Radio InSights

What's All the Fuss Over Voltair? How About $2 Billion.

In the course of a serious online discussion there comes a time when it attracts pundits who want to demonstrate their higher intellect and superior knowledge by offering a new perspective on the subject.

Too often they do just the opposite. Their comments reveal ill and uninformed opinions that demonstrate their lack of understanding of the subject. Rather than make useful contributions that advance the discussion, they simply add to the noise level side-tracking the discussion.

So it is with the discussion about Voltair. Failing to understand the broad implications of Voltair’s apparent success, too many people new to the issue bring up silly issues. It’s like a child around a group of adults shouting "look at me, look at me!" to get attention.

The first foray into silliness was the assertion that using Voltair was unfair. Anyone who feels this way simply doesn’t understand the economic value of a device that may significantly increase TSL and in turn a station's AQH rating.

The latest diversion is the notion that there is just too much fuss over Voltair. It is no big deal, just another way to game PPM.

"What about engagement, what about passion?" is asked, as if these things somehow make up for a flawed technology potentially undercounting radio listenership.

Suggesting that radio is too obsessed with accurate listening estimates proves that one has no concept of the role that ratings play in today’s multi-media environment and tomorrow’s programmatic marketplace.

Only a person who has never sold radio time, never tried to explain PPM’s 30% lower AQH ratings, or had to make a sales budget makes that argument.

Voltair is a canary in the coal mine, a warning that something is amiss with PPM. It is a warning with broad implications regarding radio sales and radio revenue.

A rough "back of the envelope" calculation illustrates the magnitude of the problem.

Last year US spot radio revenue totaled $13.6 billion with nearly three-quarters of the total coming from PPM markets.

How much of the revenue was ratings driven is anyone’s guess, but large market managers tell me it can be 70%+ of total spot revenue. Even in smaller PPM markets the percentage can be 50% and higher.

We’ll use the lower 50% number, knowing that it probably understates the actual average across all PPM markets.

Let’s call it $6 billion in spot sales driven by ratings.

Let’s also assume that rating sensitive sales are tied to cost-per-point. In other words, the higher a station’s AQH rating, the higher the rates it can charge.

Now for our last assumption let’s say that PPM is under-reporting AQH ratings by 30%. Remember Arbitron’s "70 is the new 100" campaign? That was an admission that AQH ratings are about 30% lower when measured by PPM.

Given those assumptions, spot radio revenues should be north of $16 billion instead of less than $14 billion.

If these assumptions are in the ballpark, PPM is costing radio a little more than $2 billion in lost revenue every year.

Let that sink in. Two billion dollars of lost revenue. Every year.

What if a higher percentage of spot sales is driven by ratings?

What if lost listening is higher than Nielsen’s estimate? We’ve seen ratings jumps over 50% at some stations after installing Voltair. (Your mileage may vary!)

It is not inconceivable that ratings driven sales revenue could double. That would put total spot radio close to $20 billion.

And if programmatic sales really do take off, you can kiss good by all those warm fuzzy reasons to buy radio. Spot sales deals will all be driven by ratings.

That’s really what the fuss is all about with Voltair.

If Voltair is helping PPM meters more consistently log radio listening, it confirms that PPM based estimates are low, that listening levels are higher than we thought, and we ought to be charging more for our spots.

If a flawed ratings system is conceivably costing radio $2 billion a year in lost revenue, that’s worth fussing over.

Next up, we’ll take a closer look at the "70 is the new 100" campaign that Arbitron hatched in 2009 as a way to explain the drop in listenership with PPM.

 

The Nielsen Press Release That Kills Voltair

So far Nielsen has had little substantiative to say about Voltair other than it is studying the device.

There’s one thing Nielsen could announce that would pretty much end Voltair.

Nielsen could publically declare that PPM is as accurate as it originally claimed to broadcasters, and that Voltair offers no benefit.

Imagine this press release from Nielsen:

Nielsen Audio’s PPM captures and reports 99.9% of all encoded radio listening to which panelists are exposed. The technology works equally well with all radio formats, all programming material, and is immune to environmental interference.

Case closed.

Voltair’s critics would be correct claiming that all this talk about boosting ratings is just hype, a classic example of confirmatory bias.

But don’t expect Nielsen to issue this press release.

All the evidence points to just the opposite: PPM does not capture listening to all formats and program material equally, and that ambient noise can make identifying a radio station much more difficult.

