A Story

Pandora’s September 2013 Audience Metrics report shows growth

Wednesday, October 2, 2013 - 12:45pm

This morning Pandora released its monthly Audience Metrics bulletin, showing across-the-board growth in the company’s key indicators.

Pandora’s reported listening hours grew to 1.36-billion, an 18% year-over-year gain from September 2012 (1.15B). Month over month, listening time marginally improved from 1.35-billion hours in Pandora’s August report.

For September, Pandora claims 72.7-million active listeners, a year-over-year increase of 25% (58.3M in September 2012, and 72.1M in August). Some observers regard September as the start of a crucial period of metrics comparisons with iTunes Radio, which claimed 11-million users in its first week. iTunes Radio and Pandora operated concurrently for 13 days in September. Although much was made of the 11-million number, it is too early in the life cycle of iTunes Radio to delineate “active” listeners -- users who return to the service. September, by itself, does not tell much of a story, but it is a reasonable bet that P stock would not have jumped today (+6.3% as of this writing) if Pandora’s active listeners metric had gone down. For one month's report at least, the launch of iTunes Radio does not seem to have had a discouraging impact on Pandora.

Finally, Pandora reports a 7.77% share of total U.S. radio listening for September, a 6.53% lift from a year ago. (August share was reported at 7.46%.) That particular metric has come under scrutiny and criticism recently, by Clear Channel CEO Bob Pittman (here) and Entercom CEO David Field at the recent RAIN Summit Orlando (audio here; coverage here). Pandora’s monthly reports do not disclose methodology or underlying data, but RAIN spoke with a Pandora spokesperson about the share-of-listening statistic, and received this response:

"Pandora arrives at this calculation using data from Triton Digital, Arbitron and the U.S. Census. The estimated total hours include satellite radio. There is no one group that measures total radio metrics. We welcome all third-party research from a variety of established partners, including Triton Digital, Edison Research, The Media Audit, comScore and Nielsen. Ultimately, we would like to see all radio measured side-by-side."

 

Free Market Royalty Act: Plenty of swirl around an unlikely law

Tuesday, October 1, 2013 - 12:35pm

Rep. Melvin Watt yesterday introduced the Free Market Royalty Act (FMRA) which would address the lack of parity in statutory royalty requirements levied on terrestrial broadcasters and Internet radio services. (Read Rep. Watt’s statement and rationale here.) 

By law, broadcast radio is exempt from paying a performance royalty to artists and labels. Broadcast stations do pay royalties to publishers and songwriters. Also by law, Internet radio is not exempt, and must pay for use of recordings in addition to paying songwriters and publishers.

The Free Market Royalty Act introduced by Rep. Watt aims to remove government from setting royalty rates, and to turn the matter over to free market negotiations. As such, the bill has a compulsory impetus, but no compulsory mechanism. It would repeal the existing blanket license that makes label-owned recordings available to broadcasters free of charge. To gain a license for playing music recordings over the air or in an Internet radio stream, programmers would negotiate with labels directly, or with SoundExchange, a performing rights organization that represents labels and performing artists.

Labels and broadcasters are already striking out on the non-statutory path, ditching government compulsory licenses for negotiated ones. This summer, Warner Music and Clear Channel Media & Entertainment agreed to establish broadcast royalties payable from Clear Channel radio stations to Warner labels, and to lower label performance payouts on Clear Channel digital streams. (Clear Channel operates iHeartMusic, a streaming platform that features broadcast webcasts.)

Is it a good idea to push government out of its long-standing role as copyright arbiter? RAIN spoke to David Oxenford, law partner of Wilkinson Barker Knauer LLP in Washington, who specializes in broadcast regulation, and who has represented radio groups and digital media companies. “No. The government has almost always been involved, either through the Copyright Royalty Board, or through rate courts that ASCAP and BMI go through on the publishing side. The only collective in the performance rights world that is not subject to government oversight is SESAC, and SESAC is being sued by radio and TV broadcasters to bring it under that kind of oversight.”

The National Association of Broadcasters, radio’s chief lobbying voice, unsurprisingly disputes the bill. NAB head of communications Dennis Wharton cited the Warner Muisic/Clear Channel deal in his refutation of the FMRA as an unnecessary correction: “NAB believes market-based negotiations like the recent Warner Music-Clear Channel accord demonstrate that this issue is already being addressed in the free market. This legislation would impose new costs on broadcasters that jeopardize the future of our free over-the-air service.”

