Monday, February 27, 2012

The New Radio

radio tower graphic from Music 3.0 blog
A few years ago I posted an article called "The New Radio" that was an excerpt from the 1st edition of Music 3.0: A Survival Guide For Making Music In The Internet Age. Here's an update on that post, this time from the 2nd edition of Music 3.0, that focuses more on Internet radio.

"As outlined in Chapter 2, traditional radio has gone from being a cultural juggernaut to almost a media has-been, but new flavors of radio have significantly energized the medium to the point of rebirth. Let’s look at some of the ways today’s radio listeners consumer its product.

Internet Radio
Radio is said to have gone through its own version of M3.0, with Radio 1.0 being the early, startup days of AM, R1.5 being the age of the Top 40 formats of the ’60s and ’70s, R2.0 being the rise of FM, R2.5 being the rise of talk radio, and R3.0 being the era of Internet Radio. You can say that we’ve entered into R3.1 as Internet Radio has matured and now moves into the car.

Internet radio has risen in popularity quickly as a whole new set of online-only virtual stations have appeared along with Internet counterparts of many of of the terrestrial stations as well. In fact, Internet radio has radically changed our listening habits, according to Arbitron/Edison Research, a leader in media opinion and marketing research used by the radio industry. In their Infinite Dial 2010 report, they state:
  • approximately 70 million people a month listen to radio online
  • 52% of all radio listeners have listened to radio online
  • 23% listen to Internet radio while working
  • they listen to Internet radio because of the control and variety to provides
  • Pandora is the clear leader in top-of-the-mind awareness at 28%
The report also has some interesting demographic material as well.
  • the online audience skews 55% male
  • nearly 2/3rd’s of the audience is between the ages of 25 to 54
  • online radio attracts an upscale, well-educated and employed audience, with 55% having a college degree and 61% employed
  • 30% of 12 to 25 year olds are interested in listening to Internet radio in their car or on their cell phones
  • 27% of all listeners are interested in listening to online radio in their car (a point that we’ll cover in depth later)
Most independent Internet radio stations differ from their terrestrial cousins in that they utilize the vertical nature of the Internet to provide very specific targeted programming to their listeners. But while terrestrial stations have a sales staff with a host of customers used to advertising, their independent Internet counterparts require a different business model to survive, as they are relegated to traditional Internet sales support like banner and contextual ads, paid search, and pay per click if they don’t utilize on-air advertising.

Pandora, MOG, Slacker and similar services are successful because they solve the filter problem. You program your own music channel, and your choices are analyzed and some additional recommendations are given. This is the antithesis of traditional broadcasting where the programming choice is made for you via consultants, focus groups, advertiser requirements, or in the class old days, by the DJ himself. It’s also one of the reasons why these services will continue to gain support, as the various services try to outdo one another with better recommendations.

One of the biggest problems for Internet radio is the issue of performance fees, which broadcast radio does not pay (although this might change soon). Currently, an Internet radio station pays on a sliding scale depending on the type of station and number of listeners, but the rates gradually rise each year until 2015, jeopardizing one of the truly great resources to new artists. As the cost of doing business for Internet radio rises, many stations will have to resort to the advertiser-supported model of their terrestrial cousins to survive. This also brings with it the same problems that their terrestrial counterparts now endure, meaning outside pressure on the makeup of their playlist. The bottom line remains that the fan is out of the loop in advertising-supported entertainment, other than their passing interest in something like a chart statistic.

In the end, technology doesn’t change the lessons of broadcast history or the fact that there is always intense competition for advertising dollars. There is very little difference between electronic distribution and broadcasting once you peel away all of the hype."

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