Las Vegas

RAIN Summit West recap: The royalties panel

Friday, May 24, 2013 - 1:20pm

The annual spring RAIN Summit West gathering in Las Vegas last month closed with a discussion of the evergreen topic of music licensing costs and the effects on services. Somewhat encouragingly, the on-stage participants -- representing webcasters, the music industry, rights organizations, and performers -- seemed to agree on more than disagree. The panel, "The Song Plays On," was moderated by attorney and webcasting legal expert David Oxenford.

Attendees heard from artist Patrick Laird, a cellist in the classical/rock outfit Break of Reality. A strong advocate for webcasting, he says his band's experience has led him to believe play (that is, exposure) on Internet radio is far more valuable than the royalties his band earns from that play.

"I'd much rather be played," Laird said. "We've had over 16 million plays in a year on Pandora... we wouldn't get radio play otherwise... but our record sales tripled." He told a story of a promoter finding Break of Reality on line and booking them for a show which paid them more than all their royalties for an entire year.

When the discussion swung to the promotional value of Internet radio versus that of on-demand streaming, Laird (left) said, "Internet radio is what radio has always been, a discovery tool, a way to sell tickets, to fill concerts, to sell music, to get more fans. Internet radio is a better version of radio, it does all those things better. What's important is the growth of the medium. We need to support Internet radio, it's the future of the way people discover music... especially independent artists."

Consultant Ted Cohen, of TAG Strategic, while maintaining that "radio should pay," respects the benefit to artists of being played on services that can now reach "a hundred, two hundred million people." He said, "We're somewhere in the sweet spot -- I don't think the artists and labels are entitled to more... I'm not sure how much less they're entitled to."

This led to panelists considering how services could be even more beneficial to artists. Laird really liked the idea of linking directly to artists' presences on Facebook or YouTube ("that's money right there"), and suggested giving tghe artists themselves an interface to maintain those links.

But SomaFM GM/Program Director Rusty Hodge (right) feels the statutory license is a barrier to some of these methods of promoting new music. He suggested the need for a wider range of licenses, that could, for example, allow for use of music that's currently prohibited by the "performance complement" of the law (such as a rule forbidding play of more than three songs by a single artist in two hours, among others). It "keeps you from doing a lot of creative things," Hodge explained.

Cohen agreed that constraints on webcasters' use of content, even when promoting artists, held back creativity.

Moderator Oxenford then brought up the fact that some services like iHeartRadio and Apple's upcoming service are negotiating directly with copyright owners (and going around the statutory license) to, among other things, avoid the constraints of which Hodge complained. And while services going this route would lose the convenience of a "one-stop" for all their licensing, Cohen said the process of direct licensing has become much easier in recent years: "The goalposts have gotten wider."

Getting back to the statutory license, Oxenford asked if a "percentage-of-revenue" royalty model, such as those employed by publishing performance rights organizations, makes more sense for a young industry like Internet radio (The statutory rate is based on a "per performance" rate, a performance being one song/one listener.).

SoundExchange Senior Counsel, Licensing & Enforcement Brad Prendergast explained "the beauty of a per-performance" royalty is that "every transmission of a track is valued the same -- it's 'delivery mechanism neutral.'" It helps protect the value of the music from an operator that would use a high volume of music but make very little money from the service. (He also reminded the panel that there are indeed some statutory agreements to which SoundExchange is a party that use a percentage of revenue, such as the small webcasters' license).

One recent development the panel brought up was the announced withdrawal of digital rights by some publishers from performance rights organizations (PROs) like BMI and ASCAP. BMI VP/New Media & Strategic Development David Levin (left) explained that publishers are seeing record labels making much more licensing music to services than they are, because the PROs operate under federal regulations that they feel supress the rates they can charge. The publishers tell BMI, Levin said, "Because of the government structure you operate under, we can get a better rate outside of this monopoly, by going direct."

Cohen empathized with the sentiment. "The labels are getting 90% of the revenue, the publishers are getting 10%. That pendulum has to swing a little bit."

