9/25/13: New Edison survey reveals most online Americans listen to Internet radio

Brad Hill
September 25, 2013 - 11:40am

Edison Research has released a new study of streaming audio adoption, indicating that over half of the American online population listens to Internet radio. The research package, titled “The New MainStream” (get it?) details survey results of 3,014 connected Americans over 11 years old. The report was formally introduced yesterday at an Advertising Week panel in New York by Edison president Larry Rosin, in collaboration with Edison’s Streaming Audio Task Force partners Pandora (Steven Kritzman), Spotify (Brian Benedik), and TuneIn (Rick Cotton).

The headline stat is this: 53 percent of online Americans listen to Internet radio to some extent. By this study’s definition, “Internet radio” comprises the full spectrum of online listening, divided into three categories:

  • Personalized Radio: Services like Pandora or iTunes Radio which allow creation of personal “stations” based on an artist or song. (39 percent adoption.)
  • Streaming Live: Online webcasts of broadcast stations, not necessarily local to the listener. (27 percent adoption.)
  • On-Demand Music: Services like Spotify and Rhapsody which feature random access of tracks and albums. (18 percent adoption.)

Edison’s survey delineates and prioritizes why people are adopting Internet radio. Choice is the differentiating thread that runs through many responses. Consumer hunger for choice extends to track choice in on-demand services, and station choice in streaming broadcasts. Other responses, such as “Available on device” (44 percent agreement) and “More convenient than a regular radio,” (27 percent agreement) seem pointed at lifestyle customization.

Car and home remain staunch broadcast strongholds, according to Edison results. In both environments, Internet radio is meaningfully present, but running second. The disparity in cars (83% broadcast; 17% Internet) probably indicates the complexity and non-standardization which impede adoption of online audio -- a recurring theme in “connected car” sessions at last week’s RAIN Summit and Radio Show in Orlando. The delay in solving dashboard fragmentation gives broadcast radio a window of opportunity to develop distribution strategies on digital platforms.

Perhaps the most interesting aspect of the research is an implied expansion of listening hours as IP-delivered solutions insert themselves into formerly unoccupied contexts. From the press release: “The total time spent with audio is clearly expanding as people are now enjoying more audio from more devices in more places.” To whatever extent this premise proves out, it could provide a salve to AM/FM operators who feel threatened by the digital tidal wave.

Yet, the study’s main bullet points (see this infographic) do indicate that the shape of listening growth, and listening recession, imply upside for the Internet and downside for broadcast. Sixty-seven percent of respondents listen to more Internet radio than one year previous, but only 23 percent say the same about AM/FM. On the flip side, only six percent listen to less Internet, and three times that many listen to less AM/FM. (More than half of those surveyed listen to the same amount of broadcast radio year-over-year.)

The “listening expansion” theory is borne out by 26 percent of responses indicating that Internet radio listening transpires in “new time” previously spent without audio. Worth noting also, though, that 44 percent said that online audio replaced AM/FM listening to some extent. The upshot seems to include both realities: New listening time is being created, and some amount of AM/FM erosion is also happening.

Brad Hill
September 25, 2013 - 11:40am

Pandora founder and Chief Strategy Officer Tim Westergren was spotlighted in a hosted Q&A session at the Goldman Sachs “Communacopia” conference yesterday. (Transcript here; elaborate registration required.) In a wide-ranging discussion, Westergren elaborated on Pandora’s business priorities, the state of music rights management globally, the company’s ad sales efforts, competition from Apple, the Nielsen/Arbitron merger, and several other topics.

“Our goal is to supplant the existing broadcasts of formal radio, becoming much more pleasing to consumers,” Westergren remarked at the start. Throughout the interview he emphasized Pandora’s main differentiator being the quality of its music experience (“We build better playlists”), and a stay-the-course roadmap absent of reinvention.

