Bob Pittman Is A Bold Guy
Clear Channel’s move to make a direct licensing deal for over the air performances with record label Big Machine is a stunning development for the radio industry. I’ve spent a day or so pondering all the ways this could impact the issues, and have come away marveling at what a forceful move this was by Bob Pittman and his team. (Read excellent coverage by RAIN here.)
The radio industry has been refusing to cut a deal with record companies that would compensate artists for over the air play in exchange for a better deal on streaming royalties. Broadcasters and the NAB have tried and failed to come up with a solution, and the issue is currently headed for Congressional intervention – with Future of Audio hearings that started yesterday on the hill. Hence the incredibly nervy and savvy timing of Clear Channel’s announcement that they had signed up to pay a share of both on-air and online revenues to record label Big Machine, the company behind such big names as Taylor Swift, Rascal Flatts and Tim McGraw.
Bob Pittman is indeed just what the radio industry needs.
The radio industry has been moaning about streaming royalties for years. This has caused them to take a half hearted approach to Internet radio, which in turn has created mediocre offerings that are not competitive with highly developed interactive offerings such as Pandora, Spotify and others. But their unwillingness to pay over the air royalties to artists makes the record labels unwilling to negotiate better digital deals with them.
Meanwhile, online listening is growing exponentially.
“Unrealistic rates on the digital side were choking the ability to expand digitally for radio companies,” said Irving Azoff, a Clear Channel director and chairman of Live Nation Entertainment Inc.. “We’re trying to convince labels to enter into a direct deal because we can’t get legislation passed,”.
“Someone has to go first, someone has to take a risk,” said Clear Channel CEO Robert Pittman. “If digital grows a lot, this will be a good deal. It’s a gamble. But you win nothing if you don’t take a chance.”
So Pittman took a chance. He took a look at the future of radio and decided that digital is it. Reluctant to let Congress determine how his game will be played, he cut a deal with a little record company that has a few big names. By doing that he forced the first brick out of the wall between broadcast radio and performance royalties for artists, and I suspect we’ll see the whole thing come tumbling down. Broadcasters will pay over the air royalties, because their hand was forced, but also because it just doesn’t make sense that other platforms have to and they do not. Playing fields will be leveled, programming will improve and opportunities will grow – for radio stations and for recording artists.
Spot Radio Revenue Stands Still While Digital Surges
Broadcast radio revenues grew 1% in the first quarter of 2012, with revenues derived from digital assets at the helm, according to the Radio Advertising Bureau. Digital revenues for broadcasters grew 10% during the same period, or ten times as fast as spot revenue. Network revenues grew 8% and fueled the growth as well.
“While advertisers continue to capitalize on Radio’s Spot and Network efficiencies, they’re increasingly utilizing local digital capabilities and audience engagement that this medium affords.” said Erica Farber, the newly appointed President and CEO of the Radio Advertising Bureau.
Digital revenue now accounts for more than 4% of radio’s overall revenue. Digital revenue grew 15% in 2011, while spot radio lost 1% and network grew 3%. Digital Revenue is made up of activity generated by websites, Internet/web streaming and HD Radio.
So if you were a car dealer that sold ten times as many efficient hybrid cars as you did station wagons, you’d order more hybrid cars for your lot, right? You’d train your salespeople in the best ways to sell hybrid cars, and you would make sure that everyone knew you had a lot of them. In fact, you would move them right up to the front of your lot. That’s the way broadcasters should be looking at their online and digital products. As the engine that is driving their future…
Pandora Panderings in the News
It’s been a strong news week for Pandora, which is not unusual – the service has a great strategy for maintaining visibility in the media. That’s good for their brand and all of Internet radio by-the-way.
They recently released some new data from a study done by The Media Audit surveying 54,000 people in Los Angeles about their radio listening affinities. As reported in the LA Times, “Pandora beat out local stations such as KIIS-FM, KNX-AM4, KROQ-FM5 and KOST-FM in the survey of 54,000 adults who were asked in the biennial phone poll, in October, what stations they had listened to in the previous week.” In fact, “The research group estimated that 1.9-million people in Los Angeles listened to Pandora between September and October of 2011. The No. 2 station, KIIS-FM, garnered 1.4-million listeners in the same time frame, according to the survey.”
