RAIN 1/12: AdWeek examines pureplay radio's designs on "traditional" radio ad dollars

Paul Maloney
January 12, 2012 - 9:00am

The ongoing tussle between the broadcast radio industry (which we covered most recently here and here) and Internet radio (mostly Pandora) over ad dollars is now on display for the ad industry in the pages (and website) of AdWeek.

"The streaming services need advertising dollars, and they have monies previously allotted to broadcast budgets in their crosshairs," reads the article, titled Streaming Music Has a Problem—It's a Huge Success. "It is, in general, a well-trod story: New medium goes after old ad dollars. But in this case, the stakes are unusually high. Online radio’s very survival depends on stealing ad dollars from its traditional counterpart, and it needs to do it fast." 

See, Internet radio's ad revenues have been estimated at just 5% those of the broadcast radio industry. In fact, listening is growing far more quickly than ad sales (Pandora CEO Joe Kennedy told CNBC (see video here), "In the short run we really continue to focus on investing (in) this tremendous opportunity to disrupt the traditional radio business. Today we only have a bit more than 4% of all radio listening in this country," he added, which "illustrates how much opportunity lies ahead of us.").

Then of course there's the "onerous" royalties arrangement for copyright sound recordings (an obligation broadcasters don't have, and the terms of which can't be changed until at least 2015) putting pressure on webcasters to bring those ad dollars in.

Aside from the size of the pile (eMarketer estimates broadcast radio's 2011 ad revenue at $15.7 billion -- the graphic you see is from AdWeek), what makes traditional radio ad dollars a logical target for webcasters is the form online radio advertising is taking: traditional audio spots. "As streaming usage migrates to mobile (70% of Pandora’s listening is via smartphones, for example) and vehicles (which utilize smartphones), the ads need to look and feel a lot more like traditional broadcast spots than display ads," AdWeek staff writer Erin Griffith reports. "Filling that mobile inventory with audio spots, supported by broadcast-allocated ad dollars, requires that streaming services are defined as radio, not digital."

And as webcasting emulates the broadcast model, broadcasters have buttressed their position by adopting customizable and interactive digital services themselves (e.g. Clear Channel Radio's iHeartRadio, CBS Radio's Radio.com on top of CBS's purchase of Last.fm). "As consumption of all media shifts online, both sides — their respective diss wars aside — will likely need to act more like the other in order to sell their ad inventory." And this perhaps calls into question the logic of cordoning off listening estimates for broadcasters from those of webcasters. Especially when ad dollars, for both sides, are at stake.

Read the AdWeek article here. And we'd love for you to leave a comment with your thoughts (if you don't see the form below, please click the "Add a comment" link).

Paul Maloney
January 12, 2012 - 9:00am

Radio industry vet Jerry Del Colliano is another voice in the chorus of experts who say broadcasters are making a mistake by trying to force ratings services to segregate their listening estimates from those of "pureplay" Internet radio (catch up on RAIN coverage here, here, and in today's top story here). He suggests broadcasters' thinking should be guided by how radio will need to succeed in the future: by building a brand that goes far beyond a broadcast tower and PPM.  

"Pureplays are here and radio can co-exist with them. Even, distinguish themselves," Del Colliano wrote in his Inside Music Media blog yesterday. "Pureplay stations can’t do local radio and terrestrial stations can... for the stations that are still live and local, bring on the pureplays, radio will continue to perform well."

So, radio broadcasters, why not launch your own pureplay service? Or two? Get into the low-barrier-to-entry game of Internet-only radio, secure in the knowledge that webcasters can meet your ante and easily go and pick up a broadcast frequency or two. "There is no reason why you can’t own radio stations, iPad formats, paid services, video sites and pureplay music stations based on your brands." NPR has built for themselves a brand and a value that goes way beyond simply "radio stations," and local commercial broadcasters need to follow that blueprint, he suggests. "Agencies are screaming for digital... Smart money is on making strategic adjustments in advance so that broadcast stations will be poised to gain an advantage."

Read more and subscribe to Inside Music Media here.