4/22/13: RAIN Summit recap: Kurt Hanson's "State of the Industry"

Paul Maloney
April 22, 2013 - 1:10pm

The year 2020 sure sounds like the space-age future, but so did "2000," remember? (If our calculator is to be trusted, it's less than 7 years from now!)

RAIN Summit West attendees heard Kurt Hanson's "'new-for-2013' State of the Industry" address in which he encouraged broadcasters and webcasters to make a plan for 2020, based on seven key industry trends and seven possible "action items" to get there.

Kurt Hanson is CEO of multi-channel webcaster AccuRadio, and publisher of this newsletter. His "State of the Industry" speech is a recurring feature of RAIN Summits.

Kurt cited several specific, quantifiable changes in consumer behavior that he says are key to understanding where radio might be in 2020. Chief among them is the explosive growth in Americans' consumption of online radio.

Based on the latest numbers from "The Infinite Dial" (Edison Research and Arbitron, read more here and here), 86 million people now listen to radio online weekly. That's a third of the U.S. population, and 253% of what it was just five years ago. Online radio's time-spent-listening (TSL) has nearly doubled since then, to almost 12 hours a week.

Multiplying the number of listeners by the time they're spending listening, and you see online radio listening is almost 500% higher than it was five years ago.

Next, Kurt brought in listening measurements for leading webcaster Pandora from Triton Digital's Webcast Metrics. Pandora is now up to a 1.6 million "average quarter hour" (AQH -- which can be understood as "the number of listeners at an average moment"), which is about equivalent to an eight-share of all radio listening (In other words, in your market, about 8% of those listening to radio right now are listening to Pandora).

"It's an undeniable trend," Hanson said. Looking to a 2020 plan, broadcasters can see this consumer behvavior "as a threat, or as an opportunity."

A second key consumer trend Kurt spotted is the "primacy" of mobile phones in people's lives ("This is basically a full-featured personal computer that is 4 oz and fits in your shirt pocket," Kurt said.).

The remaining key trends include (3) our "world of on-demand variety" (in which consumers are offered 42 types and flavors of Crest toothpaste and at least 12 versions of Cheerios cereal); (4) the rise of the tablet as a media-consumption interface; (5) "open" car dashboards (that is, car makers won't limit Internet and mobile access to a single, select technology vendor), and (6) "near-infinite" bandwidth (ever-increasing connectivity via mobile and wi-fi).

The seventh "reality" professionals should understand in creating their "2020" plan: there are "billion-dollar" opportunities out there, evidenced by the fact that online radio has produced its first billion-dollar brand, Pandora.

The public company's market cap is more than double the combined market caps of the country's top-five biggest "pureplay" AM/FM radio groups (Cumulus, Entercom, Saga, Beasley, and Radio One): $2.1 billion compared to $1.2 billion.

"Again," Hanson advised, "you can see this as a threat, or as an opportunity. You can build a brand like this." As a public company, Pandora's historical financial reports are easy to access. Anyone can "see how they did this," Kurt said.

The matter of sound recording royalties remains the biggest threat to all of this, however. But Kurt offered this: "I believe it's going to be resolved, because in the debate on royalties over the last decade, musicians and net radio have been on opposite sides -- but for musicians, Internet radio is one of the best things that have happened to them."

Given the royalty arrangements in place today, one million "performances" on Pandora would yield an artist about $600. Webcasters lobby for royalty relief, and the record industry calls for higher payouts. But Kurt argues that this tug of war on this price point (should it $500? $700?) misses the far greater value artists get from those plays.

By way of demonstration, Hanson showed how it's possible that one million "performances" of a talented but niche-appeal band like Chicago's Canasta could result in an eventual payoff of $980 thousand over time.

[For go over the math with Kurt, please listen to the audio of his presentation here, at the 22:30 point]

On the matter of Apple's likely entry into webcasting, Kurt suggested "it might be great for all of us." He cited other battles between brands -- like when two CHR stations in the same market go head-to-head -- as being great for the product category.

Looking to create a plan for 2020, Kurt offered broadcasters and webcasters seven "action items" they might incorporate into a strategy.

First, define radio "inclusively." When limited to AM/FM, "radio" does not appear to be a growing industry. But when segments like online and mobile are included, and growing and aggressive companies like Pandora, radio is healthy, growing, and well-positioned for the future.

