Why Radio is Stuck in the Middle of a Streaming Pincer Movement

2014 will be another year of growth and of controversy for streaming, with much of the debate set to focus on how streaming may, or may not, cannibalize download sales.  The evidence from Sweden and from the US so far suggests that streaming revenues may indeed grow at the direct expense of downloads.  But while we may be some way off from a definitive judgment on that issue, there is one cannibalization threat that is looking increasingly incontrovertible, yet has got far less attention: the cannibalization of radio.  In fact radio faces a two-pronged attack on its two heartlands, the home and the car.

The Home Front

There are many forms of streaming service and each sub-segment is eager to declare its uniqueness.  Spotify and Pandora practically fall over themselves to explain how different they are.  And indeed, in many ways they are, but what they have in common is that they are both direct competitors for radio listening time.  While they do not compete for all radio listening, nor for all radio listeners, they compete for much of the listening of some of the most valuable listeners.    Indeed streaming is looking more like radio with every passing day. The intensifying focus on curation as a means of making sense of 30 million songs is leading to on-demand services delivering a richer suite of lean-back, programmed and semi-programmed experiences.  In doing so the competitive threat to radio intensifies.  Whereas radio broadcasters can rightly claim that radio delivers a low effort, lean back listening experience, streaming services now wear those clothes too and they are not going to relinquish them.

Where things have really heated up though is the surge in streaming playback technology for the home.  Companies like Sonos and Pure have pioneered in-home streaming technology and CES saw this whole sector upping its game.  Music hi-fi is disappearing out of the home and these companies plan to bring it back with streaming at its core.  While radio is a key component of these devices, any hardware that gives a user the choice between traditional radio and interactive streaming is going to mean that radio is directly competing for listening time on that very device.  The home is one of radio’s heartlands, and broadcasters are now having to fend off the unwanted attentions of streaming music services establishing an in-home beachhead with consumer adoption of home streaming devices.

Digital Radio Fragmentation Plays Into the Hands of Streaming Services

Dedicated digital radio devices such as DAB and satellite radio players have only found traction in a handful of markets, with the US and UK notable exceptions at the forefront.  But international and domestic squabbles over competing digital radio standards mean that the global digital radio landscape is a fragmented mess of half-baked trials and aborted roll outs.  All the while internet streaming adoption accelerates on smartphones and tablets.  Radio may even buckle under the weight of this app invasion.  The more radio broadcasters rely on internet streaming for digital strategy, the more they put themselves directly in competition with streaming services, both on-demand and interactive radio.

The Battle for the Car

If the onslaught on the home was not enough, the growth of interactive car dashboards means that streaming services are getting straight into the car too.  In the US SiriusXM has long been held up as a standout success story for digital content with 25.6 million paying subscribers outshining any on demand music service by a country mile. But the same app invasion that is threating radio on smartphones and tablets is now pouring into the car via interactive dashboards. Car manufacturers are striking up deals at a bewildering rate with streaming providers with Pandora and Spotify being particularly active.  SiriusXM had a decent run at things, offering a truly national radio experience in the US, but now more and more consumers will start wondering why they need to pay $15 a month when they can get Pandora and Songza for free.

streaming pincer movement

The Free Music Land Grab

Thus radio finds itself locked in a streaming music technology pincer movement that threatens it like never before.  Radio broadcasters have countless assets at their disposal – talk radio, DJs, market-leading programming expertise – but they cannot rely on these alone anymore.  They have to up their innovation ante posthaste.  They also face a further and utterly crucial disruptive threat from streaming: the free music land grab.

Spotify and Apple only offer free music as a means to sell their core products.  Advertising revenue is a nice way of covering some costs but is not their lifeblood in the way it is for commercial broadcasters.  This means that they can be more cavalier in their ad sales strategies and undercut radio broadcasters for business with rates that might not be sustainable for a commercial broadcaster.  2014 will see these two powerhouses pursue aggressive advertiser strategies and when coupled with Pandora’s burgeoning ad sales record, traditional broadcasters may find themselves becoming collateral damage in the free music land grab.

Is 2014 a Napster Year for Radio?

2014 will be an important year for streaming, but it will be even more pivotal for radio.  It is far too early in the development of streaming to say that this is a make or break year for radio, but it is fair to say that 2014 looks and smells for radio a lot like 1999 did for the music industry.  Back then the labels failed to respond to Napster with innovation and they spent the next decade paying the price.  Radio broadcasters would be well served to –learn from the labels’ mistake.

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For those of you at Midem next week I will be giving a presentation on Monday entitled ‘Making Streaming Add Up’.  See you there.

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8 thoughts on “Why Radio is Stuck in the Middle of a Streaming Pincer Movement

  1. Streaming in current “all access” with option to own form cannibalizes both direct sales and Radio advertising revenues.
    Unless we introduce discovery moment monetization (pay for addition of any new item to your play list) we are compressing total size of the music goodwill to maximum 35B dollars.
    Ads and subs will never bring more! Very sad business activity considering that 1999 sales after inflation adjustment would be 56 billion today.

    In the meantime we can have sub free streaming with 100B industry in less then five years.

    Just convert Radio stations and all streamers to discovery based retailers – few small changes required to lock the music inside of virtual walls and activate Shazams and lyric ID guys as new cash registers of the industry.

  2. @hypebot – that is a blog post in itself, but here are a few bullets:
    - re-imagine radio in digital contexts, that doesn’t mean just simulcasting or podcasts, but taking the foundational elements of radio (curation, programming, DJ personalities, understanding audiences etc.) and building entirely new digital products around them. Who’s to say that radio in the digital age need look anything more like analogue radio than a xBox does a board game
    - compete around and coexist with on-demand streaming services. Work out ways to add irreplaceable value, to become a crucial component of the experience. The BBC took a brave initial step in this direction with its Playlister app
    - Get its act together re: digital radio technology. Agree on standards NOW and roll them out NOW. All that endless trials has resulted in is more trials once a new technology comes along. DAB, then DRM (Digital Radio Mondiale, not Digital Rights Management), then T-DAB, then DAB+ etc etc

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  4. Great post!
    I totally agree with your statement, there’s a lot radio has to do to keep listeners faithful to their service.
    In France some are beginning to think their communication in a transmedia strategy, using Spotify, iTunes and others to create their own playlists or podcasts, which they include on their websites, social media pages, etc.
    But as they’re having a hard time getting responsive enough websites, they keep losing their audience, especially mobile people and youngsters.
    Anyway, I agree when you say they should agree on standards for digital radio technology right now…

  5. Great post! I couldn’t agree more. I only wanted to add the following: I am from Mexico and people sometimes listen to the radio not just for music but because of the charismatic radio hosts and for news programs. As you said, radio still has the opportunity to turn things around before they fall into an inevitable cannibalization.

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