Monthly Archives: October, 2008

Study: Digital Music Market is maturing

A new study released by Ipsos shows some interesting movement in digital download services. Itunes remains the (very) dominant player, but some other services are making headway as well – primarily Amazon music and Rhapsody.

There are some interesting factors related to Internet radio and streaming at play behind the scenes. Any progress that other services make in competing with ITunes is good for Internet radio. ITunes does provide a decent portal for Internet radio stations but listeners that access stations through ITunes do not see or hear a gateway ad, nor does a banner ad or text link appear on the ITunes player with an audio instream ad. That makes it very difficult to monetize those listeners, so it’s better for Internet radio if listeners come from other significant players develop.

Amazon music sells music downloads that can be played in Windows Media player format. Because of this, many stations offer links to Amazon Music from their own players and sell music downloads on a rev share basis through Amazon. Perhaps this has contributed to the advance in share that Amazon Music has made according to this study. Windows Media is much more flexible in supporting an ad model for Internet radio, allowing banner ads and more options for the player itself.

Walmart, which recently shut down its music download platform, actually has a pretty decent awareness level according to the study. The study does conclude that the successful services in terms of awareness and traffic tend to have a relationship with a big name that provides a “halo effect” – as in the case of ITunes, Amazon, Napster, and MySpace. Its probably more than just a big name, it’s the actual traffic that these entities are able to provide that contribute to the success of their download platforms.

The study mentions the obvious ability of streaming entities to drive downloads, concluding that “New innovations are sure to change this market. New models, especially those based upon ad-supported streaming, are sure to bring new brands into the space.” That’s for sure – MySpace announced earlier this week that they had streamed a billion songs just a few days after they launched MySpace Music last month.

Licensing Commercials for Internet Radio – Part Two

There’s been a lot of confusion around the question of whether an advertiser can run broadcast commercials on an Internet radio station. The answer is straightforward – the right to use the commercial on the Internet is compulsory and the advertiser or agency must pay a license fee for new media use. It’s very simple now to obtain that license. It does not require renegotiating a contract or rewriting a contract, it simply involves a review of the original contract for talent production to determine the original session fee, and payment of an additional flat fee for new media use.

There are two important distinctions between AFTRA’s standard broadcast contracts and contracts for using commercials on the Internet that were initially made for use on broadcast radio:

  1. Internet contracts for use of these commercials are one-time up-front fees that do not include per-use fees.  They cover unlimited usage on an unlimited number of sites or stations during the contract period.
  2. Depending on the details of the original contract, the initial term of the contract period is for 12 months or until termination of the Maximum Period of Broadcast Use .

These two facts are important to keep in mind when considering the costs of licensing such commercials for use on Internet radio.  The standard rate for an AFTRA performer for these commercials is 300%, or three times the session fee paid for broadcast use.  If the session fee for the broadcast spot is $249.50, then the cost to license that spot for Internet radio use is $748.50 for a one year period. There are no additional use fees as there are with broadcast.

The bottom line is this: there is nothing unclear, undecided, or complex about licensing a commercial for use on Internet radio.The right to use commercials produced for broadcast on the Internet is compulsory. The steps for licensing are clear and easy to follow and the flat fee is easier to compute than the use fee that broadcast commercial licenses require. You can read more about it on AFTRA’s site here

 

Internet Radio and the AFTRA issue

One of the first big hurdles the Internet radio industry had to overcome was ensuring that all commercials licensed for broadcast use by The American Federation of Television and Radio Actors (AFTRA) were also licensed for use on the Internet. While this issue has been resolved, some advertisers and their agencies and stations remain confused about the issue.

This problem was born when broadcasters began to stream their content and therefore agency produced radio commercials began to air on Internet streams. AFTRA, protecting the interests of the artists who produced the commercials, called for commercials that were not licensed for streaming be taken off the air immediately or broadcasters would face penalties and possible litigation. This caused many broadcasters to stop streaming entirely, because they did not have a way to schedule and insert different commercials on their stream than on their broadcast.

As they say, necessity is the mother of invention: all of this caused the development of Ad Insertion technology that nearly all broadcasters who stream use today so they can run a different commercial log on their stream and broadcast. The development of Internet radio as a separate revenue model for broadcasters was born.

Tomorrow’s post will summarize the current licensing rules for running broadcast spots on the stream.