We have audio for all of our RAIN Summit West content (including this panel) available via SoundCloud. Look for the links in the right-hand side of kurthanson.com.

Rhapsody's Irwin suggests strategic partnerships to defray costs, make services more attractive to consumers

Wednesday, May 22, 2013 - 6:20pm

Streaming music service Rhapsody has committed to providing "liner-note-style credits" for every track in its 17 million-plus library, including the names of producers, engineers, composers, session performers, and more (you can read more about this in The New York Times here).

There are likely several reasons why Rhapsody would commit to such a huge undertaking, but one might just be that enhancements like this help make service the center of (listeners') music experience," to quote the company's Jon Irwin. Irwin, Rhapsody International president, gave the second of two keynote addresses at the recent RAIN Summit West event in Las Vegas.

Liner note-style credits would also help the listener and the artist to "connect in a meaningful way," to again paraphrase Irwin -- fundamentally necessary for creating the experience for which consumers will pay. 

The streaming music/Internet radio space is certainly crowded, yet Irwin maintained that none of these companies are "really killing it" from a customer experience perspective, or from a profitability perspective (and he includes his own company in that assessment). "Nobody has nailed it across all content types and all listening modes," he said, to offer what he termed "the Ultimate Stream." That is, the various types of content (music, news, sports, comedy, live radio) a listener might want at different times, in any listening venue or device (in the car, the mobile phone, at home).

Irwin listed what he thought the necessary qualities of the perfect music service interface. It would (be):

  1. deeply personal
  2. drop-dead simple
  3. connect fans to artists, personalities
  4. new yet familiar
  5. easier than piracy
  6. guided by trusted sources
  7. needs to be embraced by artists and personalities.

Yet creating that is just half the challenge. There's the question of creating "a rational business model" he mentioned. That is, balancing the need for momentum and growth, yet "making sure you're following a sustainable business model, in which you're delivering enough value to your listeners so that they'll pay you for the service" (either by accepting ads or paying a subscription fee).

One solution he offered is for streamers to partner with services with which consumers already have "trusted billing relationships" -- like mobile carriers. Rhapsody itself has partnerships with moblie carriers Metro PCS in the U.S., and E-Plus in Germany. The cost to the consumer is decreased (as its subsidized by the carrier), and it's easier to pay because it's rolled into a bill they already pay. Parntering in this way "takes you down off that $10 price point, you can get actual and perceived reductions in well over 50% for consumers and still give them a great experience," Irwin said.

We have audio of Irwin's speech (and all our RAIN Summit West content) available for free via SoundCloud. Look for the links in the right-hand margin of kurthanson.com. Irwin also published an op-ed summarizing his speech in Hybebot here.

RAIN Summit West recap: NPD Group research

Wednesday, May 15, 2013 - 11:55am

NPD Group SVP/Industry Analysis Russ Crupnick sees the music industry headed towards another cliff -- and thinks streaming audio and capturing the favor of the 100 million "casual music fans" may be the keys to averting it. Crupnick presented recent research findings at RAIN Summit West last month in Las Vegas. 

"We desperately need streaming radio to succeed," Crupnick told attendees. "We need to get the lawyers, guns, and money out of the way, and start having a better understanding of how to get consumers on to the next model."

Back in the '90s, 90% of adult Americans regularly bought CDs. NPD research shows it's now 35%, and that's not being replaced by paid downloads. Just about 23% of people have purchased a music download in the last year, which means 3 of 4 haven't! And, as much as CD purchasing has dwindled, it's still more prevalent than downloading! And the amount of time people spend listening to these legacy formats (CDs, MP3 files, and even radio a bit) is down too.

Here's the bright spot: online radio usage is up 6% among young people (see the chart) -- and up 23% among baby boomers -- in the past year. Online radio is even the "way number-one" reason people are quitting P2P downloading: "It's just so much easier to use a streaming service," Crupnick paraphrased.

And, Crupnick adds, "these are really valuable customers" to the music industry. While the average American spends $24 on music in a year, Pandora listeners spend $40, and Spotify users $52. Streaming audio listeners also strongly out-index average Americans buying concert tickets.