And ponder what it means if Nielsen cannot claim that PPM captures 99.9% of all encoded radio listening under all circumstances.

It means that radio listening is being under-reported by PPM.

The real story that is getting lost in all the hand-wringing over whether Voltair is fair is the implication if Voltair actually works.

If Voltair really does boost ratings, then PPM without Voltair is not capturing all radio listening.

Then we have to ask ourselves what percentage of radio listening is not being reported by PPM. Is it 10%? Is it 30%? Is it more?

Is it OK if PPM misses 10%, but not OK if PPM misses 15%? How much potential listening are you willing to lose?

Spot radio is a $14 billion business where cost-per-point matters. If actual radio listening is higher than Nielsen reports, then radio may be losing billions in potential revenue.

Some claim Voltair is unfair. Is it more fair for radio to give up potentially billions of dollars because of a flawed measurement technology?

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.

Talk Radio is Dead. Long Live Talk.

Have you heard? Talk Radio is dying.

At least that’s what the pundits say. Talk Radio is dying. It’s history!

Of course it has been dying for years according to the critics. Newsweek alluded to its passing in a cover story in 2009.

The fact that Talk Radio is still alive while Newsweek is gone should not go unnoted.

Since then there has been a steady stream of stories questioning the survivability or relevancy of Talk, invariably invoking the name of Talk Radio’s bad-boy poster child Rush Limbaugh.

Remember Sandra Fluke? Rush Limbaugh called the poor Georgetown law student a slut, and all hell broke loose.

The Fluke controversy led to sponsor boycotts, and a condemnation pile-on that included many Talk Radio “experts” and high profile personalities including Don Imus of nappy-headed hos fame. (There’s the pot calling the kettle black.)

Look at the impact of the Fluke remark on Limbaugh's Google search traffic below (click to enlarge). The blue line is Mike “more conservative less controversial” Huckabee’s searches over the same time.

Meanwhile others were taking a wider swipe at radio. The Hollywood Reporter gave a bitter Tom Leykis a platform to vent in a breathless piece called How Radio Will Kill the Radio Star.

Shirley Halperin, who penned the piece tells us that:

Leykis left his first love (broadcast radio) not because he couldn’t get paid, but because he believes traditional radio is dying.....Radio audiences are getting older (more than a third of talk-radio listeners are 65 and up) and the personalities are aging out of relevance.

And if there were any doubt whether Talk Radio was dying, it was put to rest when a major Captain of the Radio Industry, Lew Dickey, confirmed the prognosis.

Even a year after the Fluke incident, Lew Dickey was still talking about the destruction that Rush had done to Talk Radio and his company. And it was newsworthy enough that the Huffington Post picked up a radio trade story quoting Dickey:

Clearly, it's been well documented that the talk side has been challenged....There has been residual hangover on the talk side in terms of advertisers sitting out and not placing there.

Clearly that's had an impact not only on our network business but it's had an impact on some of the news talk stations that we own.

Arbitron added its official imprimatur to the Talk Radio is Dying meme last month noting ominous trends in Talk Radio’s ratings:

News/Talk's lead over Pop CHR and Country has shrunk in each of the past two months, and for the first time since we began keeping our format records, it recorded two consecutive books below a 9 share, finishing at an 8.7 in July.

Now summer is historically the lowest time of the year for News/Talk listening, and we will be keeping a close eye on the results as August and September approach, but it's worth noting that the format's summer shares have declined about 10% since 2011.

So is it true? Are we looking at the end of Talk Radio?

No, to paraphrase Mark Twain, the report of Talk Radio’s imminent death is greatly exaggerated.

All formats go through periods of boom and bust. Every one of them.

Think about Top 40. According to Arbitron, CHR is currently the top rated format in PPM markets, in 25-54 no less! Yet Top 40 has been declared dead more times than Generalissimo Francisco Franco.

CHR might be riding high now, but in the 1980s stations were bailing out of CHR right and left. And many stations that stuck it out denied they were CHRs.

It was a time when every CHR tried to pretend they were really AC and every AC wanted to call itself Mix. Now look at the two formats.

Today Country is doing well, but there have been dark days for that format too. Remember when the Eagles were in power rotation?

Every format experiences different levels of success in repeating life-cycles. Every format goes through periodic transformations, periods of creative destruction.

For the most part, a cycle is roughly every ten to fifteen years, coinciding with generational shifts in tastes.

Few people want to listen to their parent’s radio station.

