9/26/13: RAIN Interviews Larry Rosin and Steven Kritzman about Internet radio study

Brad Hill
September 26, 2013 - 11:55am

Larry Rosin authored a new Edison Research package titled “The New MainStream,” a study of Internet radio listening. (See the slides here, and RAIN's initial coverage here.) The survey was presented at this week’s Advertising Week conference in New York, in collaboration with the Streaming Audio Task Force.

RAIN spoke with Larry Rosin about the study’s genesis and reception, the impact of Internet radio on AM/FM listening, the variety of user preferences, and, unexpectedly, 1970s research that led to the introduction of cable television in the U.K.

Here are excerpts of the conversation, lightly edited for readability.

RAIN: Can you describe the history of this study?

LR: I was contacted by the three companies on the Streaming Audio Task Force, looking for a data set dedicated to the topic of streaming audio, to create a benchmark for where things stand among the online population of the U.S. Ideally it will be repeated annually, to track the dynamic aspects of this space.

RAIN: How was it received at its introduction at Advertising Week in New York? Was there was good engagement?

LR: Very much so. Questions during and afterwards. I thought it went over really well. I think it was a logical story that hit people’s guts, made sense, and was a positive and upbeat story. I emphasized that audio is a booming category. I don’t think it had ever been put the way I put it, perhaps as forcefully. People seemed to be very open to that point of view.

RAIN: Did you discern any surprise around the 53-percent metric? [53 percent of online Americans listen to Internet radio.]

LR: Not really. I didn’t meet any resistance, and it didn’t seem to register as much higher than the audience thought it would be. I didn’t do the game-show technique of asking people to guess what the number might be.

RAIN: One key point is the amount of displacement of broadcast listening that it might represent, and the amount of listening that has been added to the day, thanks to mobile devices.

LR: There are certain people who would have you believe that not one second of online usage comes from time that was previously spent on broadcast radio. And there are people who assume that 100% of internet radio time comes straight out of broadcast radio. Of course, both are wrong. It turns out, both about equally wrong. I think it’s important to note that our study confirms what Arbitron reports about the reach of broadcast. We got virtually the exact same number that Arbitron reports for the reach of broadcast radio. But online radio has a considerable reach as well. And while the total time spent listening to broadcast radio is clearly down somewhat, not anywhere close to all the time [spent on] internet radio comes straight from AM/FM radio.

The overwhelming point is: this technology has brought audio to new places, new locations, and new times in people’s lives that they weren’t previously filling in with audio. This is a golden age of audio. If all audio were counted, people would see that never before -- probably even going back to the twenties and thirties when radio had no competition -- there is more audio listening going on today than ever before.

RAIN: Would you say there are two viewpoints, and two marketing approaches: One is reach, and the other is time spent? Things look different depending on which vantage you’re using.

LR: Correct. But it’s not a wholesale transference. The pie has absolutely expanded. I truly believe that advertisers should be shifting more money into the audio space. Then let the players in the audio space hash it out in that greater pool of money. The line which has been used for years, that the amount of time people spend with audio relative to the amount of revenue audio gets, is dead on. In fact, that discrepancy is probably worse than ever, as audio continues to expand. I am proud to be an evangelist for advertisers taking money from other verticals and putting more of it into the audio space.

RAIN: It seems that choice is a thread that runs through many of the survey responses. Choice of stations, choice of tracks, etc. Are choice and customization the main differentiators of Internet radio?

LR: They are slightly different things, but yes. They are two of the things that really matter to people. But there are other [reasons to choose Internet radio] that people might find surprising. A lot of people mentioned better sound quality, or reception, if you will. A lot of people are transferring listening to their favorite over-the-air radio station to I.P. because they can hear it better. In this day and age, with a lot of RF in office buildings, a lot of interference, for many people the Internet is a better way to listen.

Another reason [survey respondents choose Internet radio], in services like Pandora and Spotify, is the ability to skip songs, [which is] a powerful differentiator of their experience. It repositions the experience of linear listening. It changes the way you relate to what you’re listening to. It’s not unlike a DVR. If you’re accustomed to pausing live TV, and then you’re in a hotel room and you lose that capability, it can be frustrating to shift back. It’s a similar situation [in radio listening]; it’s hard to shift back.

