eMarketer: Internet Is Future of Radio

The future of radio is broadcasting to an audience of one

NEW YORK (Sept. 10, 2009)—Video never managed to kill the radio star. Despite the arrival of cassette tapes, MP3 players and satellite radio, AM/FM broadcast radio still has enormous reach. According a study by Knowledge Networks, 18% of the time US consumers use media—nearly 97 minutes a day—is spent listening to the radio.

Advertising spending on terrestrial radio in the US tells a grimmer story. Many of the country’s largest national broadcasters are on the verge of bankruptcy, and the Radio Advertising Bureau (RAB) announced that Q1 2009 was the industry’s worst quarter ever in terms of ad spending.

eMarketer predicts the radio industry will see double-digit losses in ad spending this year, with terrestrial radio bringing in $14.5 billion in ad revenues in 2009, a drop of 18% from 2008 levels. Only when confidence returns to the market at large will the sky start to brighten for radio. That rebound will begin in mid- to late 2010, but radio will still end next year with revenues down by 2%.

Marketers will transfer some of their ad budgets online, where Internet radio stations are positioning themselves to take advantage of the shift in dollars. Though the ad spend is still low, Internet radio will be the future. As auto sales plummet, terrestrial radio ad spending drops accordingly and so do the free trial satellite radio subscriptions that come with many vehicles. Internet radio isn’t wired to the same fate.

While satellite radio provides niche content by offering hundreds of stations, the most popular Internet radio sites such as Pandora allow millions of listeners to create a station programmed uniquely for them. Internet radio offers listeners a personalized experience virtually unrivaled by other media. In return the sites get loyal and highly engaged listeners.

The bulk of online radio listening today is done on a desktop or laptop computer, but the number of consumers with smartphones capable of online streaming is growing. Internet radio listeners are no longer tethered to their computers.

Radio—including terrestrial, satellite and online—is leveraging mobile devices to further expand its reach and opportunities. The explosion of downloadable mobile applications that run on such devices transforms them into portable, miniature radio receivers with a virtually infinite dial.

Still, Internet radio will not kill terrestrial radio. Studies indicate that the growth of Internet radio listening is not coming at the expense of terrestrial broadcasts. In fact, online listeners are tuning in to radio more than average, further justifying why there is still much hope for the medium at large.

Source: eMarketer