The CHR format dates back to the 1950s, but today’s CHR is very different from Gordon McLendon’s KLIF, Bill Drake’s KHJ, or Mike Joseph's WCAU.

The KSAN of Tom Donahue was unlike any of today’s Rock stations, but AOR continues to thrive. The same is true of virtually every other mainstream format.

What about Talk Radio?

Modern Talk Radio was born on August 1, 1988. That was the day that Rush Limbaugh debuted on WABC, 25 years ago.

Back then Ronald Reagan was President. Miami Vice and Murphy Brown were hit TV shows. Rick Astley, George Michael, and Richard Marx all had Billboard’s Top 100 hits.

In those 25 years we’ve seen at least one boom and one bust period for every music format. Yet Talk Radio has not really changed that much.

Why? Because Rush Limbaugh is still on the air.

Limbaugh is about all radio has that is still relevent for many people. Were it not for Rush, radio would hardly be mentioned at all in general market news sources, and the few mentions would be the same old radio is dying story. 

The clock has stood still for Talk Radio because the format’s spiritual leader continues to command the biggest megaphone, the most buzz, and the largest audience.

The pattern of radio format transformations suggests that formats evolve because they have to. Even after a format falters, intrenched leaders refuse to adapt.

Leaders make too much money to risk taking a chance.

Talk Radio is too successful, and Limbaugh is too critical for the format’s continued success for stations to try something new.

But what if Limbaugh quits tomorrow? What if he tires of carrying the format and decides bottling tea is more fun?

Talk Radio will have to reinvent itself. It will have to experience (some might say suffer) the same transformation that every other format experiences.

And like every other format before it, Talk Radio will ultimately be stronger because of it.

In part 2 we will explore what Talk Radio 2.0 might look like. Hint: It won't sound like your father's Talk station.

Ford Dumps Digital Dashboard

It’s easy to get caught up in the analog is dead, everything will be digital movement.

We are bombarded with a seemingly endless stream of breathless press releases and gushing reviews about new digital devices that boosters claim will transform our lives.

One such development is the automobile digital dash, the move to replace numerous dashboard controls, knobs, and switches with a single touch screen.

Digital pundits proclaimed the “infotainment” touch screen the next Big Thing. But the pundits don’t always get it right, and now Ford is paying the price.

MyFord and Sync were supposed to catapult Ford into digital first-mover status in automotive. No more knobs or analog devices. Ford’s cockpit would integrate virtually all of a car’s controls into one multimedia touch screen.

And to top it off, many controls would be voice-activated. Want to listen to Pandora? Keep your hands on the wheel, your eyes on the road, and order up Pandora.

Ford has hit several speed bumps along the way, speed bumps that we first noted in 2010, and again a year later as complaints grew.

Putting a smiley face on MyFord, the maker repeatedly defended the digital decision, citing positive research, strong sales and enthusiastic buyers. Ford kept claiming that they were just one software upgrade away from perfecting Sync.

Now Ford has finally admitted that Americans aren’t ready to abandon their analog ways. Because of the difficulty of using its touch-screen system, the auto maker is putting radio tuning and volume knobs back in their cars.

As reported by the Wall Street Journal:

One of the things that bothered customers was the inability to quickly change the channel or volume on the radio through familiar knobs.

The story notes that after switching to a digital dashboard, Ford’s ranking in J.D. Power’s Initial Quality Survey plummeted, falling from a top spot to below average.

According to Automotive News:

Ford was (once) the highest-ranked non-luxury brand in J.D. Power & Associates' annual Initial Quality Study. After MyFord Touch was launched, Ford dropped from a fifth-place overall ranking in 2010 to 23rd in 2011 and 32nd in 2012.

All over a few knobs.

How can it be that Ford’s research says that people buy Fords because of the digital dash, but the buyers complain about it to J.D. Power?

It’s called Buyer’s Remorse.

One buys something with great expectations, only to discover that the product doesn’t work as well as the maker promised.

Digital devices seem to generate considerable buyer’s remorse, perhaps because digital promises too often fail to deliver.

Ford’s reversal should be a warning for us all.

Gullible consumers might be willing to shell out a couple of hundred dollars for the latest toy, but they understand that these shiny new digital objects have life spans measured in months.

Sure it might be more complicated than promised. It might not work as advertised, but there will be another shiny object to distract us, and another one after that.

A car is another matter.

People spend a lot of time in their car. People keep their car for a long time, a lot longer than an iPhone, game console, or piece of software.