Internet radio and GRPs

The primary measurement metric for all online media including Internet radio is the impression. Impressions are a simple, basic measurement unit. One person exposed one time to one ad equals one impression. But using impression based measurement does not mean that GRP metrics are obsolete. GRPs have long been the standard for traditional media planners and buyers. Converting Internet radio or interactive campaigns to Gross Rating Points can be useful because enables a planner to make cross media comparisons.

You won’t find Gross Rating Points reported on interactive research tools, but it’s a simple math formula that can easily be integrated into a spreadsheet. A GRP (Gross Rating Point) is 1% of the measured audience. For Internet radio purposes and for the sake of consistency, I recommend using the Arbitron definition of the measured audience, either for a certain market or entire US, but this is certainly a point to discuss with the planner or media buyer. Once you define the market the formula is

# of impressions / defined market population = GRPs

There’s no reason you can’t use the same formula to compute banner, mobile, video or other impression values. This is an easy way for radio and Internet radio sellers to begin to quantify the value of packages that include audio impressions, banner impressions, and perhaps other assets as well. Impressions do not tell the whole story, but this is one way to educate buyers on the value that they are getting from the cross media package you are selling.

Lessons from NPR

National Public Radio announced this week that they’ll be launching a new social networking feature that will enable listeners to register, comment on shows, and network with other listeners and show hosts.

Connecting with their audience

“We are providing a forum for infinite conversations on NPR.org,” said Dick Meyer, NPR’s Editorial Director of Digital Media in the company’s announcement blog post. “We want NPR employees to participate and talk about their work.”

There’s good reason to pay close attention to what NPR does in the digital space. They are enormously successful in their online and broadcast endeavors – according to BusinessWeek here, NPR stations combined had 31.3 million weekly listeners in spring 2008, a 3 percent increase from the same period a year earlier….Online traffic is also up. According to comScore, NPR.org had 2.6 million unique visitors in August, a 78 percent increase from a year earlier. They are one of, if not the most prolific supplier of podcast content on iTunes.

Connecting their audience to their programming

NPR claims that they are late to the social networking game, but among radio broadcasters they are quite innovative. With this new social networking tool, their purpose is to create a forum for their community, which they say “is made up of the people who work here, the people who work at member stations, the people who listen to NPR on the radio, the people who use NPR.org and the people who support NPR.”

It’s a great way to solidify relationships with listeners…creating an online community where radio hosts and personalities, listeners and supporters (how about advertisers?) can create profiles, share ideas, discuss programming and more sounds like a stroke of genius to me.

How long should Internet radio ads be?

Yesterday’s post talked about the need to create radio ads specifically for Internet radio. Internet radio’s audience is online and different than the broadcast radio audience. Time spent listening is on average twice as long as it is to broadcast radio. Therefore, new rules apply. So what is the best length for an Internet radio commercial?

Shorter ads online

The Internet is a fast paced environment with lots of information and choices just a click away.  Recommended lengths for Internet radio spots are 10 to 30 seconds. I got input from several online broadcasters who not only advocated for those shorter lengths but also emphasized the need for creative that is suitable for the audience. Ari Shohat, owner of Digitally Imported, one of the largest independent online broadcasters, said bad creative can do more than just fail to work, it can negatively impact the listener, and actively drive them away from a product. More important than the length, says Ari, the spot must be suitable for the audio environment and the listener. “Ads have to be made in a way that resonates with the audience – do that and you can get away with longer ads and still make it a successful campaign.”

Mike Roe, Founder of Radioio agrees. When advertisers speak to “this [online] audience it needs to be in a manner beffitting it and in a way that doesn’t insult it, or interrupt it for too long.” Mike also advocates for “NPR style” sponsorships that are integrated into the content. There’s sense to this: the Internet radio listener is well educated, high income, and online savvy, and could be attracted to a more sophisticated advertising approach.

How about creating unique pods for advertisers to sponsor?

This creates a technological challenge for broadcasters who are streaming their on-air product and inserting ads over the stream. There are creative solutions to this, such as creating short valuable non-commercial content that could surround or piggyback 20 or 30 second spots. Something like this could create more value for the advertiser and the listener. Either way, it’s very important for Internet radio sellers to educate advertisers and agencies on the need for distinct creative for Internet radio in order to ensure a positive ad experience for their clients and a renewal on the campaign.

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