ad revenue

Mobile listening restriction dampens Pandora TLH and share in April

Tuesday, May 7, 2013 - 12:50pm

Pandora says its just-revealed audience decline is "in-line with company expectations" following a March move to restrict mobile listeners on free, ad-supported streams to 40 hours a month. Pandora made the move to reduce royalty costs (ads on mobile streams don't pay as well as those to desktop listeners, and so it's harder to recoup the cost of performing music on phones and tablets).

Today Pandora released its April 2013 audience numbers, showing total listener hours (TLH) were 1.31 billion last month. While that's up 24% from April 2012 (1.06 billion), it's a significant reduction from March (nearly 1.5 billion hours, a 12% slide) and February (just under 1.4 billion) of this year. The company says its share of "total U.S. radio listening" in April was 7.33% -- again, an increase from the same time last year (5.95%), but down from March's 8.05%.

CFO Michael Herring, during a webcast of a Morgan Stanley "Internet Bus Trip" covered in Billboard, said the cap on mobile listening had "almost the same impact" as a similar restriction put on web listening in 2009.

Pandora's total number of unique "active listeners" -- a number one wouldn't expect to be affected by a 40-hour cap on mobile listening, was indeed up. Pandora reported 70.1 million active users by April's end, which is up both over March (69.5 million) and April of 2012 (51.9 million, a 35% increase).

See our coverage of Pandora's March 2013 numbers here. Pandora's press release with its April 2013 numbers is here, and the Billboard coverage is here.

Mobile leads 2012 digital ad growth, shows IAB report

Wednesday, April 17, 2013 - 12:35pm

According to a new report from the Interactive Advertising Bureau, mobile ad revenue more than doubled in a record-setting 2012, making it the year's fastest-growing digital segment.

The report shows digital ad revenues overall hit $36.6 billion last year, up 15% over 2011. Mobile ads now account for 9% of the digital ad total.

IAB President and CEO Randall Rothenberg commented, "Mobile, in particular, soared due to its ubiquity and intrinsic ability to serve as a powerful digital dashboard that travels with you from morning commute to nighttime video viewing and beyond."

IAB VP/Training & Development Michael Theodore, moderating the RAIN Summit West "Profiting from Mobile" panel (recap here), questioned what he thought was the underlying premise of the panel. That is: why isn't mobile revenue growing as fast as it should be?

He said, "Those who feel mobile isn’t generating enough dollars are way too impatient." He also hinted that the (at the time) forthcoming IAB report would show big gains for mobile.

Other digital segments showing 2011-2012 growth include digital video (up 29%), search (up 14.5%), and display (up nearly 9%).

Read the IAB's report summary here. TechCrunch covered this here.

Citing royalties, Pandora limits free mobile listeners to 40 hours per month

Thursday, February 28, 2013 - 11:45am

Pandora announced via their blog yesterday they are limiting free/ad-supported mobile listening to 40 hours a month. Found Tim Westergren says it's about royalties.

"Pandora's per-track royalty rates have increased more than 25% over the last 3 years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years," he wrote. "After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption."

Pandora is the most visible industry player backing the Internet Radio Fairness Act, which they hope will decrease sound recording performance royalties with a change in the standard that's used to determine those rates. See more in RAIN here.

While the webcaster is monetizing mobile audience better than most, its ad revenues are just $26.96 per thousand listener hours on mobile, compared to $56.40 across all platforms.

According to Pandora, only 4% of listeners will be affected, as the average listener streams just 20 hours a month across all platforms. The limit is only on mobile listening, and does not affect paying "Pandora One" subscribers. Free mobile listeners are also given the option of paying 99 cents for unlimited listening for the rest of the month after they hit the limit.

This is not Pandora's time capping free listening. Prior to September 2011, free stream mobile and web listeners were limited to 40 hours per month.

Read the Pandora blog entry here.

Forbes writer thinks an Apple streaming play would hit Pandora in the ad revenue

Monday, February 25, 2013 - 12:00pm

Apple will hold its annual shareholder meeting on Wednesday, and naturally many are eager to hear the company's plans for a streaming music service. A Forbes writer predicts an Apple entry into streaming music wouldn't hurt SiriusXM, but it would likely take a toll on Pandora.

"The main issue for Pandora is going to be with advertisers," writes Richard Saintvilus. "This is where Apple will bring the most damage."

Apple would give Pandora competition for ad dollars it really doesn't have, and thus give advertisers leverage, which would drive ad rates down. Apple, with so many other revenue streams, could afford a music streaming service as a loss leader. Pandora, obviously, could not.

"This, then, puts Pandora in a position to sacrifice margin for revenue."

Saintvilus' bet is that Pandora gets acquired, by Facebook or Google. Read more in Forbes here.

RAIN Guest Essay: "Song 2" by Andy Lipset

Tuesday, October 9, 2012 - 11:30am



Earlier in the year, I wrote an article for RAIN entitled "The Song Remains the Same" (here) which discussed how the noise around the subject of streaming was hurting potential dollars to come into the marketplace for all players in the space -- be it pureplay companies or broadcasters. 

Today, there is another wrinkle that has appeared in the space that could start to hamper dollar flow and that is one around technology. So, I have titled this article "Song 2," a follow up to my original article in January. ("Song 2" was also a big alternative rock hit in the 90’s and - somewhat appropriate to what’s happening in the marketplace -was recorded by the band Blur.)

I want to center on the debate whether or not broadcasters should stream separate commercials in their online versus over-the-air product.