RAIN: What you’re saying is parallel to how media consumption has been developing for years, getting more granular in the choices offered to consumers.

LR: I’ll tell you an anecdote. In the late-1970s or early-1980s, a research company did a study in the U.K. about television, and whether there would be a market for cable television in the U.K. At that time television sets in Great Britain had four buttons on them. There were four television stations. That’s how you watched it. They did a survey. People’s overwhelming response was, “What more could we possibly want? We’ve got FOUR choices at any given time!” People’s imaginations couldn’t conceive of wanting more than four channels. Undaunted by this research, and seeing what was going on in the U.S., they launched cable television in the U.K. Suddenly, people were like, “Oh, wait a second here. There’s a 24-hour news channel?”

Very few people are against more choice. [But] there is a paradox of choice. Too many choices [can be] stressful and overwhelming. Seems like, in media, very few people feel that way.

RAIN: TV in America used to be four channels: ABC, CBS, NBC, and public television.

LR: Oh yeah.

RAIN: There are different postures of Internet listening: lean forward, lean back, and various postures in between. Your data seem to show that an in-between attitude -- for example, leaning forward to create an artist-based station, then leaning back to listen -- has the highest usage metric. Is that correct?

LR: Right. But there’s a lot that goes into that. Certain platforms and products have had a nice running start, and have developed that. It’s fascinating to track. Your thesis could very well be correct. Or, it could just be a moment in time, and those numbers might change.

Brad Hill
September 26, 2013 - 11:55am

Steven Kritzman, SVP of Sales for Pandora, was on this week's Advertising Week panel which presented new survey research titled “The New MainStream,” a study measuring adoption of Internet radio among Americans who are online. (As a side point, see the new Pew study examining the portion of the American population which does not use the Internet.)

Pandora, along with TuneIn and Spotify, comprise the Streaming Media Task Force, which co-presented the Edison study.

RAIN spoke with Steven Kritzman about the Task Force, the reduction of AM/FM listening implied in the new research, car listening, and aspects of Pandora’s general advertising strategy. Following are excerpts of the conversation, lightly edited for readability.

RAIN: Can you talk a bit about the Task Force?

SK: We got into a conversation 6 or 8 months ago, in which we thought, “Wouldn’t it be great if we could do a deeper dive, and start to show people the behavior and document trends that are happening in the internet radio space, and to some degree paint a picture on the consumer shift that’s happening. While people understand that something is happening, they don’t really know to what degree. As you know from the results, it’s pretty dramatic. Half the [online] people in the United States are listening now. So it’s not only a niche thing; it’s a reach play as well as a frequency opportunity. That was the baseline for the discussion six months ago. Then we really wanted to say, Hey, we’d love to create something that we could push out as an industry, without a specific publisher agenda, on an annual basis, to show the incremental moves in time spent, and the behavioral changes.

RAIN: The headline point of the research package is the 53 percent. But another interesting research point is the extent to which new listening is displacing broadcast listening, and the extent to which it represents added listening during the day. The survey indicates that 44% of internet listening is replacing AM/FM. Do you have a perspective on how much displacement is part of what’s going on?

SK: I think a ton. The terrestrial radio industry has done a great job to mask the time-spent migration. Radio has always been a frequency medium -- at least, when I sold it for 15 years. [Kritzman is the former Director of Sales for Clear Channel Radio.] And now, over the last five years it has been re-packaged as a reach medium, that 92 percent of all Americans listen to radio every week. That is true, and radio is still incredibly relevant, and marketers should be planning for it. But, if you go to the RAB website, and you look at time spent with radio since 2007, it’s down 25 percent. That’s the number that is captured in that 44% [metric]. I think that’s where the majority of listening to Internet radio is coming from. I think there is a 1+1=3 [aspect]. I think people are spending a lot more time with audio, because of the portability -- you can listen to it in so many more places than you ever could [before smartphones]. However, there’s going to be some cannibalization.

RAIN: The car is one place where there is still a big disparity. Do you agree that internet radio has a long way to go before catching up to AM/FM in the car?

SK: I do and I don’t. 50% of our mobile listeners say that they listen in the car. We’ve got over 50M mobile listeners, and they say they listen in the car. As we look to the future, we see the car as one of our biggest opportunities for growth moving forward. One in three cars sold this year will have Pandora in it. That will increase over time. Over the next three or four years, I expect you’ll see our place in the car rise tremendously.