But the real opportunity for streaming radio to succeed, and the music industry to avoid another cliff, Crupnick argues, is not going after the "core" music fans (the 30% of the population that accounts for 80% of the money spent on music). Radio and streaming services are already "serving them really well." The opportunity lies with attracting the other 70% of people -- the "casual" music fan.

Consider: Nearly all "core" music fans listen to AM/FM, and 77% listen to non-subscription online radio, according to NPD figures. And while a good majority of casual fans also listen to music on AM/FM (74%), just 25% listen to free online radio. That's the 100 million people market opportunity. That's the potential audience gain for Internet radio, if it can reach beyond the hard core music fans and get to everyone else who listens to AM/FM.

And to do that, Crupnick advises, it's necessary to understand the mentality of that casual listener. He stresses that the research shows these people aren't at all focused on those things broadcasters and webcasters obssess over. NPD found, as he put it, "98% of people don't know what 'an Rdio' or MOG is!" Most casual listeners don't really have any interest at all in mobile apps (though he suggested an Apple streaming radio entrance might change the game).

The lack of interest in mobile apps notwithstanding, Crupnick says "this battle is going to be won in the car," as that's where the vast majority of casual music fans' listening takes place.

And casual listeners aren't interested in subscribing for music either. "We've gotta figure out a way to help these services thrive outside of subscription," he concluded. "We can work together, labels, artists, services, to grow the pie."

RAIN Summit West was April 7 in Las Vegas. You can listen to audio from Crupnick's presentation, and all the RAIN Summit West content, on our website. Look for the SoundCloud links in the right-hand margin of kurthanson.com.

Our next event is RAIN Summit Europe, May 23 at the Hotel Bloom in Brussels. Limited space is still available. Information and registration links are available on the RAIN Summit Europe website here.

Summit panelists look at accelerating revenue from ads, subscriptions, and donations

Tuesday, May 7, 2013 - 12:50pm

Triton Digital president of publisher development Dominick Milano acknowledged that there's a "disconnect" between the unprecedented amount of audio consumption made possible by Internet and mobile technology, and the fact that advertising dollars haven't moved to those platforms in levels reflective of the audience. That "disconnect" served as the premise for the Triton Digital-sponsored "Accelerating Your Revenue" panel, which Milano (at right) moderated, at last month's RAIN Summit West event in Las Vegas.

The panel covered the three principal revenue models for online radio: advertising, premium (or subscription), and listener-supported (i.e. donations).

Katz360 VP of broadcast services and online audio and video sales Dean Mandel suggested one key is the right combination of broadcast radio and online radio -- not only for ad campaigns, but in creating worthwhile listening experiences. He encouraged radio programmers to "take better advantage" of what technology has to offer to improve their online product.

"The programmers are brilliant and if they can come up with interesting content to fill instead of a lot of PSAs and ads, it will help grow the audience," Mandel (left) said.

He said he sees lots of value in what sets local broadcasting apart from national/global database-driven music webcasters: a local brand, personalities, and local content.

Mandel is also a big supporter of targeting advertising, and suggested effective listener-registration helps a lot. His "pro-tip" was for stations to look for online listening happening in markets outside your own that may command higher CPMs (his example was a Charlotte station that might have significant listening in New York City).

He also suggested that media buyers have indeed become sophisticated, and being able to provide them with targeting and third-party tagging on audio will raise CPMs.

Andrew Polsky, as VP of digital media for SBS Interactive, also deals in the advertising world. He says what his company needs is "advocacy" at the agency and buyer level, especially for the Hispanic market.

His company, aside from Hispanic-focused broadcast and online radio, owns MegaTV (video content and network) and SBS Entertainment (which is concert production). Key for him is being able to leverage all the properties as a unified platform, "offering a 360 approach to advertisers," and using content from one property on the others (see his company's LaMusica mobile app as an example).

Polsky (right) seconded Mandel's notion that there needs to be a better solution than "PSAs" to fill long stopsets when streaming broadcast content.