Pandora is a two-tier Internet radio platform that offers free listening supported by advertising, and ad-free subscription membership. Westergren clearly articulated how the two programs, with their respective costs and revenues, are balanced. Business growth efforts are concentrated on the ad side, with the premium membership portion considered supplementary. Subscriptions account for 20 percent of revenue. “We’re not a premium business [...] the real name of the game for us is delivering on the ad-supported business [...] that’s really where the home run is.”

Accordingly, the free-listening cap applied during this past summer was not a ploy to drive subscriptions, Westergren said, although it did motivate some users to sign up. The cap’s purpose was to solve under-monetization of a portion of non-paying mobile listeners. When that loss was corrected (no specifics there from Westergren), the cap was removed.

When it comes to supplanting broadcast radio, distribution is paramount. The Pandora founder talked about capturing market share in cars and in homes (neatly corresponding to survey results released yesterday by Edison Research showing car and home as AM/FM strongholds), and a strategy of ubiquity. A significant portion of Pandora’s engineering force is dedicated to embedding the service in all kinds of devices, from dashboards to in-car CD players to refrigerators.

If device distribution is proceeding quickly, geographic expansion is stalled. According to Westergren, the problem is music rights negotiations. It’s no secret that Pandora is struggling with content costs. “Rights administration is just not a very healthy part of the music business [...] rights are granted country by country, territory by territory.” Pandora was able to open in Australia and New Zealand because of favorable royalty setups, but has been thwarted in other regions because of licensing obstacles. “As we think about deploying in new countries, right now we can’t even begin to do it.”

A few other points:

  • Pandora is embedded in over 1,000 devices.
  • The service’s recommendation engine, built on the Music Genome Project, is enhanced by over 36-billion up/down votes by users.
  • Westergren has been aggressively hiring local sales specialists, region by region according to market share.
  • There is no immediate, specific plan for recently-raised capital. Acquisitions are possible, but nothing on the horizon.
  • Pandora’s audio ad load will never approach that of broadcast radio. It is possible to achieve a “fantastic business” with fewer commercials.
  • Westergren likes the Nielsen/Arbitron merger for the usual “common currency” reasons.
  • The competitive impact of iTunes Radio will be “modest.” Pandora has faced many large competitors, and its share has grown.
  • Pandora is the third-largest generator of mobile revenue.
Paul Maloney
September 25, 2013 - 11:40am

In-car infotainment platform Aha by Harman announced that the new 2014 Mazda3 (for American and Japanese markets, as well as select other North American and Asian countries) will offer access to Aha's free service of more than 40,000 audio and information stations.

Aha will be Mazda's in-car solution to access podcasts, radio stations, news, entertainment, audiobooks, music, Facebook and Twitter feeds, and personalized location-based services.

Station partners include AccuRadio, CBC, EMF, NPR, CBS's Radio.com, SHOUTcast, Slacker, SomaFM, and others.

Brad Hill
September 25, 2013 - 11:40am

Grooveshark, considered by many to be a bad boy of music streaming platforms, may be gradually emerging from a tangle of legal assaults. Last month the service scored a licensing agreement with Sony/ATV. A previous agreement with EMI was undermined by the label’s accusation that Grooveshark failed to produce accounting statements, but that complaint was settled, and the deal resumed last month (as noted in RAIN here).

The source of legal claims from the major labels (some of which are still in process) centers around Grooveshark hosting song files uploaded by users. Although the company purportedly responds to takedown requests, operating a business under continual DMCA shelter is like living in a tent during a hailstorm -- the protection is inadequate and you spend all your time repairing damage.

In an interview published in Business Insider, Grooveshark CEO Sam Tarantino forecast the future in terms of “a 360-degree consumer experience.” His particular focus is live concert transmissions, and Tarantino compares the economics of selling record products to high ticket prices of concert shows. The logic is that there is a sweet monetization spot around distributing live acts online, at lower cost to the listener, while building a more complete fan-artist relationship.

Read the complete interview at Business Insider here.