities that promised municipal city-wide WiFi? How’s that worked out?

In 2009 we coined the phrase Delusional Rapture to capture the frothy excitement new-media zealots exhibit when they talk about some future device or service they believe/hope will cause radio’s demise.

And it is always something in the future. The zealots all seem to believe that while radio may have survived everything thrown at it thus far, it is the next thing that will do it in.

If all their predictions were accurate, Mr. Broadcaster would be toast by now. However, the zealous enthusiasm of radio’s critics far exceeds the accuracy of their predictions.

Mr. Broadcaster faces many challenges as well as new opportunites, but radio is up to the task. That’s why the zealots have to fabricate boogeymen and hobgoblins. It keeps their spirits up.

Are You a Doomsayer or Pathfinder?

As the debate continues over broadcast radio’s place in the digital age, participants have fallen into two distinct camps with two distinct views of the future.

One faction fancies themselves enlightened Doomsayers, people who confidently predict a dark foreboding future for radio.

People in this camp think radio is populated by greedy aging luddites who don’t realize that radio is hurdling towards disaster driven by ignorance and an unwillingness to face the inevitability of radio’s irrelevance if it continues on its current path.

The Doomsayers take every opportunity to accuse radio of ignorance, over-confidence, greed, and just plain stupidity.

They seem to delight in pointing out radio’s foibles and missteps. Their “contribution” to the discussion is to engage in continuous radio bashing. They delight in creating radio straw-men who they can debate and verbally crush.

Take the recent Pandora is/isn’t radio debate.

A casual comment by Bob Pittman to a reporter dismissing Pandora as “not radio” turned into fodder for the Doomsayers.
 
Radio critics pounced, seeing it as another opportunity to blast radio’s ignorance, one writing:

I see an almost delicious zeal in diminishing these new definitions of radio by damning Pandora....Any broadcaster who defines "radio" according to century-old rules in a digital age is a fool.

The only fool here is the one that fails to understand why Pittman said what he did. Pittman was doing what any good salesman does regarding the competition.

Clear Channel along with CBS and other groups are developing products to compete against Pandora.

It doesn’t matter what radio is, or isn’t. It matters that Clear Channel and others take Pandora seriously enough to create competitive products.

Calling broadcasters fools serves no useful purpose other than to elevate the accuser’s self-importance.

Streaming is another area where the Doomsayers virtually froth at the actions and inactions of broadcasters.

Station operators, the people who actually know, have said for some time that streaming is a money-losing proposition. Read here and here, for examples. 

The high cost of royalties, much lower spot rates, AFTRA contracts, and the fact that Arbitron doesn’t measure streams all conspire to raise costs and lower revenue.

Doomsayers dismiss all these problems declaring:

The inability of today's leaders to see tomorrow squarely is as old as industry leadership....The vast majority of broadcasters have never even explored a sensible business model around streaming.

The Doomsayers can’t argue the economics of streaming, so they attack the vision and business acuity of those with whom they disagree. It’s an old trick: If you can’t win on the facts, attack the ones with the facts.

The latest silliness is challenging the notion that radio invented social networking.

In 2009 Radio Insights declared that We (radio) were creating social networks long before there was a fancy name for it.

Since that post a number of writers have made similar comments.

So what? So what if radio claims that its social networks pre-date the Internet?

The doomsayers see an ominous corrosive impact:

What bugs me about it isn't just that it's wrong, but that the implication behind its use is so destructive. The over-use of this unfortunate cliché will serve only to console us into acquiescence.

Once again doomsayers portray radio as naive, complacent, and ignorant of the true facts.

Contrast the dismissive downbeat Doomsayers with the other faction, the Pathfinders. Pathfinders also see a challenging future for radio, but they see digital as a great opportunity.

They understand that browbeating radio, calling broadcasters senseless fools, is not leadership, and it isn’t productive.

Radio Pathfinders look for solutions that balance the need to prepare for the future with business realities.

They understand broadcast’s strengths, and its demonstrated ability to adapt to new challenges.

Radio’s Pathfinders understand that digital is still new, a first-mover advantage for the pure-plays is non-existent, and there is plenty of time to develop responses to digital threats.

Whether it is music discovery, personalized streams, or crowd sourcing, the successes of Internet pure-plays can be matched and improved upon by broadcast radio.

Doomsayers focus on silly peripheral issues to portray radio as hopelessly ill-prepared for the future.

Pathfinders see a challenging yet bright future for radio. They focus on the critical issues, confident that broadcast will prevail.

Which are you?

Radio: Still Sounding Like It’s 1999.

