A Story

New Edison Research videos show a “barrage of new” in connected cars

Monday, October 28, 2013 - 11:55am

Seeking insight to how new-car owners are coping with modern infotainment systems built into digital dashboards, Edison Research has produced video interviews with recent buyers. (Watch the videos here.) Unlike the eye-opening videos of prospective buyers trying to turn on the radio for the first time, shown at the Radio Show in Orlando, the subjects of Edison’s videos have had some number of months to learn and adapt to expanded listening choices in the car.

We spoke to Larry Rosin, President of Edison Research, to ask about key takeaways.

RAIN: You spoke with new-car owners who have been dealing with sophisticated dashboards for several months. What did you learn?

LR: The average car on the road is 11 or 12 years old; most of these people had traded in 10- or 11-year-old cars. So they’re excited by the prospect of a new car, and by the systems that are baked into these cars. They’ve gone from the alpha to the omega of the [dashboard] experience. They get hit with what I call a "barrage of new.” Lots of new things. In every one of these cases, on top of these dash systems -- connection with their phones, or embedded 4G -- they get a free trial subscription to SiriusXM. Lots of new things are coming through to them. We see in the videos very significant changes in behavior.

For broadcast radio, those guys are fighting the “barrage of new.’” And I don’t think we think enough in the broadcast radio industry about “new.” We seldom launch new shows, we seldom launch new formats, we seldom come out with new initiatives. In many ways we’ve come to represent the opposite of New. I think that’s a dangerous prospect.

RAIN: To what extent do you think the Barrage of New will stick with new-car buyers? For example, how long had these people owned their new cars, and were they still in the trial satellite subscriptions?

LR: In some cases the trials had lapsed, and some of them had not renewed. We asked people to project into the future, and of course that’s hard for people to do. But I think these people are forever changed in their behaviors. They all came from cars where AM/FM was the only [listening] option, except for CDs -- and in one case, cassettes. [Now they’re in a world where] their phone, their iPod, their own music was readily available in the car, and streamed music was easy to access also. They’re taking advantage of that. In the videos they seem excited about what they can do.

If you watch the videos, [the subjects] still do turn to radio. Every respondent said they do turn to radio for unique, compelling content they cannot get from streaming audio or satellite radio. News reports, traffic reports, weather, personalities, sports, public radio.

RAIN: Do you think that encourages radio as an industry to double down on its legacy values of news, traffic, and weather -- as opposed to developing new content?

LR: No. Not at all. Of course we should stress things like news, traffic, weather, and personalities. But I think it compels radio to say “What other content beyond all that can be unique and compelling in a much more competitive environment?”

RAIN: One of your subjects made a remark that must feel like hitting a wall for radio professionals who see these videos. The subject said, “I don’t listen to radio anymore because I don’t have to.”

LR: Yes, but I wonder whether that is over-interpreted. Clearly it came down hard, but I’m not sure that woman meant it with nasty connotations. She had a ten-year-old car, where radio was the only option. She was merely pointing out that she went from a world of one option to a world of many options.

RAIN: Even though the new dashboards are difficult for your subjects to learn and master, it appeared there was no desire for a return to simpler controls.

LR: There was definitely an adjustment period. Nobody said they wanted to go back.

RAIN: Your videos, and others, seem to illustrate that voice control really doesn’t work yet. Perhaps it will be an important factor in safe connected cars, but presently isn’t effective. Do you agree?

LR: I have no doubt it’s gotten better, but the people in these videos who have it, are really struggling with it. I can also say this: Not having had the benefit of time that these people have (and they’re still struggling with it), I’ve been in cars where I’ve tried to synch my phone to the car, and I simply could not do it. I took out the manual and gave it a serious effort. I simply could not do it. As of today [phone pairing] is just terrible.

RAIN: Have you gotten a sense from the radio people what their emotional reaction is to these videos? Is there denial?

LR: In all honesty, I think the denial period is rapidly coming to an end. It’s not that long ago, when there was a Code of Omerta in the radio industry, where if you point out a problem, you are the problem. If you look at the tone of the Radio Show in Orlando, and the tone of DASH in Detroit, and the general tone, the era in which denial is the only acceptable approach is over, or ending quickly. An attitude is emerging in which it’s a competitive world and we have to compete smart and compete strong. A healthier attitude is emerging.

