July 14, 2011
by Mary beth Garber
?(Pandora) is a far cry from what listeners are used to with radio,? according to Tim Westegren.
Broadcast Radio and its listeners couldn?t agree more.
Pandora, which has at least two analysts currently rating it a ?sell?, had its first investor?s call yesterday. In it they made several boasts about how Pandora offers advertisers a better value proposition than Broadcast Radio. They took the approach that when facts fail, rhetoric usually succeeds. But today it didn?t, because no matter how convoluted their arguments, the facts simply do not back them up. And with Clear Channel?s highly competitive new features for iHeartRadio looming on the horizon, it may have seemed wise for Pandora to talk boldly now.
Let?s look at facts and logic about Broadcast Radio and Pandora.
Broadcast Radio has thrived and prevailed over every competitor that has ever attempted to claim supremacy over its unique business model and value propositions. Competitors like the Walkman, tape cassettes and more claimed that listeners preferred their content delivery to that of Broadcast Radio and planned their inevitable success on the premise that they ran fewer or no commercial messages compared to Broadcast Radio. Nice try. But this is how the most recent challenges have actually played out: When satellite radio, iPods, MP3 players and internet music stations surged onto the marketplace, some of our listeners added them to their audio entertainment inventory. But not at the expense of listeners? use of their favorite Broadcast Radio stations, according to Arbitron/Edison?s Infinite Dial 2011, TargetSpots?s May 2011 White Papers, Jacob?s Media?s Tech Survey 7, 2011 and Arbitron PPM analyses. And the other earlier competitors? This year Broadcast Radio reached more listeners than ever before, and those other guys are out of business.
There are many reasons why Broadcast Radio has not been diminished or displaced in people's lives. Those reasons go on the air, usually live, in nearly 300 individual markets, on over 14,000 local, environmentally targeted radio stations every day. They are the personalities and interactive programming aspects of Broadcast Radio that are demanded by listeners on music and talk stations alike. And yes, every hour of every day they deliver and define what listeners want and expect from their Broadcast Radio experience. There is no ?dramatically better radio experience? to our listeners than the one they seek ? and get -- from Broadcast Radio.
These primarily local broadcast personalities provide an emotional connection to their listeners that cannot be replicated by unending music play. People become emotionally invested in these personalities and return to stay connected on a regular basis. About 93% of people 12+ in the U.S. tune into their favorite Broadcast Radio stations in the course of a week. That generated over 167.5 billion hours of listening in a 12 month period, according to Arbitron NRD Fall 2010. In Los Angeles in May 2011, the average listener tuned in over 22 times in a week, which is pretty typical across the country.
The Infinite Dial 2011 shows that approximately 10% of all people 12+ tune into Pandora in a week, generating what Pandora claimed was 3.1 billion hours of listening in a 12 month period. From the data available, in May of 2011, the average Pandora listener tuned in a little over 2.5x in a week. That infrequency and the unpredictablity of tune-in makes it more than somewhat difficult to build an effective ad campaign on Pandora and also lacks any proof of preference for what Pandora has to offer.
Pandora claims we are at the tipping point of radio delivery moving from broadcast to Internet. They must have a new definition for ?tipping point?. Because in 2010, all of digital radio represented only 3% of the total amount of time spent listening to radio (combining over-the-air and digital/online). If critical mass for technology products is 30% penetration, the digital platform has a long way to go before anything is likely to tip in its favor. Broadcast Radio listeners continue to prove that it is not the platform of the delivery, it is the combination of the entertainment experience and the content that determines where our listeners spend their audio entertainment time.
Now let?s talk about what Pandora calls ?hours and hours of clutter, be it commercials, talk, liners, whatever?? Broadcast Radio calls this some of the best town hall meetings in the world. They happen every day on every station between personalities and listeners, over the air, on eblogs, facebook, etc. And if it is really so ?awful and hated by listeners,? why are one quarter of the nation?s Broadcast Radio stations news and/or talk formatted?
Next let?s take a closer look at this targeting and interaction that Pandora claims to produce. How much more targeted can you get than having a station personality endorse your product? How much more interactive can you get than listeners texting, Facebook-friending, tweeting, following and calling radio station personalities? In fact, 22% of people say they have talked directly to a personality on a Broadcast Radio station, according to Infinite Dial 2011 research. And sure, listeners on Pandora can change their personal music mix ? well, up to a point; then they either give up choice or have to pay for the privilege. But listeners to Broadcast Radio can change what music their favorite radio station plays. They can share their ?Top 5 at 5? or whatever with tens, hundreds of thousands or millions of other people in their own market. And Broadcast Radio constantly introduces them to new music, if that is what they seek.
Let?s talk about their idea of a ?superior advertising environment?. I wonder how much an advertiser would appreciate an environment with a wide variety of commercial sound levels. Our engineer and another independent source ran some preliminary test samples and reported that their analyses of Pandora commercial levels suggests that they seem to be unable to consistently match commercial levels to their programming. There's a great deal of variability to levels, with some commercials considerably lower than programming, other commercials at the same level of their programming. Broadcast radio solves the problem by using audio processors that even out levels across programming elements. It appears that Pandora isn't using audio processing, or is using it improperly. In any case, the environment created by a Broadcast Radio station is like that of a virtual neighborhood. The people, the content, the entertainment, even the advertisers are familiar and friendly.
The question is whether or not people avoid commercials on Broadcast Radio stations. I can give you the Coleman audience retention study that proves that audience levels remain within 90% of what they were from beginning to end of a 5 spot cluster. But the best thing I can give you is a growing list of advertisers who have used ? and still use -- people?s responses to their commercials on Broadcast Radio stations to develop successful businesses. Mark Gray, President of Katz Radio Group, recently noted that 92% of national advertisers who used Broadcast Radio in 2010 have returned so far in 2011. They certainly wouldn?t come back if people weren?t responding to the commercials.