And most people don’t want to invest a great deal of time fumbling around to do something that ought to be pretty simple and quick, like switch stations or just crank it up.

It’s telling that the first Ford model to see the reappearance of radio knobs is their F series pickup. Ford makes a lot of money selling the top selling pickup in America.

Next time you hear that something is the next Big Thing, or that you’re foolish to not spend money on it, think about Ford.

Who knows. Mabe the next real Big Thing will be analog.

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.

 

On-Line Listening Growth Anemic. Maybe Even Declining.

The latest on-line radio ratings raise serious questions about the future of digital radio.

Aside from a couple of exceptions, on-line listening growth is at best anemic, and in some cases even declining.

Broadcast groups that are betting everything on streaming and an app may be making a very bad bet.

In 2010 Radio Insights introduced Hours-Tuned in order to create a metric that would enable the industry to compare broadcast and streaming listening levels. Hours-Tuned tells us how many hours of listening a station attracts.

Think of it as a measure of the total “consumption” of a radio service.

Hours-Tuned illustrates the fact that when it comes to on-line radio, there’s Pandora and then there’s everyone else.

Pandora alone makes up 75% of listening reported by Triton Digital. Not only does Pandora dominate Triton ratings, the service’s share is increasing, up from 66% a year ago.

But even Pandora’s growth is slowing. The first graph at left shows the monthly year-over-year percent change in Hours-Tuned for Pandora.

After six months of triple digit growth, Pandora growth has dropped precipitously. It’s still considerably higher than most other services, but well off the pace of earlier this year.

On top of that, Pandora is one tide that isn’t lifting any other boats.

The second graph better illustrates what’s happening at many streaming services.

After fourteen months of slow steady growth, AccuRadio went into reverse, losing total hours.

For seven months now, year-over-year Hours-Tuned comparisons have been negative, with the decline accelerating. (Note the difference in scale compared to the Pandora graph.)

Even a brand like ESPN isn’t immune from this trend.

The ESPN graph below isn’t pretty, with twelve of the last 16 months showing negative growth in consumption of ESPN streaming.

Clear Channel is the best performing broadcast group, but it too is showing decelerating growth. It’s growth rate is similar to Pandora’s but with a fraction of its total hours of listening.

Total Hours-Tuned for the top twenty streaming services has increased 54.5% in the past year, but most of this is Pandora.

If we take Pandora out of the picture, streaming hours have only increased 11.9%, not exactly robust growth.

Terrestrial groups have grown 8.3% in the past year, but this too is distorted by one outlier, Clear Channel. Take Clear Channel out, and terrestrial radio stream listening has declined 24%.

One of the problems in analyzing long term Triton Digital trends is the many changes that have taken place within services.

For example, CBS numbers included AOL listening until AOL moved to Slacker. The move led to an immediate decline in CBS numbers, and a gain for Slacker. Since then CBS has added Yahoo.

Interestingly, the combined listening of CBS and Slacker today is 28.4% lower than a year ago.

The September change in Hours-Tuned for several groups are summarized at the left. The numbers do vary somewhat from month to month, so the numbers might be different next month but the trend is unmistakable.

Aside from Pandora and Clear Channel, on-line listening growth is at best anemic, and perhaps even declining.

When we recently noted the precipitous decline in on-line listening spans, new-media pundits and stakeholders rose up to challenge the numbers.

One declared:

In fact, while ATSL is declining as people migrate to mobile, their number of SESSIONS per week is increasing at a FASTER rate, so that total Internet radio listening hours per consumer per week (or per month) -- i.e., TSL -- is INCREASING, not decreasing.

It sounds reasonable, but it isn’t true.

Hours-Tuned takes into account both ATSL (time per session) and Sessions, and total hours are declining for many services.

Pandora and Clear Channel are both growing, but over-all listening growth is slowing, and some services are declining.

The rosy new-media narrative of nearly infinite Internet radio potential might sound great, but the numbers paint a very different picture.

Streaming is becoming a game with many more losers than winners.

Pundits like to point to Pandora and its death-defying success story as proof of Internet radio’s inevitable dominance.

But we heard similar stories about on-line gaming and daily deals.

Is Pandora another Zynga or Groupon? These are each category leaders with what seemed like limitless possibilities.

Now Zynga is a $2 stock (down 88%) and Groupon is a $3 stock (down 89%). Meanwhile Pandora has fallen to $8, a 60% decline.