The seemingly endless hand-wringing about radio’s digital future is all about peripheral issues.

Social media, web sites, mobile apps and streaming might seem important, but in truth they are worthless unless the product is right.

Radio today sounds pretty much as it did in the 1990s.Yet today’s listener isn’t anything like a listener from the 1990s.

A 1990s listener didn’t have many audio entertainment options. She listened to a handful of AM and FM stations, could play a CD, and now and then maybe watch an MTV music video.

Today’s listener has a seemingly infinite number of options from streaming stations to on-demand services, iPods, satellite, Vevo, social networks, and maybe a couple of HD stations in addition to the same dozen or so AM and FM stations.

As a result of the explosion of audio options from iPods to Pandora, today’s listener has much higher expectations than yesterday’s listener.

With more options than ever, today’s listener has much less patience for a radio station that falls short of her expectations.

This is radio's greatest challenge preparing for the future. While today's radio station is little changed, today's listener has changed a lot.

Radio’s failure to adapt the product to today’s listener is a far greater issue than worrying about Facebook, Twitter, or any of the other issues that seem to preoccupy the industry.

Take music.

A 1990s listener grew up with radio organized around music formats. Stations stayed within a format “lane” playing only songs that fit the format.

This rather cloistered arrangement meant that the 1990s listener heard a pretty small body of similarly sounding songs. Because of this, a listener accepted predictability and repetition as inevitable and perhaps even felt comforted by it.

Formats have all but disappeared for today’s listener. The ability to hear millions of songs with the click of a mouse has expanded the musical horizon of today’s listener.

Today’s listener downloads a little country, some pop, maybe hard rock, and maybe even a little international, for no other reason than she liked each song at the time and it cost virtually nothing.

Programming her own music she effortlessly segues between country, pop, and rock songs without giving any thought to whether they “fit.”

This means that when she tunes to a radio station, she isn’t looking for a format. She’s looking for songs she wants to hear.

Surprise and variety now share the stage with familiarity and comfort. She wants to hear something familiar, but at the same time wants to hear something different.

We can no longer refuse to play a popular song because it doesn’t fit the format. Today’s listener expects us to break format.

This even has implications for rotations and how songs move on and off the playlist.

When a listener could only hear a new song on one or two radio stations, we might power a song for weeks. However, today’s multimedia exposure to music means that today’s listener will grow tired of music much faster.

Today, a listener might first hear about a new song from friends on a social website, listen to it on Rhapsody, and then see the video on YouTube, all before radio adds it.

As a result of multimedia exposure, the velocity of a new hit is greater today. Radio is often the last place today’s listener hears about new music.

Music research today is more about measuring the trajectory of a song rather than determining the right moment to add a song.

We can no longer power a top testing song for eight or ten weeks even if it keeps testing. Today’s hits are far more perishable. At the speed of digital, a radio hit can quickly become  yesterday’s news.

What we test has to change too. With today’s listeners exposed to a much wider range of songs, music tests have to test a wider range of music, songs that stretch the boundaries of a format.

Adapting our approach to music is just the start. Every other programming element has to change too. We’ll get to those in future posts.

Gary Shapiro Wants TV Shut Down. Is Radio Next?

Remember Gary Shapiro, the FM-chip attack dog for the Consumer Electronics Association? It turns out that he hates free television just as much as he hates free radio.

During the debate over a proposal to require an FM-chip in cellphones, he famously declared:

Rather than adapt to the digital marketplace, NAB and RIAA act like buggy-whip industries that refuse to innovate and seek to impose penalties on those that do.

Calls for an FM chip mandate are not about public safety but are instead about propping up a business which consumers are abandoning as they avail themselves of new, more consumer-friendly options.

Now we know this attack was part of a broader agenda to ultimately shut down broadcast.

The reason Shapiro doesn’t like radio or television is that when someone listens to free radio, or watches free TV, his CES members don’t get a cut.

His ultimate goal is make sure his members make money anytime people listen to radio or watch TV.

In a recent interview, he said as much. If it were up to him, he would confiscate the spectrum and turn it over to CES members.

Here’s a taste of the interview:

For decades (broadcasters) haven't been creative, and they've been resistant to changes in technology. And they get a phenomenal amount of money from what they do. For years, they've basically controlled Congress.

Broadcasters have faced a declining viewership for years. They have been left behind. And they're sitting on way too much spectrum.

Whether it's 8 percent of the population, as our research indicates, that now relies on over-the air TV or 15 percent as others claim, it's still a low percentage of people relying on broadcast TV compared to the demand for more spectrum to fuel growth in wireless broadband services.

