Internet radio

Pandora's ratio of revenue to its share of radio listening means earnings potential, says Billboard

Friday, August 9, 2013 - 1:00pm

Labels and performers critical of Pandora's efforts to lower the royalties it pays often say the webcaster should simply sell more ads and generate more revenue. Billboard says its analysis of Pandora's business model indicates it is, in fact, "well-positioned to turn its massive listening audience into profits."

It's simply a matter of monetizing its audience at the same rate as broadcast radio, according to the analysis.

"Pandora had roughly a 7% share of U.S. radio listening in June," writes Billboard's Glenn Peoples. "A 7% share of the $16 billion radio advertising market is worth $980 million to broadcast radio. Pandora’s revenue during the last four quarters was just $417 million. That implies Pandora’s current market share could generate an additional $563 million."

Morgan Stanley analyst Scott Devitt predicted a 15% share of radio listening for Pandora by 2015, which at its current montetization would amount to half a billion in ad revenue. Billboard reasons that if Pandora squeezed the same revenue out of its inventory as radio, it would be four times that ($2 billion).

So, would Pandora need to load up on ads like so many local broadcasters, with several 6- or 8-minute spot breaks per hour? Wouldn't that substantially affect audience? Or would superior ad-targeting mean Pandora could charge advertisers a substantially higher rate than broadcast radio, requiring fewer spots to generate the same revenue?

That specific question isn't addessed in the analysis, but Peoples does write, "no other platform can deliver both audio and display ads to more than 71 million monthly active users while allowing advertisers to target by demographic characteristic and location."

Read the Billboard analysis here.

Apple reportedly has all finalized deals with all major labels and publishers in time for WWDC

Monday, June 10, 2013 - 12:15pm

[From Monday's early edition:]

Today's the day -- Apple is widely expected to unveil its long-awaited Internet radio product to developers today at its Worldwide Developers Conference. The service is expected to launch for consumers in September, according to The Wall Street Journal.

Launch of the new service was delayed by negotiations with music labels and publishers, and the final deals weren't finalized until late last week (see RAIN here) (the final publishing holdout, Sony/ATV, has apparently reached an agreement with Apple -- see CNet's reporting here).

The Journal reports that two of the tougher matters to settle were "the point at which Apple must begin sharing ad revenue with the labels and the minimum guarantee it would offer as an insurance policy." There was also disagreement over "whether Apple will have to pay for songs listeners skip — it won't under some deals — and how well it should compensate music publishers."

All Things Digital's Peter Kafka writes today that "If Apple wants to generate real ad money for iRadio, then that means it has to try to crack the market for radio ads. And that is a very, very un-Appley business.... It doesn’t really matter what kind of precision targeting the Internet offers — the bulk of that $14 billion comes from local ad sales," he wrote. "And it’s a slog." Read more from Kafka here.

According to the paper's sources, Apple will pay the labels about half of the ad revenues, with publishers getting only 10% (which is actually more most webcasters and broadcasters pay).

Read more from The Wall Street Journal here.

Will Apple be competitive in Internet radio? Experts say: "Depends"

Monday, June 10, 2013 - 12:15pm

Forrester Research analyst James McQuivey told The New York Times that Apple is too "late in the game" to compete in Internet radio on the level of Pandora. That is, unless they unveil a product that significanlty, and noticeably, better than what other services offer.

He said, "It’s going to have to innovate. It can’t just be Pandora with an 'i' in front of it or Spotify with an 'i' in front of it."

Oracle Investment Research chief market strategist Laurence Isaac Balter sees things lots differently. He gives Apple the advantage of Spotify and Pandora owing to "deeper control of the iPhone software and hardware" (in The Times' words), and "more data about its customers... so it can make smarter music recommendations..."

User data and preferences can later be leveraged for a potential Apple television product, Balter told the paper. He said, "There’s so much of a white canvas here for Apple to paint on. It’s refreshing to see them start to think in this area."

Read more in The New York Times here.

The Onion spotlights key features of new Apple Net radio service

Monday, June 10, 2013 - 12:15pm

Online satire newspaper has a very funny and characteristically clever list of "top features" of the new Apple Internet radio service today.