This caused the Huffington Post to headline an article with the proclamation that Pandora is the Number One Radio Station in LA. I’m sure the folks at Pandora were very happy about that.
Meanwhile, Inside Radio, a publication owned by Clear Channel which owns Pandora competitor iHeartRadio, was busy covering a story about more research on Pandora’s listeners. Mark Kassoff and Company, a radio programming research company, surveyed 1,177 Pandora listeners, asking them just what they like so much about the service. Their conclusion? Pandora listeners are control freaks. And that’s the headline that Inside Radio chose for their coverage of the info.
Now, despite the headline, the Kassoff data is actually pretty good – revealing to those that read past the opening sentence that people like the personalizable options that Pandora gives to listeners. Kassoff goes on to examine in his survey the ways that Pandora and FM are different, and encourage broadcasters to focus on those differences. Which is a great conclusion for his study..
You Won’t Want To Miss RAIN Summit West
The stage is set for RAIN Summit West in Las Vegas on Sunday April 15th to be one of the best RAIN Summits ever. This year’s event will take place at LVH – Las Vegas Hotel and Casino, formerly the Las Vegas Hilton, which is adjacent to and attached to the LV Convention Center. RAIN Summit Las Vegas is an education partner of the NAB Show.
The program is a good one – designed to examine and discuss many aspects of the Internet radio and digital audio marketplace from a business perspective. Panel discussions will focus on programming, revenue and planning strategies in a format that allows competitive businesses to sit together on stage to discuss, agree and disagree while sharing ideas with the audience.
The day will feature a keynote speech by Traug Keller, SVP at ESPN Audio, one of the most successful digital audio platforms. Under Keller’s leadership, ESPNRadio.com became the most listened to live stream of any terrestrial broadcaster in the world, reaching more than three million unique users per month. His insights are sure to be informative. There’s a long list of other interesting panelists, and at the risk of leaving someone off the list, here are a few names: David Carson, US Copyright Office; Jim Cady, Slacker; Jon Mitchell, Spotify; Jim Lucchese, The Echo Nest; Tim Murphy, Entercom; Steve Jones, ABC News; Steven Kritzman, Pandora; Sandhi Kozsuch, Cox; Michael Robertson, mp3Tunes; Larry Rosin, Edison Research. And lots of other smart folks.
Did you read that list? Hopefully you noticed the best thing about it – that RAIN Summits is a discussion that includes every side of the Internet radio conversation. From streaming broadcasters to online only platforms, straight up simulcasts to on-demand and personalized services, it’s all part of the discussion at this event. Lots of smart talk, dynamic agreement and disagreement. That’s how an industry evolves.
A new feature this year at RAIN Summits will be POVs – short talks by industry leaders on the same topic. This year the topic is “Redefining Radio” and we’re looking forward to hearing what Triton CEO Neal Schore and Liquid Compass CEO Zackary Lewis, among others, have to say on the topic. We’re still looking for a third POV speaker, so if you have an idea of who you would like to hear from, let me know.
In the meantime, if you haven’t already made plans to attend, now’s the time. The complete agenda and growing speaker list for RAIN Summit West is available here, and right now you can register for $99 including lunch and cocktails, and all registrants can save $100 on an NAB registration and get a free exhibit floor pass as well.
RAIN Summits are the best educational and networking events for our industry – providing a full day of programming and plenty of opportunities to meet people. I hope I’ll see you there!
Consumers That Stream Also Listen To FM In Cars
Nearly 40% of smartphone owners have used their device to listen to a streaming music service while in their car, according to new research by NPD Group on automotive connectivity. Devices and ways to connect them have become a serious focus for the auto industry. 79% of car owners are using a digital device in their cars.
It appears at this point that streaming in the car is used to supplement listening to traditional radio – according to NPD’s Ben Arnold, seventy three percent of drivers report still using their FM radio “always” or “most of the time” during car trips while more than half (57 percent) of vehicle owners say a CD player is vital in their decision to buy a car stereo or entertainment system.
The desire to consume connected content is a challenge for the auto industry as well – as they focus on best ways to integrate mobile connectivity into the car with minimal driver distraction. Apple’s voice controlled Siri and Microsoft’s motion controlled product found in Kinect are technologies that automakers are looking to integrate into the equation.
