From the Editor:
Welcome to the July 2008 edition of RadioWaves. This issue marks the publication's third year and we continue its mission of separating truth from hype in the media industry. This month, in addition to the regular features on Radio, Traditional Media, Digital Media and Marketing, two new columns have been added. "The Bottom Shelf" will slice and dice complex or obscure metrics and make them more understandable. "Show Me the Money," a revenue wrap-up column, features topics on ad spending and revenue forecasting. As always, your feedback is welcomed. 

Radio 

Radio is still GROWING!
The latest RADAR data released proves that Radio continues to grow its listener base with steady gains year after year. This year, Radio grew by three million listeners, its largest gain in five years. Over the last decade, Radio has averaged 2 ½  million new listeners each year. 

Radio is GROWING its FUTURE, too!
Even with the multitude of digital choices, two recent studies confirm that well over half of all Americans say that Radio is still their number one source for new music. What about tomorrow's listeners? We keep hearing that our youth market is embracing the digital alternatives at the sacrifice of Radio. This is not true. According to a new study by Paragon Media Strategies, 14-24 year olds have a renewed interest in AM/FM Radio. Two-thirds of all 14 to 24 year olds in Paragon's study are currently listening to the Radio the same or more than they did in the last one to three years. And that figure is up 16% from last year. Of the growing majority of youth who are listening to the Radio longer, the number one reason they give for increasing their listening is Radio's music choices and variety. Very few answered that they listened because it was convenient or free. Paragon even confirmed their results with Arbitron, which shows this demographic's time-spent-listening erosion actually stopped two years ago.  

This same young lifegroup is a large part of the growing Internet Radio audience. The vast majority who are already listening to Internet Radio say it has not caused their "regular" Radio listening to shrink. What has diminished is their iPod/MP3 listening. According to Paragon?s research, 14 to 24 year olds increased their regular Radio time-spent-listening by 11% this year, while their iPod listening declined 13%. We have already seen the impact of iPod fatigue on adult demographics who have little time to maintain these personalized programmable entertainment devices. Apparently the youth market is now also shunning the money, time and effort it takes to keep these devices fresh. Since most 14 to 24 year old iPod owners have fewer than 400 songs on their iPod, it should be no surprise that, after some time of iPod ownership, these listeners perceive Radio as being "fresh" with new music once again.

Source:  RAB/RADAR,  Jacobs Media April 08, Sonoro Audio Study May 08, Paragon Media Strategies June 08

Traditional Media

Television: The 2008 Upfront - "The Good, The Bad?."
Television just celebrated the closing of another record-breaking upfront selling season, posting $9.2 billion in Network TV sales, a 1% increase from last year. This sales success comes despite a challenging economy paired with record low TV ratings last seasons. While ratings losses in the February 2008 sweeps were written off to the writer's strike, the May 2008 sweep reported a 10% decrease from last year in total viewers and a record low for all networks. TV was able to protect its upfront revenues by packaging more inventory into its mix, including online video advertising. 

The upfront for Spot, Cable and Syndicated TV also went well and impressive sales gains were shown. Cable posted an upfront sales gain of 9% for the year. Is there any bad news for TV sales at this point?  Some suggest that the aggressive upfront may be at the sacrifice of dollars during the season from scatter plan schedules and others say that the packaging of digital alternatives into the mix could prevent future monetization of these opportunities.   

Source:  TV week, Mediaweek, MediaPost, NY Times, TNS Media Intelligence

Newspapers - "...and the Ugly"

A very controversial series of ads hit some newspapers recently, which claimed that newspapers reached more people than Radio. At best, the data was sketchy and, at worst, blatantly inaccurate. Radio significantly out-delivers newspapers-and it always has. Newspaper circulations are in a freefall, dropping an average of nearly 3% per year while Radio audiences have grown by 10% in the last 10 years. As a result, Radio is actually pulling farther away from newspapers in total audience. Newspaper circulation losses are now so extreme that the Newspaper Association of America has actually stopped reprinting the Audit Bureau of Circulation's regularly published newspaper circulation numbers. 