The question comes down to whether every market needs seven to 12 broadcasters. There will always be some broadcasters in every market. But is this the best use of spectrum? There has got to be better uses of the public airwaves than watching 40-year-old episodes of "I Love Lucy.”

And Shapiro couldn’t resist taking another shot at radio:

Radio broadcasters are the only medium that doesn't have to pay copyright fees. That's a fight that has been going on with the music industry for years. But it hasn't changed because they are so powerful politically.

So according to Shapiro, it is only political muscle that keeps broadcast radio and television on the air.

According to him, broadcast radio and television are wastes of spectrum space that mobile providers need so that more people can play Angry Birds and pay for subscription radio and television.

At the risk of sounding a little like Glenn Beck, it really sounds like Shapiro dreams of a future when AT&T and Verizon control both radio and television.

We speculated some time ago that the NAB was using their music royalty proposal as a Congressional bargaining chip in the fight over television spectrum.

Now you know why.

Is Radio Embracing Digital Too Quickly?

 

Is radio embracing digital too slowly, or too quickly?

While the answer may seem obvious given the barrage of criticism directed at broadcast radio, the answer is not as obvious as you might think.

 We’ve all heard the criticism:

“Many terrestrial station owners resistant (streaming), in part because it is human nature to resist change.”

“The inability of today's leaders to see tomorrow is as old as industry leadership itself.” 

“The sooner broadcasters step into that space (streaming), the better.”

But like the calls of religious zealots, the self-assured beseechments of new-media types are based on faith rather than facts.

BIA/Kelsey thinks that digital will contribute half a billion dollars to radio this year. How much more would digital contribute to radio’s $15 billion revenue if radio moved faster?

Critics don’t have a clue. Like a scene out of Field of Dreams, they just believe if you build it, the dollars will come.

Jerry Lee, owner of Philadelphia’s WBEB, disagrees:

For me to go out and sell digital is playing with pennies against the dollars I could make by becoming sharper at selling my product.  The money comes from selling commercials.

As it turns out, radio just may be doing what Lee warns against, working too hard to bring in digital pennies instead of working to bring in more spot dollars.

Harker Research recently analyzed radio revenue patterns going back to 2009 and to no one’s surprise found that a growing proportion of revenue growth is coming from digital.

Radio critics point to this as proof that digital is the key to radio’s future growth. But is it?

 

Take a look at the graph at left (click to enlarge).

 

 

We have indexed quarterly revenue for spot radio, spot TV, and newspaper print against 2009 as media were coming out of the recession. To smooth out seasonal effects, each data point is the average of four quarters.

Television has rebounded from its post-election doldrums, and is now growing steadily. It now stands ahead of where it was in 2009. Newspaper continues its free-fall, now at 70% of 2008 print revenue.

Radio is better off than newspaper, but worse off than television. It appears stuck at about 92% of 2009 spot revenue.

The contrast between the three media’s recovery from the recession suggest that each is on a different trajectory.
      
Television spot growth is considerably stronger than radio’s, suggesting that radio might be inadvertantly following newspaper's path. Instead, perhaps radio ought to emulate television’s growth strategy.

The curious thing is that as the second chart illustrates, newspaper generates the highest proportion of revenue from digital, television generates the least, and radio is in between.

The medium that has focused primarily on its traditional product, television, is the most successful, while the medium that has essentially gutted its product, newspaper, is the least successful.

If digital is the key to growth, why is television, the medium that has done the least preparing for a digital future doing better than either radio or newspaper?

Newspaper was the first medium to decide that the future was digital. Newspapers put all their resources into re-inventing newspaper as an online product.

They fired reporters, writers, and editors, eliminated whole newspaper sections, and in most ways hollowed-out the product they delivered to readers.

During this time, print revenues dropped like a rock. $23 billion of annual print revenues have evaporated.

After eight years of gutting print to grow digital, newspaper has $3 billion of annual digital revenue to show for it, still leaving the medium $20 billion in the hole.

Radio has approached its digital future much like newspaper. It too has taken an axe to the product, firing air staff and program directors, cutting marketing and research dollars all the while it pours more money into digital.

If gutting newspapers backfired and left print in a deep hole, will it happen to radio too?

The third graph traces newspaper’s growth in digital revenue from 2003 when the Newspaper Association of America starting reporting digital separately.

 

As with the first graph, the data points are four-quarter averages of quarterly digital revenue as reported by the association, in this case indexed to 2003 revenue.

Revenue grew steadily until the recession, fell back, and then returned to pre-recession levels. Perhaps digital revenues will continue to grow, but so far this year digital growth has been anemic.