Are the declines in listening just confirming what Wall Street has already figured out?

Think Streaming will Replace Radio? Think Again.

Do you think soon streaming on a smartphone will be the primary way people listen to radio?

A lot of broadcasters at the recently concluded Radio Show thought so. Before you agree, better look at how much a listener is going to pay.

A story in this month’s PC World points out how quickly a smartphone can run up against data plan limits.

According to the author, streaming Pandora consumes about 24MB an hour.

If you’ve got AT&T’s $15 200MB plan and you’ve maxed out your plan watching Hulu or YouTube, uploading pictures to your Facebook account, or sending emails with your latest Hipstamatic creation, listening to Pandora is going to cost you $1.80 an hour, a little less if you use their lower quality settings.

Smartphone radio listening during the daily commute could cost more than the Starbuck’s Iced Latte you picked up on the way.

When Pandora recently eliminated the 40 hour per month limit on free listening, many users cheered, but they must not have been 3G listeners. Now Pandora will allow you to spend up to $320 on their "free" plan.

If your boss won’t let you use the company WiFi to listen during the day (many companies are starting to ban Pandora in the office because it chokes networks), you could rack up $200 a month using your smartphone at work.

If you’re smart and sign up for the $45 4GB plan and watch no videos, upload no pictures, and otherwise minimize your data consumption, you’ll be able to listen to streamed radio up to 140 hours a month and not incur any data overage costs. That's not much more than four hours a day.

That’s more than the typical person listens to radio now, but who can resist the occasional YouTube or Hulu video? Who can resist the occasional download or email attachment?

If the smartphone does become the Swiss Army knife of information and entertainment, are people really going to spend their bytes on radio when they can get it for free?

AT&T provides a useful online tool to estimate how much data you are going to consume. Give it a try and see what you come up with.

The notion that soon we’ll all be watching Netflix movies, playing games, listening to the radio, and placing video calls from our smartphones assumes that data rates are going to go down, but the opposite is happening.

One by one, the carriers are eliminating unlimited plans. Most people are going to have to budget their data and watch their consumption.

The bottom line is that the belief that most listeners will switch from broadcast to streaming is a pipe dream. But AT&T, Verizon, and Sprint hope you’re right.

“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.

Sex and Silly Surveys

We’re sure you’ve seen them. Those surveys that ask whether a person would rather give up some other gadget or their smartphone.

“If you had to give up (insert device here) or your smartphone, which one would you give up?”

Whether the choice is television, radio, or anything else, the smartphone always wins.

There was a lot of hand wringing among broadcasters when the story first broke that listeners would rather give up their radios than their smartphone.

And radio critics had a field day. They pointed at the results as clear evidence of the growing irrelevance of radio. Radio’s death couldn’t be too far behind.

A new study puts this silliness into a more useful perspective. As reported by Mobiledia, a recent national study found that a third of Americans would rather give up sex than their smartphone.

A majority would give up alcohol, caffeine, chocolate, or exercise, while 22% would give up brushing their teeth.

The significance of people willing to give up their radio before their smartphone is no greater than their willingness to give up chocolate or sex.

These are so what? type questions. They tell us nothing about the relative importance of gadgets or actions. The fact that radio or television never wins these comparisons means nothing.

Keep that in mind next time you read a survey that forces a person to choose between radio and some other gadget or medium. These questions are asked to generate headlines and cast new media in a positive light. 

Read the original TeleNav press release and learn such shocking things as twice as many women as men are willing to give up sex, go here, and find an infographic for your wall here.

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?

Digital Could Turn Radio's $17 Billion into $8 Billion.

Know how to turn radio from a $17 billion business into an $8 billion business? Follow the advice of radio critics and new-media zealots.

They say give up on terrestrial broadcast. That’s history. Focus all your energies on a digital future.

Despite their confidence that digital will save radio, the opposite is true.

If radio shuts down its transmitters and broadcast competes head to head with pure-play Internet services, radio revenue will plummet.

That’s the implication of recent reports contrasting broadcast and streaming cost-per-thousands (CPM).

SQAD’s latest report on spot radio estimates that CPMs average about $12. Mike Agovino, Triton chief operating officer, recently pegged streaming CPMs at about $4.

In other words, a radio station makes three times the money running a terrestrial spot as it would running a streaming spot.

That means every spot that runs on the Internet rather than over-the-air will generate one third the revenue. Something like $9 billion in spot revenue will evaporate when radio turns off the transmitters.