Meanwhile, in place of smooth integration, consumers are finding ways to connect their mobile devices using auxillary inputs (18%), USB ports (11%), and Bluetooth technology (56%). This fact – that consumers are so interested in developing workaround ways to use their connected devices in their cars, is a huge indicator of the desirability for a more connected dashboard.
“The key is for auto makers and traditional audio manufacturers to facilitate consumer use of connected devices in the vehicle, allowing content from the smartphone, tablet, or digital media player to easily stream or be controlled through the deck mounted in the dashboard,” Arnold said. “We’re only going to see greater consumer attachment to social media, streaming audio and video, and other services as content options grow.”
Digital Revenue Is The Bright Spot On Radio’s Revenue Report Card For 2011
Broadcast radio’s revenues from digital assets continued to outpace other categories in the 4th quarter of last year, according to a report by the Radio Advertising Bureau. Spot revenues meanwhile, shrank another 1% from a year before – a reality that is more ominious considering that the economy began to show signs of life late last year and many sectors were seeing recovery from the very low numbers of 2010.
Digital revenue in this report is activity generated by websites, Internet/web streaming and HD Radio. It grew by 15% over the previous year. “Driven by Radio’s mobility, local appeal and scale, broadcasters are finding more and more ways to generate the interactive experience expected in today’s marketplace.” said Jeff Haley, RAB President and CEO.
Digital revenues account for a mere 4% of the overall revenue for broadcast radio. While that number is growing, it’s not growing fast enough to replace ad dollars lost in the form of declining spot revenues. Digital media sources are replacing traditional ones as devices such as tablets and smartphones accelerate the migration online. In 2010, digital news readership and revenues were higher than newspaper readership and revenues for the first time.
The fact is, radio is well positioned to grow online audio ad dollars, thanks to a well developed business model. Pandora and sales companies like Targetspot, Katz360 and Triton’s Digital Sales group, radio’s national advertisers understand online radio and know how to buy it. Expanding the number of advertisers by improving online offerings and emphasizing online sales assets among local sellers is the key to growing digital revenue. In fact, according to Inside Radio, Clear Channel revenues grew 4% last year – attributable to the purchase of Westwood One’s traffic division as well as “higher digital radio billings.”
Why Broadcasters Need To Work With Lots of Streaming Portals
Last week Clear Channel announced that they continue to expand the variety and number of streaming broadcast stations offered on iHeartradio by adding a list of college radio stations. College radio is a broad category that spans everything from student-run stations featuring block programming and music, news and sports programming to professionally-run stations with specific formats. At launch, iHeartRadio’s College programming will include more than a dozen of the leading college stations from eleven states across the country. 
It’s a nice move that college radio stations would find attractive – why wouldn’t they want to join up with a larger streaming portal? More potential listeners, an easy entry into mobile and automotive audiences. It’s a good idea, right?
I think it’s a fine thing that iHeartRadio is expanding into a major portal to broadcast streams. The name iHeartradio is a good one for a site with such a universal offering. A tuner-like portal that offers listeners the ability to sort through stations by geography and format and find just what they are looking for is a valuable offering for listeners who can search for the station from the place where they grew up or their alma mater’s stream.
iHeartRadio has a nicely developed offering, a handy mobile app, facebook integration and even some deals with automotive manufacturers, all things that are appealing to smallish broadcasters who can’t leverage those sorts of thing on their own. Signing on to iHeartRadio makes sense for all of these reasons.
Unless it’s an exclusive deal. Then what seems like a really good idea turns into a really bad idea very very quickly. Unfortunately some early deals with iHeartRadio by Univision, Greater Media, Cumulus, and EMF are rumored to have made iHeartRadio their exclusive digital portal. Despite the fact that other great big portals exist and already have lots and lots of traffic. Like, for example, TuneIn – a service that has one of the most popular streaming radio apps in iTunes, provides a tuner to many devices, and has lots of auto deals too. They’ve been around for a long time and are sending lots of traffic to lots of stations. Why abandon that?
