We officially have a kerfuffle on our hands.
Last week, Pandora stirred it up by publishing a colorful “white paper” that fires off a series of torpedoes aimed right at broadcast radio. It criticized everything from commercials, repetitive music, erosion among newer car owners, and – last but not least – the notion that AM/FM radio listeners are habitual button-punchers, limiting their exposure to commercials.
This is a central issue for radio because the car is the number one location for radio listening, automakers are working hard to change up the dashboard ecosystems in their vehicles, and mobile phones are becoming content gateways for drivers. What was once radio's domain is now being chipped away by other sources, and that's precisely the point Pandora is making – and then some.
But let’s go back to the beginning. It started with an Edison Research study, “Hacking the Commuter Code: What Really Happens When Consumers Are Driving.” Among other things, the study indicates that while commuting, AM/FM radio listeners push buttons an average of 22 times per journey, far higher than when listening to other sources (like streaming radio).
As we learned at DASH last fall, Pandora is working hard to bolster its automotive presence, from the dashboard to dealership. In the process, broadcast radio has new challenges on its hands. So when the Edison study was released, Pandora was quick to jump on this study with a provocative presentation of their own called “The State of In-Car Audio; New Insights on Today’s Commuters.” It liberally quoted the Edison data, including the conclusion that “streaming is the solution for reaching engaged drivers.”
Larry Rosin in his company’s blog pointed out some key stats that Pandora conveniently left out, including the fact that nearly three in ten commuters (29%) don’t switch stations when commercials come on. But the damage was done, and a series of outraged “first responders” in and around radio, including Pierre Bouvard, and Mary Beth Garber, were quick to refute many, if not all of Pandora’s claims. They quoted many different data sources, from Edison to a well-publicized IPSOS study in their defense of radio's primary in the car.
Well, as it happens, we have a little data of our own. Our Techsurvey12 will be presented to its 200+ station stakeholders today, and then an executive summary will be shown to attendees of the Worldwide Radio Summit on Thursday. And as you might imagine, we asked versions of many of these same questions to the more than 39,000 respondents who took our survey.
So let’s first take a look at all the different sources consumers listen to while on the road. In Pandora's “white paper,” they use the Edison slide below to make their point that “AM/FM radio has been joined by a great number of audio options.” No one argues that point, but at 90% usage, no one in broadcast radio (or its advertisers) would push back.
Even though the questions are similar, they are quite different. The Edison survey asks whether commuters ever listen to these sources. In TS12, we ask whether drivers and passengers use audio sources during an average weekday. Here's the way our study breaks it down:
When it comes to AM/FM radio, the numbers are very close. In each of our studies, 9 of 10 listen to broadcast radio. But the big difference is in the way we treated internet radio. Edison lumps it all together, looking at streaming globally. In that format, four in ten commuters have ever listened to “streaming internet radio” while commuting.
Given the way Pandora sees its own brand as bigger than all the other pure-plays, we break them out separately in TS12. And our study shows that only 14% listen on an average day. So yes, radio has a 6x lead while people are on the road – a sizable advantage. Daily usage is important, especially to advertisers, and that's why we use this wording.
We also ask our question a different way in order to get more granular about in-car listening. We ask our on-the-road respondents to assign a percentage to each of these sources that approximates their average day time spent with each medium, source, and activity. So think of these as shares, and our sample breaks down this way:
So AM/FM radio earns a very impressive 66% share of in-car listening, followed distantly by satellite radio and personal music (both with 10%), along with many other sources – including Pandora – at or around just 2-3%.
Now one of Pandora’s points is that as “connected car” ownership proliferates, streaming radio usage is going to go way up – and conversely, broadcast radio listening will greatly erode. As a company that is heavily invested in both the mobile and automotive space, we wanted to put this to the test as well.
In the slide below, we’ve isolated “connected car” owners to see how their in-car media usage varies from that of the total sample share above:
True enough, AM/FM radio takes a hit, dropping to a 55% share of in-car media usage. But it’s not Pandora that benefits – it’s satellite radio, doubling in share among those who drive cars that are fully connected.
As for Pandora and other streaming sources, the differences – at least for now – are miniscule.
And one more data point to keep in mind revolves overall satisfaction among Pandora listeners – wherever and whenever they listen. Overall, our study reveals that while 27% of their audience say they’ve been listening more in the past year, 23% report less listening. And when we drilled down to better understand that behavior, we learned that for people listening less to Pandora, the following are the key impediments:
A lack of song skips is the biggest problem, cited by half of these disgruntled Pandora users. But annoying commercials and a perception that Pandora has increased their advertising represent major impediments to listening more.
It’s noteworthy that while Pandora boasts of a more conducive commercial environment, particularly compared to broadcast radio, it’s a fact that advertising is not especially welcome content from pure-plays either.
And an additional drawback is that Pandora is now enduring what broadcasters have coped with since the early days: competition. Note that four of ten of those listening less to Pandora cite using other streaming sources, like Spotify.
The research knife cuts both ways. And in the case of Pandora (and other media outlets), they may find it just as rocky and arduous when it comes to successfully integrating advertising with the content.
A final note on whether people really listen to commercials – or not. When you ask respondents whether they actually hear ads or change the station, the reported or perceived result may be different than what actually occurs. In the case of the Edison study, nearly half say they tune out immediately or punch to something else in the middle of the first commercial while listening to AM/FM radio.
As an old advertising professor of mine used to point out when people would say “I never listen to (or watch) commercials,” somehow we all know what products to purchase when we walk down the aisle of a store. In one way or another, those insidious ads find a way to reach deep into our souls and into our purses and wallets.
Even on the radio.
Postscript: Techsurvey is comprised primarily of respondents who are members of radio station email databases. The Edison study is a national sample of solo auto commuters with journeys of more than 20 minutes each way.
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