Radio 2.0 – how the net is disrupting broadcasting

The golden age of radio is long gone. Today, we have cookie-cutter DJs playing more or less the same music and commercials as the next station on the dial.

Music is often selected by a computer program based on the time of day along with a few other parameters few outside the industry get to hear about. Save to say, someone in marketing probably schedules the music you hear.

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By Steve Hart
The golden age of radio is long gone. Today, we have cookie-cutter DJs playing more or less the same music and commercials as the next station on the dial.

Music is often selected by a computer program based on the time of day along with a few other parameters few outside the industry get to hear about. Save to say, someone in marketing probably schedules the music you hear.

The broadcaster will also have more than one powerful and expensive transmitter, and pay hefty fees to licence each radio frequency it uses. But are the days of wireless transmission slipping away?

Visit the website of your favourite station and you’ll likely find an option to listen live online or download sections of the week’s shows for your future listening pleasure.

Play on demand (POD) is not only affecting TV broadcasters, it is quietly seeping across the radio industry too. Helped along by a demand from people who want to listen to what they want, when they want – a thirst for choice that’s quenched by faster, cheaper, broadband.

The traditional radio business model is being undermined by professional DJs and upstarts who are operating 100 per cent online using a mixture of automated and live broadcasts – often using some pretty basic equipment.

These internet-only stations don’t need a licence to broadcast, the expense of a transmitter, premises to locate it or people to maintain it. All they need is a computer, a selection of MP3 music files and to sign up with a firm that provides internet broadcast services.

The cost of entry can be as little as $1000 a month for a serious player, although packages can start at $20 a month for the keen amateur – let’s call them bloggers of the online broadcast world.

Among the dozens of companies that offer people a way to deliver their selection of speech and music to the world include Live365.com, ShoutCast.com and StreamLicensing.com. There’s even a free option at listen2myradio.com (but you do get what you pay for).

The prices these firms charge vary according to the quality of the audio and the number of listeners who can listen to a broadcaster at any one time.

Unlike wireless radio, listening figures can be accurately measured – right down to how many people are logged in to listen at any given moment in time. Advertisers love this transparency.

It’s early days for internet-based radio, but make no mistake, this new breed of broadcaster has the power to disrupt the established players in much the same way as the internet disrupted newspapers.

In a way, we are on the verge of a new ‘golden’ era of radio. Internet-based stations play music selected by the DJ (like it used to be) – listeners tune in to hear a particular DJ’s selection of music, or gravitate to online broadcasters who specialise in one particular style of music, be it non-stop trad jazz, 50’s doo wop, 60’s ballads, 70’s rock or 80’s club music.

Smart broadcasters have already adopted their own online radio streaming services and some are even making money by selling ads for online ‘transmission’ only.

Despite the fact that listeners ‘pay’ to listen to an internet station with increased bandwidth usage – transferring some of the cost of broadcasting from the provider to the listener – studies show that people are increasingly listening to stations online – at work, in the car, at home and with their smartphones etc.

According to US advertising agency TargetSpot, internet radio listenership has reached 42% of adult broadband households in the US, that’s up 8% on 2010.

Its May 2012 report also reveals that while internet radio use grows, broadcast radio listening is holding strong with 65% of broadcast radio listeners spending the same amount of time listening.

Authors of the report say this is evidence that access to content is facilitating listening and that listeners are not unilaterally choosing online over broadcast radio, but rather the device that works best for them at a particular time and place.

For example, someone with an iPhone using the free Tunein Radio app, could be walking along Auckland’s Queen Street listening to a broadcaster based in London. Smartphones are the new portable radios.

The TargetSpot survey also found that 47% of people aged 18 to 24 spend less time listening to broadcast radio than they did a year ago.

For listeners tuning in between 10am and 10pm, the study finds consistent digital usage patterns throughout the entire listening day – the only exception is the 6am to 10am drive period, which is still owned by broadcast radio. However, as in-car internet connectivity increases, internet radio listening may extend here as well.

Being internet based has also led to listeners interacting more with broadcasters’ websites. The TargetSpot survey reports that engagement with online audio carries through to websites as listeners search for new music, artist or band information, and playing video clips.

This interactivity is helping stations, even small operations run by a few volunteers, build relationships with their listeners. Advertisers like to build relationships and engage with people who might buy their products.

 Advertising

According to New Zealand advertising agency The Radio Burerau, commercial radio attracts 11% of national advertising revenue, one of the highest shares in the developed world.

The TargetSpot survey reports that as the digital audio space evolves, so does its consumption patterns.

It says the audience for internet radio is large and growing; with connected devices facilitating increased listening. It says the online listening audience has become more valuable – the increased engagement levels and interaction with listening experiences individually and socially has translated to higher effectiveness for internet radio advertising compared to one year ago.

Both ad recall and response rates increased, with 58% of people recalling having seen or heard an internet radio ad within the last 30 days compared to 52% in 2011, an 11% increase.

Of those listeners, 44% responded to an internet radio ad compared to 40% in 2011, a 10% increase versus last year.

Media technology consultant Skipi Pizzi, in a report published in June 2010 called ‘The Mobile Internet: A Replacement for Radio?’ writes that the growth of online radio listening will continue and that some of this growth will be at the expense of broadcast radio.

He says a “relatively slow transition is now in evidence among nearly all demographic groups, and within all radio listening venues” such as home, work, car, and personal devices.

“This gradual cross-fade will continue between broadcast and online radio listening, but the transition will never be complete,” he writes. “A permanent baseline of broadcast listenership will remain, regardless of the ultimate growth of internet radio.

“It is unlikely that a typical station will ever see its online listening audience greatly exceed its broadcast one – or afford the bandwidth costs, if it did – although a broadcaster’s ‘online time spent listening’ may surpass that of its over-the-air services – the latter has already been observed.”

Pizzi says an increasing number of new devices – fixed, mobile and handheld – will include both broadcast and online radio listening capabilities.

“In this ‘mixed’ environment, listeners will take up a ‘best available device’ approach to seeking out the content – not the channel – they desire in their current situation,” says Pizzi. “Podcasts of broadcast content also play an increasingly important secondary role.

“Broadcasters should respond to these trends, not by trying to choose any single delivery approach but by using an “all of the above” platform methodology, with minimal duplication of content and careful programming of each service appropriate to the usage behaviors observed for the respective delivery methods.”

Pizzi says rather than being preoccupied by the question of internet vs. broadcast, the key for station owners is the development of compelling visual content to enhance their radio services.

 Bandwidth

Despite the ease of access to internet-based radio stations – via web browsers and smartphone apps – the downside for the listener is that they will use costly bandwidth all the time they are online.

People can use the free wifi offered in many public places, but at home, the bill payer may have something to say as little Jimmy uses up the monthly bandwidth allowance listening to GothRock FM out of LA.

Having said that, bandwidth is getting cheaper and one day there may not be any monthly caps or limits on broadband usage in New Zealand. Maybe.

Until then, wireless broadcasters just about have the upper hand with their expensive transmitters. But once bandwidth is removed as a barrier, and as the ownership of smart devices grow, people will think nothing of listening to stations broadcasting the music, documentaries and news they want to hear.

The bottom line is that radio broadcasters the world over are on notice that a quiet revolution is undermining their business model – listener patterns will change and advertisers will go where the [niche] audiences are.

Traditional broadcasters need to understand that the threat to their businesses will probably come from a teenager with a PC in their bedroom.

Feel free to link, but no copying or republishing without written permission from the author. Copyright Steve Hart.

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Author: Steve Hart

Steve Hart is a business journalist, editor, designer, podcaster and host of the Cool Nights radio show.