SNL Kagan and Senior Analyst Robin Flynn have produced a 2011 report on the Economics of Internet Music and Radio that’s very comprehensive and insightful. Using existing data points from RAB’s quarterly revenue reports, publicly available financials on Pandora, and research from Triton Digital and Arbitron on audience, SNL Kagan provides an excellent summary of the marketplace and its players, both online only and radio broadcasters.
Digital/online ad revenue will become an increasingly important and larger portion of radio’s revenues. The report pegs annual revenue for 2011 attributable to digital/online, including website, streaming, hd, and other digital sources, at $713 million for 2011. That number will grow to $1.55 billion in 2021 and comprise 7% of radio’s overall revenues.
Internet only stations will grow revenue at a faster rate – coming from $293 million projected annual revenues in 2011, that number will be $365 million in 2012 but reach $1 billion in 2021. Those projections are based only on ad revenues and do not include revenue from subscription or song download sales.
Pandora’s IPO has provided insight to the business model for an Internet radio station, and it’s a challenging one thanks to the enormous share of revenues that are owed in royalties. SoundExchange takes 45% of Pandora’s revenues and leaves them still losing money after ten years. The report quotes several radio broadcast company CEOs discussing the expense of streaming thanks to those issues as well. But most agree it’s a channel that they can’t afford to ignore.
Internet radio’s audience is growing, and connected devices are expanding the audience and time spent listening. Optimizing cpms for targeted mobile ads is a critical piece for Pandora in overcoming the digital royalty expense. Interestingly, SNL Kagan has projected that Pandora will take 4% of 2011 mobile ad revenues in the US, ranking fifth behind Google, Apple, Yahoo and Twitter.
Mary Meeker is widely considered to be an expert when it comes to spotting trends online. A partner at venture capitallist firm KPCB, she was named one of the ten smartest people in tech last year by Fortune magazine. She’s a popular speaker and analyst who has a knack for spotting the next big trend in technology. Lately Ms Meeker’s specialty has been mobile and the way it is revolutionizing the way we do everything, from shopping to consuming media.
This week, speaking at Web 2.0, Meeker gave a fast talking presentation about Internet trends. In it, she predicts that the next big thing is online audio. Lots of new technologies are contributing to this emerging trend. For example, she points out that while twitter and facebook have enjoyed enormous success with their mobile apps, it’s Pandora that has the largest percentage of their audience on mobile devices.
Meeker went on to mention new technologies that are driving the new trend, including Bluetooth enabled wireless devices which permit hands free access, higher quality, more compact wireless audio speakers, connected car audio, sound recognition and understanding apps such as Apple’s new Siri, and sound creation and sharing platforms like SoundCloud and Spotify.
The presentation is chock full of great info and perspective on the promise of mobile. There’s plenty of room left for growth for smartphones, mobile ad dollars are ramping up just fine, cpms are ramping too.
What’s more, the US has taken a leadership position in new mobile technology – thanks largely to Apple and Google. Innovation in Silicon Valley has never been more rapid.
And in case you missed this point a few paragraphs ago, Mary Meeker, one of my personal favorites in the biz, said that Online Audio is the next big thing…
You can watch her presentation online here.
This is a guest post by Angus MacDonald, General Counsel at Live365, Inc. regarding a recent court ruling that could have significant impact on the streaming audio industry.
Cloud-based music services can heave a sigh of relief. MP3tunes, the cloud locker service founded by Michael Robertson, scored a partial victory in the copyright litigation brought by EMI. In his August 22nd decision, Judge William H. Pauley III agreed with MP3tunes that the safe harbor provision of the Digital Millennium Copyright Act (DMCA) protected it against many of EMI’s infringement claims. The decision represents a significant victory for other cloud-based music services – such as Google, Amazon and Dropbox – who should have renewed confidence in operating their cloud services without a license. Though the decision sets a beneficial precedent for cloud-based music services generally, it is a mixed result for MP3tunes as the court also found both the company and Robertson liable for copyright infringement on some of EMI’s claims.
MP3tunes allows its users to store music files in personal online storage lockers and then to play those stored files from Internet-connected devices. MP3tunes also operates a second website, Sideload.com, that permits users to search for free song files on third-party websites and then “sideload” those songs, which would be saved to users’ lockers. EMI, along with fourteen record labels and music publishers, filed this lawsuit in November 2007, claiming a laundry list of violations of copyright and unfair competition laws.
Yesterday’s decision turned largely on whether MP3tunes is eligible for the DMCA’s “safe harbor” protection, which shields qualifying online service providers from copyright infringement for content uploaded (or “sideloaded”) by their users. To qualify, online services must follow the rules set forth in the DMCA, including expeditiously responding to takedown notices from copyright holders. The court found that MP3tunes – for the most part – complied with all of the DMCA rules and, therefore, was largely immunized from liability.
