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

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Issue Date: 
Apr 22 2013 - 1:10pm

From Issue:

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.

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YouTube

I wasn't able to attend RSWest this year but enjoyed the SoundCloud audio of Kurt's terrific State of the Industry 2013 presentation. Will you be posting the video of the presentation on YouTube?

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