Convergence of broadcast and online radio may question logic of keeping audience estimates separate

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Issue Date: 
Jan 12 2012 - 9:00am

From Issue:

The ongoing tussle between the broadcast radio industry (which we covered most recently here and here) and Internet radio (mostly Pandora) over ad dollars is now on display for the ad industry in the pages (and website) of AdWeek.

"The streaming services need advertising dollars, and they have monies previously allotted to broadcast budgets in their crosshairs," reads the article, titled Streaming Music Has a Problem—It's a Huge Success. "It is, in general, a well-trod story: New medium goes after old ad dollars. But in this case, the stakes are unusually high. Online radio’s very survival depends on stealing ad dollars from its traditional counterpart, and it needs to do it fast." 

See, Internet radio's ad revenues have been estimated at just 5% those of the broadcast radio industry. In fact, listening is growing far more quickly than ad sales (Pandora CEO Joe Kennedy told CNBC (see video here), "In the short run we really continue to focus on investing (in) this tremendous opportunity to disrupt the traditional radio business. Today we only have a bit more than 4% of all radio listening in this country," he added, which "illustrates how much opportunity lies ahead of us.").

Then of course there's the "onerous" royalties arrangement for copyright sound recordings (an obligation broadcasters don't have, and the terms of which can't be changed until at least 2015) putting pressure on webcasters to bring those ad dollars in.

Aside from the size of the pile (eMarketer estimates broadcast radio's 2011 ad revenue at $15.7 billion -- the graphic you see is from AdWeek), what makes traditional radio ad dollars a logical target for webcasters is the form online radio advertising is taking: traditional audio spots. "As streaming usage migrates to mobile (70% of Pandora’s listening is via smartphones, for example) and vehicles (which utilize smartphones), the ads need to look and feel a lot more like traditional broadcast spots than display ads," AdWeek staff writer Erin Griffith reports. "Filling that mobile inventory with audio spots, supported by broadcast-allocated ad dollars, requires that streaming services are defined as radio, not digital."

And as webcasting emulates the broadcast model, broadcasters have buttressed their position by adopting customizable and interactive digital services themselves (e.g. Clear Channel Radio's iHeartRadio, CBS Radio's Radio.com on top of CBS's purchase of Last.fm). "As consumption of all media shifts online, both sides — their respective diss wars aside — will likely need to act more like the other in order to sell their ad inventory." And this perhaps calls into question the logic of cordoning off listening estimates for broadcasters from those of webcasters. Especially when ad dollars, for both sides, are at stake.

Read the AdWeek article here. And we'd love for you to leave a comment with your thoughts (if you don't see the form below, please click the "Add a comment" link).

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