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..
Robin Flynn of SNL Kagan hosted a panel discussion called “Charting Digital Audio Ad Dollars” at RAIN Summit West on April 15th. Advertising is on the upsurge, she concludes, and cpms are solid.
Pandora SVP of ad sales Steven Kritzman, Katz Online President Brian Benedik, Spotify VP of ad sales Jon Mitchell and Alexis Van de Wyer, President of Adswizz, Inc. were the panelists contributing to the panel hosted by Flynn.
There is a healthy interest in advertising on Internet radio, and the cpms are getting stronger. Contributing to the interest is Internet radio’s ability to deliver key groups such as 18-34 year olds, Hispanics and upper income groups. Advertisers from many leading categories are now active in Internet radio, including finance and entertainment along with auto, restaurant and retail. Mitchell said that Spotify has 1,400 different advertisers.
Nonetheless, audio ads continue to be under monetized. Campaigns that include video in the mix with audio will produce a higher cpm overall, but targeted local campaigns are also pulling higher cpms. Benedik estimated that while generally network radio CPMs are $4 to $6, he said that geo-targeted campaigns can boost CPMs to $6 to $12.
Local advertising is gaining interest on Internet radio, led by the precise targeting abilities of Pandora. Thanks to listener registration, platforms like Pandora and Spotify can target by listener demographics, geographics, or taste in music. Benedik is looking for local revenues from political campaigns this year to be healthy.
The group acknowledged that monetizing audio effectively remains a challenge. Flynn notes: “Given that 70% of Pandora’s listeners listen on a mobile device, Kritzman said, the company is working hard to better monetize those listeners. Pandora execs have recently said the company’s RPMs, or revenue per 1,000 listening hours, are $60 to $70 for its desktop Internet business versus $20 for the mobile side, but mobile is expected to catch up.”
At RAIN Summit West last week we introduced a new segment called POV, a familiar acronym for Point of View. In business circles, POVs are a type of presentation used to briefly define a position – often on a new or widely debated topic. We thought it would be interesting to invite leaders in the industry to weigh in on a broad topic, so this time around we invited several folks to make a brief presentation on “Redefining Radio”. We didn’t offer any further instructions about the topic than that.
Triton CEO Neal Schore took the stage early in the day and used his POV presentation to talk about something that I think is critically important for Internet radio – listener registration. Schore told the audience that it’s time to require listener registration in exchange for online content.
I couldn’t agree more. As Schore pointed out, most online stations are already requiring registration. This enables them to offer highly targeted ads and content that is more interesting to the listeners and more valuable to advertisers. It expands the time that listeners are willing to spend with a station, and it raises the likelihood that they’ll interact with an ad because that ad is specifically targeted – by gender, geography, or perhaps other criteria, to their specific situation.
Folks that don’t register their listeners argue that it depresses audience growth. But in the next breath they’re arguing that streaming expenses are too high. Those two things go hand in hand — require registration and maybe you lose a few listeners but that lowers your overall expenses while at the same time raising your ability to effectively monetize the remaining listeners. They’re more valuable because you know exactly who they are, you can interact with them and expand your relationship, and offer them targeted ads.
This is not broadcasting folks. Internet radio has the ability, as Schore pointed out at RAIN Summit West, to uniquely target every single listener and develop a unique one to one connection that is far more valuable and meaningful in today’s content marketplace. There is no reason not to. Schore’s message was an excellent contribution to the smart exchange that took place at RAIN Summit West last week.
Digital audio is not a trend it’s a behavior. So said Targetspot CEO Eyal Goldwerger during his research update at RAIN Summit West this week. With 42% of the population listening, listening online is a firmly established behavior – one that grew 8% since last year.
Goldwerger presented a lot of great stats during his brief ten minute research update at the Summit – where he updated a research study originally presented last year by Targetspot. The audience is 54% male and 46% female. 51% are married, 22% have a household income of $100k +, and 64% own their own home.
What’s more – 80% of all listeners spend 1 – 3 hours per day listening online.
The numbers presented by Targetspot are remarkably and reassuringly similar to those recently presented by Arbitron/Edison Research in an update to their Infinite Dial Study, where 39% of the 12+ population was found to be listening monthly to online radio and 29% are listening weekly.
