Turns out a global pandemic is likely to shake things up a bit. With much of the country locked in their homes many new behaviours have been learned and others accelerated.
Internet shopping, video calls, smart speakers, streaming services - all nothing new, but now something that’s become a bigger part of people’s lives. Disney+, alive for just nine months, has over a quarter of the subscribers of Netflix (3.5m vs 12.8m). With the groundwork done on streaming to the TV from Netflix, the BBC and Amazon, powerful new entrants can certainly make a splash without ten years of heavy lifting.
For these new entrants, the technology has been tested and commoditised, both in people’s homes but in production too. The rise of Amazon’s Web Services means that systems that previously would have required banks of servers and swarms of developers can be booted up on the sofa. At the same time, off the shelf systems can deliver 80% of what the big boys have spent years building themselves.
Taken together, this means that consumers are well-practiced consuming and paying for digital content, and it’s never been easier to create and distribute it.
Of course, the hard thing is having the route to audiences to sell in your new service, on top of being able to create good content. Everything, always, comes down to content, marketing and distribution (alongside a business plan).
In the audio sector there’s four elements that I tend think about - heritage broadcast radio, digital linear channels, music services and podcasts.
To me, heritage broadcast radio is the AM/FM radio stations who’s success is due partly to their content and partly due to their platform. Whilst, of course, platform is an essential part of any radio station’s success, many FM stations do disproportionately well because they occupy a space on a dial and have done so for a long time. If they were to disappear from it tomorrow, is their content strong enough that people would change their behaviour to follow it?
Historically, this has been hard to track as the move from AM to FM to DAB has been co-ordinated on an industry-wide basis. Now, however, we’re seeing in places like North Yorkshire, where Yorkshire Coast Radio has been replaced by Greatest Hits Radio on FM, but at the same time a station with the same content/personalities has popped up online and on DAB in the form of This Is The Coast.
When GWR and Capital’s heritage stations changed to Heart, it was a relatively smooth change, as the two formats were fairly similar. The GHR changes across the country are the closest the UK has ever had to a US-style format flip. Will listeners stick around and listen to good quality, but very different programming they’re used to, but on a button they’re used to pushing or will they move their attention elsewhere?
Measuring this friction, or lack of it, is certainly easier nowadays. The best example being Chris Evans jumping ship from Radio 2 to Virgin Radio. Around a million followed him, 10 % of his Radio 2 audience. The rest were happy to hit their traditional familiar button when they wake up. Now, with Graham Norton making a similar leap on a Saturday (and Sunday) mornings we’ll see whether he has more pull, or just whether three years of consumer change means people are happy to have an itchier finger.
My general prediction is that older audiences are happier to consume what’s delivered rather than seek out their own perfection. The knock on is likely to mean that traditional broadcast platforms - whether that’s AM and FM - or scheduled broadcast television is likely to get older whilst younger audiences become more prolific with their finger pushing. BBC One’s average audience is 61 and ITV’s is 60, I imagine that, and an older audience on AM/FM radio, is only going to increase.
Digital Linear Streams
For me, the second type of radio stations are those that are brand-driven and relatively platform agnostic. This could include broadcast stations like Kisstory, that appear on DAB or internet-only music streams like Kiss Jams or the new Radio 1 Dance.
The last few years have seen a raft of spin offs from existing brands. For those that make it to broadcast, using the power of the mothership brand often means no need of much explanation to dial twiddlers. It’s easy to know what Heart 80s is going to deliver.
Indeed, for Heart 80s they now get 1.2m listeners and 4.5m hours. Belonging to a large radio groups means that it probably costs them relatively little to run - I’d guess around £500k/year - whilst being plugged into the established money machine of Global’s successful national sales house. No doubt it’s a very profitable venture.
The benefit is even more acute, as a new entrant would have to spend more money to do the same thing, without the same access to the advertising market (and likely without the same brand resonance too). It’s perhaps of little surprise that outside of Jack, Fun Kids and the religious and ethnic stations, there are few national competitors to the big boys.
What is starting to change, though, is the viability of internet-delivered music stations. The rise of Global’s DAX and Bauer & Wireless’ Octave Audio allows stations to outsource their ad sales to these third parties. If you have the ability to drive audience, monetising it is now far easier than it used to be.
However, the slight fly in the ointment is the cost of music-rights. The income per listener and the cost of delivering it is a little too close for anyone to make it their primary business. It’s one of the reasons that there are no internet-only radio stations of any note (or that could be described as proper businesses). It’s also something that has inhibited even the largest radio operators from really pushing internet-only radio delivery. There just isn’t that much money in it.
I think what this music-rights lock also means, is that it’s essential that companies do more than just create a linear radio stream. It’s a necessity for theses businesses to diversify where their income comes from. They need to be creating true multi-platform, content-rich brands rather than just marshal some audio feeds.