Content creators should work with every distribution platform they can to give listeners access in as many ways as they want it. Leverage your content to build your audience through as many access points as you can. Limiting access is only good for one brand, and it’s not yours that I’m talking about…
Pandora’s Local Market Clout
Pandora released audience data today showing that they have grown their audience by 50% or more in top markets across the country in the past year. Releasing data that compares January’s audience stats with “holiday 2011″ stats, Pandora now claims to have a 1.0 rating with Adults 18-34 in top markets across the country. 
The report uses audience information provided by Pandora and analyzed by Edison Research using methodology that resembles that used by Arbitron, however, they make no specific comparisons to Arbitron’s reports or other stations in their press release. Releasing audience data in this form enables advertisers and agencies to assimilate Pandora’s audience reach with traditional broadcast radio stations’ reach. This assimilation of data and direct comparison to broadcast audience data is precisely the kind of thing that some broadcasters are trying to prevent.
It’s a powerful statement about Pandora’s popularity that they are able to deliver a 1.0 rating in all of the top ten markets in the US with Adults 18-34. You can read the press release here.
Arbitron’s Internet Radio Measurement Headache
In 2003 I started a company called Net Radio Sales that was designed, in large part, to offer a sales solution to streaming broadcast radio stations. Later that year I met with an Arbitron executive to discuss their decision to shut down server based streaming measurement and shift to census based measurement through comScore. I told Arbitron that broadcasters in particular would suffer from that because their streaming audiences were small and local, and would never show up on a national panel. At the time, Arbitron told me that they had two clients (AOL and Yahoo) who were pushing them to move to panel based measurement, and since they were the only two paying clients, the decision had been made. They shuttered Measurecast and moved to estimating streaming audiences based on comScore panel behavior. In case you don’t know the rest, a few years later they abandoned that game as well.
I’ll bet Arbitron wishes they had stayed in server based streaming measurement way back then, because what they had was a platform that measured everyone – streaming broadcast and online only stations, all together. Which brings us to the topic of the day. Now, Arbitron has a bunch of clients who want things done a certain way. Again. This time it’s their broadcast radio clients, and they want Arbitron to measure streaming broadcast stations and online only stations separately. Not just separately but differently, so that the ratings cannot be easily combined.
It’s a problem for Arbitron because their broadcast radio clients pay them a lot of money and they don’t want to alienate them. Those clients want Arbitron to measure their streams – in such a way that they can roll up their broadcast and streaming audiences into one and sell that total audience to advertisers. And they don’t want to be compared to online stations.
And then we have Pandora. Pandora has a large audience – large enough that they can now claim to have more listeners in many markets than some broadcast stations. And they are claiming that – by working with research firm Edison Research, who has helped them crunch numbers and make comparisons. Using standard calculations that are not proprietary.
Under pressure from its clients, Arbitron recently sent out a letter intended to dissuade buyers from using the data that Pandora, with the help of Edison, has been releasing, stating: “We strongly advise clients to avoid comparing self-reported audience estimates from Internet music services to Arbitron radio audience estimates…” They offer several reasons why it’s a bad idea, including claiming that there’s no way to know if anyone is really listening. Really. The most overused objection to radio, the objection that every salesperson in the world learned to overcome in Radio 101? I just really think it’s the pot calling the kettle black on that one.
But on to the thing that really concerns me. Arbitron says comparisons between broadcast streams and online streams can’t be made because there is a vast difference between “one to one” and “one to many” streaming audiences. They’ve created an imaginary line to justify measuring the two categories separately and differently. Supposedly, because “one to many” audiences are all exposed to the message simultaneously while “one to one” listeners are exposed to the message during their unique sessions, the data is different and cannot be assimilated.
Huh?
“This is an absolutely meaningless distinction” says Kurt Hanson, Publisher of RAIN: Radio and Internet Newsletter and Founder of AccuRadio, an online station. “Case in point: If Samuel Adams wants to deliver one million impressions of a commercial to listeners in the 4pm hour next Friday (to use a simplified example), they can either buy (A) a couple dozen top AM/FM radio stations, in which case the WAAA listeners will hear it at 4:08pm, the WBBB listeners will hear it at 4:10pm, the WCCC listeners will hear it at 4:13pm, and so forth, or (B) they can buy their desired demographic slice of the audience of a brand like Pandora, in which case some listeners will hear it at 4:01pm, some will hear it at 4:02pm, and so forth. In BOTH scenarios, not all of the target consumers are hearing the spot at the same exact moment! That’s never been important to the advertiser. Both scenarios are precisely the same, in terms if effect, for Samuel Adams.”