Michael Jackel, who is Spotify VP of West Coast advertising sales, also agreed about the power of being able to target listener groups for advertising (he addressed the perception of his company as a "subscription service," but insisted Spotify is a "dual-model" business with the large majority of its users accessing via free, ad-supported streaming).

Moderator Milano asked Jackel (left) if there were a model for subscription alone to work -- or if services need a free version to remain viable.

"If the value proposition is really there, pure subscription can work," Jackel answered. "Spotify has a great product that's free, but the premium is a great value proposition." He said, in the U.S. especially, people are used to "free," so Spotify's free streaming makes sense. "Pandora isn't winning on the subscription model because there's not that much value to their premium service," Jackel went on. "Few people will pay just to 'not have ads'. You have to offer something that's really compelling in order for people to pay for it."

Compelling content is also key to driving donation revenue for listener-supported stations, like Joe Gallagher's MVYRadio.com. After some background on WMVY-FM and its early foray into streaming (Net Radio Sales, now Katz360 and AndoMedia/Webcast Metrics, now owned by Triton Digital, were both born of these efforts), Gallagher said successful donation support relys on offering content that "serves a niche, serves a vertical" and allows for "a passionate connection" with listeners.

Gallagher is the "#1 volunteer" for Friends of MVYRadio, the non-profit 501(c)3 that runs the (now) Internet-only, listener-supported station (more in RAIN here). He's also president and CEO of Aritaur Communications, former owners of WMVY-FM. He says his listener-supported model has "worked well, really well," and allowed for year-over-year growth for the past four years. The station recently raised the necessary $600k to operate for the rest of the year.

Gallagher (right) explained that listener targeting allows him to (for example) entice donations from L.A.-area listeners by giving away tickets for a concert there.

Milano polled the panel on the likely entrance of Apple into online radio. Katz360's Manel said, "It'll grow the business, it's a good thing. It might make local AM/FM focus more on their local value proposition" -- again, meaning the personalities and local content.

Spotify's Jackel said, "It's good. When (Apple) come(s) in, advertisers and Wall Street will see the value... it lifts the industry, it publicizes other businesses, to consumers AND advertisers."

You can listen to audio coverage of this panel, and all of RAIN Summit West's content, at kurthanson.com (look in the right-hand margin).

Triton Digital CCO and general manager of data and measurement Rob Favre and SVP and general manager of international markets Jay Supovitz will be part of RAIN Summit Europe, May 23 at Brussels' Hotel Bloom. Spotify's Benelux managing director Tom Segers will also be there. Info and registration links are on the RAIN Summit Europe page.

Hanson advises Summit on 7 key trends and 7 action items to get us to the year 2020

Monday, April 22, 2013 - 1:10pm

The year 2020 sure sounds like the space-age future, but so did "2000," remember? (If our calculator is to be trusted, it's less than 7 years from now!)

RAIN Summit West attendees heard Kurt Hanson's "'new-for-2013' State of the Industry" address in which he encouraged broadcasters and webcasters to make a plan for 2020, based on seven key industry trends and seven possible "action items" to get there.

Kurt Hanson is CEO of multi-channel webcaster AccuRadio, and publisher of this newsletter. His "State of the Industry" speech is a recurring feature of RAIN Summits.

Kurt cited several specific, quantifiable changes in consumer behavior that he says are key to understanding where radio might be in 2020. Chief among them is the explosive growth in Americans' consumption of online radio.

Based on the latest numbers from "The Infinite Dial" (Edison Research and Arbitron, read more here and here), 86 million people now listen to radio online weekly. That's a third of the U.S. population, and 253% of what it was just five years ago. Online radio's time-spent-listening (TSL) has nearly doubled since then, to almost 12 hours a week.

Multiplying the number of listeners by the time they're spending listening, and you see online radio listening is almost 500% higher than it was five years ago.

Next, Kurt brought in listening measurements for leading webcaster Pandora from Triton Digital's Webcast Metrics. Pandora is now up to a 1.6 million "average quarter hour" (AQH -- which can be understood as "the number of listeners at an average moment"), which is about equivalent to an eight-share of all radio listening (In other words, in your market, about 8% of those listening to radio right now are listening to Pandora).

