Radio's 3% Internet Solution

New Arbitron People Meter information for July in several of its markets shows some impressive listening by affluent and educated people on the job at their workplace.

The Internet may be responsible for about 3% of the midday listening Monday through Friday and according to Radio & the Internet Publisher Kurt Hanson, that’s a big deal.

I like Hanson’s analysis:

According to Arbitron PowerPoint slides…Arbitron found about 60 PPM panelists listening to webcasts at the average moment on a weekday midday. Doing the math, it seems listening to local terrestrial streams (which is all Arbitron measured) must comprise about 3% of midday radio listening at this point in history. If one were to add in estimates of listening to Internet-only stations (e.g., Pandora) and out-of-market terrestrial streams, one could imagine that Internet radio listening now comprises 6-10% of midday radio listening. That’s meaningful. To look at it another way: If WBEB’s stream has a .5 cume rating, it probably adds .1 or .2 to the station’s 12+ share, and in Philadelphia, an extra .1 to .2 on a station like WBEB is probably worth an extra $300,000 to $600,000 in annual ad revenues. Again, that’s meaningful!

This is not surprising.

Available radio listeners – the older ones, inclined to listen to terrestrial radio in the first place – find it convenient to listen at work over the Internet. This says a lot for them and for the stations to which they show an affinity.

But the PPM figures also give us an indication of where the future is headed.

Online stations are also part of the listening stream. Terrestrial radio will have a whole lot more competitors when WiFi is available in autos starting slowly with next year’s models.

This means that terrestrial radio – if it is looking for real meaning in the PPM numbers – must find a way to compete with thousands and thousands of “stations” that will reside only on the Internet and be available to listeners at work and soon – on the go.

This is meaningful – very meaningful.

While terrestrial broadcasters will have all this competition, they could also offer programming that online streamers might find hard to compete with – personality radio, for example. But that is not the current trend in radio. The current trend is to cut programming budgets and rely more on the music.

In effect, radio decision makers have opted to play on the streamers playing field.

And, if they do this – terrestrial radio will lose.

Internet streaming is the antidote for cluttered, faceless, commercial radio. Streamers are the original “less is more” crowd. Except that the "less" streamers are talking about is less of the irritants that turn listeners off.

Less clutter (and commercials)

Less repetitive music

Less mindless chatter

But to win in the brave new world of Internet streaming – soon to be empowered by universal WiFi – radio will have to come up with new programming elements that are going to keep their available listeners loyal and perhaps attract some new young ones.

More creativity in presentation

More personal choice in music playlists (either by “jocks” or platforms such as Pandora).

More community and interactivity

It has taken the People Meter – the instrument that many influential terrestrial broadcasters have fought for so long – to legitimatize in-office Internet listening as another valued delivery system for radio programming.

But don’t be surprised if there is little growth ahead for broadcasters who think just being one of hundreds and thousands of streams will be enough to enter the digital future.

My prediction is that over the years, Internet streamers will rise up and leave traditional broadcasters with a small share of the listening.

For radio owners who want a presence in Internet streaming, a few thoughts:

1. Create forty or fifty Internet streams as soon as possible targeted at a group of common listeners as opposed to a meaningless demographic. Not simple music streams.

2. Have no tie-in whatsoever with your terrestrial operation. That's broadcasting and the next generation has already made up its mind about terrestrial broadcasting content.

3. Do hire your terrestrial talent (managers, salespeople and programmers as well as on-air talent) to create, run and breath life into these new streams. But if they work for your online product, they must come off the air. Fat chance of that happening in this world of cutbacks and firings but it is the right thing to do if terrestrial radio wants to succeed in digital media. Terrestrial broadcasters think there is what they broadcast on the air -- and then nothing else. Stream it. Repackage it. That's a blueprint for failure.

4. Sell these streams with new approaches to commerce (i.e., not spot commercials). I know this puts an arrow in the hearts of radio people but radio commercials don't work online -- and that's assuming they work on-the-air (a big assumption).

5. Look for ancillary ways to earn big money (i.e., merchandising opportunities). This is the key to profitability in Internet streaming and mobile content. It's not like radio -- you don't air the content and sell commercials to monetize it. You air the content (for free) and find ancillary ways to build revenue streams -- a major difference.

6. Connect the streams through social networks that you create.

There’s, of course, much more.

But I’ve said it before and I’ll say it again – radio has a content problem not so much a technology problem.

We have new evidence here that die-hard listeners will find terrestrial radio on the Internet at work where they might have a hard time receiving a good signal.

What few want to talk about is that to become meaningful in a world of so many choices, terrestrial broadcasters are going to have to invest heavily in content and talent. Investing and heavily are two works you don't say to radio operators these days so you know what they are going to wind up with.

If not, enjoy your 3% -- it won’t be getting much higher.

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