However, MP3tunes and Robertson did not completely avoid liability. Shortly before filing this lawsuit, EMI sent MP3tunes three takedown notices that identified specific song titles and URLs to be removed. Although MP3tunes disabled the links to those songs, thereby preventing more users from downloading them, it did not actually delete the songs from the lockers of its users who sideloaded the songs from those links. (MP3tunes claimed that it would be subject to lawsuits by its users if it removed property from users’ lockers.) The court held that MP3tunes did not do enough when it failed to remove the sideloaded songs from users’ lockers.
As for Robertson, the court ruled that Robertson was “directly liable for the songs he personally sideloaded from unauthorized sites.” This finding is somewhat confusing based on the court’s earlier statements that “there is no evidence that MP3tunes executives or employees had firsthand knowledge that websites linked on Sideload.com were unauthorized.”
There are several key-takeaways from this important decision. First, this decision provides significant legal cover for cloud-based music locker services to continue providing their storage and play-back services without obtaining a license. (When Amazon and Google launched their respective cloud services earlier this year, the record labels were “upset” and clamored that licenses were necessary.) While the decision does not specifically address the legality of MP3tunes’ music locker business model or other similar cloud-based services, it is clear that MP3tunes would have completely escaped copyright liability if it had removed the specific songs listed in EMI’s takedown notices from its users’ lockers.
Second, the ruling re-affirms the DMCA as a powerful shield against copyright holders, who claimed that the DMCA did not apply to MP3tunes. As the court observed, “the DMCA does not place the burden of investigation on the Internet service provider.”
Third, the decision appears to let MP3tunes off-the-hook for its storage process, which eliminated duplications of the exact same music files so that only one copy of a particular file would be stored on its servers and then streamed to its users. Google and Amazon took a different approach when they launched their respective services as both companies require every user to upload every song, regardless of whether other users had uploaded identical files, thereby resulting in an enormous consumption of bandwidth and storage space.
Finally, the ruling indicated that playing back songs stored in a user’s digital locker was not a “public performance” requiring a license, contrary to EMI’s contentions. This holding was a natural extension of an earlier decision – commonly referred to as the Cablevision case, which determined that a public performance license was not required for the play-back of television shows that were stored on a remote DVR at the direction of Cablevision’s subscribers.
The EMI v. MP3tunes case, however, is not over. While the decision disposes of some claims, several issues (such as damages) still will need to be tried – unless there is a settlement. The range of damages is $750 is $30,000 per work infringed, and can increase to $150,000 per infringed work if there is a finding of “willful” infringement. Because there are at least 350 works at issue, the damages could exceed $50 million dollars, though that result is highly unlikely. And, barring a settlement, one can certainly expect an appeal of this decision. But, in the meantime, the decision provides some important clarity and leverage for cloud-based storage services that may have been considering the daunting process of negotiating with labels (and other copyright holders) for the right to store and play-back their users’ lawfully-obtained digital files.
A copy of the decision is available here:
Your comments are welcome below. You can reach Angus MacDonald at firstname.lastname@example.org.
A new company with some not so new faces has launched a platform designed to enable advertisers and stations to easily buy and sell on-air and online ad inventory. Called The Media Dash™ Local (www.themediadashlocal.com), the digital platform provides an easy way for small- and mid-sized businesses to buy advertising on local radio stations.
Rob Williams and Drew Hilles launched The Media Dash, which is designed to help broadcasters sell premium on-air and streaming commercials to both new and repeat advertisers. It’s not their first adventure together, the two paired up as the team that launched Goom Radio in the US, but left not too long after that. Williams comes from a Clear Channel based background in broadcast management, while Hilles was with dMarc, a broadcast traffic platform company that was acquired by Google, where Hilles then spent a few years.
This project resembles attempts Google has made to make radio ad inventory buying and selling more digital. Google’s goal was to make it easy for local and smaller advertisers who were already spending ad dollars with Google on things like search and adwords to add audio to that mix. The plan failed when many broadcasters, wary of Google’s intrusion into their territory, refused to participate. Since then, a few other companies have tried it – Bid4spots is an auction based online marketplace for radio inventory. Targetspot offers a similar “self service advertising platform” that enables local advertisers to get an audio ad made and select a target area and budget.
“Due to limited resources, local radio stations typically focus their sales efforts on their largest customers, failing to address a broad market opportunity of under-served local advertisers,” said Drew Hilles, CEO of The Media Dash. “Our goal is to make it as easy to buy local radio as it is to place Internet advertising. The Media Dash Local is designed to bring new advertisers to radio and generate incremental revenues for stations.”
