The Internet Is Hurting Radio

Posted By James on Feb 27 2013 01:00 AM
Since the turn of the century, the onslaught of new technology has contributed significantly to the dimming commercial radio's star.

It was about that time that the first major satellite radio service launched, offering subscribers the opportunity to listen to hundreds of channels of programming for a fee. Apple created the iPod, which popularized the digital music player and allowed CD owners to put their music on one device. And Tim Westergren founded what would become Pandora Media.

When it released Pandora Internet Radio in 2005, it was largely limited to computers that were tied to the Internet by a phone line or network cable. Now, thanks to the proliferation of smart phones and high speed cellular data networks, you can stream music almost anywhere your cell phone, tablet or laptop has cell service or a wireless network connection.

All of these advances are creating a headache for commercial broadcasters such as San Antonio-based CC Media Holdings Inc., which is laboring under a $20 billion debt load — a carryover from when it was taken private in a leveraged buyout. The broadcasting and outdoor advertising giant, which owns more than 800 radio stations, said last week it posted a $191 million loss in the fourth quarter of 2012.

“The biggest problem facing the corporate owners of radio stations is that they are smothered by debt,” said Michael Harrison, the publisher of RadioInfo, a trade publication for commercial radio. “Add to that the fact they have new and exotic competition from new media, and that makes it an even bigger problem.

”The ability to stream music from the phone in your pocket — using Pandora or one of its competitors — represents the biggest challenge to commercial radio that the technological revolution has wrought, said Larry Rosin, president of Edison Research, a media research provider.

“(Pandora) is clearly stealing time from commercial radio music stations, primarily among people under 35 years old,” Rosin said, referring to drop-offs in the amount of time people spend listening to radio. “Pandora is more than two-thirds of all Internet radio all by itself.”

To Harrison, though, the iPod and other devices have played an important role in cutting into radio's influence in determining what music is discovered and becomes ingrained in culture.

“People being able to program their own music and get it off the Internet has been very challenging because radio used to be the place that people went to as their primary source to hear music ... and to find out what's going on in music,” Harrison said.

While the percentage of the population that listens to radio has remained almost constant during the past decade, time spent listening to the radio consistently has declined by about 15 minutes a year for the past 20 years, said Larry Johnson, senior research consultant for Paragon Media Strategies.

He said the drop has been especially pronounced among younger listeners, who usually are among the early adapters of new technology and services — such as iPods and Pandora. However, he added, there's no clear way to see if those declines have been caused by listeners leaving radio for online streaming services.

“You have more choices and, of course, the time spent listening (to radio) is going to go down,” he said. “But when you step back, radio is still very strong, though not as big of a deal as it was in 1989.”

A study by the Katz Radio Group provided by Johnson showed that listeners between the ages 18-34 listened to 15.25 hours of broadcast radio every week during spring 2011, while listeners between the ages 35-64 listened to 17.5 hours of radio every week.In spring 2009, listeners between the ages of 18-34 were listening to almost 15.75 hours of radio a week.

The three largest radio companies in the U.S. — Clear Channel Communications, an arm of CC Media Holdings, Cumulus Media and CBS Radio — are trying to get a foothold in the rapidly growing terrain of online streaming. Still, representatives for CBS and Clear Channel were quick to point out that listening to online radio services accounted for only 6 percent of all the audio listened to.

San Antonio-based Clear Channel has put the marketing muscle of its 800 radio stations behind its iHeartRadio apps and service, which allows users to create their own music stations, such as Pandora, and also provides live feeds from its stations across the country. Cumulus announced in December 2011 that it was partnering with Clear Channel so that its 570 stations also would be on the iHeartRadio app.

CBS launched in 2010 to provide a streaming platform for its radio stations, and it released apps that allow people to stream CBS' stations from their smart phones. However, its offering doesn't give users the ability to build custom stations. The company also purchased, a Pandora competitor, in 2007 for $280 million.

“Digital for us is a tiny portion of our overall listening,” said Brian Lakamp, president of digital at Clear Channel Media and Entertainment. “For us, it's about creating new occasions and using technology to do new things with the radio experience and really doubling down with the relationship that we have with our big brands ... taking the best of radio and using technology to supersize that.”

He said the technology was allowing them to expand their major brands such as KISS FM. And he said that users are responding to the strategy; during the past 14 months, 25 million people have registered to use the iHeartRadio app. Representatives for CBS and Clear Channel also said they view their digital and terrestrial radio services as complementary offerings that don't compete with each other. Instead, they said digital offerings simply made it easier for audiences to listen to their stations where they might not have been able to before.

“We've seen them complement each other,” said Ezra Kucharz, president of Local Digital Media at CBS. As an example, he said someone might listen to 1010 WINS — an all-news radio station in New York City — on their car radio on their way to work, and then use the web stream to listen to the station on their computer on the job.

“They're not cannibalizing each other,” he said. “If anything, it's growing the overall pot.”

He said that CBS hadn't seen any significant shift of their audience to competing music-streaming services. And CBS spokeswoman Karen Mateo said listeners ages 18-34 actually listened to slightly more radio in 2012 than they did in 2011.



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