What prompted the newspaper industry's anti-Radio ads? Worse than the declining circulations are the double digit revenue losses newspapers are experiencing. In the first quarter of this year, newspaper revenues were down 13%, a rapid acceleration over the 8% loss the industry showed at the end of 2007. Even the New York Times admitted that this will be newspapers' worst year in history with their very survival threatened.                                              

A few weeks after these anti-Radio ads were published, many newspapers announced further cost-cutting measures, which included turning hiring freezes into layoffs. Substantial numbers of staffers were let go at the same newspapers that produced the anti-Radio ads. Newspapers are also slashing costs in other ways. For example, the Orange County Register announced it would outsource its copy editing and layout to India. That?s like a New York Radio station suddenly deciding to have someone in New Delhi pick its music!

Source:  RADAR, Newsday, The Los Angeles, Times, The New York Times, Borrell & Associates, OnLine Publishing Insider, CNBC, MediaPost 

Digital Media

Is Web 3.0 here already?
The term Web 2.0 has come to mean the monetization of digital platforms; in other words, the Internet as a business. Now the term Web 3.0 is being used more often. While some use this term to describe the internet's future, others are using it to describe the wisdom of the web's users, turning them into curators of the web's information and ultimately monetizing that collective braintrust. Social networking websites like MySpace, informational sites like Wikipedia, user review sites like TripAdvisor, bookmarking sites like del.icio.us and even buyer reviews on e-commerce sites like Amazon, are all aspects of the Web 3.0 dialogue. Even comedians have gotten into the act. Steven Colbert's now famous new word, "wikiality" is a comical take on what some marketers are calling Web 3.0. The word is loosely defined as: it happened this way if the collective consciousness says it did. The ultimate outcome of this phenomenon will be that the opinions of the experts will take on less weight when the collective opinion of the many is so easily obtained. 

This Web 3.0 concept has also taken the form of the listener customized Radio station that is available on Internet Radio websites like AccuRadio, Last.fm, Yahoo Launchcast and Pandora. These stations can be shared with other listeners, instantly making a listener into a program director. The challenge of Web 3.0 will be to monetize this collective consumer braintrust.     

Sources: Newsweek, The Colbert Report

Everything Old is New Again

Internet Radio continues to grow, with the largest gains coming from the websites of terrestrial Radio stations.  This growth does not come at the expense of traditional AM/FM Radio, which just reported its largest gain of listeners in the past five years. However, other digital music choices have seen their growth stagnate. Internet Radio now dwarfs Satellite Radio and iPod sales. 

 Source:  RADAR, Piper Jaffrey, Edison, JP Morgan Internet Radio Scorecard, RAIN

Show Me the Money!
This new RadioWaves column features topics on ad spending and revenue forecasting.

Are the challenges of the economy catching up to the Internet?
In the last issue of RadioWaves we introduced the "flat is the new up" concept. With the economic downturn having a strong impact on all markets, including the advertising market, remaining stable is a victory. The difficult economy has apparently begun to impact digital offerings. Overall, Internet advertising dropped by nearly 1% in the first quarter and total advertising spending was flat. Website CPM's are dropping, with the largest sites sustaining a CPM drop of 52% last month. The PubMatic AdPrice Index is a new industry-wide measure of online pricing, which is based on data from 3,500 online publishers that generate billions of advertising impressions. The new index showed a 25% drop in the last two months. These are the first indications of the Internet?s slowing revenue growth. 

Source:  TNS Media Intelligence, PubMatic AdPrice Index, MediaPost,  NY Times.

The Bottom Shelf - a new column on metrics
This new RadioWaves column is devoted to slicing and dicing complex metrics and obscure studies to make them more understandable and useful. The expression "the bottom shelf" refers to a Southern expression that says, put the jam on the bottom shelf so everyone can reach it.