"It's an undeniable trend," Hanson said. Looking to a 2020 plan, broadcasters can see this consumer behvavior "as a threat, or as an opportunity."

A second key consumer trend Kurt spotted is the "primacy" of mobile phones in people's lives ("This is basically a full-featured personal computer that is 4 oz and fits in your shirt pocket," Kurt said.).

The remaining key trends include (3) our "world of on-demand variety" (in which consumers are offered 42 types and flavors of Crest toothpaste and at least 12 versions of Cheerios cereal); (4) the rise of the tablet as a media-consumption interface; (5) "open" car dashboards (that is, car makers won't limit Internet and mobile access to a single, select technology vendor), and (6) "near-infinite" bandwidth (ever-increasing connectivity via mobile and wi-fi).

The seventh "reality" professionals should understand in creating their "2020" plan: there are "billion-dollar" opportunities out there, evidenced by the fact that online radio has produced its first billion-dollar brand, Pandora.

The public company's market cap is more than double the combined market caps of the country's top-five biggest "pureplay" AM/FM radio groups (Cumulus, Entercom, Saga, Beasley, and Radio One): $2.1 billion compared to $1.2 billion.

"Again," Hanson advised, "you can see this as a threat, or as an opportunity. You can build a brand like this." As a public company, Pandora's historical financial reports are easy to access. Anyone can "see how they did this," Kurt said.

The matter of sound recording royalties remains the biggest threat to all of this, however. But Kurt offered this: "I believe it's going to be resolved, because in the debate on royalties over the last decade, musicians and net radio have been on opposite sides -- but for musicians, Internet radio is one of the best things that have happened to them."

Given the royalty arrangements in place today, one million "performances" on Pandora would yield an artist about $600. Webcasters lobby for royalty relief, and the record industry calls for higher payouts. But Kurt argues that this tug of war on this price point (should it $500? $700?) misses the far greater value artists get from those plays.

By way of demonstration, Hanson showed how it's possible that one million "performances" of a talented but niche-appeal band like Chicago's Canasta could result in an eventual payoff of $980 thousand over time.

[For go over the math with Kurt, please listen to the audio of his presentation here, at the 22:30 point]

On the matter of Apple's likely entry into webcasting, Kurt suggested "it might be great for all of us." He cited other battles between brands -- like when two CHR stations in the same market go head-to-head -- as being great for the product category.

Looking to create a plan for 2020, Kurt offered broadcasters and webcasters seven "action items" they might incorporate into a strategy.

First, define radio "inclusively." When limited to AM/FM, "radio" does not appear to be a growing industry. But when segments like online and mobile are included, and growing and aggressive companies like Pandora, radio is healthy, growing, and well-positioned for the future.

Second, as you look for growth opportunities in online radio, maximize the value of AM/FM signals. "Be live, local, and linear," according to Kurt. "Linear," in this case, means a focus on content that makes sense in an "in-sequence" presentation (talk, sports, most news).

You'll need to (3) build a great team, and (4) be ready to embrace new business models. "You'll be better off if you can be flexible and embrace new approaches" to ad sales and programming.

Next, when entering a new product category, it's best to come up with a new name, and specialize the product to a specific consumer market, Kurt offered. Consumers perceive that "specialist" brands (think McCormick & Schmick's seafood restaurants, or Ruth's Chris steakhouses) are of higher quality in their focused segment.

(6) Be prepared to take that brand global, and (7) have the guts to gamble.

"Don't wait until it's a sure thing to get started," Kurt said. "Don't take the 'wait-and-see' approach to develop your '2020 vision.'"

Listen to Kurt's "State of the Industry" speech (and all thet content from our recent RAIN Summit West) on SoundCloud at KurtHanson.com (look in the right-hand column).

Our next event is RAIN Summit Europe, May 23 at Hotel BLOOM in Brussels. Event information and links to register are here.

Deeper understanding of listener expectations and preferences key to building audience, say Summit experts

Friday, April 19, 2013 - 1:50pm

Unsurprisingly, the panelists in our RAIN Summit "Accelerating Your Audience Growth" panel stressed the importance of good, "differentiating" content to build an audience -- especially as music (and even news) becomes "commoditized."

