analysis

Pandora avoids sentiment in analysis of textures, harmonics, and tempo of love songs

Thursday, February 14, 2013 - 1:10pm

Using its Music Genome Project database of song analysis, Pandora for Valentine's Day shared some of its insight into "The Anatomy of a Love Song."

"We thought it would be amusing to mine the Music Genome Project to identify what makes a love song tick. To do this, I've pored over the musicological data of 100 songs from two of our most popular Valentine's Day genre stations," Pandora music analyst Steve Hogan wrote on the company blog.

He found the use of acoustic instruments very important for love songs ("Over 60% of our top love songs favor acoustic instruments over electric"), while "the electric guitar is king" for heartbreak songs. Harmonically, "over 90% of Pandora's most-played love songs are written in major keys," while almost half of break-up songs are in a minor key, and another third are not clearly major or minor.

And what's the "rhythm of love?" "I recommend a tempo of 82.28 beats per minute, for this is the tempo of love," writes Hogan. Heartbreak songs, perhaps surprisingly, don't fall in tempo, but step it up to nearly 120 bpm, with heavier backbeats and more syncopation.

Read Pandora's analysis of love songs here. Happy Valentine's Day.

Coady Diemar says royalty, scalability issues hamper AM/FM growth online

Wednesday, August 1, 2012 - 12:30pm

Investment banking group Coady Diemar Partners released a report today in which they suggest the prohibitive cost of streaming sound recording royalties, coupled with programming that doesn't translate well to the Internet, has led to radio's passive approach to pursuing an online audience.

A quick glance at Triton Webcast Metrics ratings (see a graph here) shows little positive growth for most terrestrial radio's online listening. The Coady Diemar report shows only 8 of 14 terrestrial broadcast companies posting online listening gains from May 2011-May 2012. The investment bankers suggest it's broadcasters' content (simulcasts with "8-12 minutes of commercial time" and lack of customization features) and "lack of scale" (it's not likely for most local radio stations to build Internet-sized audiences) that keep audience growth, and thus profitability, down.

Internet radio listening trends

Pandora, however, has used its advantages as a web-only service (customization features and the ability to build a national brand) for "phenomenal growth in reach and time-spent listening... According to Triton Webcast Metrics, Pandora’s listening in June 2012 accounted for approximately 5.98% of all radio listening, up from 3.37% of listening in June 2011... In fact, since September 2010 in any given month Pandora has captured between 78%-95% of the incremental internet listening."

So Pandora's created a huge online audience, but they face the same royalty hurdle as broadcasters. Despite an explosion of usage, Pandora's royalty obligation prevents them from being profitable. "We believe this lack of profitability is a major reason why terrestrial radio operators have not been more aggressive in marketing and promoting their online streams," reads the report.

"Venture capital firms continued to invest in Internet radio or digital music opportunities in the last year," writes Coady Diemar director Chris Ensley, despite a "lack of profitability" for companies like Pandora due in part to high royalty rates. But "most terrestrial radio companies, many of whom have public shareholders, were not in a position to incur" the type of losses associated with getting started in web radio. In Pandora's case, that totalled "$82 million in operating losses over the last six years."

AM/FM online listening flatlining or dropping for most

Those who've followed the Internet radio space since its inception will remember the industry's bewilderment at potential royalty bills amounting to many multiples of what any service was making at the time. How could something so one-sided in favor of the recording industry as the Digital Millennium Copyright Act -- which (largely) birthed the obligation for webcasters to pay for sound recording copyrights, at rates determined by the CARP (Copyright Arbitration Royalty Panel, now replaced by the CRB) -- have been passed? In 1998 there was no Internet radio industry to speak of to fight it. Had the NAB been "asleep at the wheel?"

The legend grew that broadcasters at the time weren't too worried about high online royalties. They served as a barrier to new media competition. And what did online streaming -- where audiences, and thus ad revenue, were miniscule -- have to do with end-of-the-quarter goals anyway? Radio certainly was in no position to spend $82 million and six years to find out.

As it turned out, of course, high royalties did not prevent the rise of Pandora and Slacker, nor has it prevented terrestrial radio's (still moderate) listening declines. It's also true now that broadcasters like Clear Channel recognize the importance of the Internet and see radio's gradual shift from "local over-the-air" to a market of audio content producers operating on all platforms.

In fact, Clear Channel and its iHeartRadio web and mobile platform are growing well. Ensley credits the company for being "aggressive in promoting iHeartRadio." Clear Channel has also sought clever ways of reducing the costs of streaming, like its new agreement with Big Machine (RAIN coverage here).

Coady Diemar Partners

"By combining its promotional prowess with a more satisfactory online royalty rate, Clear Channel should be able to reduce operating losses while increasing the speed at which iHeartRadio reaches profitability."

Indeed, Clear Channel and iHeartRadio may then be AM/FM's best hope, Ensley writes, especially when it comes to future car dashboards. "No radio station group on its own is likely to be able to compete with Pandora when it comes to being in dashboard on future car models." But by joining services like iHeartRadio or TuneIn, "radio companies can ensure they have a compelling service to compete with newer in-car/in-dashboard services such as XM Satellite and Pandora."

You can find the report from Coady Diemar Partners here.

Popularity of net-connected devices to drive demand for content, says Gartner

Wednesday, November 9, 2011 - 12:55pm

Gartner logoA new study indicates that consumers worldwide are becoming more willing to spend money for premium online music content -- including subscription-based and (to a lesser degree) ad-supported Internet radio (which Gartner lumps in with subscription-based services in their study).  

As consumer spending on CDs and LPs is expected to slide from $15 billion to about $10 billion 2010-2015, Gartner forecasts end-user revenue for online music sales and services will grow more than 31% over that same time span: from $5.9 billion in 2010 to $7.7 billion in 2015. Subscription services (e.g. Spotify, MOG, Rdio, Pandora) alone will take in $532.1 million this year, growing to $808 million next year. 
Gartner chart
While the more mature "a la carte" download market will still drive the bulk of overall online music revenue (a projected $3.62 billion will be spent on downloaded music this year) through 2015, music subscription services are expected be the main growth sector in this market. Gartner says the music subscripton segment itself will show fivefold growth from 2010 to 2015, accounting for nearly one-third (29%) of end-user online music spending by 2015.

"We expect that their (a la carte music download) growth will slow down as more consumers begin to turn to subscription services that are leveraging the popularity of consumer smartphones, media tablets and, in the future, devices such as TVs with Internet connectivity built in," reads a "top line assumption" from the Gartner report. "We include advertising-supported Internet radio services with this class of offerings — for example, Pandora, which offers advertising-supported and monthly subscription options (although our focus is on the end-user spending, rather than on the advertising revenue)."

Read Gartner's press release here; and the report findings here (.pdf file).

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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