AM/FM

Troy Carter is founder and chairman/CEO of entertainment management company Atom Factory -- he's Lady Gaga's manager. He says when he thinks of music industry segments ripe for some tech-driven disruption, he thinks of AM/FM radio. He spoke yesterday at this week's Disrupt NY 2013 conference.

When asked "what holes a technology start-up could fill" that would benefit working musicians, Carter said "Figuring out terrestrial radio, particularly in America."

"I think the opening right is figuring out terrestrial radio, that's the one space that Sirius could have done it with subscription radio, but you look at Clear Channel and CBS, it’s not what people want," he said. "People just get in a car and turn on a local station. It’s going to be interesting when you get in your car and you’re listening to a 17-year-old kid in Russia."

Which, to us, sounds a lot like Internet-delivered radio -- which can be delivered to your car today!

Reporting on Carter's remarks, TechCrunch suggests it's a company like Slacker as "the type of product that could play a role."

TechCrunch's coverage of Carter's remarks, with video, is here.

Radio broadcasters are beginning to grasp the reality that, despite steady (and high) cume, the amount of time Americans spend listening to broadcast radio is falling, most notably in younger demos.

Arbitron RADAR data reveal broadcast radio reaches about 92% of the U.S. population regularly, but 12+ TSL is off 3.2% from April 2010-March 2012.

Inside Radio writes today that while "there's evidence (growing Internet radio listening) is a factor... The issue may not be whether listening to streaming is cannibalizing broadcast radio but rather how much it is increasing listening to broadcast radio brands."

In other words, is broadcast radio listening falling, or merely shifting to a different platform? How much of this Internet stream listening is to broadcast radio brand content?

Triton Digital says, in December, broadcasters accounted for 22% of the web radio traffic the company measures, which means 78% goes to pureplay Internet radio. And that percentage as dramatically shifted in pureplays' favor over the last three years.

So, the likely answer is: Yes. Yes, some loss of AM/FM TSL to streaming is recovered by broadcasters' simulcast (or supplemental) streams. And, yes, Internet-only radio, satellite radio, online music services, and very nearly any other entertainment option, are taking a toll on broadcast radio listening.

Vision Critical's new research indicates Pandora listeners spend more time listening to broadcast radio than non-Pandora listeners. What's more, on average, Pandora listeners' say their time spent with AM/FM radio has held steady over the last two years.

The charts from the research summary show that while non-Pandora users in the U.S. report spending just under 13 hours a week listening to broadcast, the average Pandora user tops 19 hours a week with terrestrial radio -- 50% more than the non-Pandora fan. The second chart shows that even over time, the average Pandora user reports spending slightly more time with AM/FM now than 2 years ago (or at least, is not spending significantly less time with AM/FM).

It's probably not controversial to say the typical Pandora listener is more comfortable with technology than the average person. So, perhaps it's not surprising the survey revealed Pandora listeners as much more likely to listen to AM/FM on digital devices than non-Pandora listeners.

A recent NPD Group study (here) seemed to show Net radio usage is cutting into music listening on more traditional media -- including AM/FM. Note that the Vision Critical study didn't ask about the format of respondents' on-air listening (music, news, talk, sports, etc.).

Pandora listeners in another recent survey (conducted on the webcaster's behalf) strongly favored the service over AM/FM regarding which was more "unique and different," "innovative," "engaging," and "connects me withe the music I love" (study here). But Pandora listeners told Vision Critical AM/FM has the edge in "easy," "convenient," and "helps me feel connected."

Vancouver-based Vision Critical surveyed more than one-thousand U.S. adults for the Canadian Association of Radio Broadcasters, "to better understand the potential impact on Canadian radio tuning in the event that Pandora, or a service like it, is launched in Canada."

See the Vision Critical summary report, "What Pandora Means for Radio," here.

RAIN Analysis: Naturally, we wanted to follow up on this with Vision Critical SVP Jeff Vidler. After all, the results of this study seem counterintuitive in light of Arbitron reports showing radio listening per capita declining -- declines that seem to correspond Pandora's gains.

Vidler suggested three hypotheses:

1. Interest in music is not a "zero sum" game. Flash back 100+ years ago and the consensus was that recorded music would kill live music performance. Then, radio was going to kill the recorded music industry. Then, in-car 8-tracks/cassettes/CDs were going to kill radio. But today, music is bigger than ever. Each new technology and platform simply provides a new way and a new reason for music fans to indulge in music — it’s additive. So it would seem to be for Pandora.

2. The enduring lure of broadcast radio is connection, not music. Pandora listeners, like most other folks, want to feel connected to other people, to what’s going on in their community and elsewhere. Broadcast radio does a great job at that. And, as music fans, they also want to feel connected to the music that other people like. Broadcast radio performs well there too. (The recent success of CHR radio may be the best evidence of this.) So, on this basis, it’s not that surprising that they might be above-average listeners to broadcast radio.

