Local radio stations grew online revenue at a 15% pace in 2011. Total industry online revenues were $439 million, according to a new report by BIA Kelsey.
According to BIA Kelsey, radio’s ability to create and sell local content, combined with the ability to cross promote on and off air, has “has given broadcast stations the opportunity to expand their position in their local markets from solely an over-the-air media source to a local media company that can provide access to local audiences in different, effective ways for their advertiser clients.”
In fact, local content assets, sold by a trained local sales team, are the combined forces that will enable local radio stations to grow online revenue to $767 million by 2016. BIA Kelsey predicts a steady 11.8% growth rate 2012 – 2016.
Roughly 23% of Sound Exchange’s total revenues in 2010 came from Pandora, based on publicly reported info and some quick math by Live365 Attorney Angus MacDonald.
According to SoundExchange‘s Annual Report for 2010, the collections agency for the RIAA collected statutory royalties from all statutory classes of services in the amount of $263,593,310. That number includes royalties from services other than webcasters, such as satellite, cable services and subscription services.
According to Pandora’s recent SEC filing (dated 5/26/11), Pandora’s revenues were $137,764,000 for its last fiscal year, which ended Jan. 31, 2011. MacDonald notes that his comparison uses Sound Exchange’s calendar year reporting and Pandora’s fiscal year reporting which is February 2010 through January 2011, so it’s not entirely accurate, but very close.
MacDonald uses a factor of 45% as the percentage of Pandora’s overall revenues that the service pays to SoundExchange because that was the percentage that the service paid in their fiscal 2010 year. However, MacDonald also notes that with the newest quarterly report, Pandora’s percentage of revenues owed to Sound Exchange has increased to 53%.
Says MacDonald, “Using the lower figure – i.e., 45% – means that Pandora paid $61,993,800 ($137,764,000 * 0.45) to SX in the 12 months that ended Jan. 31, 2011. That $62 million is 23.52% of SX’s total revenues ($263.6M) collected in CY2010.” He adds that this is 23.5% of Sound Exchange’s overall revenues, the percentage of revenues the agency sees from Internet radio alone would be much higher.
Online revenues for radio will grow 14% a year over the next five years, according to a report from BIA Kelsey. Overall, radio revenues will rise just 3.7% in 2011 and 4.5% in 2012, meaning that online or digital revenue’s share of total revenue to radio will increase.
“Radio… continues to face a lot of competition in the local and online advertising marketplace. Stations are responding by becoming more aggressive with their digital and online strategies, which are driving measurable revenue.” says Mark Fratrik, vice president, BIA/Kelsey.
According to recent 2010 data from RAB, digital revenue for radio is up 24% over 2009 to 3.5% of overall revenue, up from 3% of overall revenue in 2009.
BIA Kelsey’s reported increase in the portion of radio’s revenue that came as digital dollars last year was 14.1%, versus RAB’s report, using Miller, Kaplan data, that digital dollars for radio were up 24%. This could be due to different assignments of revenue to the “digital” category.
Digital music sales grew globally by 6 percent last year to $4.6Billion. That number accounts for 29% of record company revenues around the globe. According to a new report by IFPI, consumer choice for accessing music via digital channels continued to grow in 2010. It’s recently released Digital Music Study makes a very clear case that digital music piracy has stifled and eroded the music industry.
Case studies included in the presentation cite examples such as in France, where government regulation, awareness campaigns, and even subsidized legal downloads have made headway in lowering the amount of piracy and stemmed the loss of revenues, and in Spain where a once flourishing and highly creative music scene has gone the other way, with nearly half the residents using illegal download sites to obtain music and fewer and fewer new artists are emerging.
The study calls for government action in the form of ISP regulation, consumer awareness campaigns and content protection. It’s an interesting read – certainly worthwhile for anyone hoping to do business in the online music marketplace. You can access the summary and download the study here.
When it comes to introducing new technological features that could increase revenue as part of their media offerings, broadcast groups that own more than one station are moving much more quickly than stand-alone stations. Group owned stations are better able to finance the deployment of new features – in fact at about twice the rate of independently owned stations.
That’s bound to impact the rate at which the two groups – group owned and independent stations – will be able to grow revenue. Group owned stations are much more likely to have video on their website, mobile listening apps, multiple channel streaming and even broadcasting in HD, according to a new “Progress Report” on Revenue Generating Radio Technologies sponsored by Wheatstone Engineering.
