Video Killed the Radio Star. So What's the Life Expectancy of the Medium?
My article two weeks ago about radio commercial scripting being a lost art prompted a question from my son-in-law who is in marketing for a major technology brand. Specifically, he said, "I am intrigued to understand how audio advertising has changed with the growth of Spotify and Pandora." While his question was directed more to the creative side of the equation, it got me thinking about the impact these Internet apps are having on local radio stations. Then this morning, I read a piece in the New York Times entitled, "Pandora Courts Local Advertisers, by Offering Well-Defined Listeners."
Certainly radio broadcasters have ample cause for concern. When you combine Sirius/XM (satellite radio) with Pandora, Spotify and other online music streaming services, there are plenty of companies nibbling at the market share of traditional radio. The numbers get a little fuzzy, but it seems the U.S. radio market is about 240 million strong. Of this, satellite appears to have about 20 million. And, according to Pandora, they serve about 2/3 of the total online radio users, which they also contend amounts to about 4.3 percent of the total. So by their numbers, that would seem to indicate about 10 million Americans are active Internet radio subscribers.
Feel free to dispute my calculations. I can be geeky about some things but statistics is not one of them. But if my numbers are reasonably correct, it looks like about 12 percent of the radio audience is actively using alternatives to broadcast radio. This is not insignificant. If I were a broadcaster, I would certainly be concerned. On the other hand, they still have an 88 percent slice of a very large pie. Of course, not reflected in these statistics are people who may be splitting their time between traditional broadcast radio and satellite or other alternative options.
Perhaps more relevant to this discussion is the future business model of the online streaming services. Bear in mind that Pandora has never turned a profit and in less than a year, its stock has dropped by 50 percent. If Pandora can effectively execute its proposed local advertising model that theoretically pinpoints listeners by age, gender, ZIP code and/or musical preferences, it could be a game changer.
Stay tuned.
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