3. Arbitron isn’t capturing the full gamut of online AM/FM tuning. Do PPM meter-keepers, who listen through their headphones on their PC at work, or on the app on their smartphone, always remember to plug in their headphone insert? The study indicates that Pandora listeners are way above-average in listening to AM/FM on digital platforms, so it’s possible that Arbitron may not be capturing all their listening."

All three hypotheses make sense. The third is particularly interesting -- maybe apparent losses in per-capita AM/FM listening in recent years are really just an artifact of increases in headphone-based listening! -- KH

Pandora has published a white paper based on testing it says shows radio listeners are significantly more receptive to advertising presented on Pandora (or in similar environments) than on AM/FM radio.

This "receptivity" is enhanced, Pandora says, because listeners have come to have more overall positive feelings towards services like Pandora compared to AM/FM radio.

Study subjects (800 adults, age 18-49) listened to 15 minutes of either simulated AM/FM programming or Pandora radio in the genre of their choice. The programming contained ads presented as they would be on the respective media (that is, a single isolated ad on Pandora, and the same ad but within a multi-unit stopset, on the simulated broadcast).

"When compared to AM/FM radio, the research indicates that internet radio, and Pandora specifically, has been highly successful in establishing an even more positive – and more personal – relationship with listeners. Listeners are far more likely to feel Pandora is innovative, provides a great experience, and even contributes to the happiness of their day-to-day lives," the paper reads. This results in what Pandora calls "better ad receptivity... with engaged listeners tuning in to the ads and feeling positively toward the advertisers."

Pandora worked with a marketing/brand development consultant called Added Value to produce the study. The paper is titled "Personalization and music discovery ignite passion for Internet radio."

While more respondents overall could remember hearing some kind of ad on AM/FM radio (potentially a negative impression), Pandora listeners who recalled hearing an ad while listening were "70% more likely than AM/FM radio listeners to correctly recall the brand" that was advertised. And more of the Pandora listeners said they "noticed (the ad) more" and "(the ad) got my attention" than did the AM/FM listeners in the test.

The paper is now available on Pandora's site here.

RAIN Analysis: It makes sense that there could be more benefit to an advertiser in having a :15 (or :30) spot in a single-unit stopset than in having a longer spot in the middle of a five- or six-unit stopset.

One would think that continued evidence of this would eventually allow Pandora, Slacker, iHeartRadio's custom radio, CBS-owned Last.fm, and other Interet-only offerings created by broadcasters to command premium CPMs. -- KH

Nearly half (46.4%) of the respondents to a new study say they listen to AM/FM streams on a PC/Mac/tablet daily. Among those who own smartphones, 23% say they use them to listen to streams of AM/FM stations daily.

Alan Burns & Associates and Triton Digital polled more than 41-thousand people of "all ages, genders, (and) format fans" in August and September, and revealed their findings last week at the 2012 NAB RAB Radio Show in Dallas.

A little more than a quarter (25.4%) of all the respondents said they use a smartphone to listen to music. 

Interestingly, of those with in-car Internet access, more than 70% listen to AM/FM the most of all their listening options (Internet, CDs, MP3s). Only about 7% of those with Internet in the car seem to be using AM/FM less.

See the slides from the study presentation here.

"Radio is foolishly ignoring streams today," writes Radio Ink publisher Eric Rhoads. "Streaming will be your primary source of revenue," he tells broadcasters in a new editorial, predicting that by 2016, "your transmitter will make up only a small percentage of your listening."

Rhoads sees broadcasters tripping over the same mistakes when it comes to streaming as they did with HD Radio: allocating minimal resources and trying to do things "at the lowest possible cost" with the least effort. The results are eerily similar: content that sounds "badly programmed" and feels like an "afterthought." Is it then any wonder "why HD Radio has not been embraced" by listeners, or why streaming audiences are smaller than they might be?

This "sloppy" approach imperils radio's future, Rhoads argues. "Radio must put its best foot forward in everything it does," he writes. "You have to sound great."

But it's not just a matter of improving stream quality. As a broadcaster, you must "be everywhere your listener is, which means on every device," because "the transmitter is no longer [radio's] only form of distribution" and it could be flat-out "irrelevant" in the future.

"If you’re not streaming, don’t have a mobile app, are not on aggregators like TunedIn or iHeartRadio, if you cannot be found in every possible device, you’ll dilute the impact of your brand. If people want to listen and you’re not there, they will find someone else."

Rhoads concludes, "Ignoring [streaming] is ignoring millions of listeners, and they all have other alternatives."

You can find Rhoads' full post in Radio Ink here.

RAIN Summit Dallas will include an entire panel dedicated to issues like those discussed by Rhoads. The "Online Strategies for Local Broadcasters" panel will feature members of CBS Radio, Triton Digital, Emmis Digital, TargetSpot, Marketron and more. Click here to find out more.