The study surveyed technical radio professionals – radio engineers, operations managers, etc. and attempted to gauge how fast new technologies are being adopted by radio professionals. The survey was sent to the email list of two industry publications that are likely to be read by tech folks. While the results are interesting, I weighed in earlier and pointed out to Josh Gordon of Alethea Research that it looked like he was hearing from more of the technologically savvy folks. For example, this study finds that between 20% (AM) and 37% (FM) of stations are broadcasting in HD, but according to Arbitron’s Radio Today report just 4% (AM) and 10% (FM) of stations are.
When respondents were asked to pick the one new technology that they thought would make money for their station before all others they chose streaming their signal over the Internet over a list of others.
It’s an interesting assessment of broadcasters’ attitudes toward new media. There’s obviously an opportunity for vendors who can figure out a way to make it affordable for independent stations to implement some of these new technologies..
Radio revenue posted a 6% gain over a year ago, the largest year over year gain posted since third quarter of 2000, nearly a decade ago. The gain was made by national spot and digital revenue categories. Digital revenue as defined by the RAB, who released the report, includes all revenue derived from radio websites, and includes streaming. The report includes only AM/FM broadcasters and does not reflect revenue for the overall Internet radio category.
While the growth for national spot revenue was a huge comeback for radio from the 10% decline of last year, the digital category shows enormous positive momentum, growing at an even more rapid pace than it grew last year.
Last year, the digital revenue category was the only revenue category that showed growth for radio, with an annual rate of +13% over 2008. In the year end report for 2009, RAB President and CEO Jeff Haley remarked “Radio’s digital platforms are experiencing the greatest growth and are reflective of the dollar shift from media to marketing by many of today’s advertisers,”
Internet advertising revenues in the U.S. hit $5.9 billion for the first quarter of 2010, representing a 7.5 percent increase over the same period in 2009. While digital dollars for Radio are growing faster than the entire digital spend, Radio’s 480 Million in digital dollars remains a small segment of that pie.
by K. Todd Storch
Yes, I’m being a little goofy with the title, but work with me.
It doesn’t matter if you’ve seen the movie to understand the point. For those of you that have seen the movie, you probably remember Napoleon’s older brother Kip.
Do you remember the song he sang at the wedding? Let me help you out if it has been a while and if this sticks in your head, my apologies:
Yes I love technology
But not as much as you, you see
But I still love technology
Always and forever
I get the opportunity to work with a whole lot of talented people around the country in all kinds of media. One thing that is on everyone’s mind is technology…wrapped up in words like:
…insert new, shiny technology here.
Do you love technology? I know I do! I’m a total geek about this stuff! But when it comes to the job of selling, who do you love?
If you are in love with the technology, the new fancy “thing”, you are only making it harder on yourself. Your best prospects and your client’s don’t want your technology.
They want your experience.
They want your ears.
They want your advice.
They want your ideas.
They want your audience to act.
They want your blood, sweat and tears to help them solve their marketing challenges.
They want your solutions.
Are you in the business of Communicating Value, or Creating Value? Bringing in a package of the latest, greatest, shiniest, fanciest, faster, better, stronger, quicker, bigger, cheaper technology, only communicates value. May be it sounds like this…’Hi Mr./Mrs. Prospect, I’d love to show how my station’s/company’s/publication’s/etc new podcasting/streaming/website/shiny toy can help you and your business!’.
Who cares? I know you deeply care as does your sales manager and your company. These technology solutions are investments and there needs to be a return on that investment. However, your prospect/clients don’t care about your ROI on that investment. They care about their ROI. Their challenges. Their payroll. Their bottom line.
We have to create value: Be a resource and conduct a great client needs analysis. Find out what their real challenges are. Determine what success is going to look like. Set expectations. Then, put together a custom solution that just might include some a great new technology product that you have. Make your entire presentation based on how it solves their needs and why they can’t live without your entire plan. Taking away any element of your plan would take away a part of the true solution.
Now, get out there and create some great value with your clients. Include all of the great technology that is at your disposal, when it makes sense for your client.
To use Kip’s words, you can “love technology, but not as much as you, you see”. We we need to be in love with solving our client’s solutions.
K. Todd Storch is VP/Senior Consultant at The Center for Sales Strategy, a full service, consulting company dedicated to helping organizations develop salesmangement, salespeople, and sales. You can reach Todd and find out more about him and CSS at: