According to the newly released Infinite Dial study, listening to Internet radio didn’t increase much from 2009 to 2010. Last year’s study pegged the audience at 69 million, this year it’s 70 million, both netting a 27 share of the population.
That’s because broadband is nearly ubiquitous, says the study. As organic growth of broadband has nearly stopped, growth for online mediums such as online radio, podcasting and online video have slowed.
The audience is 55% male, 45% female and tends to be employed, educated, and have higher incomes. They like the interactive options that online radio offers, along with variety and fewer commercials. When asked to name an online only station, Pandora was the clear winner. Pandora is has taken the brand position for online radio. (See my post here about Pandora becoming the Kleenex of Online radio).
The study found that more people listen to online only brands than AM/FM streams. This should be a clear impetus to AM/FM broadcasters to offer more and different options in their online streams. According to this information, listeners are turning online to find offerings that are different than what they can hear on their AM/FM radios. To compete, broadcasters must expand their offerings to include side channels and options that give listeners ways to control and interact with the streams.
Update: I’ve been hearing from some sources that the report that all of the companies involved in the lawsuit may not have been involved in this settlement, as was reported by Inside Radio on 12/30. That report was my only source of information on the settlement.
Key broadcasters have settled a patent lawsuit that claimed they were infringing on a patent owned by Aldav for streaming ad-insertion. Aldav and its subsidiary Acacia are companies that specialize in buying up patents and pursuing licensing agreements – often through litigation. Earlier this year they filed suit against a long list of key broadcast companies including CBS Radio, Citadel, Clear Channel, Cox Radio, Cumulus, Entercom, Gap Broadcasting, Radio One, Regent, Saga, Univision.
While the Acacia website shows news of settlements with Cox and Regent, Inside Radio (which is owned by Clear Channel) reports that a settlement has been reached with all of the companies, without any money changing hands. IR reports that just before Christmas the companies and Aldav agreed to a dismissal of the suits. Broadcasters had asked that the court declare the patent invalid because Aldav had failed to assert its rights for years and its patent is unenforceable. The case was set for arbitration in February.
Joining the parade of predictions that online radio revenue will grow in 2010, SNL Kagan predicts that by 2013 online radio revenue will account for nearly 5% of radio’s overall number. Kagan’s announcement, published as part of SNL Kagan’s Broadcaster Investor Service, expects 12% growth this year, with radio’s online revenues tallying $441 million (up from $394 million last year).
Beyond that, SNL Kagan projects an annual online revenue growth rate of 20% in 2010 to $530 million. As the market matures, growth is expected to level off through 2013, rising to $827 million, or 4.7%, of total radio revenues by the end of the five-year period. That compares to 2.0% in 2008 and a projected 2.7% of total radio revenues in 2009.
The decline in broadcast radio revenues has helped to spur the growth of online radio dollars, according to the report. Out of necessity, stations looked to develop online initiatives with websites, streaming and mobile applications to replace traditional ad dollars and increase sales.
The report is focused strictly on broadcasters and appears to refer only to online revenue growth for broadcast stations. Pure online stations such as Pandora, AccuRadio whose revenues would be completely online do not appear to be part of this report.
Last week, after news that Pureplay Webcasters had reached an agreement with Sound Exchange on performance royalties, Internet radio industry darling Pandora made more news by announcing support for the Performance Rights Act before Congress. That bill would require AM/FM broadcasters to pay performance royalties as well.
Deep background, for those who don’t have it, is that in 1998 the Digital Media Copyright Act (DMCA) was passed requiring various forms of new media, including satellite and Internet radio, to pay performance royalties on digital media transmissions. Traditional broadcasters have not paid performance royalties. Broadcasters have maintained that the benefits that musicians receive from having their songs played on radio stations is substantial and therefore replaces the need for additional payments.
While I believe that’s true – that the value of playing a song on the radio is substantial – the fact remains that record companies are suffering from an enormous shift in the way music is purchased, and their business is way down. I’ve been saying for a long time that future of the music industry – both record companies and music services (AM, FM, online, whatever) is going to be one of sharing revenue. Radio stations can’t survive if record companies do not find a way to profit.
There are many ways to argue against Pandora’s stance. Just because they have to pay royalties, why does that mean broadcasters should. Isn’t that an eye for an eye mentality? Sure, I think that’s a good point – why should Pandora want broadcasters to be penalized in the name of fairness?
A much better point, also made by Pandora, is that they want to see musicians get their fair share. Because, whether broadcasters like it or not, if musicians and their labels can’t make money, the system is flawed, and the industry is doomed.
by Brian Benedik
As we have seen from various 3rd party research studies, the future of Digital Audio is bright. As more consumers continue to migrate towards listening to audio through computers & mobile devices, the opportunities for advertisers are enormous…Pre Roll Video, In Stream Audio, Companion Banners, and evolving In Stream Video inventory can all be activated and customized for a Local or National Advertiser. The growth of audio mobile applications such as Pandora, IHeart Radio, CBS/AOL and others is fueling this trend and it will only accelerate…The idea of marrying terrestrial radio placement with a strategic digital audio program to create a true “Audio” experience is a concept which is resonating with many large & small Ad Agencies around the country.
However, just having Digital Audio in your tool bag is not enough. Advertisers are looking to activate multiple channels of inventory within their campaigns. As a Local or National sales agent, you must be able to offer a more comprehensive group of platforms for your clients. Display, Rich Media Ads, Database segmentation, Mobile and Search capabilities are Digital inventory to build with Internet Radio so you can create multi channel programs for your customers. Today’s media salesperson has to think of themselves as a multi channel solutions provider for their clients.
Many of the large terrestrial radio groups are changing the complexion of their sales staffs during the current environment. The contraction of sellers are now focused on selling multiple sets of terrestrial and digital inventory. The value proposition of using on air and online assets together is appealing to many brands around the country.
Brian Benedik is President of Katz360, a division of Katz Radio Group. Katz360 sells digital and new media assets for Katz Radio Group’s large network of broadcast stations and online radio brands.