Rebirth will be fueled by the downturn of the $16 billion broadcast radio industry.
Ad-supported and subscription streaming services have tripled revenue paid to artists and labels, growing from seven percent to 21 percent of digital revenues in the last four years, according to the RIAA. Strengthened by investments of more than $432 million dollars just last year, streaming radio services like Pandora and Spotify are booming, while broadcast radio struggles. And many of broadcast radio’s top ad-sellers have jumped ship to these Internet radio companies, helping to capture the dollars now fueling an important growth category for the music industry.
Forty-four percent of online radio listeners say their online listening comes mostly at the expense of their FM/AM listening. Seventy-five percent of people age 12 to 24 listen to online radio monthly, andalmost two-thirds of them listen weekly.
In fact, radio broadcasters are not only seeing their FM consumers listen less, but, according to Triton Digital, at any given moment among online listeners (Monday-Friday, 6 am to 8 pm), Pandora has more than three times the audience of all of the thousands of radio stations owned by Clear Channel (iHeart), CBS (Radio.com), Cumulus, Entercom and the next six broadcasting companies combined. Borrell Associates predicts “time spent listening” to pure-play mobile services will grow by 38 minutes over the next four years — while broadcast radio will decline 42 minutes over the same period.
Arbitron’s (now Nielsen Audio)own data shows a steady “Average Quarter Hour” rating decline of “Persons Using Radio” over decades. In 2009, Arbitron apparently stopped releasing the national AQH rating data, perhaps because there was a severe decline from the previous year, conceivably triggered in part by the launch of Nielsen’s Portable People Meter (PPM) ratings system, the rise of Pandora and other non-broadcast competitors, both and/or other factors.
Online radio offers advertisers data-driven, advanced technology delivering more efficient ad buys — an area where broadcast radio lags.
Eighty-eight percent of Pandora’s revenue is derived from advertising, not subscriptions. The future will tell whether or not the subscription model offered by Beats and Rhapsody has legs. Meanwhile, the time-tested business model most widely embraced by listeners is ad-supported radio.
As broadcast radio (and its fledgling online offshoots) treads water, it’s inevitable that a sizable portion of its $16 billion ad empire will follow the audience as it migrates from FM to online radio. Clip Interactive’s SVP/Labels Michael Fischer suggests that “record companies and artists need to go all in. That means embrace and cooperate with existing streaming services to further expand their audiences.” At the same time, they must build their own unique audio media strategies and online radio brands to attract listeners with dazzling original content