There’s clearly value for Heart in having a range of station spin-offs where they can leverage what they already do to increase their yield and revenue (or to better manage any sector declines) but real growth will come from beyond the stream.
For new entrants, like the recently announced Boom Radio, their aim should be to build a broad, brand-based business. There’s nothing wrong with having radio at the core, indeed it’s a great, cost-effective way to build a decent-sized audience. But it’s the opportunity that audience gives you to build a larger business, rather than just directly monetise with radio ads - a rather competitive place with low yields.
The danger for radio is also getting too close to the playlists music streaming services like Spotify and Apple Music make and promote. These companies strong development and marketing budgets, alongside having business models that currently mean they don’t have to be profitable, makes them tough competitors.
Additionally their control of their platforms mean any third-party success can be replicated and promoted.
Both Spotify and Apple Music have also worked to create more radio-like features this past year. Apple Music’s re-launch of Beats 1 as a suite of linear radio stations and Spotify’s introduction of music shows is their attempt to take on the reach and revenue of traditional radio.
Music streamers have tried to do ‘radio’ for 20 years, without much real success. I’m constantly surprised that they haven’t managed to do a better job of it. They have good people, and lots of money, but they all seem massively unwilling to really look at what radio does that works. The well practiced art and science of radio is seemingly ignored and what you end up with is the equivalent of a listener trying to make their own radio station. They’re familiar with what comes out of the speakers, but just seem to guess at how it’s put together, and why. It’s shocking that none of them have cracked it.
Whilst some of podcasting has its roots in radio, the low barriers to entry and relatively open-access eco-system has meant it’s developed its own rhythm and is definitely a medium in its own right.
2020 saw an influx of new content from new and established players, whilst podcast discovery still faced a fair few challenges. I think the economics of podcasting in 2021 however, are likely to become a little more real.
The last few years has seen many media companies jump into the medium. On the surface it’s relatively easy to do and it does appeal to both corporate and host egos.
The embarrassing secret for many corporate podcasters is how few downloads they receive and the limit to how many times they can say “hey, downloads don’t matter, it’s good for the brand!”
To do podcasting well, companies need skill, focus as well as a decent helping of luck too. They probably also need the economics of podcasting to change as well.
Generating an audience of more than 36k downloads per episode puts you in the top 1% of all podcasts - but the revenue you can generate from that is likely to be under £1,000 (often significantly). So if you’re able to pay participants and an editor, there isn’t a lot left.
Shows that do well financially are often in a more profitable niche or have direct sales teams who can do better than advertising networks. Of course many podcasts build income around merch, touring, patreons and more as well.
For media companies where their podcasts are already a spin off of a brand, it can be difficult to see the value. I imagine a number of companies will have another look at the impact of their shows this year.
In the charts, there are a number of super-shows, doing great numbers where suddenly the economics of making something very popular, that’s relatively cheap to produce can reap large rewards. I’m talking about shows like My Dad Wrote A Porno, No Such Thing As A Fish, Shagged Married Annoyed and Dear Joan and Jericha. Whilst these shows are often talent-led, which makes spin-offs difficult, I’m surprised that they haven’t used their brand equity to launch new podcasts and grow their family of products. Perhaps we’ll see some of this in 2021.
For the shows and for organisations that have built scale - usually from decent downloads over a number of podcasts - the opportunities are definitely growing. Whereas historically shows and networks put themselves with an Acast or Audioboom, the rise of programmatic sales and multiple sales points means there’s never been more places that podcasts of scale can access revenue.
For large publishers, having your shows on your own technology platform means that you can sell ads direct, access programmatic pools and be cleverer about how you make inventory available in other territories. I think 2021 will be the year when many publishers do take sales in-house and we see the traditional podcast ad networks be a part of their sales plans, rather than lead them.
This year Global’s DAX has made solid progress creating their own originals whilst repping large publishers like Sky and new entrant Podfront repping US shows from Stitcher, Wondery and now NPR has arrived on the scene with instant scale. I wouldn’t be surprised if Octave widened from streaming to podcasts this year too and see Audioboom grow it’s Originals outside of the US.
The other big question is what Spotify will do around ad sales. They now have a large selection of shows, combining output from their acquired production companies - Gimlet and Parcast - along with commissioning a raft of Spotify Originals from high value talent and special distribution deals with the likes of Joe Rogan. Their purchase of Megaphone in November, a podcast sales company, gives them a way to reach out to more shows and to provide special advertising opportunities to podcast listeners on Spotify. You could certainly see them as an attractive place for podcasters to move to.
Drawing these four strands together - everything comes back to content, marketing and distribution (with a business model to support it). Something you’ve always needed to make a successful media product.
In 2021 though, we’ll never have been in a better place where the evolution of technology, advertising and consumer behaviour has meant that the opportunities for success have been so strong.
Good luck, and have a great year.
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