If Pandora provides value and a better way to enjoy music, "real radio" question is irrelevant, says Jacobs

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Issue Date: 
Jan 23 2012 - 11:00am

From Issue:

Own a digital camera? Do you take photos with your phone?

Here's why we ask: Consultant Fred Jacobs, in his Jacoblog today, offers a nice analogy of some broadcasters' thinking in regards to Pandora and the argument that it "isn't radio." Imagine it's the 1980s, and you work at Kodak. And someone said this:

"Digital isn’t really photography. Photography is defined as buying a roll of film, inserting it into the camera, taking pictures that exhausts the film supply, removing the film from the camera, and taking the roll of the film to a drugstore or Photomat, waiting a day or two, paying for the processing, and picking up the pictures – some of which look good but most are terrible. That’s photography. So you can’t say that 'digital photography' is really photography because it doesn’t use film and doesn’t need to be processed."

How'd that turn out for Kodak and "real" photography? See, the crux of it is: consumers don't care whether something they find entertaining or useful fits your strict definition or category. If I can watch a film on my tablet, whether or not the industry considers that "seeing a movie" couldn't be more irrelevant to me. What should be relevant to the industry is that I may do this instead of going to the theater. Or watching something on television. And if someone is playing song after song of music that may or may not be in my personal library, perhaps in my car, it doesn't really matter to me whether it fits your definition of radio. But my engagement with it should be relevant to you!

What's important is that your listeners may enjoy this in addition to (or instead of) your content

Back to Fred Jacobs, who asks, "Instead of arguing about whether Pandora is or isn’t radio, wouldn’t it be smarter to learn what consumers are thinking, feeling, and doing – and then incorporate that learning into radio’s brands?"

Read his blog here.

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Another perspective on Fred's commentary

Dear Fred:
Dear Fred:

With regard to your articles yesterday and today, I like to think that Radio has taken the consumer reaction to Pandora and other digital audio entertainment options developments seriously. But I don’t think that the primary reasons people listen to radio are the same as the reasons people listen to Pandora (or iPods on random or genius, or cd players), so I don’t think the Kodak simile is altogether an accurate one.

If all that radio offered was “listening to music”, it would be. “Taking a picture” is taking a picture – that was the end game. Kodak chose to take quality of reproduction as the driving factor of selection and usage and ignore convenience, even though convenience had come up to bite them before (with the “instant picture” Polaroid market). They refused to let people capable of reframing what ‘photography’ meant sit at the table; their driving consideration was protecting their profits, not the future of the business. We saw the same thing with the American auto industry, which refused to consider changing their decrepit systems because the CEOs were paid on five year performance cycles. No one was going to ruin profits during their five year cycle by retooling and rethinking what people expected fromtheir vehicles. So most of the companies went into bankruptcy.

Some of radio is guilty of stalling and avoiding the future. They refused to embrace the Internet, everything from streaming to putting their personalities on social websites, widening audience participation through social media channels, and tying compensation to developing these new revenue streams. A few, unbelievably, still do (and many have gone into bankruptcy). But much of radio opened their eyes and opened those digital doors, many early on, and began incorporating them into their content. They invited the visionaries to the table. What they found is what radio critics have a difficult time embracing – that what people love about and expect from radio is RADIO — the content (on any delivery platform) that makes them say “I love these guys. They make my day.” That isn’t just playing music.

While “listening to music that someone picks for me” is indeed one of the major driving factors of selection for radio, it is not its defining expectation. If it were, radio would have been overrun by all the other ‘audio entertainment’ entrants (8 tracks, walkmans, tapes, cds, iPods, satellite radio, internet radio pure plays, channels on cable tv…). But the primacy of radio’s content is based on an emotional connection with the people who generate the content associated with a givenradio station. Including the consumer-generated-content of fellow listeners — something we’ve had since the day the first DJ played a request or read a dedication.

Radio isn’t threatened by Pandora — because Pandora doesn’t deliver the entertainment experience expected by listeners from radio, any more than an iPod does. Radio would be threatened by any alternate form of audio entertainment if we stopped producing content that generated an emotional connection with our listeners, one they perceive as personal.

It comes back to business models, doesn’t it? Kodak degenerated into a company with a lousy business model. I believe that’s one of the criticisms the Street has leveled against Pandora. We’ll see. In the meantime, people need to understand that there is a very good reason that Pandora has to use Edison to develop “Average Quarter Hour-like” ratings for them. It’s logistically impossible for Pandora to encode for PPM ratings by Arbitron because Pandora is not structured and cannot be measured like a single radio station. Hence the skepticism at the comparison of Edison’s data to Arbitron’s data.

Please do continue to be a gadfly to the possibility of radio’s complacency. But please also look for apples to apples comparisons. It’s something no one seems to be able to do when it comes to comparing Pandora with Radio.

Mary Beth's comment

MB, thanks for taking the time to heighten the conversation. (It will no doubt continue tomorrow as we continue our theme.) You are right that RADIO provides something very different from what Pandora offers – at least some radio.

The FM jukeboxes may be more threatened by Internet radio, but well-branded, highly local, personality oriented radio has clear-cut advantages – IF companies continue to fund and believe in their missions.

The trend in radio moving away from local content and personalities contrasts sharply with actions that might highlight radio’s inherent strengths. There are ratings and scalability goals that radio must confront. But in the long run, if there are quality-sounding Internet music channels available without commercials, those attributes deserve consideration.

Radio will need to continue offering that “experience” you speak of, and companies like CBS Radio running “local audits” by their stations speaks to the need to re-examine content, focus, and long-term goals.