Media Effectiveness:  What buyers and planners think
The Association of National Advertisers' Study of Marketers found that 62% of corporate marketers thought TV was a less effective advertising vehicle today than it was two years ago. Media Life Magazine took exception to this study and decided to get the opinions of media buyers and planners who deal with TV and other media on a daily basis. The study yielded a complex set of responses and surprises, including some results which contradicted with the ANA study. We've condensed these responses down to two viewpoints: which media are more effective today than they were two years ago versus which are less effective. Buyers rated Radio as one of the more effective media but it's no surprise that newspapers are at the back of the pack.

Media Life Magazine's 2008 study of Media Effectiveness
A study of the perceptions of Media Buyers and Planners

Media Effectiveness vs. Two Years Ago

To be read: 62% of the media buyers and planners say that Radio is more effective than it was two years ago. Only 24% say that newspapers are more effective today than they were two years ago while 76% say they are less effective.

Satellite Radio Update

The long-awaited merger of XM and Sirius Satellite Radio, as of this writing, remains pending government approval, but many speculate that the point is moot since technology has already passed Satellite Radio. In particular, the acceleration of Internet Radio, WiFi and WiMax make Satellite Radio look like 1990's technology.

Financially, Satellite Radio continues to bleed money. Its revenue losses continue to grow and both XM and Sirius lose well over $1 million a day. Meanwhile, subscriber growth has fallen and the number of units purchased at retail outlets dropped 35% last year. Furthermore, with new car sales at a standstill, XM and Sirius have few new paid subscribers in the pipeline. The vast majority of those who did buy new cars this past year with free Satellite Radio don't intend to renew when their free trial is up. The bottom line is that Satellite Radio has only 18 million subscribers and only its two largest stations (out of over 300) have enough listeners to "make the book" in Arbitron. No matter whether the government allows the XM and Sirius merger or not, most experts, including most on Wall Street, think that Satellite Radio is doomed to fail.

 Sources: US News & World Report, Silicon Alley Insider, The Wall St. Journal,  Jacobs Media Annual Tech Survey 2008, Arbitron

This Issue's Definition

What is "The Long Tail?"     
The term "Long Tail" describes a niche marketing strategy of businesses like Amazon, iTunes, eBay and Netflix, where large numbers of unique items are sold in small quantities. The phrase was first coined by author Chris Anderson in 2004 in a magazine article and eventually became a book. The Long Tail is at the opposite end of the marketing spectrum of the 80/20 rule (i.e., that 80% of your business comes from the top 20% of your customers). With the dramatic increase in the number of available choices and the customization opportunitites that exist in this digital age, what used to be call "fragmentation" has become "personalization." This concept has found its way into applications for research, media, micro-finance and user-driven innovation such as peer-to-peer contacts and viral marketing.

Is there still an 80/20 rule on the Internet with its infinite possibilities? Sort of. But it's more like 50/50, with the rest being that ever lengthening tail. 

Source: Wikipedia; MediaPost; The Long Tail: Why the Future of Business is Selling Less of More

Truth or Hype?

Video Streaming is the next major advertising medium
This is HYPE! In fact, we found articles with two contrary opinions in the same issue of a trade publication. A new report from Forrester Research speculates that video steaming will be present in everything from GPS devices to alarm clocks and will control our lives pretty soon. Meanwhile, YouTube actually saw a drop in viewers in May with an 8% decline from the previous month.  Total video viewing from all websites dropped 3% in May. Also, keep in mind that while there are billions of video views every day, the average time-spent viewing these videos is only four minutes per day, so user engagement is not optimal.  Finally, establishing a cohesive economic model for online video has proved to be an uphill climb.

Source:  Nielsen, Web Video News, Forrester Research, July 2008

Factoids You Can Use

New car buyers no longer look like the rest of us
With the tightening economy and increases in fuel costs, the profile of the new car buyer is pulling farther away from population norms. There is currently a 13-year age gap and an 82% income gap between new car buyers and the population in general. 

Source: J.D. Powers 2008