Pandora updated its SEC filing last week to give us a glimpse of what’s been going on in 2011. Impressive growth continues to be the story. In the 3 month period ended April 30th they added 1.6 billion listener hours and another 14 million registered users. Of those 94 million registered users, 34 million are active users who have “requested audio from our servers within the trailing 30 days to the end of the final calendar month of the period.”
Last year Pandora streamed 3.2 billion listener hours of programming, in the first quarter of this year they streamed 1.6 billion. Their listener hours are up 129% over a year ago. Those additional hours are not just coming from new listeners. Registered users and Active users are up (77% and 89%), but not by as great a margin, meaning that listeners are listening to the service longer than they were a year ago.
Pandora seems to be having no trouble finding demand for their inventory, which they are growing at an extraordinary pace. Pandora made $137,764 million in their fiscal year that ended at the end of January. They added more than $47 million of that in their final quarter (November – January). In the first quarter of this year, which for them is February – April, they added $51 million. Revenue from subscriptions was 15.4% last year, and is 16.9% for first quarter.
More and more listeners are accessing Pandora on mobile devices – in the recent quarter 60.3% of their audience came over mobile devices. Check out this trajectory – listener hours on mobile devices constituted approximately 4.6%, 23.5%, 50.5% and 60.3% of their total listener hours for fiscal years 2009, 2010 and 2011 and the three months ended April 30, 2011, respectively.
On the expense side the pace is stiff as well – Pandora’s licensing obligations tore more than $29 million out of the $51 million the company brought in in the new quarter. Billboard notes that the challenge for them will be to increase their ability to monetize every listener hour, which is a challenge given the rapid rate at which they are growing listener hours at this point.
There’s no doubt about it, Pandora’s growth is impressive. I’m delighted to watch it..
In 5-10 years the term “radio” will encompass all audio content that is distributed as continuous programming and delivered via various technologies including broadcast, satellite, and streaming. Radio devices will receive such programming from all of these sources seamlessly, so there will be less and less focus on which technology is delivering it. The listener will select programming from a list of presets that shows broadcast radio next to streaming radio next to satellite choices.
As they are empowered by more and more choices, the consumer will become more selective and less tolerant of mediocre programming. It will be the content offerings rather than the technologies that draw in the listener.
With so many listening options, listeners will be less tolerant of ad content that offers them no value. This will further cheapen mass appeal advertising, but it will drive the use of more targeted, relevant ad creative. Free, ad-supported stations will obtain permission from listeners who will opt to receive targeted, relevant ads. Those ads will be more valuable to them and will show a higher return on investment for the advertiser.
The ability for listeners to interact with and respond to programming and advertising will become critical, stations and advertisers will develop more and better ways to do this such as sms and online 1-click solutions that make it as easy for listeners to respond to an ad as it is to give a song “thumbs up” or “thumbs down.”
I’m thinking more and more these days about the large number of listening choices that consumers now have and the way that that will impact just about everything in the future. Listeners are empowered and can choose exactly what they want to listen to, on what technology and device, and how they want to hear it. I think the winning platforms will be the ones that recognize that. What do you think?
Lipton Iced Tea has teamed up with Pandora for a summer promotion that encourages listeners and tea drinkers to “Discover the Natural Side of Music.” All natural Lipton Iced Tea will sponsor a summer long promotion designed to emphasize the all natural ingredients in Lipton Iced Tea by tying in with acoustic concerts, artist videos and exclusive channels on Pandora.
Lipton and PANDORA internet radio will continue to engage fans by bringing exclusive and compelling content from major artists including Train, Kelly Clarkson, Bon Jovi, and more—representing a variety of genres. Each will share the unique and personal natural roots of their music as part of a video series on Lipton’s Facebook page.
Fans can also interact with the natural elements of music on Lipton PANDORA internet radio stations to cater to their musical preferences. Stations include Lipton Pop (Pandora.com/liptonpop), Lipton Country (Pandora.com/liptoncountry), Lipton Rock (Pandora.com/liptonrock) and Lipton Hip-Hop (Pandora.com/liptonhiphop).
This is a nice illustration of smart creative ways that Pandora and other online stations can offer value to advertisers that’s far removed from cost per thousand advertising. Pandora’s channels are the centerpiece of this brand’s promotion, the added value that they are offering their customers. The interactive channels that they have created will extend their brand further than any generic ad campaign ever could.
Are you thinking about how can you create smart advertising that adds that kind of value for your advertisers?
A new Webcast Metrics ranker of measured stations for March shows that Pandora‘s audience AAS sits slightly below the half million mark, a number that is just slightly above last month’s position. Last month, when Pandora’s number showed some negative growth, we learned that there was some missing data and that would affect March and April data as well: “During this period, the code that measures audience and time spent listening was inadvertently omitted by Pandora in some versions of their mobile applications. Therefore, not all of Pandora’s mobile listening is captured in this report.”
For the most part, the other leading groups or stations on the ranker showed increases: CBSRadio, Clear Channel, Citadel, Slacker, Entercom, ESPNRadio, Cox and Cumulus all saw modest growth in their AAS number while Digitally Imported, the third online only station in the top ten, saw a minute decrease in their domestic AAS.
AccuRadio, Salem and Bonneville continue to lead the pack with strong TSL numbers that are 3 or more times greater than Pandora and some of the other leading groups on the ranker. No doubt, this has to do with lots of sampling, but also to a loyal userbase for the three TSL winners on the ranker.
I attended RadioInk’s Convergence conference last week and joined a panel discussion about streaming versus broadcasting, which examined the technologies, expenses, and revenue opportunities of each of those options. As you can guess, I advocated for broadcasters to pursue streaming and develop an online audience along with strategies for monetizing that separately from their broadcast platform.
