Pandora Takes On Local Radio

It’s time that the radio industry took Pandora seriously.

Over 60 million subscribers and counting. Loyal listeners who sound like Apple fanatics when they describe the music service.

While Google is getting ready to offer the iTunes store some competition thanks to its popular Android mobile platform, a handful of streaming music services are quietly rising up and winning popularity.

I mention all of this because once a new service converts a listener from radio to streaming radio, it is harder to get them back.

Richard Harker, one of my favorite radio researchers, made a tantalizing point a number of months ago when he asked if Pandora had more listeners than, say, B-101 in Philadelphia. His argument being that a typical Arbitron PPM shows B-101 with a cume of around 1.6 million and Harker figured that Pandora’s Philadelphia listeners total half of that stations weekly cume.

Pandora sure isn’t killing local radio – yet.

But alternative music services that can be streamed and enjoyed by local listeners get to be a potent competitor. How would you like a radio station to sign on across the street and attract half your estimated weekly cume? Ask Greater Media how hard it is for a local station to do it. They tried to cut into B-101’s audience and were forced to retreat.

Here are some focus points to consider:

1. Pandora – no matter how you choose to do your math – is siphoning off x number of radio listeners to their version of customized radio. And they are doing this in the weakest of situations – little car presence. True, you can rig Pandora to work in a car and autos are on the way that have a dedicated button, but there are costs involved and poor audio in some cases. Still, the vast majority of Pandora listeners cannot hear it where they hear radio – in the car.

2. It’s hard to hear Pandora in your house. Oh, you can listen on your laptop and there are ways to once again rig it so you’ll hear Pandora through the speakers of your stereo, but it’s not seamless.

3. Pandora is running commercials. Either become a paid subscriber and skip the commercials or listen to tasteful short spots. No 8 unit stop sets. Starbucks, Lexus, Budweiser, Chase and AT&T were sponsors who helped the service go commercial. Not a big threat to radio’s ad revenue for sure, but competition that could grow. According to Billboard, “At any given time, there are 500 simultaneous targeted advertising campaigns on Pandora, with 45 of the nation's top 50 advertisers spending money on the site”.

4. Pandora extends advertising to the iPad, iPhone and features video and audio elements that are interactive with users – all without leaving the Pandora app. Pandora does target marketing to gender, age, location, music type, time of day – after all, they know their subscribers by name and their whereabouts.

5. Pandora launched 100 genre channels just in case you get tired of your customized channels and they are very good in my opinion.

6. Pandora influences record sales -- read more here. This is bad news for paid streaming sites that have never really taken off. It is a victory for free music although it’s not free to Pandora which pays huge royalty fees to stay in business.

Pandora founder Tim Westergren signaled his intention to go after national and local radio dollars in a Billboard article.

"Our intention is to build a radio business that looks a lot like the traditional radio business, with a scalable mechanism for selling national and local advertising so we can do everything from big, branded national campaigns to local pizza joint specials. They can be delivered as graphic ads, as audio ads, as video ads. We're pitching big ad agencies who have historically bought broadcast radio and pitching them to shift that money to the Web."

Perhaps you can see why I believe that just as the music industry has no choice but to take a different path if it is to remain viable, the radio industry must adapt as well.

The major owners and influence on the future of broadcasting believe their models are national as well. They do national programming and pipe it to local transmitters and towers. But the local nature of radio has been lost over the past few years of cost cutting.

The large radio operators argue that the RADAR study of total radio users doesn’t lie – that over 225 million radio listeners tune in every week and that number keeps growing. There are many responses to that claim not the least of which is how long can local radio continue to grow when in essence it is only local in name. The effect of drive-by listening resulting from People Meter ratings is another contributing factor that might inflate the listening.

One must conclude that the best thing radio operators can do for themselves in the wake of successful competitors like Pandora, satellite channels in cars and other music services is to do what they cannot and will not do – dig into their local communities, go live, flood the air with local personalities, get involved in civic causes, bring news first by building credibility and –

By pioneering the way to the digital future with whatever consumers crave on their mobile Internet devices.

Local radio is terrestrial radio’s domain until they give that claim up – which they are doing now.

It’s a mistake.

No national competitor can hurt local radio more than operators who let their local franchises get away.

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