Targetability is the other key feature to being able to compete for digital dollars, and this system enables advertisers to select local markets where they want their ads to run. Available markets are limited, but will presumably increase. Ultimately, as Google learned, the service will have to be able to offer lots of inventory from lots of markets in order to succeed.
The platform also allows you to decide whether you want to run creative that you may have, or offers to produce audio ads for free, something that will no doubt add to the success of the plan as it tries to bring new digital advertisers into the radio marketplace. Watch the video below for more info.
Amazon has launched a cloud based music service that allows users to store their own music in music lockers and then listen to it on computers and other streaming devices. It’s been rumored that both Google and Apple are readying similar services, so this move by Amazon puts them ahead of the pack. They’re hardly the first – services like MP3Tunes have been offering a similar service for over a year.
But moving early gave them the nifty name – they’re calling it Amazon Cloud, making it difficult for Apple or Google to use the word Cloud in their branding. I’m sure part of their thinking in launching early is to capture the word Cloud and associate it with their product.
Perhaps the most interesting thing about this new service is the legal stand that Amazon took in launching it. While rumors of Apple and Google’s cloud based music streaming platforms have been brewing, supposedly delayed by tedious negotiations with the record labels, Amazon just went ahead and did it, taking the position that the music loaded in the lockers is owned by the user and no further licensing is needed.
Michael Robertson, Founder of MP3Tunes, has been in a legal battle over such issues with the record companies. His post about Amazon’s new service on his blog cheers Amazon’s entry into the space. “I must admit, it’s great to have a giant corporate ally in the battle against the record labels that are fighting against user’s storing their personal music libraries online.”
Amazon Cloud is definitely intended to increase sales from the AmazonMP3 store. Songs purchased through the store are automatically loaded into your personal music locker in Amazon Cloud. The service is well integrated with Android, and not integrated with iPhone. It does sync with iTunes. Several reviews point out that it seems to be pretty basic, look for further developments and improvements.
Last month Apple announced that the ten billionth app had been downloaded from the app store. Apple’s app store is a huge success that has revolutionized the way people use mobile devices, and the way online companies do business. Now every major mobile OS manufacturer has an app store, and Gartner recently predicted that 17.7 apps will be downloaded this year alone.
So it’s hardly a surprise that Apple wants a slice of the pie. They’ve announced big changes with regard to their app store that include, as the most controversial, their taking a 30% cut of all subscriptions that they drive to a company through their app store. Along with that, they are implementing changes in the platform that will make it much easier for mobile app customers to purchase apps from the store with one click. So, enhancements for the seller, enhancements for the buyer, and a cut for Apple.
Of course, the companies that had been enjoying lots and lots of app sales through the Apple app store without any rev share are not at all pleased. Rhapsody, as a subscription based on demand platform, was downright pissed off, calling Apple’s 30% share “untenable”, and adding that Google’s rumored-to-be-coming-soon 10% rev share was more reasonable.
So, the app party is kind of over, or at least the open bar has closed. I’m just not sure that it’s unreasonable that Apple wants a cut, a pretty big cut, of the money everyone is making off of their platform. If the improvements are so good that it’s as easy to subscribe as it is to download a free app I think companies will benefit. The problem now is that disappearing from the app store would be like cutting off a lifeline. Which may be the indication that Apple has earned a slice..
By now you’ve probably heard that Pandora has moved to go public. On friday afternoon they filed a registration statement with the Securities and Exchange Commission of their intention to sell shares via an IPO as soon as possible after the filing. They seek to raise $100,000,000.
The document they filed is full of great info about their business and their strategy.
Pandora says they are redefining radio from a one to many to a one to one radio listening experience by enabling personalization and discovery. Their Music Genome Project, which assigns attributes to songs and then is able to define and deliver an individual’s preferences for music, is their key weapon. Listeners choose to listen to Pandora because of this service, because it is free and because it is everywhere. Advertisers choose the service because it offers a one to one delivery, multi platform options, and an “enhanced messaging environment.”
Pandora has 80 million registered users. Listening on mobile devices is higher than on computers. According to AndoMedia’s ranking of the top 20 stations or networks in the US they have more than a 50% share. Perhaps they should have added the caveat that not all stations or networks are measured by Ando’s service, however they do list their reliance on third party measurement services as one of their risks.
In the first nine months or 3 quarters of last year their revenue was slightly more than $90 million, $78 million of that was ad sales and the remainder was subscription. The ad revenue number includes more than $6.6 million in ads they run as part of the Google ad network.
A daunting 60% of those dollars are paid out in royalties which they call “content acquisition”. Pandora was not profitable last year based on income and expenses for the first 3 quarters. In the fiscal year ending January 2010 they lost $16.8 million.