The following is a guest post by Angus MacDonald, General Counsel, Live365:
A few days ago, SoundExchange publicly released its Annual Report (Draft) for 2011. According to the report, SoundExchange’s 2011 collections from ALL statutory services amounted to $371.9 million. See SX’s Annual Report, p.7 (“In 2011, SoundExchange collected statutory royalties from all statutory classes of services in the amount of $371,922,621.”). That’s an increase of 40% ($106M) in collections compared with the previous year – i.e., $265.9M in 2010 vs. $371.9M in 2011.
Impressive increase. However, as discussed below, Pandora accounts for most (over 70%) of that growth. In its most recent 10-K filing (released about 3 weeks ago) for the fiscal year that ended Jan. 31, 2012, Pandora paid 49.7% of its revenues to SoundExchange. See Pandora’s 10-K , p.20 (“For our fiscal year ended January 31, 2012 we incurred SoundExchange related content acquisition costs representing 49.7% of our total revenue for that period.”).
Using the 49.7% figure (along with Pandora’s recently-reported revenue of $274.3M for its last fiscal year) means that Pandora paid $136,346,980 to SoundExchange in the 12 months that ended Jan. 31, 2012. That $136.3M figure represents 36.66% of SoundExchange’s total revenues ($371.9M) collected in CY2011. [NOTE: For the purposes of this exercise, I’m comparing Pandora’s FISCAL year (Feb. 1, 2011 to Jan. 31, 2012) to SoundExchange’s 2011 CALENDAR year, even though it’s not entirely apples-to-apples.]
That 36.66% figure certainly would be much higher – well over 50%, I’d safely bet – if you look only at SX’s Internet-radio revenues, which are NOT separately broken out in SX’s Annual Report. [As many of you know, SoundExchange collects statutory royalties from many different types of services – including noninteractive Internet radio (Pandora, etc.), satellite (Sirius XM), cable subscription services (Music Choice), and business establishment services (DMX).]
Pandora’s royalty payments to SoundExchange more than doubled year-over-year – $61.99M in FY2011 vs. $136.35 in FY2012. That $74.35M increase in royalties paid by Pandora accounts for MOST – i.e., over 70% – of SoundExchange’s increased revenues ($106M increase) for 2011.
Another interesting factoid: Pandora paid about as much in royalties for its FY 2012 (i.e., $136.3M) as it made in TOTAL REVENUES for its previous fiscal year, FY 2011 ($137.7M).
My own editorial: With Pandora’s ever-growing listening hours and royalty payments, SoundExchange and the labels need a healthy Pandora as much as Pandora needs a reasonable Pureplay-like rate for the next royalty term (2016-2020). This is especially true if Sirius XM continues to sign up more direct license deals, thereby bypassing SoundExchange (though Sirius XM’s recent antitrust complaint suggests that may be a tough row to hoe).
There are several other semi-interesting tidbits from SoundExchange’s Annual Report, including its mini-hiring binge in 2011 (55 employees in 2010 vs. 72 employees in 2011) – which was probably necessary to handle all of the additional royalties from Pandora!
William Feinstein is the General Manager of Planet Honda in New Jersey, about 15 miles outside of NYC. He’s smarter than the average bear when it comes to analyzing his advertising, and he’s pretty excited about the results that he’s seeing from ads he’s been running on Pandora. He recently discussed this with RadioInk‘s Ed Ryan in an interview.
Feinstein admits that he loves Pandora, which is why he was willing to try it when a Pandora salesperson gave him a call. He says it solves a lot of the issues he has with terrestrial radio. He’s clearly an informed radio advertiser, conversant about AQH, cume, and dayparts – the general mechanics of radio advertising. But what he likes about Pandora is that he doesn’t have to be bothered with all of that because he’s buying actual delivered impressions. Which he sees as a real advantage. It doesn’t matter what they are listening to, he says, if they are in my demographic, I’m going to capture them through targeted messaging on Pandora.