More interesting was this point: An important step towards delivering the right content is a more thorough understanding of your listeners.

Edison Research cofounder/president Larry Rosin (left) moderated this first panel of the afternoon half of the Las Vegas Summit. He asked Pandora VP of Engineering Chris Martin about Pandora's "genre" stations

[sidenote: Pandora not only creates channels "on the fly" by asking the listener for a favorite song or artist, it also offers more traditional radio-style channels programmed by genre, e.g. country or pop hits]

Martin (right) explained them as the product of realizing that not all Pandora listeners come to discover new music. Rather, these channels are an "entry point" for those listeners who want a "super simple" experience based around artists they already know.

Rachna Bhasin is SiriusXM SVP/Corporate Strategy and Business Development (lower on the left). She explained SiriusXM is always looking for new content and talent intended to drive more subscriptions. Those efforts are informed by significant amounts of research and interviews with listeners, and an understanding of the expectations of "key audience demographics" to develop that content ("We're doing a lot with Latin right now," she illustrated.)

The Echo Nest CEO Jim Lucchese introduced his company's concept of "audience clusters" as an example of understanding the listener to deliver the right content.

[The Echo Nest is a "music intelligence" service with a massive database on listeners preferences and musical attributes of millions of songs, which is used by services like Spotify and iHeartRadio (and SiriusXM's new MySXM customizable streaming service).] 

Putting "a real keen focus" on understanding the listener, Lucchese explained, means looking at "clustering audiences into different types of music listeners" and examining how different underlying programming rules need to be applied for those different clusters.

"We found different 'rule sets' drive engagement wildly differently based on (listeners') geography, (preferred) style of music... you need to understand your fan base better before messing around with rules."

Rosin followed up with a question on how The Echo Nest client services learn about listener preferences, especially new listeners. Lucchese (right) explained some services can scan a new listener's local media library (by examining their iTunes XML file, for instance) to get a sense of the listener. There's also public preferences expressed on social media (such as Facebook 'likes'). Then, of course, later the services can simply track "what you listen to" -- and, importantly -- "how you react to it and build that up over time."

The Echo Nest CEO spoke directly to broadcasters and advised them to improve their streams by spending more time "focusing on and understanding" their audience: "Online listeners provide you with a ton of information about who they are. We're still in the stone age about recognizing not just what they like, but how they listen. Developing that will make a more engaging experience, and a more profitable one," he said.

Speaking to this very point, ABC News Radio VP/GM Steve Jones (left) described how he wants this guide the development of his service.

For a hypothetical 28-year old country music listener, Jones' company has vast amounts of "non- fiction spoken word" that she'd find of interest (she could learn how to "advance her career, manage her boss, get relationship advice").

"We can't yet, but what I'm excited about is being able to, when that listener is finished listening to a Taylor Swift song to let her know there's an opportunity right now to drive that listening experience into one of those other areas," Jones said. "That, to me, is the future, to control how listeners are going to consume audio beyond any one narrow niche..."

SiriusXM's Bhasin even returned to the theme of "understanding the listener" when discussing Apple's expected entry into streaming radio: "They have lots of data" on purchase history and customer preferences from which they can draw to program the right content. "They're trying to build curation now."

Consultant Alan Burns (Alan Burns & Associates president/CEO) (right) even suggested streaming broadcasters and pureplay webcasters could look to each other for better ways to present content.

"What radio needs to do most of all, the thing that would boost online listening to (music) radio streams," Burns said, is to "make broaddcast streams skippable" (that is, replicate the ability of most Net-only streaming experiences in which a listener can instantly skip to the next song).

For pureplays, his advice was that "jukeboxes don't hold up as well" as programming with "deeper branding and content." Pureplays need to create experiences "that will help them develop the personal bond you get with traditional radio," he suggested.

You can listen to the audio of "Accelerating Your Audience Growth" from RAIN Summit West. Go to RAIN's homepage to find all the RAIN Summit West audio in the right-hand column.

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