RAIN 9/10: Analysts picture an industry with an Apple Internet radio service

Paul Maloney
September 10, 2012 - 2:00pm

The aftershocks of Friday's bombshell (in RAIN here) -- Apple's rumored entry into Internet radio -- continue today, as several industry experts chime in on the possible implications of such an event. For one, Wall Street had its say, as Pandora's stock fell 17% on Friday.

But does an Apple Net radio service mean certain death to Pandora (and other webcasters, including broadcast radio's Internet plays)? Actually, "Some analysts say Apple’s entry into the web radio business also validates Pandora’s business model — something most radio executives have cast doubt on," Inside Radio suggests. Another one of those experts is former Cox Radio/Cox Media digital chief Gregg Lindahl, who thinks Apple's entry would legitimize Internet radio, especially to advertisers. "It says that this is for real and it is going to be bigger than AM or FM. The only argument that we can have now is how long it will take for that happen. It makes radio that much more exciting," he told Inside Radio.

An ArsTechnica op-ed (here) makes the point that the general public is beginning to adopt music services (i.e. free streaming) beyond iTunes, and that "Pandora, iHeartRadio, Last.fm, and the others aren't feeding money through Apple... it's most likely because Apple simply wants a slice of the streaming pie." BTIG analyst Richard Greenfield agrees (as reported in Inside Radio). He told CNBC that he’s not surprised by Apple's rumored move. "They’re not doing this to kill Pandora purposefully. This is a natural extension of their business that, unfortunately, Pandora and other companies are going to get caught on the short end of the stick."

Some feel Pandora would actually come out smelling better in a head-to-head with an Apple Internet radio service. TheStreet.com thinks an Apple Radio would just be a cheap, uninspired knock-off of Pandora. "Pandora is the only company properly positioned to disrupt traditional radio and its $16 billion annual advertising market. And nobody else has or can come even close to duplicating the Music Genome Project," they write (here). "If Apple competes against Pandora, Apple is likely to lose," Jerry del Colliano wrote in Inside Music Media today. "Apple won't use Pandora's music genome system that makes it so unique and so beloved by users. Going after them may be the biggest mistake Apple ever made unless they buy Pandora" (but not until Apple negotiates better royalty rates than what Pandora has).

TheStreet.com wrote, "If Apple is going to do this the only credible way forward is to buy Pandora. I'm not sure why Apple would enter the streaming business in the first place, but it could seamlessly integrate Pandora with iTunes. If you're going to do personalized radio, do it right for goodness sake." Forbes writer Mark Rogowsky contends (here) that Pandora has little hope of being profitable on its own, given what it pays in royalties, and how he sees the profitability of ads playing out. Thus, Pandora is ripe for acquisition by a larger company that can make its profits elsewhere, like Apple!

So, what would an Apple Internet radio service mean for broadcast radio? Fred Jacobs (from whom we stole the Apple with antenna image), wrote in his blog here, "For radio, nothing really changes. It’s just another indication that the world of audio entertainment has become more crowded." He does suggest broadcasters consider "how radio brands can provide a unique and welcome service that is different from what they get from pure-plays." For starters, radio should "clean up and improve" its streams (concerning ad-insertion, buffering, bit-rates, programming, etc.).

We'll undoubtedly be talking about the prospect of an Apple Internet radio service at RAIN Summit Dallas on September 18th (just a week from tomorrow).

Paul Maloney
September 10, 2012 - 2:00pm

Internet radio listening as a whole traditionally slows during the summer months (see our coverage of the July Webcast Metrics here), and Pandora's August numbers show they're not an exception. But their year-to-year growth remains a positive.

The webcaster says it streamed 1.16 billion aggregate "listener hours" for the month, a 70% increase from the 682 million it streamed in August of 2011 -- but actually down slightly from 1.2 billion in July (see RAIN here). Pandora also says it has 56.2 million "active listeners" (that is, the number of accounts that've signed in during the last 30 days) now, up 48% from August of last year (38 million), and but up only slightly over July's 55 million.

Finally, Pandora says its "share of total U.S. radio listening" is now up to 6.30%, an increase from 3.67% at the same time last year (and from 6.13% in July).

Paul Maloney
September 10, 2012 - 2:00pm

Some great coverage in Inside Radio today on what mobile advertising can do for radio, if broadcasters are ready for it.

Consider that more than 234 million Americans (13+) use mobile devices, but advertisers have yet to spend more than 1% of their media budgets on mobile. The Mobile Marketing Association says mobile's share should grow to 10% over the next four years, and eMarketer says U.S. mobile ad spending will double this year alone. It's obvious a big change should be coming.

"BIA/Kelsey VP Mark Fratrick says radio is poised to do well in mobile because of it offers unique content and has cross-promotional opportunities and armies of local sellers," writes Inside Radio. "But to cash in on the mobile shift requires building out platforms, such as optimizing station websites for the mobile web in order to increase page views and impressions," as groups like Cox, CBS Radio, Entravision, and Emmis have.

Spanish-language radio is already seeing the windfall. An Entravision told Inside Radio that mobile is the company's fastest-growing revenue source, pacing 200% year-over-year, and is now 20% of Entravision and Spanish Broadcasting System interactive revenue. "Mobile will probably be our second biggest ad category outside of broadcasting within the next few years. Mobile is already showing signs that it will leap ahead of online display advertising with a 50% year-over year growth rate," Univision Radio EVP/Sales Lee Davis told the news source.

Subscribe to Inside Radio here.

Paul Maloney
September 10, 2012 - 2:00pm

Spotify seems busy. Various sources say the on-demand (and custom radio) music streamer will soon launch a browswer-based version of the service. In other words, instead of downloading and installing Spotify on your desktop, you'll simply be able to listen via Chrome or IE or Safari at Spotify.com (like you'd listen to Pandora or AccuRadio), which will make it easier to use the service from multiple computers (and make it easier for potential listeners to sample it -- no download/install necessary). TechCrunch has more here, AllThingsDigital here. What other reasons might Spotify have for putting its service on the web? Evolver.fm has some ideas here.  

What's more, TechCrunch here has also picked up the idea that Spotify may push its "App Center" (the section of the desktop software where you can find cool third-party uses of Spotify) to its mobile app (there's currently no link to the App Center on mobile devices). Last week Hypebot.com reported here on Spotify's Android app update.