U-S Radio: Music Streaming Services Want To Lure Drivers

The car is one of the last places where tech companies still struggle to reach users. That will likely change as music-streaming services like Spotify gradually loosen radio’s grip on American car journeys, The Wall Street Journal reported over the weekend.

Traditional radio is still a key companion to travel, particularly to and from work. Most Americans commute in their cars, where AM/FM stations dominate the dashboard. While terrestrial television has lost millions of viewers to streaming services like Netflix and Hulu, radio still reaches 92% of Americans over 18 every week, according to Nielsen data.

According to WSJ, the coronavirus crisis may change that in the short term as more people work from home. Longer term, the pandemic could even encourage more Americans to embrace home-working semipermanently.

WSJ Graphic

Yet U.S. drivers will probably remain a highly valuable radio audience by global standards. Last year, Americans listened to an hour and 40 minutes of radio every day on average. Consulting firm Deloitte estimates that each listener is worth $67 in radio industry revenue annually, compared with $25 in the U.K. and just $2 in China.

Music-streaming services like Spotify and Apple Music are making a play for that market. Last year, the Swedish company launched Your Daily Drive in the U.S., a service with a mixture of curated music and news content. To encourage drivers to switch, Spotify needs to offer more of the local traffic, weather and news updates that listeners usually turn to radio for. This month, the company hired radio veteran Kevin Weatherly to help it get the right mix.

Spotify, Apple Music and Amazon Music have been trying for years to muscle in on radio’s patch, with little to show for it. Between 2014 and 2018, the number of daily radio minutes listened to by adults aged 18 years or over in the U.S. fell by a modest 2% a year on average, Deloitte’s analysis shows.  Yet Nielsen’s 2019 data shows that the pace of decline in time spent listening to radio picked up slightly to 3% compared with a year earlier. It could gather further momentum as more high-tech cars roll off assembly lines.

The biggest winners, however, might not be streaming platforms but recording giants Universal Music Group, Sony Music Entertainment and Warner Music Group. Spotify and Apple Music would hand over more than half of any new in-car streaming revenue to the record labels in the form of royalties for playing their songs.

Record labels have no big incentive to defend radio from the onslaught. Quite the opposite. Terrestrial stations currently pay no royalties to artists or labels whose tracks are played on U.S. airwaves. This has been a source of tension for decades, but the radio industry argues that airplay is a form of free advertising for new tracks and musicians. The more radio listeners that can be switched over to services like Spotify that do pay royalties, the bigger the boost to record labels’ streaming revenue.

Yet Nielsen’s 2019 data shows that the pace of decline in time spent listening to radio picked up slightly to 3% compared with a year earlier. It could gather further momentum as more high-tech cars roll off assembly lines.