The interview is really insightful as a lesson on what matters to local advertisers and the ways that radio has failed the local advertiser. For example, this car dealer is located in a major radio market – New York City. He says radio’s big market rates are unaffordable for his business. On Pandora, he can target 3 or 4 counties more affordably, with measurable results.
Describing his approach on Pandora, he says he’s buying the “Radio Everywhere” product that includes a :30 ad, an on screen display ad, and a third ad that remains on the screen during the next song. The campaign includes targeting by county and frequency capping by registered listener as well. Ads are limited to 3 per hour. He’s seeing excellent response and lots of mobile web traffic from his campaign and he’s happy.
I found this audio interview to be really informative as a snapshot of the impact that Pandora is having with local advertisers. It’s impressive to hear Mr. Feinstein discuss his business, his campaign and his level of satisfaction. Hats off to RadioInk for the report.
CBS RADIO has signed a non-exclusive deal with tunein, giving tunein listeners access to news, sports and talk content on more than 40 CBS RADIO stations. This news flies in the face of several exclusive deals recently leveraged by Clear Channel on its iHeartRadio platform, where some major broadcasters were signing away their rights to work with multiple online portals to engage listeners, and instead agreeing that the online online portal they would work with would be iHeartRadio.
“We have always believed in the value of great local content, and this agreement validates the demand we know exists for our original programming while at the same time creates a new revenue source for the company,” said Ezra Kucharz, President, CBS Local Digital Media. “By forging relationships with premiere distribution services such as tunein, CBS RADIO will significantly grow its audiences by exposing our content to new listeners.”
The CBS RADIO deal make a lot of sense, although it’s disappointing that only talk radio content is included. This may be due to tunein’s global appeal – CBS Radio restricts streaming of its music stations to the US. tunein has a suite of very popular mobile apps as well as deals with many devices and automakers, high rankings on iTunes for its popular app. According to Alexa, it’s one of the most popular websites in the US and world, ranking just above the top 1000. That’s a lot of potential listeners…
Last week in an interview with CNET, Michael Robertson talked about how his TiVo-for-radio service DAR.fm is good for the radio industry. DAR.fm lets subscribers record shows from a listing of 5000 stations and 20,000 programs. Those shows are then streamed or downloaded to a personalized list of devices.
Robertson’s goal is to build a better distribution platform to keep radio relevant. No stranger to the idea of ruffling a few feathers, Robertson is well known to the industry as the guy that built MP3.com and got sued by all the major record labels for copyright infringement. He later sold the service to Vivendi Universal for $385 million.
Now Robertson’s pursuing his vision with DAR.fm, focusing on the intersection of technology and the radio industry. “It’s going to be fascinating to see what happens in the radio business over the next three to five years,” Robertson said last week in an interview with CNET. “This is a car accident waiting to happen. You have traditional broadcast radio, Sirius XM (satellite radio), and the Internet start-ups such as Pandora. They are all approaching the audio business with different assets, different royalty structures, and they’re going to realize that they’re all in the same business. They think of themselves as separate right now but everything is going IP.”
On April 15th RAIN Summit West will take place in Las Vegas and host an entire day of interesting conversations about topics like this. Michael Robertson will participate on a panel called The Streaming Music Landscape. Other interesting panels include Innovating the News/Talk Format Online, Personalizable Radio, Charting Digital Audio Ad Dollars, and others. You can get a look at the complete agenda here. See you there!
Songza is a streaming music platform that has been getting some buzz lately. Songza is a couple of years old and got its start after Amazon bought Amie Street in 2010 and the founders of that platform created Songza in its wake. In similar ways to Pandora, Songza lets listeners create stations starting with artists. Listeners can pick songs, share playlists, and get music recommendations.
Songza has a new feature that offers a new twist on personalized music called Music Concierge. Songza’s Music Concierge suggests the perfect playlist for your situation or mood. The Concierge will suggest music for Monday morning or Saturday night, using your preferences and combining them with information like mood, time of day, activity. So if you’re going for a run, you can plug into Songza and listen to a station just right for that.
Songza is reportedly also working with “several large players in the terrestrial radio market” to license their technology and “help them create a compelling digital experience.” They are not, at present, running audio ads.