Sirius XM reports record earnings, lowers guidance, raises rates

Friday, October 25, 2013 - 11:45am

From the department of mixed messages, Sirius XM reported record earnings on yesterday’s quarterly call, predicted disappointing earnings for 2014, and handed a rate increase to subscribers. SIRI stock is down over six percent on Friday, as of this post.

The third quarter was positive for the satellite broadcaster, showing year-over-year revenue growth of 11 percent, and subscriber growth of 9 percent over Q3 2012. Good wind for sailing forward? Well … the company shaved nearly $200-million off the average $4.17-billion revenue estimate Wall Street predicted for 2014, and handed a price increase of six dollars per year to its 26.5-million subscribers. The street isn’t over the moon about the lowered forecast, but favors Sirius XM’s confidence in hiking rates for only the second time since 2008.

Satellite radio faces the future with enviable advantages, and strengthening competitive headwind -- especially in the car. Most new cars have factory-installed satellite receivers, and offer months-long trial subscriptions designed to addict new listeners to the Sirius XM service. That distribution tactic plays out to a 45-percent conversion from trial to paid subscription. Historically, satellite’s increasingly entrenched position in the dashboard has disrupted AM/FM’s traditional reign in the car, forcing it to share built-in dash territory.

Going forward, Internet-connected dashboards offer an expanded suite of built-in listening choices. Even disconnected head units that permit smartphone plugs insert a competitive wedge between the driver and what comes through the car speakers. Pandora is the leading IP-delivered alternative to both AM/FM and satellite in the car, and many other options (including iPod playlists) cater to fine-tuned user customization better than one-to-many broadcast models.

YouTube’s reported music service: Has Google missed its own boat?

Thursday, October 24, 2013 - 12:10pm

YouTube, the gorilla in the room when it comes to online music listening, is reportedly ramping up to launch a freemium music service, probably modeled after Spotify and Rhapsody with a video component. (See Billboard’s breaking report here.)

If true, activating YouTube’s rampant music-listening audience in a formal offering is a sensible idea, and one that has been rumored for a long time. The unanswered questions are around how Google will differentiate value on the free side of the rumored service against an already-free YouTube, and what added value will be poured into the subscription package. 

Because YouTube is historically a UGC (User Generated Content) platform, its content boundaries are vast and flexible. Today, an unregistered, unpaying YouTube visitor can access a cosmic selection of music, some of it in album form with tracks delineated and linked for random-access listening. In addition to indie and amateur content that cannot be found elsewhere, an exceptionally long tail of vintage recordings from hidden back catalogs has been ripped and uploaded by the creative side of YouTube’s user base.

So the looming value question is how a YouTube music service would be separated and distinct from the larger YouTube experience -- especially if the overarching YouTube platform offers better selection, lower price (e.g. free), years of familiarity to users, and an unregulated atmosphere that appeals to millions of young users.

The answers will probably be folded around packaging. YouTube is not the easiest or most elegant media consumption interface, to put it graciously. Comparing YouTube on the web to Spotify’s desktop app is like comparing a teenager’s bedroom to Martha Stewart’s dining room. If Google puts some design effort into a new service, it might be able to leverage its brand clout and ecosystem footprint to bring new listeners into a platform that historically serves a young demo.

In addition to improved merchandising, ad-removal will probably drive some interest in the subscription side. Even staunch advocates of the unregulated YouTube experience dislike the delay of pre-rolls and the intrusion of ads layered onto the screen during video playback.

All this boils down to one question: Has Google missed its own boat? YouTube is already the dominant music service (skewed to youth) and distribution outlet. John McVey, a music producer at Coupe Studios in Boulder, Colorado, told RAIN that YouTube was “the world’s largest record label.” 

Can Google formalize YouTube as a listening platform, package it neatly enough, and somehow give it more value than YouTube already has?

Apple announces 20-million iTunes Radio users; fuzzy math abounds

Wednesday, October 23, 2013 - 11:35am

After launching on September 18, simultaneous with the release of iOS 7 and baked into that mobile operating system, iTunes Radio has attracted 20-million users. Apple announced this milestone in a live product event on Tuesday.

Many media outlets are positioning the datum as a comparison with Pandora’s latest audience metrics report, which claimed 72.7-million active users in September. But quick conclusions of impending doom for Pandora, while not without speculative value, often disregard audience measurement realities.