One of the featured speakers on the second day was Jim Cady, CEO of Slacker. Cady began his speech by telling the audience that Slacker doesn’t speak or share information at industry gatherings very often, nor does he read industry press or blogs regularly. The message, as I took it, was that Slacker is different and doesn’t really feel that there is much for them to learn from meetings or press. I have to say, this was a curious way to warm up the crowd.
Cady went on to give us an overview of Slacker’s strategy. A key element of their success is Slacker’s backend that integrates with wireless carriers for easy billing. Slacker will be pre-installed on 52 million handsets this year alone, and when listeners want to upgrade to subscription, they can easily be billed through those carriers. No doubt, this goes a long way to selling subscriptions.
Slacker’s main objective is to get listeners to sign up for the free ad supported version. After that, they hope to upsell them to ad free or on-demand streaming options. According the Cady, Slacker has “hundreds of thousands” of paid subscribers.
Cady went on to say that Slacker has 26 million listeners. I’m sure he meant to say that they have 26 million registered users, a number that is roughly 30% of Pandora‘s 80 million. This is the first snapshot we have of the size of Slacker’s database and I have to say, 26 million is a big number of users. He wouldn’t discuss revenue, but Cady did say they work with Triton and a total of 26 ad networks in all.
According to 2010 year end shipment statistics reported by the RIAA, digital formats now comprise 47% of all music shipments in the US. That’s a large share, especially compared to the 9% share digital music held in 2005. Overall, the total digital music market in 2010 was $3.2 billion, a 3% increase over last year.
According to 2010 year end shipment statistics reported by the RIAA, revenue from downloaded tracks and albums increased 12% and 8.6% year over year. Sales from physical units were down 10.9%. Music video sales and ringtone sales slipped as well. Subscriptions grew in number, but revenues were down, meaning more subscribers paid less for those services.
Performance royalties are becoming a major source of revenue for the labels. Payments grew from $155 million in 2009 to $249 million in 2010 – a 60% increase in just one year. That’s on top of 55% growth the year before that. At the current pace, that number will top a billion in just a few more years…
Music sales are up this year, bucking a several year annual decline. Led by strong digital downloads of albums and songs, music sales in the US are up 1.6% through May 8th. That’s according to Nielsen. Physical album sales continue to drop, but the rise in online sales is compensating for the first time. Digital album and track purchases went up 16.8 percent and 9.6 percent respectively.
A contributing factor in this would be the release of the Beatles catalog online which drove catalog album sales to a 5.4% increase. CD sales were down, but only 8% compared to double digit declines for several previous years. And strangely enough, Vinyl album sales were way up – 37% year over year, after growing 14% last year.
So what does all of this mean? Well, the future’s not as bad as it seems. Perhaps precipitous drops in revenue are a thing of the past for the record companies.
Mobile is changing the way we do things, and smartphones are changing the way we do mobile. Smartphone ownership has tripled since 2009 – close to a third of Americans 12+ own a smartphone.
What’s really interesting to note is what smartphoners are doing with their devices. According to the new Arbitron/Edison Infinite Dial Study, 40% browse the Internet several times a day or more. 14% play games. 8% watch video. 8% listen to Pandora. While the most popular activity remains talking on the phone, texting is gaining fast, and other activites are growing.
Folks are looking for ways to use their smartphones and platforms that are well suited are the big winners. 27% of smartphoners use social media sites like Facebook and Twitter, a number that jumped 34% in a year. Sites and activities that are well positioned in the mobile game are winning audience big time: Facebook, YouTube, Pandora, Twitter.
The media landscape is changing. Mobile, and in particular smartphone usage is revolutionizing media delivery, use and expectations. And the pace of change is phenomenal. Are you thinking about ways to make mobile happen for your platform?
Google launched its long rumored cloud based music service on tuesday, calling it Music Beta, a name that signals the tentative nature of the service. It’s likely a response to Amazon Cloud, which hit the market a few weeks ago. Google had been in talks with record labels, trying to strike a deal for its service, but was meeting with lots of resistance. Amazon Cloud launched without record label permissions, boldly claiming that they did not need them.
The service is similar to cloud based streaming music locker services such as MP3Tunes as well as Amazon Cloud. Listeners can upload their personal music collection from one or more computers, any folder or ITunes library; build playlists and keep them in sync; and listen to recently played music offline as well. Missing from the service at this early stage are options to purchase songs, and share music with your personal network. Users can store up to 20,000 songs for free, versus Amazon‘s service which limits free service to 1,000 songs.
Even though it’s clearly temporary, I’m not very impressed with the name Music Beta which is far more hesitant than Amazon’s bold entry with Amazon Cloud. What, they couldn’t think of anything to call it? Music Beta is a branding catastrophe, an automatic do-over later. In the meantime, if you are trying to decide where to upload your ten thousand songs, are you choosing something called Music Beta???
But then again, Google’s history with music projects has been kind of tentative. They launched their last iteration, called Google Music, in October 2009. That initiative offered search for music by band, singer, song, album or lyrics, with results that allowed a full song streamed along with a purchase opportunity and other stuff. It disappeared quietly a while back.
In 2006 Google bought radio ad software company dMarc to launch Google Audio, a platform that tried to sell audio ads on radio stations by tapping into Google’s enormous advertiser base. After a bunch of stops and starts, I think that platform is still in existence, but limping along.
So it’s game-on for cloud based streaming music platforms, with Google, Amazon and MP3Tunes in play and Apple reportedly readying their entry as well. I’m waiting for my invitation to try Music Beta, so that I can come up with the perfect name…