RAIN: Tim Westergren said this week that Pandora’s commercial load will never approach that of broadcast radio. Free users of Pandora see many display ads, and hear 2-4 minutes of audio commercials per hour. Will that increase, and if so, where do you think it will land in the future?

SK: It’s really hard to say what the ideal mix is. Our users will determine that. We’re always testing, and we’re always sensitive to the user experience. A lot of that will come from what our users’ palate is for the ads, and what types of ads they are. Because of the size of our platform, we can take a small percent of our audience, and test different ad types, so users will help us determine what’s most effective. That, in turn, becomes the most effective for our advertisers.

RAIN: When it comes to the balance of local and national advertising. How do you deploy sales resources between national and local?

SK: Both are important pieces of our business. With the scale we have now, north of 70M people nationally every month, we are a national branding opportunity. It’s a huge piece of our business. In the last two years, our scale has gotten to a point at the local level where we are, from an audience perspective, as large as many of the biggest radio stations in any individual market. We’ve been deploying resources in the top 28 market this year, and we’ll build that out next year. We’re getting as exciting responses locally as we did nationally. Looking a couple of years down the road, our local/national advertising mix will look pretty similar to most major media companies.

RAIN: Do you break out that revenue mix now?

SK: No.

RAIN: What about Australia and New Zealand? [Pandora's only non-U.S. countries.]

SK: We’re not live with advertising [now], and are growing the audience. I’m not directly involved, but the audience growth has been terrific, and we’re going to look to get ad support in the next year.

RAIN: Pandora is well represented on measurement systems along with broadcast. Does this research about internet radio help you gain presence for the sales effort generally, or are you past that point?

SK: I think anytime you provide research that is educational, it’s going to be helpful. The [internet radio] space is at a tipping point. We’ve got to do our job in the industry to educate on how much it should be allocated. Six percent of all time-spent on media is spent on print, and they still get 23 percent of the ad budget. Mobile represents 12% of time spent, and they get three percent of the budget. Radio represents 14% of time spent, and they get 10% of the budget. From my perspective there’s a huge paradigm shift that has to happen via education to marketers, to say that things have changed dramatically over the last five years. Studies like "The New MainStream" are one step in that direction.

Brad Hill
September 26, 2013 - 11:55am

Amazon caused a media ripple yesterday when it connected its previously independent Amazon Cloud Player with its MP3 Store. The Cloud Player is an online music locker where customers can store their owned tracks (whether purchased from Amazon or not), and play them from any device which can run an Amazon Cloud Player app (pretty much any device). People who prefer outright ownership of music, as opposed to the access model which motivates Spotify and Rhapsody, can get the benefits of mobility by maintaining their collections in the cloud, like celestial jukeboxes.

In mashing up the Cloud Player with the MP3 Store, Amazon joins buying, storing, and mobile playing in an agreeably seamless connection. That’s why Hypebot headlined the news: “Amazon Finally Gets Closer to iTunes” -- Apple’s download store is likewise integrated with its iCloud service.

But of course Apple owns the whole three-legged stool of downloading, cloud storage, and internet radio streaming, designed to cozy the user into an embryo of uninterrupted music monetization, at home and on the go. No less for Google, too, by the way, even though nobody’s talking about it during this period of obsessive Apple scrutiny.

Straddling the competitive fence which divides Apple and Google is one of Amazon’s cutting advantages. It has navigated mobile-OS politics by forking Android into a specialized operating system for Kindle Fire tablets, thereby remaining secular amid the tablet holy wars. Amazon apps are distributed to both iOS and Android phones and tablets. Amazon is everywhere, trading rabid fanboyism for the privilege of being despised by nobody.

From what better position to forge the missing link in the triplet chain of music merchandising? Last May, The Verge reported that Amazon was in talks with labels about a music subscription service. This is the ecosystem roadmap: sell the downloads first; provide universal cloud access second; lock in the user with unlimited listening third. If Amazon were to bundle a streaming platform into what is already a packed-with-value Amazon Prime membership, which now provides streaming movies and television, the media-loving consumer sector might undergo some kind of rapture and rise to the heavens.

If not, yesterday’s cloud/download maneuver will have been just another incremental product update. We’ll see.