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Pandora is Moving on Local Radio Revenue. Everybody Freak Out!

Pandora’s chasing local ad dollars.  Everybody freak out! I know and like Pandora critic Mary Beth Garber, but it’s time for the critics to take a chill pill.

Yes, Pandora is aiming for radio’s local ad dollars.  Yes, traditional broadcasters should meet this challenge.  Yes, radio has lots in its favor compared to Pandora (and vice versa).  But the critics are bent on convincing the market that Pandora is not radio and radio is not Pandora. Because if Pandora is not radio, then buyers will not substitute ad dollars on radio for ad dollars on Pandora (even if listeners do exactly that with their own radio listening).

So let me say this for the last time (I hope) and as simply as possible:

You don’t have to be identical in every way to radio to be used the same way radio is used.  If you are a substitute for radio in that consumers go to you for what they would otherwise go to radio for, then you can be considered “radio” – and “radio” can be considered you.

That means “radio” should be defined much more broadly than we usually think of it, and arguments that seek to segregate “radio” from its functional equivalents (e.g., Pandora) do no service to the future of the industry, since that future will be driven by consumers – people with choices – not by industry chieftains in their ivory towers.

Such limited thinking will constrain the strategies of broadcasters and ensure that upstarts from outside radio – like Pandora – will continue to blossom and grow and siphon radio’s revenue stream from outside its too-limited borders. This will be, in other words, a self-inflicted wound.

Mary Beth suggests that Pandora has 2.5% of all radio listening, not the 4% they claim.  Even if the number is 2.5% I find that pretty impressive since that technically implies that if Pandora earns 2.5% of the audience it is potentially entitled to 2.5% of the advertising dollars devoted to that audience.

Says Mary Beth:

Why does Pandora compare its group of streams against a single radio station? Because they have to. [If Pandora didn’t compare itself to radio], the relatively limited reach of each of their streams is exposed. Pandora is not one station or stream – it’s a group of different streams.

What? No. The subtext for this argument is that Pandora’s execution of radio doesn’t fit the traditional “one stream – one station – one audience” model that has driven the business of radio for a hundred years. That is true. But that’s a problem with the model, not a problem with Pandora.

Consumers don’t care whether or not you have one stream or a million any more than they care whether you own one station or a thousand. The fact that Pandora’s streams are unique to every individual means I can have a different listening experience from you even while listening to the same brand you listen to. This is good for consumers and the advertisers who wish to engage with them.

In any local market, Pandora is a radio service on par with any other radio service. The fact that their radio service has as many faces as it does listeners and yours has only as many as you have radio stations is your problem – your opportunity, not theirs.

Mary Beth:

If Pandora wants to compare itself to a uniquely formatted single radio station, they need to, for example, collect all their hip hop listeners into a single rating — not combine them with contemporary hit, country, classical and alternative music listeners.

What?  No. Advertisers are ultimately buying access to consumers, not “formats” per se. “Formats” are artifacts of an industry that creates formats, they are not narrow lanes to which listeners feel confined. Just check out the music collection of any individual consumer – you will find “individuals” whose tastes rarely fit a single, neat “format.”

Mary Beth:

Radio stations embody engagement and local focus. Pandora doesn’t.

Engagement? I can love songs, hate them, and skip them on Pandora. Can we do that on radio? Local focus? The ultimate “local” is me, personally. Radio does a better job in my community, but Pandora may do a better job of satisfying my personal tastes.

Mary Beth:

Pandora has no personalities, local news, weather or traffic, community projects or personality-hosted events.

True. And neither do lots of radio stations, for better or worse.

Mary Beth:

Radio stations enable instant, active ongoing, emotionally based engagement between their personalities and their listeners. Radio stations talk about and relate to your community, its weather, traffic and gossip, and many stations select and play music for you. Radio personalities engage with you on multiple platforms and at events. Pandora plays music and commercials.

Yes, Pandora plays YOUR KIND OF music and many FEWER commercials. And if you think that’s a bad thing ask the 100 million or so Pandora listeners why they registered for a radio service without all the bells and whistles of radio. They’ll tell you they were looking for a radio service without all the bells and whistles of radio.

Don’t get me wrong.  The advantages of radio are profound, as Mary Beth points out.  But it weakens the argument when her agenda so clearly drowns out any sense of balance, any sense that the value proposition of Pandora, to listeners and advertisers, is real enough to warrant as “little” as 2.5% of all radio listening – and growing.  When you describe a popular phenomenon like Pandora as “the equivalent of solitary confinement” you are out of touch with the pulse of the consumer market (and you have never been in solitary confinement).

Are we really, seriously arguing that my choice to personalize my own listening experience is an imprisonment rather than en empowerment? Come on.

Mary Beth argues that Pandora’s audience comes from “other music collections,” not from radio.  This is just plain wrong, and any research that shows otherwise is sloppy and can’t be trusted.

Radio’s AQH rating has been steadily dropping over the years according to Arbitron, and that trend pre-dates both Pandora and PPM. What’s declining isn’t Cume – it’s usage.  It’s attention.  The enemy is not Pandora, it’s the noise of every distraction in our entertainment portfolio.

Radio would be well-served to obsess less on Pandora’s aspirations and focus more on its own opportunities in a world of broad consumer and advertiser relationships and a growing roster of radio substitutes and alternatives.

Radio is a fabulous industry with many of the advantages Mary Beth outlines. That doesn’t make Pandora evil.  It just illustrates the potential for radio in all its shapes and flavors.

Stop dissing Pandora and start building your future.  It can be a great one.

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