The crucial distinction is between unique users and active users. Pandora does not disclose how it determines a threshold for active usage. But in all traffic and audience statistics, some level of repeat visitation is needed to turn a unique visitor into an active user. By the same token, Apple is not disclosing how many of the 20-million uniques are repeaters.

All repeat visitors are unique within the time period of their activity. But not all uniques are active with more than one visit. There is no industry standard for measuring loyalty, or a level of brand stickiness indicated by active usage. Slightly more than one month after launch, iTunes Radio might and might not have enough history for Apple to develop an internet metric of active usage.

One thing is clear: Apple is not announcing “active usage,” and comparing the “uniqeu” metrics with Pandora’s “active” metric is fuzzy math.

Microsoft’s new Web Playlist dismantles traditional “station” listening

Tuesday, October 22, 2013 - 9:15am

Windows 8.1 was released last week, and with it an updated Xbox Music service. Some of the upgrades to Xbox Music are merely usability features that make interactions easier. But one entirely new feature expands the competency of Xbox Music and creates a brand new listening mode.

Called Web Playlist, the function can connect the Xbox Music app to any web page, and play music referenced on that page. To realize the breakthrough nature of this feature, it’s important to realize that actual music does not need to be on the page. Web Playlist is not grabbing existing files and streaming them. Instead, it is analyzing the page, identifying references to artists and bands, and building a playlist based on those references. Any web page -- a message board, the comment section of a blog post, a music festival promotion -- turns into a relevant streaming music platform.

In effect, Microsoft is positioning Xbox Music to compete against Google Play and iTunes Radio by recruiting the entire web as a dispersed global music service.

Aside from a clever idea and breakthrough underlying technology (provided by The Echo Nest), Web Playlist potentially disrupts consumer behavior. In a year when the online radio/jukebox space has started to seem glutted with overlapping and duplicative services (Slacker copying Songza, Rhapsody mimicking Spotify and Rdio), Microsoft’s new feature separates the user from stand-alone platforms entirely -- except for Microsoft’s, of course -- and unleashes the listener upon the web at large, its musical potential suddenly unlocked.

Time will tell how compelling Web Playlist is, and whether Xbox Music has enough momentum to lift off. It works only in the Windows 8.1 environment, so its market is sharply constrained by platform. Of course, so is iTunes Radio. Perhaps the question is: when will we see this feature replicated by other services? Microsoft built the app, but the underlying intelligence belongs to The Echo Nest, a provider whose technology layer runs through many music services. 

Stay tuned. RAIN spoke with Jim Lucchese, CEO of The Echo Nest, about Web Playlist, how The Echo Nest’s music analysis compares to Pandora, and what The Echo Nest employees listen to in the office. The interview will appear Wednesday.

Clear Channel cuts revenue deal with Black River Records

Monday, October 21, 2013 - 11:00am

Adding to its portfolio of custom royalty-payment deals with record labels, Clear Channel reached an agreement with Black River Records, a country label whose roster includes Kelly Pickler, Craig Morgan, and Glen Templeton.

Details were not announced, but this deal could be modeled on previously-struck arrangements with Warner Music Group and smaller labels like Big Machine, Glassnote, Dualtone, Naxos, and Suburban Noize. The template includes new royalty payments to the label for terrestrial airplay, a cost that radio stations are legally exempt from paying under U.S. regulations. In the Warner Music deal, the label agreed to lower royalties for streaming play of its content by Clear Channel webcasts, where the statutory exemption does not hold. There is also a promotional component to that agreement, wherein Clear Channel stations commit to featuring WMG albums and artists.

Revenue-share deals that follow along these lines are sometimes skeptically considered a new form of payola. (See this critical article in Forbes.) The reasoning is that by giving up a portion of streaming revenue, which is bound to grow in the future, the label is essentially paying radio for promotion, plus a royalty for terrestrial play, which might shrink in the future.

Putting aside legal theories, it is deal-making like this which provides the radio industry with a rationale for rejecting governmental attempts to force radio into paying performance royalties to labels and artists for terrestrial play. The most recent proposed legislation is the Free Market Royalty Act, which would force royalty negotiations between broadcast radio and labels. (See RAIN coverage here.) The idea behind the slate of rev-share deals is to stitch together broadcast and webcast into a single royalty-paying framework.

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