The aim of this assignment is to evaluate and discuss the present and future economic health of the radio industry. From a general perspective, terrestrial radio is faring well today. In a recent study by the Pew Research Center, it was established that over 90 percent of the US audience aged above 12 years usually tune in to terrestrial radio (Varner para. 1). Further, the study also established that the major streaming radio stations, such as Pandora, only cover about 15% of the US listeners while Spotify controlled about five percent. More data revealed that Pandora controlled about 2.4 million active sessions, Spotify has 904,000, and iHeartMedia held 346,000 (Varner para. 1). Hence, these figures reflect a small portion of reach relative to the large reach of terrestrial radio. So essentially, local stations still thrive. Ross (para. 6) observes that terrestrial radio is still strong with over 30 million subscribers. In fact, terrestrial radio has not reached any point of decline. For instance, a study by Edison Research established that 39% of SiriusXM subscribers often listened to AF/AM in their cars.
As previously observed, terrestrial radio still controls more than 90% of American radio subscribers. According to Stevenson (para. 3), this percentage has barely changed between 2002 and 2013, demonstrating the resilience of terrestrial radio. However, this observation is changing. From the industry experts, it appears that more and more people are most likely to switch to streaming audio platforms. Rain News claims that “audio streaming listening hours are estimated to grow more than 40 percent, from 30 billion in 2014 to 43 billion in 2017” (Varner para. 2). This reflects about 180 million U.S. digital radio subscribers. The CEO of Emmis Communications, Smulyan, asserts that podcast renaissance cannot kill terrestrial radio. Smulyan says, “Terrestrial radio’s biggest problem right now is it has no cachet” (Stevenson para. 5). He further states that podcasts only get roughly not more than 1% share of his business, and Internet radio streaming accounts for 7% of the US radio industry.
Nonetheless, Smulyan points out that the situation is starting to fragment, but they “still made more money before lunch today than Pandora has made in its entire history” (Stevenson para. 5). Despite this claim, the reality is that streaming radio and its Internet-driven technologies will outdo terrestrial radio. Although significant growth is noted in the radio industry, much of this growth occurs online. Online radio is gaining traction because listeners have their favorite podcasts readily available compared to terrestrial radio, where one tunes in and hopes for their favorite music, for instance. The Web also offers so much more where listeners can choose from over thousands of programs compared to about 30 FM/AM stations.
This demonstrates that Spotify, Pandora, Last.fm, Sirius XM Radio, SoundCloud, Audioboo, TuneIn, The Echo Nest, and other digital music sources continue to gain popularity and claim shares of the radio business year-over-year. For example, in 2015, All Def Music, the leading cross-platform media destination for urban millennials, recorded an impressive growth of more than one million subscribers. According to the company CEO, Sanjay Sharma, All Def Music tripled its subscriber base within the year and is a leader in retention and user engagement rates. The company is able to offer diverse content across various platforms, which makes it difficult for traditional media brands to compete. They use data to generate audience insights and target the new generation of hip hop lovers, for instance.
The overall economic health of satellite radio is promising, as previously noted (Varner para. 2). The radio streaming revolution will definitely sustain the momentum as the digital space expands. This growth is equally good for advertisers because they would have opportunities to reach more target audiences. As such, satellite radio is now a popular choice because of its convenience to listeners, customization, high-quality sound, and increasing targeted advertisement. It will continue to thrive. That said, terrestrial radio is still the leader in the radio industry (Sawers 2). With a huge market share, terrestrial radio continues to appeal to marketers and, thus, driving its growth. A former CEO of NPR, Vivian Schiller, predicted that radio towers would disappear in a decade, but almost two decades later, over 90% of Americans still tune in to terrestrial radio, leaving satellite radio with about 9% of the market share. Though podcasts and streams have continued to dominate the news, terrestrial radio will continue to lead the market for many decades to come.
Further, it would be unwise to ignore cars and radio – both satellite and terrestrial. It is estimated that about half of all radio listening in American occurs in the automobile (Sawers 2). Today, SiriusXM claims, “75% of all new vehicles sold in the United States come with satellite radio installed” (Sisario para. 7). Pandora can be found in over 2.5 million vehicles because of its partnership with more than 20 auto manufacturers and other stereo brand players. Spotify also announced a similar partnership with Ford Motors.
Radio format, which is referred to as programming format or the overall content of a radio station, differs across the industry (Halbrooks para. 3). Some radio stations may have multiple formats, but they have distinct signature styles and tones. These formats generally appeal to specific audiences and niches. According to Nielsen 2016, News/Talk radio was the most popular format (9.6%) within the year. It appealed to listeners aged six years and older. They generally spend more than 15 minutes during the day listening to the radio. The previous percentage was 8.9, which reflects a growth relative to the year 2015.
The second most popular format was Pop Contemporary Hit Radio (CHR) (8.1%), and the third format was Adult Contemporary (7.5%). Additionally, Country was fourth with 7.4%, while Hot Adult Contemporary was fifth with a share of 6.4%. Age characteristics for these top formats varied for listeners aged 18-34 and 35-54. In these age groups, Pop Contemporary Hit Radio was the most popular with an excellent share of 12.2 percent, mainly from 18-34 years old. Urban Contemporary, Rhythmic Contemporary, and Mexican Regional and Alternative also commanded a significant share of listeners aged between 18 and 34 years old. Listeners aged 35-54 years were mainly tuned in to Classic Rock and All Sports formats than the rest of the listeners.
Clearly, radio – both satellite and terrestrial – continues to increase coverage in the US. It appeals to middle-aged Americans relative to other channels, but the market is highly fragmented. Today, for instance, the US has ten major radio formats, which must strive to be more customer-focused to attract marketers targeting specific audiences using different channels and devices.
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