July 25, 2012

Has Online Digital Streaming Hit Its Stride?

My family and I recently embarked on the annual summer vacation.  This year, the kids chose Charleston, SC, which meant – ROAD TRIP! In my youth, long road trips meant many periods of static on the radio as we traveled between accessible radio signals. All options on the dial were “terrestrial” based, meaning traditional AM or FM radio stations.  During this trip, we had in-dashboard options such as Pandora and Sirius XM and other streaming services as well as iPods, iPads and iPhones that could be plugged into the radio.  Because of our plethora of options, I spent several hours of our journey exploring and switching between the myriad of stations available for our listening pleasure.  Or, as my wife put it, I spent the whole time simply playing with the radio.

This experience got me thinking about radio, both traditional “terrestrial” radio and the growing ecosystem of options currently available to consumers.  Traditional radio is truly the oldest medium for reaching a mass audience. According to Arbitron, it currently reaches more than  93 percent of the US population and accounts for more than 80 percent of all music listening.  However, Arbitron also reveals that while traditional radio seems to have peaked, it has not seen true growth in listenership in several years.

On the other hand, online digital streaming is undergoing tremendous growth and the ecosystem is expanding at a rapid pace.  Arbitron reports more than 18 percent year-over-year growth in consumers who listen to music (including streaming radio) exclusively online.  Consumers spend the vast majority of their waking hours away from home; both terrestrial and online music and radio is with those consumers during the hours they are commuting, on the go or at work.

This growth is not only in online music or streaming services such as Pandora, Spotify or Slacker.  Most “terrestrial” stations currently stream their broadcasts directly, or belong to a network or “co-op” of local stations streaming through a central point, such as Clear Channel’s iHeart Radio.  These digital streams contain the same content as the “regular” broadcasts, but with varied advertising opportunities.

There is a true market shift beginning to take place in the “radio” space.  Brands need to not only be aware of this shift, but recognize the unique opportunities available for reaching consumers.  Brands need to consider and address such questions as:

  • Who are the major players in the new digital audio universe and what are the advantages and disadvantages of each?
  • Is advertising on streaming music services such as Pandora and Spotify more valuable than direct advertising with choice local streaming services?
  • Should advertising dollars be shifted from “terrestrial” radio to streaming radio and music?
  • Where is the industry headed in the next year, two years and five years?

Brands that can successfully answer these questions will be well positioned when the digital audio shift hits the point of critical mass, placing them in prime position for optimal consumer engagement.

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