It’s even worse than it appears, because Agovino points out that radio won’t be able to compete with pure-plays running the same commercial loads. He suggests that radio will have to run as few as 6 spots an hour.

One third the CPM and lighter commercial loads. Does that sound like a bright future?

Neal Schore, Triton’s CEO, recently tried to put a happy face on things by declaring a $10-$20 CPM achievable. Maybe, maybe not.

Even if Schore is right, lighter loads and music royalty costs make it nearly impossible for radio to avoid a big financial hit.

Any scenario that focuses on streaming is going to lead to dramatic declines in revenue. The only question is by how much.

If broadcast radio wants to keep revenues at current levels, then the terrestrial product must continue to be the focus of radio groups. It is radio's golden goose.

That's why terrestrial radio has to continue to improve and innovate.
 
Streaming radio’s most valuable franchises is not the solution. The products that radio groups stream have to be low-cost products that compete directly against match pure-plays.

In the digital future AM and FM will have to become premium services that provide unique products found no other place.

Otherwise, digital will be a financial disaster for radio.

Pittman versus Pundits: Who's Right?

There are two types of radio people, Talkers and Doers.

Talkers spend all their time complaining. They react to new competition by whining about all the reasons the new competitor is going to succeed.

Radio doesn’t get it!
Radio is moving too slowly!!
Broadcasters just don’t understand!!!

Doers, on the other hand, focus on their side’s strengths and advantages. They weigh them against the competition’s weaknesses and vulnerabilities. They then set about implementing a strategy to win, confident of ultimate victory.

We can see the contrast between the Talkers and the Doers in how radio people are responding to Pandora.

The Talkers are radio pundits who have all but conceded radio’s defeat. They point to Pandora’s extremely high awareness, exponential growth, its apparent unstoppable momentum and declare radio hopelessly outclassed.

For pundits, the matter is closed. No room for debate. Anyone who disagrees is a relic of radio’s past glories, a digitally ignorant luddite racing towards an analog abyss.

Bob Pittman is a Doer. He doesn’t buy the fatalistic pundit talk.

He understands radio’s strengths. He believes Pandora is a one-dimensional product. He offers concrete evidence that broadcast’s resources are far greater than Pandora’s. He is confident that Clear Channel can successfully compete against digital pure-plays.

So what is punditry’s response? Apoplexy.

To them, Pittman is the poster child of what’s wrong with radio. Proof that radio is full of simpletons who just don’t get it. Here’s what they say here, here, here, and here:

Maybe instead of choosing the denial route about Pandora, broadcast radio operators ought to go to school about this brand and what it means to consumers.

How much more evidence do broadcasters need that time is short, and opportunities are fleeting? Exactly what are you waiting for?

If terrestrial broadcasters are going to survive, it won't be by dismissing Pandora. So many broadcasters are resolutely incurious as to the reasons for Pandora's success (sic), and it is that lack of curiosity that some broadcasters may not live to regret.

Pandora (is) the customizable radio service (that) radio people and Bob Pittman love to underestimate.

So what is it that Pittman says that so infuriates pundits?

Here’s a few comments from his recent Los Angeles Times interview:

"The perception is that radio is somehow in trouble. The reality is that we have the same percentage of the population listening to radio as we did in 1970."

Pundits jump all over this and claim that the real issue is TSL. They make every effort to perpetuate the myth that radio TSL has evaporated, but there is simply no credible evidence that it has.

Arbitron looked at PPM trends and found no decline in TSL during Pandora’s meteoric rise. None. Harker Research analyzed both PPM and diary trends and found no evidence that broadcast TSL had been impacted.

In truth, broadcast radio consumption is increasing, not decreasing. Terrestrial usage has remained steady while broadcast consumption by way of streams has grown, something we proved some time ago.

"Pandora is not really radio in that it's not curated. It's more like a playlist that you put on shuffle. They don't have local information or local personalities."

Take a look at the graph at the left (click to enlarge). It shows Pandora session TSL compared to the leading broadcast streams. Broadcast stream sessions last 55-81% longer than Pandora’s sessions.

 

For a service that pundits claim is light-years ahead of broadcast, Pandora doesn't look very sticky.

Of course, Pandora has a high proportion of mobile listeners. As we recently explained, mobile listening hurts TSL. However, even when mobile isn’t included, Pandora still only has an hour of session TSL.