Newspaper may be facing a future of falling print revenue, combined with stalled digital growth.

The second trend in red on the graph is radio’s performance indexed to 2008 when the RAB started breaking out digital.

At this rate, digital revenues will reach about 8% of radio’s on-air spot revenue in about five years.

Newspaper’s failure to stop the bleeding with a digital focus, in contrast to television’s continued success improving its traditional product should be a warning to radio.

Digital has turned out to be a trap for newspaper. Gutting its print product to fund digital efforts has not solved newspaper’s problems. If anything, it has made the problems worse.

Television seems to be doing just fine with only 3% of its revenue coming from digital.

Television’s focus on creating a product that consumers want–even in a digital age, seems to be paying off.

Time spent sitting in front of a television set has inched upwards even as time with computer and mobile video consumption has grown.

Maybe if radio devoted more energy in creating compelling products like television has, radio might grow its revenue like television has.

Otherwise radio might find itself in the same deep hole in which newspaper finds itself.

Jerry Lee: Blowing Smoke or Breath of Fresh Air?

 

    “Streaming is a bad business model.  If you take the combination of the cost of streaming and the royalties you are paying now, it is a stiff dollar, (and) the problem is going to get worse.”

 Are these the words of a mad man? Are these the words of a digital luddite, oblivious to radio’s inevitable future, unaware that the light ahead is actually a digital train hurtling radio’s way?

Or is Jerry Lee, owner of Philadelphia’s highly successful WBEB, simply saying out loud what every radio station owner has discovered, that streaming revenue doesn’t even cover its costs, and may not in the future?

Last year we pointed out that newspapers were well ahead of radio in developing a digital strategy, and yet only 12¢ of revenue came from digital. The vast majority of newspaper’s revenues were still from print.

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.

In another post we pointed out that BIA/Kelsey’s estimates put digital revenue at 5% three years from now, growing at something like 15% a year. We noted that:

The disparity between broadcast and digital revenue is so great that for digital to make up for a broadcast decline of just 1%, digital has to grow 33%.

Growing broadcast revenue by less than 4% generates more revenue than all the money radio makes on digital.

Is it any wonder that Lee declares:

“For me to go out and sell digital, my website, etc, is playing with pennies against the dollars I could make by becoming sharper at selling my product.  The money comes from selling commercials.”

While critics attack digital skeptics like Lee, even radio’s harshest critics turn silent when the conversation turns to revenue.

No traditional medium has found a digital strategy that pays its way. Not a one.

So broadcast profits are funding money-losing digital initiatives. Lee is echoing a point we made some time ago that needed money should not be diverted into digital, but rather put into growing the broadcast product:

Listeners have been very patient with radio as it has cut back on local programming. They have continued to listen while radio becomes homogenized and nationalized. There is a limit to their patience, however.

The industry should pay more attention to successful broadcasters like Jerry Lee, and less attention to self-serving new-media pundits and stakeholders.

Radio needs to adequately invest in the present before it can afford to invest in the future. That means putting more money into the product and less money into new platforms.

Will Radio’s Destruction be at Its Own Hands?

Radio people who were in this business before consolidation remember a very different business.

Outside of a few corporate groups in large markets, most stations were part of small groups, maybe in several regional markets.

Many stations were literally mom and pop operations, with pop selling time and mom keeping the books.

Radio was then more of a shoot-from-the-hip business. If you had a new idea, there was a good chance you could find someone to give it a try.

There were 20% fewer stations before deregulation, yet there were far more formats and format variations. Formats would morph as they moved from market to market, so no two stations sounded alike.

Radio was a loose organic confederation, a giant network of people who’s natural urge was to keep changing things, searching for that next share point.

Consolidation, IPOs, and a focus on Quarterly Capitalism changed all that.

Radio began emulating successful public companies outside radio.

Look at successful companies like McDonald’s or Target. Major decisions are made at corporate headquarters.

Large corporations are all about centralized control, centralized decision making. And today’s corporations believe in standardization.

Adapting the approach of successful corporations outside of radio transformed radio stations into little more than McDonald’s franchises. Today formats are standardized just like the size, shape and weight of a McDonald’s beef patty.

We know that centralized decision making works in many other industries, but does it work in radio?

Not well enough to keep radio growing.

Radio has achieved its level of success through continuous, often chaotic, organic evolution and innovation.

Historically, radio programming innovation didn’t come from the cautious major market players. It came from the small market buccaneers who had little to risk, and who were willing to take fliers based on somebody’s crazy sounding idea.