From the other side of the opinion fence, burdensome costs are exactly what the bill might correct. Pandora and other Internet radio pureplays arguably serve the same music-discovery mission as terrestrial radio, and provide a corresponding benefit to performers and labels that broadcast does, yet are legally bound to add a cost line item that doesn’t exist on traditional radio balance sheets. Rep. Watt’s statement on that point: “Those deals expose the unfairness and inadequacy of the current system and they strongly point out the need for a legislative solution that will apply market wide.”

Previously introduced bills have sought to even the balance from the opposite direction -- by lowering or eliminating performance royalties on the Internet side. The Internet Radio Fairness Act was put into congressional play last year, suggesting an adjustment to the makeup of the Copyright Royalty Board, and the standards by which it sets compulsory royalties to labels and recording artists. According to David Oxenford, “They deal with things totally differently. Essentially, the structure that Watt is proposing makes the Internet Radio Fairness Act meaningless.”

The MusicFIRST Coalition, which advocates for musicians, clearly had its PR gun locked and loaded, ready for the Watts bill. Executive Director Ted Kalo delivered an instant response supporting the FMRA with plenty of historical context and criticism of the NAB. (Read it here.) “After saying no to each and every approach to date, the broadcasters have run out of excuses. [...] This bill sends all parties back to the bargaining table [...] and critically, for artists, it preserves protections in current law.” 

Casey Rae, Interim Executive Director of the Future of Music Coalition, puts a global spin on his organization’s support of the FMRA: “First, there is no defensible excuse to not pay recording artists for the use of their music, especially considering that the rest of the developed world recognizes the contributions of performers. Second, the lack of a reciprocal right internationally means that millions of dollars are left on the table that would otherwise go to American creators. You’d be hard pressed to think of another export that the United States would freely give away in the global marketplace with no expectation of remuneration.”

Will the FMRA become law? Oxenford doubts it. “I think Congress has a few other things to deal with. Besides that, the NAB has got over 100 Congressional representatives signed on the anti over-the-air bill, I think it’s unlikely to pass. Most copyright legislation -- unless you get all parties to agree on it, Congress is reluctant to act on it.”

Dave Stewart’s Spotify reversal, and how music streaming becomes an ethical issue

Monday, September 30, 2013 - 12:10pm

Recording artist and producer Dave Stewart (best known for Eurythmics) has reversed his previous anti-Spotify stance, criticizing Radiohead’s Thom Yorke for “not getting it.” (Yorke famously conducted an angry public withdrawal from Spotify.) A year ago, surmising from Stewart’s public comments, he didn’t quite get it either. At that time, Stewart complained that if one of his albums were streamed nonstop for three years, he would earn only $47. Now, speaking to The Guardian, the man sounds like a newly-hired Spotify brand evangelist: “They [Radiohead] were misinformed. Spotify is one of the few companies that is transparent and actually pays properly [...] as a songwriter you should worship Spotify.”

Deification is certainly an extreme position in the Spotify opinion spectrum. But if holy reverence seems like an exaggeration, no more so than Spotify demonization which has labeled the service “a necessary evil” and “the definition of evil.”

A few days ago, NPR published an article titled, “Does Using Spotify Make You A Bad Person?” Two interesting points underlie the positioning of that article as a piece of ethics journalism. First, the title and its premise assume that readers have an established inner context for thinking about streaming audio as a moral gray area. Second, the question was sent in by a listener/reader, who was presumably struggling with an ethical dilemma related to her Spotify use.

Responses to the article range from polite disagreement to flaming scorn for posing the question in the first place. (The most incendiary comments reside on NPR’s Facebook page.) Overwhelmingly, article feedback refutes the gray-area premise. Some readers describe the value of music discovery in Spotify, and assert that long-tail artists benefit more from streaming exposure, even in tiny payouts, than they would without it. Others cite plain legality, criticizing the article as inappropriate on that basis. Indeed, the should-we-feel-guilty type of article is reminiscent of moral hand-wringing from the Napster days of 1998, when masses of consumers were enjoying an ownership platform that really was struggling to find a legal toehold.

Two media drumbeats contribute to framing Internet radio as a guilty pleasure, no less questionable than unauthorized file-sharing. First is a royalty and payout controversy, which spotlights both the still-immature life stage of the industry and the complexity of rights licensing. Partial information and misinformation skew public understanding of how streaming music content is acquired, and how creators and performers are paid for its use. When Dave Stewart accuses Thom Yorke of being “misinformed” -- and implies that he was, too -- it is easy to believe.

