What do industry insiders think are the most important issues and trends facing Internet radio and streaming services? Advertising. You can see this clearly in answers to two of the questions from a recent survey of over 200 people working in the industry. Focus on subscriptions trails significantly.
This may surprise industry observers, given the media coverage of music labels pushing for increased subscriptions and the elimination of ad-supported listening. However, when you look at the data it is clear that listeners have made their choice. Data from Edison Research and Strategy Analytics suggest around 90% prefer ad-supported to subscription listening today and the trend is expected to continue. Internet radio and streaming services know this. Their user data tells the story. Given consumer choice, the services must determine how to make advertising work from an economic perspective and that is a work in progress.
Advertising Leads the Pack
The higher level of focus around advertising is most clearly displayed in one of the final questions of the survey. The question offered no guidance to survey participants and asked: “What is the most important trend in streaming audio for 2015-2016?”
Advertising was mentioned the most frequently of all individual responses at nearly 15%. You can see a great deal of fragmentation on what people consider the most important issues with twelve different categories gaining 2% or more of responses. However, the contrast between advertising and subscriptions is stark. Three times more responses identified advertising as the top trend for the next two years.
Subscription Model Takes a Back Seat
In another question participants were asked to explicitly rank the importance of six issues over the next three years on a five-point scale. All three advertising categories – increasing ad effectiveness, increasing ad-supported consumers and increasing CPM – outperformed growing the subscription-based listening model.
Advertising Economics Command Focus
Survey participants are best described as industry insiders. About 30% were from Internet radio pure plays, another 30% were from terrestrial radio (about half of those also have online broadcasting), and 9% were service providers to the industry. Nearly everyone had a direct stake in the industry in some form.
What these responses tell us is that the consumer survey data and the sentiment of industry insiders are aligned. Both groups see ad-supported listening as the future. The challenge for the industry will be to improve the advertising economics sufficiently to drive profitable growth. Keep in mind that what people think is important gets the most attention, regardless of media reportage.
If we look further into the responses, we see that increasing ad effectiveness is the top advertising priority followed closely by increasing CPM or ad rates. Higher ad effectiveness drives increased demand from marketers that in turn drives up CPM. You can expect these factors, along with audience growth to drive the industry agenda over the next two years.