Westergren owns 2.4% of the company he founded by maxxing out credit card after credit card back in the early 2000s. CEO Joe Kennedy has 2.7%.
Pandora’s going public is big news for Internet radio. They are by far the most widely known Internet radio service in the US, and their success or failure will impact the ability of other services to do the same. May they thrive…
“We should be wherever our listeners are.” That’s the very simple premise that former MTV Exec Bob Pittman says Clear Channel is pursuing as he builds out their multi platform strategy. According to Pittman, Clear Channel already has a great strategy and systems in place, it is just a matter of rolling it all out.
Pittman says the listener doesn’t care about what device they are listening on, but they do care what they are listening to. He points out that Clear Channel’s got a large number of those brand loyal consumers. Whereas Google has about 175 million uniques on a monthly basis in the US, Clear Channel has over 200 million. Keeping them satisfied by offering them as many ways to listen as possible is the name of the game.
What about Pandora? Pittman sort of side steps that question, simply offering the stat that “only” about 4% of listening right now is to digital or online platforms, implying he’s not really concerned – yet.. He does point out that listening online “appears to be additive” meaning that listening online adds to total time spent listening to a station, which is of course a very good thing.
Pittman has put $5Million of his own money into Clear Channel, which makes him a credible spokesperson as well. Here’s the quick interview:
In a savvy and innovative move, RadioTime has optimized their Internet radio portal called TuneIn for Google TV. This news comes as the most recent in a list of placements and partnerships that position RadioTime as a key portal to Internet radio listening. That list includes deals with device and automotive manufacturers as well as apps for smartphone mobile listening.
TuneIn Radio features RadioTime’s new Song Search technology, which allows users to quickly and easily search the directory of over 50,000 AM/FM and Internet-only radio stations for specific songs, artists, programs and stations. The TuneIn Radio home page automatically displays a user’s local AM/FM stations, and provides links to search the entire directory by selections such as “Music,” “Talk,” and “Sports,” as well as an enormous library of podcasts.
Users who create a free account on RadioTime.com can link their presets to their Google TV accounts, and save and access presets on Google TV, RadioTime.com and the TuneIn Radio mobile apps.
“Before the Internet, before television, there was radio, and the medium has remained a primary source of news, sports and music for 100 years,” said Bill Moore, CEO, RadioTime. “Seeing TuneIn Radio in Google TV Spotlight next to websites from such well-known content providers as CNN and Vimeo is extremely gratifying and validates all the hard work our team has put in to bringing the TuneIn Radio experience to Google TV.”
RadioTime continues to come up with excellent manuvers to build traffic through their portal that make them more and more essential to both listeners and content providers. It seems to be working – particularly in the US where their traffic rank on Alexa has them at 1569. May they thrive…
While broadcasters gathered in DC last week, digital folks were in NYC at the Interactive Advertising Bureau‘s annual MIXX Conference, part of Ad Week in that city. (It’s a shame that the two events are at the same time.) During their event, the IAB released its “Digital Audio Advertising Overview” Platform Status Report, a first ever effort by that organization to define the digital audio space and make it easier for digital advertisers to understand it.
The document “defines the digital audio category and provides a snapshot of the marketplace audience size and demographics as well as outlining the players in the market, the vehicles currently used to deliver content and advertising formats, and some of the most important metrics for measuring success.” It’s a white paper that provides a nice overview of Internet radio in terms of audience and measurement, ad opportunities and standards. While the report calls itself an overview of the digital audio space, in fact it concentrates solely on Internet radio – I saw no references to podcasting, on demand streaming, HD, or any other types of what I consider to be audio of the digital variety.
The paper provides research from Nielsen, Bridge Ratings, AndoMedia as well as Edison Research/Arbitron’s comprehensive annual Infinite Dial Study to define the market size, provide listening data and identify the ad units typically available. It also lists major advertisers such as Chevrolet, Ford, McDonalds, Dunkin Donuts, American Express and Home Depot (the list is longer), and includes a case study of OnStar on the Katz Online Network as well as Pandora.
With this white paper the IAB, the main ad association for the digital market, is finally acknowledging digital audio as a digital ad option for advertisers, so it’s a great thing. With all due respect to those involved, it’s long overdue. While there is little that’s new in the report, it’s all pulled together very succinctly into a credible presentation that sellers can use to educate advertisers. It should be particularly useful with digital ad agencies who have been slow to spend on Internet radio. Having the IAB stamp of approval means a lot.
Congrats to Brian Benedik of Katz360 and Andy Lipset of TargetSpot, co-chairs of the IAB’s digital audio committee, and the companies that are on the committee: AndoMedia, Google, Clear Channel Radio, Comcast, comScore, Cox Cross Media, ESPN, Pandora Media, and others. Hats off for a job well done.
You can download the report here.