The future of radio is online, device-driven and in your car

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A recent survey in the US by TargetSpot, a digtal audio network, found an increase in tablet ownership of nearly 87%, combined with a smartphone take-up increase of 22%.

As the world fast grabs hold of new devices to make their lives more connected, so our ways of delivering and receiving everyday content is being reshaped. Radio is but one of these everyday concepts that are being delivered in a new and fresh way. It’s a concept that is rapidly changing though, particularly in emerging markets like South Africa.

Let me ask you a question. When did you last hear someone raving about the new FM Radio they brought for home? Not recently I am sure. Speakers that act as a docking station for some new tech like a tablet or smart phone. But an FM receiver? Probably not.

The definition of “internet radio” should be obvious but at the same time it’s more layered than a Tim Burton movie. Essentially we use it as an umbrella term for streaming music, voice and podcasting across the internet.

Popular subdivisions of internet radio are broken down into pure on-demand streaming via specialized services (Spotify, Pandora and Last.fm for example), pre-recorecorded podcasts (which are not technically internet radio but popular perception requires it be listed), traditional radio streamed online, parallel to the stations AM or FM broadcast and lastly, live presenter driven internet radio. This is defined as stations that are completely web based with no view to acquiring an FM or AM license (e-casting, iRadio and web radio come under the same definition).

The growth of this last format has been particularly strong over the last two years. While there is no reason for established terrestrial stations to start re-looking their business model just yet, there is certainly a growth in audience and concept that cannot be ignored, both from an listener engagement point of view and as a viable new track for traditional radio advertisers.

Whilst buisnesses like Pandora and Spotify, two of the most successful versions of on-demand music streaming, continue to claim bigger audiences world wide, presenter driven streaming radio in Africa is rapidly finding a ready audience.

On-demand models are principally software platforms that have access to an enormous catalogue of music. By asking you a variety of questions around music likes and dislikes, your answers are combined with a mass of algorithms to uncover your music “DNA”. The software then identifies further music choices for you based on what it believes you may like, with astounding results.

So why not replicate this format in an emerging markets context? It works and is a proven model.

There are two answers to this. Firstly, why re-invent an already established internet business at a huge cost to replicate? And secondly but most importantly; is the current FM radio landscape really the best we can do?

It’s an easy answer. No.

On-demand streaming will happen. The thing is streaming music alone doesn’t offer something very important. The human element. And with that a choice. Commercial radio has become repetitive, dull and aimed more and more at the lowest common denominator in order to cast a wider net and claim bigger listenership figures. The listener is not the end target in this model, the client is.

High volume listenership in radio comes at a cost. Getting your message through means high repetition in a short space of time; and normally in the most expensive time bands. The rate card here smacks your advertsing budget. It’s highly traded and highly cluttered air space. And while there may be a “million” listening, but how many just turned over as soon as your ad came on? In commercial radio loyalty is a button away. A button that is now generally located on your steering wheel for even more convenient channel hopping.

Research shows that internet radio comes with a much stronger sense of loyalty (in our case an 88% return rate weekly), it carries less perceived advertising and, inadvertently, it’s harder to simply switch channels. Advertsing is more targeted, less intrusive and as such creates a more pleasant, less cluttered listening experience.

So why do we listen to commercial radio if it’s so bad? Again two very good reasons. One, unless you have travelled and engaged other forms of good radio internationally, we perhaps know no better.

Secondly, choice. We have such a limited choice of in-car entertainment on the way to work because of a limited and controlled radio spectrum in most countries. Put simply, we have no choice. We flip channels continuously. You should never need to touch the dial if that station was talking directly to you and your needs; sadly, they are trying to satisfy everyone’s at once.

Commercial radio has become somewhat of a walled-garden. It has to be in order to increase time spent listening (TSL) and retention. You are enticed by a bubbly and comical personality on your way to work. He or she plays a few new tunes, tells you to stay listening because such and such is giving away x and x prize shortly (your carrot to stay with them) and that if you listen later and SMS such and such to this number you will get loyalty points — for a radio station?!

It’s one continuous carrot-dangling operation to encourage you to stay and be loyal in order to satisfy the sales departments. Pavlov never had it so good.

Internet radio cannot compete at this stage on numbers. But it can compete on a number of important differentiators. Use of talent, content and music selection. It’s not regulated by authorities and it’s not formatted against license requirements so we have room to play and entertain.

Imagine unleashing the actual talents of South African DJ Gareth Cliff instead of the scaled down and diluted version that we get of him currently?

The argument is that by going back and creating listenable and engaging radio again you will create an audience regardless. There is a proven hunger for it.

Internet radio is for a niche audience, but one that in most emerging markets, comes highly enabled and qualified. To listen to internet radio in this country you must have an internet connection or own a smartphone — something that might be standard in the USA but not in RSA. It’s a pre-qualified audience. They have to be able to spend to listen. It’s an enabled audience that is smaller but has an 88% return rate and has an average TSL of two and a half hours.

I constantly preach the device driven track when it comes to in-car listening — the next step in online radio growth.

Entertainment while driving started with radio, then led to 8-Track and cassettes to CD’s and DVD’s. The next obvious iteration is internet driven entertainment. When you are no longer limited to whats on your FM dial, the freedom becomes immediate.

Coupled with this data will only get faster and cheaper and not other way around. Internet entertainment systems in cars won’t be used just to entice the well heeled older generation. Cars in the lower cost segment, aimed at that youth, will inevitably start using net enabled systems as USP’s.

Worldwide the youth market listening to traditional radio is in decline in the 18 to 24 bracket. TargetSpot calculated that 42% of households that have wireless internet listen to internet radio. And why not? Younger generations are not buying FM Stero players, they are docking iPhones into speakers.

With uncapped broadband now very much the norm, such preconceived ideas of data cost, no longer limits the audience as far as a barrier to listening goes. To listen to a standard online radio station for 24 hours over a full month continuously would only use around 1.2 gigs of data.

Having helped start an online radio station, I am more than satisfied there is a growing need and a growing demand for both the unformatted content and this way of delivering radio.

It’s not for the faint hearted but as far as proving concept the hard yards have been done and a future proven.

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  • Anonymous

     splendid insights about the industry. Thanks

  • The Unicorn

    Great article Rich! “The times they are a-changin’ ” … 

  • Chris Grant

     A very good read and right on the money. Good job Rich!

  • tb

    Internet Radio has grown, yes. There are some bad broadcast stations that lack invention, yes. BUT, internet has not dwarfed radio broadcast and there are some good stations out there. No one listens to “terrestrial radio” or “internet radio”, they listen to “their favorite station”, my point. Where I live there are two great non-coms on FM that are great! And an FM news/talk I like, plus a local low power AM that really is doing great, and a high power news/talk AM that has a lot to offer. There are a few other FMs I like around here. I think most of the internet sounds like crap, at 64 or 92 kb of nays compressed audio, 90% of the music and harmonics are missing! What’s this pure HD quality BS on the promos I hear about internet and HD! It’s all crap. An FM playing recorded CDs or noncompressed mpeg files have much better quality than even 128 kb on the internet. How foolish to think analog sounds bad. FM sounds great! Especially compared the crappy quality of the internet! Crank it up and compare. Does everyone have wooden ears? I hear the difference.

  • Jonathan

    Brilliant article, and thanks, makes me confident that starting my own was a good choice. http://www.pubrock.co.za

  • http://www.gearburn.com/ Steven Norris

    …soon after :)

  • http://www.gearburn.com/ Steven Norris

    Here you go: it was embedded into the article.

    http://myistore.co.za/iphone/

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