It?s certainly important to try to make your case when speaking to current and prospective investors. But no matter how Pandora would like to maneuver around actual facts and substantiated research, Broadcast Radio will continue to offer advertisers a successful business model -- one that has all the elements that are desired and valued by listeners and advertisers. One that the current Pandora business model cannot replicate.
Respectfully,
Mary Beth Garber
EVP/Radio Analysis and Insights
Katz Radio Group
Los Angeles
(7/15/2011 1:44:52 AM)
Waist deep in the big muddy...
I don't know where to start and don't want my response to be so long that no one reads it.
For starters, suggesting that Pandora (or anyone else for that matter) won't completely replace radio is obvious and not the point. The point is that Pandora and the rest of the current and future streamers are chipping away at radio, one listening opportunity at a time.
Why? Because the points made here are, to a growing extent, no longer valid. "...primarily local broadcast personalities...", uh, where is that still true? Broadcast personalities are primarily NOT local, particularly outside of morning drive. "...not at the expense of listeners’ use of their favorite Broadcast Radio stations...". Seen a PUR graph lately? It would reveal just what you would expect it to - that radio has maintained its cume, but has progressively lost TSL (and consequently, delivery) to other media. If someone used to spend 10 hours a week with radio and now spends 5, that isn't good news or evidence of radio's strength, its quite the opposite.
One of the big problems is that broadcast radio has progressively embraced the things that they claim make Pandora less attractive as compared with radio. Personalities, programming, even management are being phoned/mailed in from other cities - making radio more and more impersonal, while it lacks the music personalization features that are Pandora's bread and butter. So radio is quickly becoming Pandora without musical personalization. in a sense, radio paved the way for Pandora by strip mining itself from top to bottom.
Yes, radio will still continue to be a good advertising environment, just a progressively smaller one that will be able to charge less and less as a result.
Denial and misleading figures won't help the radio business any more than trumpeting all the jobs that have been created is helping politicians. In fact, denying the obvious is making radio and pols seem tragically out of touch. Way less than half of all college students own a radio, unless they own a car. Does radio realize this?
Embracing the facts, facing and dealing with them is the only solution. Pandora and Internet radio in general will continue to grow at the expense of radio - at least in the short term. Current royalty rates pretty much preclude them making money at it - which means somewhere, something has to give.
Real solutions will serve radio much better than fatuous denial.
(7/14/2011 4:54:56 PM)
Mary Beth-
Please, please stop. Take a few months, educate yourself on contemporary media usage habits, and THEN form a platform from which you can advocate for radio.
As it stands, you are doing yourself and broacasters no favors. We need to make a strong case to advertisers and buyers- not screech at them with propaganda.
And what on earth is Katz thinking- allowing MBG to continue to issue these diatribes on their behalf?
(7/14/2011 1:58:19 PM)
I'm a former radio GSM. I now sit on the other side of the desk and purchase advertising for my firm. I buy a little radio, btw.
I'm afraid that MB's fog of questionable numbers does not erase the fact that terrestrial radio appeals to a diminishing audience--which is still large, but demographically weighted towards older people, the technologically un-savvy, and specific ethnic enclaves. Great news if you're targeting those audiences--not so great if you're not.
You're not going to cram terrestrial radio down your advertiser's throats by forcing numbers on them. They're not stupid--they see with their own eyes what media the people around them are consuming.
Look--if you're in radio, you're going to get smaller--get used to it, grow up and deal with it. Welcome to America: Things change.
Start listening to what young adults are saying and fix your formats or you're going to be Oldsmobiled and Studebakered out of your share of the diminishing pie.
Have I missed something here?
Will Baumann
(7/14/2011 1:17:22 PM)
Saying that "TSL is down" is just not a statement that can be made alone without qualifiers. The TSL base was reset with the advent of PPM.
The pre-PPM levels of 17 to 19 hours a week of radio usage (which we still see in diary markets) was reduced to about 12 hours per week in PPM. This was a function of methodology, not a change in radio listening.
To compare PPM levels with diary markets or with pre-PPM diary levels in Top 50 markets, we need to mentally convert in the same way we convert local currency to dollars when we travel abroad.
Nobody denies the challenge that all forms of streaming present. The TSL sky may be cloudy, but it has not fallen.
Those who suggest paying attention to commercial loads, personalities and pertinent information know what radio's strengths are. I recently put satellite into both of my cars in the two below-top-100 markets where I split my time: I had to because the local stations are no longer giving the kind of service that a decade ago we took for granted. In the homes, I stream.
It's about the product, and it does not seem to be improving.
(7/14/2011 12:51:53 PM)
With arguments like this, the next thing you'll be suggesting is that the industry should relaunch HD Radio!
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how much advertising was being sold (she had a revenue sharing deal). Masters says that information has been sent to Tantaros, and it was sent on time, calling that claim absurd. "TRN Entertainment understands the contention asserted to date as to a claimed termination notice issued on Wednesday, October 9, 2013, it was that TRN Entertainment did not respond to a letter issued on Friday, September 13, 2013 within 20 business days thereafter, and that, as a result, a termination notice could be issued. However, that claim is facially absurd. The 20 business day period extended through Friday, October 11, 2013, and TRN Entertainment timely issued its response, as it had scheduled internally, one day early, on Thursday, October 10, 2013. Contrary to reports circulating from whatever sources, TRN Entertainment is also current on all of its payment obligations under the agreement, and there were no payment delinquencies which had to be cured as of the Friday, October 11th date in any event.
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