A lot of the crazy sounding ideas turned out to be just crazy, but every once in a while something clicked, and soon others were emulating, and improving on that first person’s idea. The major players were the last to copy a good idea, to do something different.

As long as the buttoned-down suits ran just a handful of major market stations, innovation continued in the hinterlands beyond the reach of those who felt more comfortable doing the same thing over and over.

However, today’s vision of radio stations as McDonald franchises can be found in every market of every size.

Craziness has been systematically bred out of radio’s DNA. Tranformational programming innovation has essentially stopped.

Cisco's CEO John Chambers recently announced that he was reorganizing the company. The company had lost its edge, was losing ground to new competitors.

He concluded that Cisco had too many committees, too much bureaucracy, and as a result, initiative and innovation had suffered:

We have been slow to make decisions, we have had surprises where we should not.

He then laid out his vision of a mobilized Cisco:

• We will take bold steps and we will make meaningful decisions in a timely, targeted way.  
• We will accelerate our leadership. We understand that our competitors are fierce (but) we will not be defined by them. 
• We will simplify the way we work and how we focus our attention and resources.  We will empower our teams, and allow our people to focus on inspiring and important work.

Even Cisco, a $40 billion computer hardware company, can admit to becoming too bureaucratic, too predictable, and unresponsive to new challenges.

Radio, a business built on innovation, unpredictability, and change should do no less.This is the spirit radio needs today.

This is no time for radio to become cautious, afraid of change. We need the crazy buccaneers of the past. We need people willing to try something different, not afraid to fail.

New media is not radio’s greatest challenge. Radio’s greatest challenge is complacency and a growing buttoned-down attitude that stifles creativity.

Against an onslaught of new highly motivated challengers, it will not be new platforms, new delivery systems, or social networking that saves radio.

Radio will survive if those last strands of crazy DNA that still exist in the minds of a few programmers are reactivated and set free to innovate and reinvent radio.

If that happens, those new-media geeks don’t have a chance.

What is a Listener Worth?

What is a listener worth?

Mel Karmazin recently compared Sirius to Pandora, bragging that Sirius makes a lot more money per subscriber than Pandora:

(Pandora) are able to generate $4.59 per year from their active users. By contrast, SiriusXM generated $141 in the year for each subscriber. I think that helps to demonstrate why we like our subscription business model.

Is this a valid way to compare Sirius to Pandora, or broadcast for that matter?

Karmazin used Pandora’s estimated active user base, but a more useful comparison is to look at Pandora’s weekly average sessions, nearly half a million in the latest reported month.

If we divide Pandora’s 2010 revenue by the service’s average sessions, it turns out that an active user is worth $467, over three times what Sirius makes from each subscriber.

So much for Karmazin’s subscription model, but how does that compare to the value of a broadcast listener?

Arbitron does not release national AQH estimates, and the current mix of PPM and diary markets makes calculating a national AQH number problematic. Nevertheless, we used Arbitron’s national RADAR estimates as a starting point.

We concluded that national full week AQH is more than four million AQH persons.

We know from the RAB that spot radio alone in 2010 totaled $14.2 billion.

This means the value of a broadcast radio listener nationally is conservatively $844, twice what a Pandora listener is worth.

Now that we have a national average, we can use this analysis to examine specific radio stations.

BIA-Kelsey recently reported 2010 station revenues for the nation’s top ten stations. If we divide the station’s revenues by their latest full week PPM AQH numbers, we can compare the stations to each other as well as the national average.

Across all top 10 stations, a listener is worth $809.44.

The graph lists the stations in order of revenue from highest on the left to the lowest on the right (click to enlarge). The height of each bar indicates how much revenue each listener generated for the station.

 

The horizontal line is drawn at the national $844 average.

What’s it all mean? First, Karmazin has made Sirius look good by making a misleading comparison.

Pandora makes considerably more per active user than he suggests, one-hundred times more using average sessions as the metric.

Karmazin didn’t bother to contrast Sirius with broadcast radio perhaps because he knew radio would look much better, six times better than Sirius.

Beyond these cross-platform issues, there is the question of the wide range of listener values even within the top ten stations.

Four stations fall below the estimated national average. Two are music, and two are news stations, all are New York stations.

Why are there so few music stations within the top 10 billers, and why do music stations within the top ten under-perform?

Commercial loads may have something to do with it, but these are full week numbers which should even things out a little better than Monday through Friday numbers would.

And why do a Washington, D.C. and Chicago station do so well compared to New York stations?

We’ll have much more to say in part two, but in the meantime, take a look at the graph and ponder the implications.

Then calculate what your listeners are worth.