12-20-2011
Pandora is slamming terrestrial radio. Releases about their listening stats as compared to Arbitron ratings of stations in markets across the country are making a lot of radio people mad. Some because they view Pandora as stretching the numbers to make their story look good. Others are concerned because a streamed signal is not evidence of actual listening, whereas PPM records actual listening. Others are frightened but refuse to admit it. I and some others simply wish we thought of it first.
Is Pandora doing anything wrong? Probably not. I don't know a manager in radio who has not found a truthful way to tell their numbers story in some ranking or comparison to make themselves look good. In fact at our Forecast
conference Lou Paskalis (pictured right), VP of Global Media, Content Development and Mobile Marketing for American Express was discussing a partnership with Clear Channel as being refreshing because they actually came in and listened to the problems they needed to solve rather than "every station coming in and showing us how they are number one. They can't all be number one.?"
PANDORA The Game Changer
The game has changed and like it or not you're in it. Some in radio want to battle the fact that a listener on Pandora should not be counted in aggregate but by individual station listening because the stats are not apples to apples because the listeners is on different Pandora channels whereas Pandora is using that captive listeners total listening time. So what? After all from an advertisers point of view all they care about is whether or not they capture that listener. We too could play that game. Is it different from Clear Channel touting their total aggregated listening number in a market or nationally? I think not.
Though what Pandora is doing is no different than bundling all the listening hours of a cluster in a market radio seems to think it's a bad idea because it misleads advertisers when they take the total Pandora listening in Dallas for instance and compare it to a single station. They are right, kind of.
The problem as I see it is that they are comparing one form of measurement to another, which may be good competitive strategy but it lacks credibility. The bigger problem is that most local and national advertisers don't know the difference and when they see a comparison of Pandora vs a local station they believe the numbers not understanding the full picture and why it may not be a fair comparison.
Radio cannot have it both ways. Out of one side of their mouth they are asking for equality in measurement and out of the other side they don't really want it. What if, heaven forbid, Pandora shows up bigger than local radio if side by side accurate ratings are provided? Though it may seem like a good idea, it might not be.
Should Arbitron Step In?
Arbitron has a responsibility to step in anytime their numbers are being used, especially if and when two side by side numbers are not the same measurement yet are being used as a comparison as if they were in the same methodology. They should visibly (to advertisers) make sure that Pandora vs local radio stats are being properly represented. They also need to produce a document, which warns local and national advertisers of the things floating around the market just like they used to sticker a book when a station was not following their guidelines. Most important they need to set a standard so advertisers know what is and is not real even if it makes Pandora look good.
But Arbitron's success is dependent on radio's continued success and if radio stops an effort to correct what they believe to be misrepresented numbers comparisons they have to be willing to live with the alleged misrepresentations. So many feel Arbitron should leave it alone. Ultimately they will probably do what their customers demand and my guess is that the radio companies won't demand it.
On the other hand if they agree to it they may be opening Pandora's box because its possible it could represent Pandora well. This is where they cannot have it both ways. I suspect subscribing companies may have a hand in pressuring Arbitron one way or the other though they are very good at remaining neutral.
Is Pandora Radio?
At our Forecast conference there were discussions about whether or not Pandora is radio and whether is should
be measured by analysts as radio or digital. Frankly listeners don't make the distinction between Pandora, Slacker, Your station or Sirius XM. To them its radio. They don't think about the delivery mechanism or whether one is pure play audio vs localized entertainment based audio. And there is a generation who does not find themselves wed to a radio, but live in a world where the swiss army knife of all devices having all services is what they care about. They will listen to the ones they most prefer and broadcasters can't change that.
A Look into the Future
This discussion will be laughable ten years from now. Maybe five. It's the same discussion that took place between AM and FM. I'm old enough to remember the discussions when FM listening overtook AM listening and whether or not it should be counted as valid. AM broadcasters did not think FM should be considered and many tried to prevent advertiser adoption. There was even discussion that FM stations should not be allowed to become members of the RAB. It was fruitless, useless and silly.
Its human nature to want to protect your turf by finding ways to block the acceptance of others but you cannot block consumers from making the call of what they most want. Fighting technology is silly and radio broadcasters are pretending that Pandora is not a factor and that everything is status quo. Again its, silly and shortsighted.
When Groupon came to the scene radio was quick to poo poo its existence. But when its giant valuations became known radio decided to get into the game and compete or collaborate with Groupon, Living Social and others. Thus the creation of Sweet Jack. Yet Pandoras Billion dollar valuation may not yet have gained enough to notice, even though they are valued higher than all publicly traded radio companies combined. Rather than pretending Pandora isn't a factor, why not compete with them for a piece of the $500 million dollar pure play market, which is bound to grow exponentially. You have the power to brand, the power to create. Compete head to head. Or better yet, innovate and come up with something better. You have powerful brands, which offer some big advantage.
Your biggest disadvantage, however, is making fear-based decisions. What if I cannibalize our terrestrial radio stations? Its that thinking that killed newspapers and though our efficacy remains strong (unlike theirs) we should assume someone will kill us and therefore should own and invent the killer so we control it.
Though I remain pro- radio because I love radio, I am not against Pandora or any other form of online radio or satellite radio and I think the terrestrial radio looks silly trying to fight them. These are exciting times and these challenges are the wake up call I've been predicting since I went into the internet radio business in 1999. Though my timing was off my predictions are coming true. Internet listening is a viable option, its business model is more viable today than ever, streaming is lower cost and bandwidth is growing in availability and radio is sharing listening with serious internet only competitors on a multitude of devices.
At my first Internet Conference in 1998 I laid out the future we are living today. You, terrestrial radio had a 13 year chance to get ahead of this and invest in the technology and now that it's happening many are whining. Isn't it time to be pro-active and stop thinking you can stop the momentum of things consumers embrace?
Is Pandora crushing terrestrial radio? Probably not. But advertisers are believing their story and Arbitron needs to step into the discussion and make sure the story is clear, no matter the outcome. Radio should defend what it owns in terms of listening and should defend any competitive threat to make sure numbers are accurate and well represented. Beyond that this is a dog eat dog world and the best competitors usually win. Perhaps the focus should be on keeping your lead.
I think we, the industry have it backwards. Embrace Pandora. Embrace Satellite Radio. Embrace those things most likely to eat into our revenues. Embrace them, understand them, and be joyful that they are bringing new advertiser interest to audio. Then find a way to have a piece of that pie.
Eric Rhoads is the Publisher of Radio Ink which in 2012 will be celebrating its 20th anniversary. He can be reached at eric@radioink.com Or you can leave your comments below.
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