The second media drumbeat is celebrity advocacy on behalf of artists. When Thom Yorke, Dave Stewart, Nick Mason, and others utter their recriminations or reconciliations, their comments beget swirls of coverage and opinionated comments. These star-tinged blasts suffer from the same confusions and partial realities as the coverage of legalities. Stewart’s turnaround, like Nick Mason’s (see Friday’s RAIN Newsletter) seem to represent a growing reversal of celebrity sentiment, perhaps driven by balanced fact-finding such as David Touve’s correlation of streaming revenue to broadcast revenue. (PDF here.) Touve deconstructs ASCAP’s “Songwriters Under Attack” media campaign, and concludes that music creators might receive identical revenue for broadcast and streaming use, per listener impression. His calculations include some arithmetic runarounds, but notwithstanding those unavoidable fuzzy spots in the math, the report solves flagrant misunderstandings of the difference between one-to-one Internet streaming and one-to-many broadcasting.

In Dave Stewart’s latest epiphany, he forecasts the growing significance of streaming music in terms that Spotify and Pandora have used for a few years: “It’s a volume business.” Streaming companies often respond to critics by saying, “Just wait” -- much as Amazon preached to shareholders in early days of its growth (and still does). The popularity of free online listening is a recent phenomenon. Although the reach of Internet radio has expanded quickly to over half of online Americans, global expansion and distribution to mobile spaces are still germinating. In many cases the per-listener impression impact of a star act does not approach that of broadcast, even when critics talk about millions of streams, and for long-tail artists it is all upside as streaming scales.

Presumably, the expansion of Internet radio will also quiet the morality play staged around its growth.

Livio, Ford, and the pursuit of connected dashboard standards

Friday, September 27, 2013 - 12:45pm

The ability to pivot, moving in a new direction from the same vantage, is crucial in basketball and business. Livio, whose acquisition by Ford has lit up the connected-car niche, pivoted adroitly from making internet radio devices to writing car connectivity software. Ford, for its part, appears to be pivoting on its Sync and AppLink assets, adding Livio’s branded technology as a wholly-owned subsidiary living side-by-side with Ford’s digital-dash solutions.

Livio’s flagship product is a universal platform that links consumer devices to car dashboards. The scenario: You bring your smartphone into the car, and your favorite Internet listening apps get connected to the dashboard’s head unit where you can more easily and safely control them. Ford’s AppLink performs the same basic function -- Scott Burnell, Ford’s global lead of business development, describes AppLink as a snippet of code written into infotainment apps such as Pandora and TuneIn.

Matching the ease of AM/FM radio in the car with the programming variety of Internet radio is the brass ring for users and app providers. But that mission does not appear to be shared among car builders, most of which provide independent solutions. Questions of who provides the Internet connection, the apps, and the operating system are being answered in multiple ways, reflecting many marketplace approaches.

RAIN talked with Tim Stevens, Editor at Large of CNET and noted car-tech expert, about creating dashboard standardization out of the deep fragmentation which currently exists. Stevens pointed to Livio’s existing relationship with Chevrolet as an interesting deal point. (Livio Connect is implemented in the Chevrolet Spark.)

“It’s interesting to see Ford acquire somebody who has third-party relationships with other car companies, GM in this case. And I’m guessing that GM is planning to expand that out to other models. Ford has been pretty open about wanting to establish some kind of standard of smartphone connectivity and infotainment in general. This is a pretty strong indication that they are serious about wanting to define that standard.”

Burnell, who appeared on RAIN Summit’s “Race to the Dashboard” panel ten days ago in Orlando, explained why Ford’s “brought-in” solution to dashboard standardization, in which the user provides the apps and the Internet connection, is favorable to users and app developers. 

“The life cycle of developing and launching a vehicle is about five years. If you embed Pandora into the head unit, going through the OEM’s [development] cycle, it might be obsolete when it comes out. With Ford and the brought-in solution, it’s the user’s app and they are already using it. It can connect to the vehicle, and work.”

Stevens notes that car companies have become more adept at separating dashboard development cycles from the rest of the car model’s evolution, quickening the creation of new dashboard connectivity features. But that isn’t moving the industry as a whole toward a standard infotainment dashboard, according to Stevens. “I don’t think the OEMs are motivated to play nice together. They ultimately are focused on delivering what they think is the best product for their buyers. Making any concessions in the interest of keeping their developers happy is not on their radar. Ford is the only one that is thinking about that.”

Livio’s mandate, as expressed by founder Jake Sigal, is “More connectivity with less hassle.” That ideal is certainly foundational to dashboard standardization, but there are many paths forward through a thicket of technologies. The mobile device companies like Apple and Google are not (yet?) significantly involved, and the competitive landscape could get more complex than it already is. A universal listening system in the car, one that approaches the simplicity of AM/FM receivers, could be a mirage for years to come.

INTERVIEW: Larry Rosin, President of Edison Research

Thursday, 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.

Edison Research: Streaming hits the MainStream

Wednesday, 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.

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