It’s almost 10 years since iTunes launched and almost 5 years into the mainstream social networking revolution. But something odd is happening – if the future is all about mass personalization and the decline of one-to-many mass broadcast, how come terrestrial radio is in rude health and right now is attracting more listeners than ever before?
A lot of column inches are wasted on analyzing the on-demand streaming sector and the revolution that the likes of Spotify, Rdio, We7, Mog, Sky Songs etc etc etc are delivering to the way we access and consume music. But whilst on demand streaming services may still be growing, the rate of growth is declining; meanwhile the market is being saturated by an ever increasing number of new entrants (at this rate there could be more services than customers). It’s inevitable that there is going to be (a lot of) blood on the floor within 12 months as the nosebleedingly high costs of running these services empty the VC money pit faster than you can say ‘freemium’.
But there is an elephant in the room (indeed he’s been there all along) and he’s called RADIO. UK radio is responsible for a staggering 82% of all audio listened to in the UK (and that includes ipods, streaming services, YouTube etc etc). It boasts 46 million weekly listeners (more than ever before – 91% of the population of over 15s – RAJAR) listening for an average of 16 hours each – that’s around 500 billion track listens a year, which compares with around 2m UK users for the fledgling Spotify which I estimate to be serving around 5 billion listens per annum in the UK. Furthermore a UK radio station will typically have a playlist of just 300-600 tracks compared to Spotify’s 8 million. So the concentration of promotion on radio is many thousands of times more powerful that on demand streaming – combine this with Radio’s ability to push new tracks (rather than relying on user request) and its obvious why Radio is by far the dominant medium to deliver exposure, influence consumer choice and control the charts.
For the vast majority of consumers, music is background, and that is what radio provides, ‘good enough’ at playing what you can live with. If Spotify is for people passionate about music, radio is for the masses. The vast majority of people just cannot be bothered (and are not motivated) to spend time programming the soundtrack to their lives. OK is just fine. Another example of this is Pandora, the wonderful radioesque music service no longer available in the UK (many thanks PRS); now profitable, it boasts an astonishing 50m users in the US alone (that’s 1 in 6 of the population) and its now finding its way into cars, phones and just about everywhere else. And why has Pandora done so well? Because its essentially personalized radio – give it one track or artist you like and it’ll play you good, similar music all day, every day. Its supercharged music discovery for musical coach potatoes – its like radio but without the DJ, news, weather and other interruptions.
In the medium term music subscription services appear to plateau on a subscriber basis pretty swiftly (Rhapsody, a leading US player, has just 700,000 users, less than 0.5% of US radio reach). But the fact remains that radio remains dominant if you want to break new tracks. How about this for a statistic: in the UK alone Lady Gaga’s Bad Romance, Cheryl Cole’s Fight for this Love and Alexandra Burke’s Bad Boys have each had over 1 billion radio listens– UK radio DJ’s have played each of these tracks almost 100,000 times (source RadioMonitor). A single play of Bad Romance on Radio 2 (simultaneous exposure to millions of consumers) will deliver PRS royalties of around £50. Contrast this with the furor around Lady Gaga receiving just $167 from 1 million plays on Spotify and you can begin to get a sense of perspective – she received 1,000 times more plays on UK Radio alone than on Spotify. Royalty rates are tiny and at present it’s only Radio that has the audience size to make the royalty cheque worthwhile for the artist (this is a little simplistic as royalty rates are different in the respective mediums, but you get the idea).
So where is this post leading? The fact is that although radio may be the dominant promotional tool and no 1 chart driver, it’s not very good at picking the right songs to play. This is because playlists are almost entirely driven by whatever the major label pluggers are hawking, combined with the gut instinct of hundreds of local programme directors. These programme directors are all fishing from a very limited pond (major label releases – approx 20-30 per week) and are all desperate to be progressive but at the same time terrified of alienating their core audience. In radio it’s all about audience share, and if you play the same as your competitors you are unlikely to lose market share, try something a little different and either you will win big, or lose big. RAJAR audience figures are published every quarter which leaves little time for experimentation from one bonus cheque to the next so everyone plays it safe.
And we can prove it. We’ve done some research in respect of 50 recent releases. The chart below plots single sales per 1,000 listens (i.e. conversion rate, the higher the conversion the better) against total number of radio listens (i.e. how much radio exposure the track has had).
As you can see, there is little correlation between the two, you can see that the Sugababes track received over 400,000 listens but sold a meager 1 copy for every 5,000 listens, contrast this with Shakira, who had only a third as may listens but sold almost 10 copies for every 5,000 listens:
By way of comparison, here is another graph that plots Sales per 1,000 listens against these tracks’ SoundOut rating (each track was passed through SoundOut, our online insight and analytics service, pre release):
As you can see The Sugababes track rated badly (around 5.7) whilst Shakira enjoyed a very strong rating of over 7.5. There is no smoke and mirrors here, all this is saying is that genuinely good tracks do better than bad ones and because radio producers have little or no predictive tools to guide their decision making they fall back onto:
1. ‘Research’ being peddled by the record labels ‘proving’ why a track should be played more;
2. What their competitors are playing; and
3. The Charts, which funnily enough are almost entirely driven by radio play…
…it’s all rather circular.
At the end of the day a decent predictive tool like SoundOut will help appropriate track selection and play frequency, this increases both audience retention and acquisition leading to higher advertising income and an even better listener experience. It’s also much fairer to the artists.
The bottom line is that radio is not going to decline any time soon, indeed as radio stations increasingly adopt SoundOut as a predictive insight tool, it’s about to get even better…
Next time we’ll do some further radio analysis and examine how much the identity of an artist influences the commercial success of a track. For instance, does a well known artist do well because they automatically get more airplay, and would an unsigned band do just as well with a similar quality track if given the same exposure…we have the data…