There is a lot of discussion around this primarily because the ad breaks in the streams of many broadcasters sound terrible. Spots run over one another. Some spots don’t start on time. Some of the breaks finish when the over the air broadcast has already started, and spots may finish 20 seconds into the start of a song. While some have categorized the decision to discontinue running separate breaks as a royalty issue — at the heart of it, this is more of a product and, specifically, a technology, issue—and it’s one that will put a cap on money that flows into the market.

Personally, I do not believe that the broadcasters should pull their ability to insert ads into their streams. That said, the issue is an understandable one from the broadcaster’s perspective. To keep your current listeners engaged, and to attract new listeners, the stream has to sound good.

But rather than run away from the problem, I would rather see the broadcasters say “I need to fix it.” This is 2012, and the problem of in-stream ad-syncing should be a very addressable issue at this point of the evolution of the medium and the technology that supports it. Talk to your vendors and work with them to fix the issue. If they point to the ad network, the insertion company, the CDN, or any other vendor in the chain as being the problem, ask them all to jump on the phone together and work it out until they find the problem. If they say the issue is on your side, ask them to help you to work it out. If they can’t work it out, it may be time to look at other vendors. Your product's sound and potential revenue should not be hurt because a technology vendor cannot service and stand behind their own product.

I see advertising revenue getting hurt from several different buckets because of this issue:

  1. Advertisers who have streaming dollars to invest today pull their budgets. We know that advertisers are hesitant to invest in products that sound bad, or worse, where they are unsure of how their spots will run. If you haven’t listened to the focus groups that Edison Research did around digital advertising (in RAIN here), you should do it (here). Current streaming advertisers have a lot to say about product quality and how it relates to investment in dollars. There are several national agencies that have pulled dollars from broadcaster’s streams because of break quality issues.
  2. New revenue to the station gets hurt dramatically : Let’s be honest, advertisers are looking for elements in their spend such as better accountability, better targeting, tracking, geo-location, frequency capping, engagement and better post-campaign reporting. And let’s face it, most of this can’t be done with a station’s over-the-air inventory. One of the few elements that a station has in its wheelhouse that allows them to participate in the new world of advertising is the inventory in the stream. It has all of the ability to help stations take part in new dollars and make the medium more relevant and robust. The concept of killing this inventory makes very little sense for where the advertising marketplace has shifted and where advertisers will continue to look at to invest.
  3. The overall streaming marketplace gets hurt: If you are a pureplay company, the lack of broadcaster participation in the streaming marketplace, could actually hurt -– not help -- your revenue picture. This is because the more sellers that are in the market telling the streaming story, the faster the market actually grows. This is especially true in nascent markets, and I saw this first-hand from our early days at Ronning Lipset Radio and TargetSpot.

    Fred Wilson, one of our board members at TargetSpot, reinforced to me the point that being one of the only players in the streaming space wasn’t the best thing for the company. He believed "there could be more than one winner in the streaming space" and having more competitors on the street would actually "rise the tide" for more dollars to be driven into the market. While initially I was skeptical, he was absolutely correct. When our sales team was the only unit talking to clients about the streaming marketplace, we grew the marketplace quickly. But when players such as Pandora, Katz360, and Clear Channel entered the arena, the market grew even faster. The same is true today: the more people that are selling the concept of streaming, the more overall heat and share of voice it will get from the advertising community.

Every broadcaster -– let alone media company -– is looking to drive additional advertising dollars into their revenue mix. I am not sure why streaming would be left out of the revenue equation for a broadcaster. There are those that will say the investment of dollars into streaming infrastructure isn’t worth the effort because revenues are not there because the market is still "young." I don’t see it that way--there are many players in streaming writing significant dollars in the space. I think the real question to ask is this: are your revenues not there because the quality of the product is hurting efforts to drive additional dollars to your stations and to the marketplace?

Andy Lipset is the former Chief Revenue Officer at TargetSpot, and prior to that he was Co-Founder and Managing Partner at Ronning Lipset Radio. He has also served as AOL Music's Director of Sales and VP at ValueClick and Interep.

Not only will listening grow, but Internet radio CPMs will climb as ads are locally-targeted, says analyst

Thursday, October 27, 2011 - 12:55pm

SNL Kagan this week announced its new report, "The Economics of Internet Music and Radio," predicting continued growth for Internet radio ad revenue, outperforming traditional media, over the next decade.SNL Kagan

"We expect radio station digital/online ad revenue to grow... from an estimated $713 million in 2011 to $1.55 billion in 2021," reads the report summary. "Based on our 10-year radio ad spending projections, radio station digital ad revenue is expected to rise from 1.5% of the total in 2007 to 7.0% by the end of 2021."

For "Internet-only" radio, Kagan forecasts a faster growth, from $293 million this year to over $1 billion by the end of 2021.

ForbesCertainly, as Internet radio's audience grows, it'll attract a greater number of advertisers. What's more, as Forbes reports, "SNL analyst Justin Nielson says that with Internet radio services migrating to mobile devices and in-car systems, companies will soon start pushing local and targeted ads." That should raise ad rates from current $5-7 CPMs to the $10-$20 range, Forbes says.

SNL Kagan publishes corporate, financial, and market news and analysis in the media and communications sector. SNL senior consultant Robin Flynn has spoken at the RAIN Summit and was a judge for the 2011 RAIN Internet Radio Awards.

The SNL Kagan report is available here (password required).

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