Longer broadcast sessions could be a consequence of radio’s curation and local content. Lack of curation could be Pandora's greatest vulnerability, a point that we made in 2009.

"We have roughly 30 million unique visitors each month to our online radio stations. Pandora has 25-plus million."

Pandora portrays itself as an enormous service serving vast numbers of Americans.

We’ve shown that in fact consumption of Pandora isn’t particularly high, especially when you consider that Pandora consumption is spread across 1.4 billion streams, while broadcast consumption is spread across only 10,000 stations.

"The good news is that we have billions of dollars in advertising revenue from our terrestrial radio business. We can afford to invest and grow our online audience. We have the deep pockets to wait it out."

Last year Pandora billed $138 million. Local  broadcast  radio  stations  billed $16,000 million. This last quarter Clear Channel alone billed $650 million.

Do we really need to debate who has deeper pockets and what deep pockets mean in a competitive battle?

"Later this summer, we'll be adding a feature that will let our users build custom radio stations just like they do with Pandora."

This is the point where the pundits’ true colors show. Critics first complain that radio isn’t moving fast enough, but then belittle Pittman for announcing that Clear Channel are building their own Pandora.

As we noted last year in the post Thanks Pandora, We’ll Take it From Here:

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

What’s wrong building your own Pandora? Every broadcast group should have their own music genome project. As we pointed out recently, now there’s even an app for that.

It's a long tradition in broadcast radio to watch the competition, copy key elements of what they are doing better, then improve upon it. It has served radio well. Isn’t that what Pittman is doing?

But to give Pittman credit would be an admission that maybe radio isn't brain-dead. That would screw-up punditry's narrative of broadcast's self-inflicted imminent demise.

Pundits want to appear visionary, so they create false straw-man arguments they can easily win. Only they understand the true threat that Pandora presents to radio. That’s why they are much smarter than we resolutely incurious radio people.

What’s surprising is that we at Harker Research don’t run into these clueless radio neanderthals that the critics see everywhere. We work with radio people who are vitally interested in preparing for radio’s digital future.

It’s just that real broadcasters have to keep an eye on the bottom line while doing it.

What too many pundits fail to understand is that the goal of radio’s digital transition is not to find a way to beat one service that bills 1% of radio’s revenue.

The goal is to find a strategy that first protects radio’s piece of the advertising pie, and ultimately helps grow radio’s share.

On this subject, the talkers are strangely silent.

Talkers versus Doers. Time will tell who’s right. We’re betting on Pittman. In this debate, he's the only one with skin in the game.

Bad Week for Radio Is Dead Crowd

It’s been a bad few weeks for the radio-is-dead crowd.

After years of predicting the imminent demise of radio, they are having to cope with a flood of new evidence that it is not only alive, but seems to be doing pretty well.

First there was the announcement that after a couple of rough years, local revenue increased in 2010. Going into 2010 the consensus view was that radio revenues would continue to decline.

As late as January 2010, Optimedia was still projecting a 2% decline. BIA/Kelsey thought that revenue might increase 1%.

As it turned out, spot radio was up over 7% and digital was up 28%. The consensus (including Optimedia) now sees revenue continuing to grow for the foreseeable future, at least through 2015.

Bob Pittman continued to press his upbeat message, most recently appearing at Ad Age’s Digital Conference talking about the future of radio. It wasn’t too long ago that digital people would have dismissed the notion of a future for radio as even possible.

Today a radio guy can mix it up with people from Twitter, Foursquare, and Razorfish like he belongs there.

As an aside, it was an Ad Age pundit who in 2009 dismissed radio declaring it hilariously obsolete in the digital world.

Pittman’s address to the conference comes on the heels of scoring interviews with Hollywood Reporter, Variety, New York Times, Ad Age, and Wall Street Journal among others.

There was a fair amount of carping at first about Pittman joining Clear Channel, but the Chairman of Media and Entertainment has generated more positive credible ink about radio in his first few months than all the group heads, trade organizations, and pundits have in years.

Bob Pittman has become radio’s Tim Westergren.

Then there was an upbeat assessment of radio from an unlikely source, BMI. Mike Steinberg, Senior VP seemed to capture the “radio as come-back kid” feeling in a blog post:

As recently as 2009, some industry observers felt that radio was in sorry shape....But despite the convenience and clarity afforded by satellite and web-based radio services such as Sirius XM and Pandora, broadcast radio, by all accounts, will not fade away anytime soon.