Second, as you look for growth opportunities in online radio, maximize the value of AM/FM signals. "Be live, local, and linear," according to Kurt. "Linear," in this case, means a focus on content that makes sense in an "in-sequence" presentation (talk, sports, most news).

You'll need to (3) build a great team, and (4) be ready to embrace new business models. "You'll be better off if you can be flexible and embrace new approaches" to ad sales and programming.

Next, when entering a new product category, it's best to come up with a new name, and specialize the product to a specific consumer market, Kurt offered. Consumers perceive that "specialist" brands (think McCormick & Schmick's seafood restaurants, or Ruth's Chris steakhouses) are of higher quality in their focused segment.

(6) Be prepared to take that brand global, and (7) have the guts to gamble.

"Don't wait until it's a sure thing to get started," Kurt said. "Don't take the 'wait-and-see' approach to develop your '2020 vision.'"

Listen to Kurt's "State of the Industry" speech (and all thet content from our recent RAIN Summit West) on SoundCloud at KurtHanson.com (look in the right-hand column).

Our next event is RAIN Summit Europe, May 23 at Hotel BLOOM in Brussels. Event information and links to register are here.

Paul Maloney
April 22, 2013 - 1:10pm

Industry attorney and expert on webcasting performance royalties David Oxenford points out an interesting possible implication for radio and webcasting of a recent court case concerning the streaming of broadcast television signals. It comes down to the government's definition of a "public performance."

Last week the Second Circuit upheld (here) a lower court finding to allow the company Aereo to continue to stream television content it captures from broadcast signals without paying royalties to the original broadcasters or program producers. According to the Court's finding, there is no "public performance" in the case of a service in which "programming is streamed to the viewer individually, at their demand, rather than transmitted all at once to multiple consumers," Oxenford wrote.

A "public performance," according to the Copyright Act, includes any transmission or retransmission of a performance to multiple individuals. The design of Aereo's system allows it to argue that ultimately, it's each individual viewer that receives broadcast content, using her or his "own antenna," and who directs the delivery of the content, not Aereo.

"Thus, the Court determined that the transmission of the television signals was not a public performance by Aereo, but a private one at the direction of the ultimate user," explained Oxenford.

It's interesting to think about what this might imply. For instance, is a service like Spotify, when it's giving a single user on-demand access to a song, making a "public performance" for which it's obligated to compensate rights holders? Listeners to Pandora (and other webcasters like AccuRadio) each have their own dedicated stream (so as to allow customization, song-skipping, etc.). Given that, are Pandora and AccuRadio making "public performances" of this content (or does this not satisfy the "at the direction of the ultimate user" element of the decision Oxenford cites above)?

"The issue could also be resolved by Congress, just as it did when cable first came on the scene, by passing legislation to redefine a public performance," Oxenford concludes.

Read Oxenford's latest in Broadcast Law Blog here.

Paul Maloney
April 22, 2013 - 1:10pm

Embattled online music service Grooveshark today unveiled a new service it simply calls "Broadcast": converting playlists into user-generated online radio.

Grooveshark is currently being sued by all four major record companies for copyright infringement, and its mobile apps were banned from both the Apple and Google Play stores. Yet, Grooveshark still attracts 3 million monthly users, and adds another 200,000 new users each month, according to coverage in Mashable.

The new Broadcast feature "lets users transform a playlist into a live broadcast with the click of a button," Mashable writes. "The DJ can select songs, record 30-second audio interludes and see real-time listening stats; listeners can engage with one another and offer feedback and song suggestions to the DJ through a live chat feature on the side." This is very reminiscent of licensed services from companies like Live365 and Radionomy. Grooveshark says it is negotiating licenses for the service with record labels.

Read Mashable's coverage here.

Paul Maloney
April 22, 2013 - 1:10pm

AdLarge Media and AirKast have created the Broadcast Calendar App for iPhone and iPad, and and are offering it for free to the broadcast and advertising industries.

The AdLarge Broadcast Calendar App is a three-year, "Monday to Sunday" calendar, with choices for pulling up an entire year, one month, or two months, and provides several background color options. The app was conceived by AdLarge and built by AirKast, who are currently developing an Android version.

Preview and download the app here.

AdLarge sells media advertising for radio, digital and mobile content. AirKast is a mobile publisher and ad network for broadcast radio and other media.