03/16

Audio is a Feature, Not an Industry

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So what does it mean when the radio industry headlines lead with debt-burdened iHeartMedia and this: iHeartMedia Battles Angry Creditors as Bankruptcy Looms.

What does it mean when the next headline is about Cumulus, and this quotation: “Q4 and 2015 results dismal as radio’s decline shows no signs of stabilization.”

What does it mean when CBS announces their plan to spin all of their radio assets while at the same time vowing to boost revenue $3.75 Billion by 2020 based on everything except radio: Retransmission fees, OTT, international projects, and more?

What does it mean when Pandora, with more than 80 million users, grows revenue by 25% year-over-year but, thanks to onerous royalties, still can’t cover its expenses amid swirling rumors that the company is for sale?

What does it mean when Rhapsody is losing $3 Million a month and Soundcloud has hemorrhaged $70 Million over the past two years?

What does it mean when Spotify tops 30 million subscribers, but while revenue grows, so do losses.

What does it mean when last year’s most talked about entry into the streaming music subscription business, Apple, considers any revenue made from that business to be a tiny drop in the bucket?

What does it mean when the latest headline about the troubled and heavily hyped Tidal is that “today is your last chance to cancel your free trial”?

What does it mean when more than half of the “30 music startups to watch” in 2013 no longer exist?

Here’s what it means:

The business of audio is fast becoming a feature rather than an industry.The business of audio is fast becoming a feature rather than an industry Click To Tweet

Contrary to popular opinion, if you’re a big radio group saddled with debt, you’re not in trouble because of your heavy debt. You and your creditors knew you’d have heavy debt from the moment you took their money. No, you’re in trouble because your straight-line growth projections didn’t pan out. The future wasn’t exactly like a past limited to TV and outdoor and satellite radio competitors. Meanwhile, a “financial crisis” was inconceivable, and the only digital threat you faced was the alarm on your bedside clock. In this new world, however, audio is a piece of many business models, and not beholden to the one called “radio.” Audio is, in other words, a feature.

If you’re a startup, you are subject to the dynamics that govern all startups: Big ups, big downs, all fast. And chances of failure far outweigh chances of success. That’s not just for music startups, mind you, but for all of them. And why do these startups fail? Because they never discover the sweet spot between consumer demand and a sustainable business model. That’s why the rising startups in the music space are driving revenue from multiple sources, not just advertising. Or they’re selling out to larger companies with already diversified portfolios – companies for whom audio is a feature.

Like what? Like Apple, which can do whatever it wants in audio, and it won’t matter as long as they’re still selling a ton of iPhones all over the world. Apple Music is no more than a feature for a device full of features.

If you’re an established player in the streaming space, it’s long past time for you to get creative with your business model. The labels see you as their primary gravy train and your rates will never be more favorable than they are today. In Pandora’s case, we’re likely to see them join the Spotify/Apple Music subscription race thanks to their acquisition of the failed streaming service, Rdio. But that’s not nearly enough: Being third in is still third in – even with 80+ million users – since the vast majority of those users are listening to Pandora because they don’t have a subscription service, not because they might (in my research I routinely see that Pandora and Spotify users listen for different reasons).

If you’re an established media player with a position in multiple media platforms, like CBS, you should place your bets on the platforms that are growing and the venues where you can both create and distribute content you own. That’s why CBS is all about video and all about their own content and all about platforms.

But what if you’re an established radio player with no other platforms that can compare with your investment in radio, what then?

What do you do in a world where audio is a feature rather than an industry?

You really have only one choice: You must become the most important media platform in your market for audiences and advertisers alike. But this means thinking beyond radio. You are not in the radio industry at all, in fact, you’re in the business of connecting consumers and advertisers everywhere, anywhere, and any way you can via whatever mechanism you’re smart enough to master, all in the presence of a brand consumers care about: Yours. You are either a portfolio of solutions and features (like audio), or you are dead.

The business of audio is fast becoming a feature rather than an industry.

Nowhere is this clearer than in the auto dashboard, where industries literally become features. Remember the GPS industry?The yellow pages industry? All in one place today, and the lines between them don’t exist. Pick the one you’re in the mood for or the one the platform makes easiest. Invariably, these will eventually be one and the same.

This new dashboard can display maps and images and solve problems related to weather and movie tickets and restaurants and shopping emergencies.

Features, all.

And audio is just one more.

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