Part of the recent revival can be attributed to the surprising resilience of broadcast radio within regional markets. Despite allegations that industry consolidation would rob radio of its local flavor, the Arbitron study (RADAR) seems to suggest that radio has, in fact, become more diverse.

As if to reinforce the views of BMI’s Steinberg, TargetSpot released a white paper on digital audio that included the observation that Internet radio users continue to listen to broadcast radio.

Digital audio growth has little effect on current broadcast radio use. 66% of Internet radio listeners listen to the same or more broadcast radio as a result of their current digital audio use.

Then there’s the latest Infinite Dial report from Arbitron. We were highly critical of last year’s study noting that:

If you are a broadcaster anxious to learn about where radio is headed and the challenges radio will face, you will be deeply disappointed in Arbitron's Infinite Dial study.

We did not need another study to tell us the Internet and new-media are transforming broad swaths of media consumption. What radio needs to know is how best to adjust and adapt to this transformation.

This year’s report is once again full of nuggets of new-media fool’s gold, but the study is incrementally more useful.

Arbitron’s Bill Rose offered the best sound-bite: "This study provides further evidence of radio's continued resilience and relevance in today's digital landscape."

For a company that has seemed reluctant to come to the aid of its meal-ticket, the confirmation by Arbitron of what many others have been saying is quite a turn-around.

Arbitron needs to do a lot more to help its clients by better documenting radio’s continued resilience and relevance, but it’s a nice start. We’ll have more to say about this year’s study in coming posts.

In 2008 we wrote:

New-media people can't accept the possibility that radio can coexist with new media. They seem to need to believe that radio is dead. The fact that study after study proves that radio is alive and well is something they just can't accept.

It is nice to see that more people are finally figuring that out, and not falling for new-media’s self-serving distortions.

There’s no denying that radio has many tremendous challenges ahead. The good news is that radio remains resilient and relevant, and is up to the task of facing those challenges.

Why “Crusty Old Buzzard” Media Keep Winning

There’s nothing more frustrating to broadcast radio critics than radio’s continued success. The critics tell us that radio along with the other traditional media will soon be toast, just a distant memory of past glories.

Soon listeners will abandon radio for Internet alternatives. Media buyers will follow them pouring more and more money into new media, ultimately starving radio to a financial death, the critics tell us.

Yet listeners keep listening, media buyers keep buying. The latest projections have broadcast radio spot revenue continuing to grow for the foreseeable future even without digital.

How can that be? How can radio critics be so righteously confident they’re right, and yet so wrong-headedly wrong?

A recent MediaPost column by Bill Rose, Seiter & Miller VP/Director of Account Services, notes that:

Big, old media brands with their passive audiences, one-way communication and clunky buyer/seller interactions (face-to-face selling, really?) are just not ready to leave the party. Many of these crusty old buzzards are having banner years in this, the second decade of the 21st century.

Rose believes these crusty old buzzards aren’t toast for a very good reason: They deliver value to the advertiser. He attributes traditional media’s continued strength to its ability to:

Drive fundamental awareness and positive perceptions for a product or brand. It is the gateway to deeper brand relationships; (it) is the battleground for the biggest marketing bucks.

He believes that “Digital media (online, mobile and social) have not inspired confidence that they can be the lead spears in putting a brand quickly on the map of consumer's consciousness.”

Advertisers may like to dabble in new delivery systems, but ultimately they put the lion’s share of their budgets into media that deliver value. Radio’s reach is unsurpassed. Radio’s ability to efficiently target an audience beats even television.

New media is not radio’s greatest threat. It is radio’s self-doubt and a fire-sale mentality that diminishes the product and willingly drives CPPs down.

Be sure to read his entire commentary.

Broadcast Streams? A Lot Stronger Than You Think.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sun Rotates 'Round Earth! Pandora Devours Broadcast!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Speed-Bump on Digital Dashboard Highway

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

Inside Radio solemnly declared:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Noting Pandora’s push for in-car listeners:

The majority of drivers place a higher value on convenience than capability in a car. The average commute is less than an hour, the average errand by car considerably less.

The likelihood that you are going to plug in your iPhone, navigate to the app of your favorite music service, launch it, and then select a stream in the 15 minutes it takes to drive to the grocery store to buy milk is small.

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

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

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

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

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

Broadcast Radio Keeps Growing. Critics Confused.

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

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

Total broadcast radio listening is growing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Then we need Ando Media’s cooperation.

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

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

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

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