Pandora may be different from many broadcast stations, but to a consumer, it’s also about “mindshare.” While Pandora’s business model may ultimately be flawed, their ability to satisfy and entertain is worth nothing. And it’s a message to radio that content and commitment matter.

Thanks for your truly credible viewpoint.

Mary Beth & Fred

Bravos to both Mary Beth and Fred. The intent and sincerity of your remarks deserve respect and appreciation. Thank you.

My sense is there are two issues representing significant and ongoing disruption hiding in plain sight. Media behavior (i.e.,consumer consumption, time spent, related to all available audio options). Advertising and marketing spend, particularly those dollars invested in ad-supported measured media. These disruptions are not simply matters related to new technology for as Henry Jenkins of MIT says "Our focus should be not on emerging technologies but on emerging cultural practices."

The legendary business case of Swatch comes to mind. The Swiss invented the digital watch but failed to appreciate its appeal - too prosaic being their thought. The Japanese - Seiko and Citizen - recognized the potential of low cost digital watches and quickly captured the low and medium priced watch market leaving the Swiss with only the high end. Nicolas Hayek founded Swatch with a big dream: rebuild the Swiss watch industry. His mission was to create an inexpensive digital watch which offered a quality which could not be matched by his Asian competitors. His game-changing idea was the low-cost watch as fashion. He went on to realize great success in creating fashion-forward, low-cost, high-quality watches in Switzerland. To compete with the Asian advantage of cheaper labor costs his first task was to completely reinvent the fundamentals of the watch industry including design, manufacturing and distribution. Hayek proved it possible to win, recapturing the entry, low and medium level watch markets and do it in Europe (maintaining the comparatively higher European wage standards). At the start of his mission Hayek was thought to be crazy, few believed in his turnaround chances much like Jobs when he returned to Apple with 90-days of operating cash on hand.

My suggestion is while there is certainly a bunch of great radio being committed every day in America, there is also an urgent need to now engage in the hard work of imagining a brighter future. Commenting on the incredible success of Swatch, Hayek said "Everywhere children believe in dreams. And they ask the same question: Why? Why does something work a certain way? We ask ourselves those questions every day."

Let's start by building on radio's present, its strong value propositions and begin asking our own WHY questions: Why couldn't radio capture more listening? Why couldn't radio capture more revenue? What would have to happen? Let us be brutally candid and work together to create a better future than it is now possible for us to imagine. Game on.

Fred, you missed the point.

Arbitron measures "listening" with a personal people meter that knows that a person (or more than one) is in the room and hearing their radio.

Streams are just data sent out through computers and other machines and there is NO WAY to know if 0%, 1%, 2% or 99% of the streams are being "heard" by a human. It's the "error we just don't know." And there's no way to know it. The worst kind of error.

So, when someone then conveniently changes the words from "streams" to "listenership" -- and uses them as if they were the same -- it hurts the industry because it devalues a very important term.

Advertisers want and need real listeners to hear their marketing messages. They are demanding, rightfully so, return on investment metrics. And we must provide them.

If and when they lose faith in the statistics of the industry, they will go elsewhere. That's why it is so important for all of us to produce metrics that are clear, honest, and transparent.

You can't trick them by changing words.

It's not the definition of the category, Fred. It's being dishonest with important metrics.

Pandora

Marshall, I took the POV of the listener - not the advertiser. She doesn't care about CPMs - she's looking for the best listening experience. More and more, it doesn't matter whether it comes from a stream or a terresetrial signal. That was my point.

The statement diverting the

The statement diverting the word listeners to streams is duplicitous at best. The notion that certain streams work in an empty room is simply not how every platform operates. Because online radio pays for every song played, some platforms, such as Pandora, assume that nobody is in the room listening if they have NOT interacted with the player in some way within an hour's time. If you have a Pandora account and fail to interact with your player (thumb up a song, skip a song, change volume, what have you) within 60 minutes of listening, your player stops and a message on the screen asks if you are still listening...the music will not come back on until the listener touches their screen and interacts. So, it actually ensures exactly what you are saying PPM does but eliminates the guess work of PPM on estimating total audience for an entire marketplace with a panel and replaces them with real people of known age, gender and market. I agree that advertisers want accountable proof of performance and the value that an online media platform provides in this regard vs. analogue media is, hands down, superior. So at the end of the day, this argument about listening and whether these things are radio is a moot point if audience and advertisers have already made choices that reflect how they feel.

re: Fred, you missed the point.

Marshall, thanks very much for your comment! We appreciate the feedback.

Do you really think a significant number of Pandora's streams aren't being heard by humans? That number has to be very small, because:

-- I know that if you don't interact with the Pandora site after a set amount of time, it actually turns off. So while it's possible that someone could walk out of a room with the stream still on, it won't stay on for hours and hours.
-- And, with the majority of Pandora's listening on mobile devices these days, few people are going to walk away from a device that's racking up usage.

What's more, it's very possible that *more* than one person could be listening to a single Pandora stream. Now, that uncertainty doesn't advance the "accuracy" argument much, but the number of streams being heard by 2 or more people would likely "cancel out" any streams being heard by no one, right?

I do know there are similar arguments to be made regarding PPMs (e.g. I walk into Bed Bath & Bodyworks to buy something for my wife, and there's a radio playing. I can barely hear it, and I've mentally tuned it out anyway because it's not my cup of tea. But the PPM attached to my belt counts me as a listener to that station -- even though an advertising message on it wouldn't even register with me). Because I'm in the room, it doesn't mean I'm even hearing, much less listening to, the radio station that my PPM picks up.

Just my 2 cents. Thanks, Marshall.

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