The Call Of The Ostrich: The "Suckers Bet" of Pandora

Written Feb. 16, 2011 by Tom Webster in Internet Radio + Terrestrial Radio with 5 Comments

OstrichHead

I've worked alongside radio broadcasters for nearly 20 years, helping them understand their audiences by researching and anticipating their wants, needs and desires. You don't do that unless you have a deep love for the medium - and I truly do. That's why articles like this one, "Radio Exec Says Suckers Invest In Pandora" don't make me laugh, elicit a snide remark, or turn on my generally dormant inner cynic. No, they make me sad - genuinely sad.

Read the article. I have no interest in engaging the arguer here, so I'll deal solely with the argument, as presented: Pandora is a "sucker's bet," for two reasons:

1. Pandora isn't available in cars.

2. Pandora has no localized human connection.

Proponents of this argument - the "Pandora as fad" argument - are clinging desperately to the ephemeral nature of #1 and drastically overstating the importance of #2, especially with listeners under 40.

We have plenty of research that shows the lengths to which people will go already to listen to Internet radio in their cars - this stat isn't limited by the availability of car-based Internet, it's only limited by (at this point) feature phone penetration (not even "smartphone" penetration) and a cheap patch cord. More importantly, however, is the stat that is right under everyone's noses - even with Pandora's car "disadvantage," they currently enjoy somewhere between 40 and 50% of all internet radio listening. Even if you only look at the AndoMedia rankings, which, though not comprehensive, do at least include the largest radio companies (Clear Channel, CBS, Citadel, Cumulus, etc.), Pandora is as big as the rest of the top 20 combined.

When you superimpose the enormous Internet listening Pandora enjoys today with the significantly smaller penetration of in-car Internet radio capability, you do NOT get a "sucker's bet." You get pent-up demand, just waiting to be unleashed by technical developments that aren't 5 years away, or even one year away. They are happening now. Ignoring that, putting your head in the sand, is the real sucker's bet.

The "local" advantage is similarly a "sucker's bet." Presumably, all of those Internet radio listeners (and they are legion) already live in cities and towns that offer "localized" broadcast media. Half of them have demonstrably voted with their mice, keyboards, phones and tablets that they don't care about #2. In most cases, they don't care about radio's local advantage because most of what passes for local on broadcast radio are the ads and the weather. Ask your neighborhood repeater for Rush Limbaugh or Ryan Seacrest if they are winning on "local."

I rarely, if ever, sound so strident in this space - it's generally unhelpful, and distracts from my arguments. But broadcasters simply have to do better. No longer can you rest on the deteriorating advantage of your towers. On the Internet - and believe this - you are David, and pure-play streamers like Pandora are Goliath. David didn't beat Goliath by underestimating him. Goliath figured out what Internet consumers really want from a music radio service in 2011, and provided it, pure and simple. It is now David's turn to learn, and not to denigrate Goliath with ineffective taunts.

If terrestrial broadcasters are going to survive in the next several years - and some of them will, don't get me wrong - it won't be by dismissing Pandora. It will be by studying Pandora and offering meaningful improvements that offer value to today's listeners. So many broadcasters are resolutely incurious as to the reasons for Pandora's success, and it is that lack of curiosity that some broadcasters may not live to regret.

Reader Comments

Your 2¢, in chronological order — add your comment below.
1  Jim Kerr on February 16, 2011 5:43 PM

Your point about pent up demand is spot on. That Pandora has been this successful with so much going against it--from royalty extortion to auto limitations--should be a huge wake-up call for radio. That someone from traditional broadcast can honestly look at the IP audio landscape and shrug is frightening.

2  Buzz Brindle on February 16, 2011 6:45 PM

An apt response, Tom to an attitude within the broadcast industry which many find frustrating and unproductive.

3  Tim Satterfield on February 16, 2011 10:47 PM

Let's see...buy shares of CBS, or any other out-of-touch big broadcast dino...or grab a piece of the future? Yea, that was easy.

4  Jennifer Lane on February 17, 2011 12:51 PM

Like.

5  Greg "Cavanaugh" McClure on February 17, 2011 1:26 PM

Anyone notice that Pandora has accomplished its feat by exposing primarily new music...directly requested by its users. You name it, they play it--and furnish artist bio and song info. Hmmm...didn't radio do that once upon a time?

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