Read More.Not long ago the music Industry was raking in $40 billion a year in sales. Today it sits at around $15 billion. Radio, once a $20 billion industry, is hanging on at a respectable $17 billion but faces significant challenges from a combination of new competitors pursuing its audience and advertising revenue while the overall trend toward digital advertising continues to divert budgets away from traditional media.
No matter what you believe, one thing is for certain; radio faces more competition for audience than ever before. Just the number of phone conversations occurring in the car each day would logically have to put a dent in time spent with radio.
As we move forward the challenges will only intensify as marketplace disruptors make their presence felt. Personalized music services like Slacker and Pandora have been aggressively building audiences online over the past eighteen months. With Pandora’s IPO this week, it now has a fresh influx of cash to keep investing in expanding its service. In just the past few weeks Amazon, Apple and Google have entered the equation announcing cloud based music services. They join a crowd that already includes the likes of Rhapsody, Rdio and Spotify, which is rumored to be announcing a big deal with Facebook. Business plans for these companies clearly identify the battlefield as the mobile device and automobile. For years those of us in radio have referred to the car as a “radio with wheels”.
Some in the radio business don’t see these “pure” players as competition because they are based upon computer algorithms rather than professional curators. However, seeing these companies as anything other than competition is short sighted. Over time these companies will add more sports and talk programming and probably use some of these same technologies to build recommendations and playlists of spoken word content. Slacker recently announced deals with ESPN and ABC News while Pandora launched a new comedy service. Online companies are building audience and a portion of that audience is coming from terrestrial stations. Soon, if not already, the online players will reach scale where they can sell the value of their audience to the same local advertisers to which radio sells ad inventory—that’s a competitor in my book!
So, what next for these two long time allies, radio and record labels?
Mike Agovino is the Chief Operating Office with Triton Media Group, a leading provider of applications, services and content to the media industry, specifically radio, with more than 6,000 station affiliations.
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