I asked one of the smartest agency folks I know – Natalie Swed Stone, US Director, National Radio Investment, OMD, what she thought. She pointed me to her write up for RBR, which she wrote a few weeks ago, and I highlight this quote: “The research has to follow the investment patterns. The more uniform the data, the easier it will be–but marketers and agencies will continue to buy what they want and use best available research to evaluate and estimate behavior.” In other words, research firms should offer data based on the ways that buyers want to buy. If the research does not do that, buyers will do what they have to.
Network radio has been adding up time shifted audiences(that are not hearing the message simultaneously) for decades. It’s completely acceptable to represent a network audience’s AQH as the sum of the AQH’s of audiences across the country listening to a program on hundreds of stations at different times. Arbitron’s RADAR product does this. “When we buy national schedules—they can air on different stations at different times—within the prescribed daypart…” Swed Stone told me, “in TV, the currency is currently live plus 3 days (DVR) etc and the currency is the same –even if a person plays back the program 3 days later –it is included in the overall rating.”
To check my thinking on this topic, I spent a lot of time calling and emailing digitally savvy radio people, asking them about this issue. None of my broadcast sources would go on the record, but they uniformly told me that this is a spin game. No one thought the “one to one” and “one to many” distinction holds any water at all. “It’s not intellectually sound.” I was told.
Arbitron is caught in a tough situation. As a research firm, they’re obligated to create products that are fair and objective. But some of their clients don’t want them to do that in a uniform platform. The listening landscape is rapidly evolving into a space that includes new audio platforms. Ultimately, advertisers and listeners will decide the landscape – listeners will listen to what they want to hear and advertisers will spend to reach them.
The audio landscape has never been more diverse and interesting. Pandora, with its enormously popular platform is bringing new advertisers into the space, and this could be a big win for the industry. Grow the pie! Adapting to new dynamics would be time better spent that shoveling sand against the tide..
Cumulus Stations Join iHeartRadio
The week has begun with news of a streaming partnership between Clear Channel and Cumulus – the latter’s online stations will be accessed through Clear Channel’s expanding iHeartRadio online platform. The 570 Cumulus radio stations in 120 markets will be available on the New iHeartRadio platform wherever it is offered, including the Web, mobile devices and automobile.
This doesn’t come as much of a surprise in terms of what Clear Channel has in mind for its iHeartRadio platform, since they have recently added Univision‘s and Educational Media Foundation’s groups of stations as well. iHeartRadio is looking more and more like an Internet radio portal, offering access to Clear Channel’s broadcast streams and online offerings as well as streams of other broadcast stations.
And they are well poised to convince other broadcasters to get on board. They have a solid partnership in place with facebook to drive traffic and enable easy sharing, popular mobile apps and dashboard deals with Ford and Toyota to get their app built into 2012 cars. This must be appealing to other broadcasters with fewer resources to dedicate to extending their own online brand. Cumulus, with its new stable of Citadel stations is a good catch for Clear Channel. Cumulus has been a company that has always taken a skeptical approach to streaming, this offers them a fail-safe way to give listeners streaming access, share in potential revenues, but avoid risky expenses.
Cumulus will continue to stream its stations on its own station websites and mobile apps, the New iHeartRadio platform will serve as the sole digital aggregator for Cumulus stations, which will all advertise iHeartRadio on-air and feature a link to iHeartRadio on all their websites. Meanwhile Cumulus expands its proprietary daily deals brand SweetJack, which it launched last spring, to all Clear Channel stations. SweetJack’s national radio daily deals platform will get advertising on almost 1,400 radio stations and station websites across the country.
This is a smart move for both companies. Cumulus has been uncommitted in its approach to streaming, this partnership gives them an easy way to offer streaming access to listeners without dedicating resources for developing their own brand. And they get branding enhancements for their daily deals platform. IHeartRadio meanwhile gets a big list of stations to include in their streaming platform, increasing their offerings and furthering the concept that they are a universal resource for Internet radio. That’s something that will help them build relationships with car brands, etc..
