Pandora will be installed in one-third of the new cars sold this year, which represents an impressive effort on the part of the leading Internet radio station in the US. That fact appeared in wsj.com recently. Pandora’s strategy of gaining automotive deals also gets them lots of listeners – Pandora says they have seen more than 2.5 million unique activations through integrations from the 23 major automotive brands and eight aftermarket manufacturers they are installed with.
Meanwhile, the popularity of streaming and the connected dashboard is not being overlooked by Sirius XM. Despite deals that already have their satellite service installed in a long list of vehicles, Sirius XM has been improving its streaming offering of late, and just announced a deal with Ford that will pair both its satellite and online radio offerings in new Ford cars with Sync AppLink.
Smaller Internet radio stations that don’t have the brand power to create their own automotive deals have options as well. Harman’s Aha Radio and TuneIn are two aggregators that have deals with car manufacturers to offer access to a wide variety of content through their platforms, and Clear Channel’s iHeartRadio has announced deals with Toyota, GM and Chrysler.
While market leaders like Pandora and Sirius XM make deals that put them front and center in your next new car, the truth is the dashboard of that car will probably have a unit installed that will enable you to access any content you want. At the Connected Car Conference during CE Week in New York recently, Audiovox President Tom Malone discussed the automotive aftermarket products his company is bringing to market, which are all about letting the consumer bring whatever content they want into the car. Solutions that enable the consumer to connect to their content wirelessly through a variety of options – smartphone, usb, cellular, and stored content in the car, for example – are the focus now. Connected car discussions are about more than just the dashboards these days too. Today’s consumers share listening less, and personalized content solutions are coming to the car as well, with rear seat docking solutions.
Content delivery to cars is diversifying, putting the consumer in the driver’s seat when it comes to choosing what they will listen to. Receivers that are dedicated purely to AM/FM or satellite are quickly becoming a thing of the past, replaced with devices that enable easy access and endless choice. In a way, you could say that it’s a game in which content is king…
As iTunes announces their streaming radio service to launch this fall, Pandora continues to make deals that put their service in the dashboard, where they can continue to expand audience. According to wsj.com yesterday, Pandora will be available and installed in one-third of new cars sold in the US this year.
That impressive stat brings the streaming service a lot of new listeners – Pandora says they have seen more than 2.5 million unique activations through integrations from the 23 major automotive brands and eight aftermarket manufacturers they are installed with.
Meanwhile, the popularity of streaming and the connected dashboard is not being overlooked by Sirius XM. Despite deals that already have their satellite service installed in a long list of vehicles. Sirius XM has been improving its streaming offering of late, and just announced a deal with Ford that will pair both its satellite and online radio offerings in new Ford cars with Sync AppLink.
Meanwhile, tuner platforms like TuneIn and Aha Radio both have integration deals with auto manufacturers as well, and folks like me connect just using their smartphones. Audio options in the car are expanding, and the big services have taken note. Is the next new thing an iTunes radio in your dashboard? If so, it will likely be one that will sync with your iPhone…
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!
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!
Things aren’t looking so bad for Sirius XM these days. They finished 2010 with more than 20 million subscribers, and renewed their contract with Howard Stern, and managed to report profits for most of last year. And while the crisis isn’t over – they still have plenty of debt to worry about – the skies seem to be brightening.
In part, they can thank Pandora for that. Pandora, who filed papers last week as a first step in their move to go public, is raising awareness of and interest in new radio technologies. And while Sirius XM isn’t really an Internet radio company, they have a substantial presence online, and could certainly head in that direction.
Actually, I’ve begun to wonder if they haven’t already – they just announced a new deal that puts them on Sonos Internet radio devices along with Pandora and others. They’re working on a new platform for Android, they’re already on iPhone. They are already in the Internet radio game – and getting an extra $2.99 a month for it from their subscribers.
Pandora’s impressed a bunch of folks with their stats – 80 million registered users is an impressive number. But we know from the filing that less than 10% of them are paying customers – and while Pandora is watching ad dollars flow in, they have a big job in front of them in turning all those listeners into advertising revenue. Pandora’s subscribers listen to ad-free music streams.
Meanwhile, Sirius XM has reported that they have more than 20 million subscribers as of the end of 2010. Who are both paying to listen AND listening to commercials. Auto sales are on the upswing, and Sirius XM gains subs from that as well.
Analysts are liking Sirius XM, and I have to say their business model is starting to look somewhat sound…
There’s buzz around the Internet that Howard Stern will leave Sirius XM at the end of his $500 million contract at the end of this year. Stern has hinted at ending his run with Sirius and turning to the Internet as his next frontier. He’s not alone. Dr. Laura Schlessinger recently announced she will leave terrestrial radio at the end of the year and has hinted that she may head for an Internet based audio platform where she can “say what’s on her mind”.
Howard Stern is arguably the most popular, most listened to radio personality ever. His move to satellite radio revved up Sirius and enabled them to eventually win the battle against XM and gobble them up.
Rumors that he’ll move his show to Internet radio next are exciting. Internet radio could provide a multi-media platform that would be entirely compatible with his larger than life image. Imagine Howard Stern apps, streams, in-studio videos, side channel audio and video programming, all wrapped into one online platform.
If he’s smart, and I think he is, he’s not just thinking about an audio stream, he’s thinking about how his audio show gets unleashed from corporate control and becomes a mega brand, a huge online destination the likes of which Internet radio has yet to see. Yeah, I think Howard Stern would be good for Internet radio. And Internet radio would be good for Howard…