They are:

  • Each song preceded by 45-minute Tim Cook presentation
  • Option to play a different song in each earbud
  • Tons of Floyd
  • A daily morning zoo show with Siri and her rowdy friends
  • Ability to lower volume is disabled whenever a really good song is playing
  • Is eager to please
  • Audiobook chapters from Steve Jobs’ biography constantly sprinkled in throughout users’ listening sessions
  • Access to millions of songs readily available on Pandora, Spotify, and Google Play

See it at The Onion here.

AdAge says better targeting of iAds on Apple net radio service will make them more lucrative

Friday, June 7, 2013 - 10:50am

Apple and Sony Music have reportedly reached an agreement to license Sony-owned sound recordings for Apple's upcoming Internet radio service. Sony Music was the final major label holdout; Warner Music and Universal (including EMI) are already in.

"As of earlier this week, the company had yet to sign up Sony/ATV, Sony’s music publishing arm," All Things Digital Peter Kafka wrote today (here), meaning it's not yet full-steam ahead for what the press has called "iRadio."

"But the gaps between Sony/ATV and Apple were supposedly smaller than the ones Sony Music and Apple were looking at a few days ago."

It's expected that Apple will announce the service at its Worldwide Developers Conference on Monday, and make the service public later this year. As an Internet radio service, it's most obvious competitor out of the gate would be webcasting giant Pandora.

Paul Resnikoff at Digital Music News points out (here): "So, kill Pandora, kill? Not exactly: just recently, Pandora CEO Joe Kennedy noted that Pandora's extremely-huge audience makes it nearly-impossible for Apple to boot the app off its iOS deck. Then again, that's what they said about YouTube."

The new Apple service will compete with Pandora not only for listeners, but for advertisers as well. Earlier this week we reported (here) that Apple was retooling its underperforming iAds program to support the webcasting service. AdAge says (here) using the iAd service for the Net radio product will allow Apple "to retain a higher percentage of that ad revenue compared with other iAd inventory. Currently, 70% of iAd revenue is given to publishers who monetize their apps using the service, according to Apple's iOS developer program." According to sources, Apple's deal with music rights holders calls for the company to turn over 10% of ad revenues.

AdAge also reported Apple's service will allow advertisers more accurate consumer targeting than would-be rival Pandora. Pandora steers appropriate ads to listeners based on age, gender, and area code (as supplied by listener). "If a Pandora user changes his or her permanent residence and fails to update their zip code in his or her Pandora account, the ability to target ads based upon location is nullified," AdAge wrote. "Using iRadio on an iPhone will give iAd the ability to more precisely target ads to users based on location." And better targeting can command higher advertising rates.

7digital to license access to DMCA-compliant streaming, 25M licensed tracks to U.S. webcasters

Thursday, June 6, 2013 - 12:05pm

London-based 7digital is releasing its "DMCA-compliant" music streaming platform to would-be U.S. webcasters. Turntable.fm's Piki service (more in RAIN here) is already using the 7digital service to stream.

7digital provides its digital music store and other related services to consumer electronics companies like Samsung and music services like Turntable.fm.

The company's streaming radio API is meant to make it easy to launch an Internet radio service that adheres to the restrictions of the U.S. law known as the Digital Millennium Copyright Act of 1998. (The law limits the ways in which "non-interactive" services can present and make music available to consumers.) The streaming API also affords access to 7digital's full catalog of more than 25 million tracks of licensed music.

7digital thinks there's real appeal to consumers and a growing market for curated, "non-interactive, DMCA-compliant" services -- that is, Internet radio.

The company's president for North America Vickie Nauman told TechCrunch, "It's such a great lean-back experience and we’ve been watching the marketplace and we feel that the partners that we have that are doing really well, combined with the need people have for a really easy way to listen to their music have led us to decide that this year we're really going to focus on radio."

7digital CEO and founder Ben Drury spoke at the recent RAIN Summit Europe conference in Brussels. Hear audio of the entire conference with SoundCloud. The links are in the right-hand margin of kurthanson.com.

Read more in TechCrunch here.

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