Tag: Pandora

Digital Radio Follows Pandora’s Lead

Web radio’s No. 1 player might have been under fire from parts of the music biz, but the number of rivals joining its space shows the format’s promise.

Digital music companies have plenty of reason to dive into Internet radio. Mobile advertising, vital to mobile-first radio services, improved greatly in 2013. In their latest quarters, mobile ad revenue accounted for 49% and 58% of Facebook’s and Pandora’s earnings, respectively. And although on-demand services like YouTube or Spotify are changing the nature of the recorded-music business, people haven’t lost interest in listening to radio. A recent Edison Research survey says 53% of online Americans ages 12 and older are Internet radio users.

Pandora had its share of headline-grabbing moments in 2013, which led to clashes with the music business. The company took the unprecedented step of purchasing a broadcast radio station in South Dakota to bring more certainty in the royalties it pays to music publishers through performing rights organizations. It sued ASCAP for lower rates. And after championing the Internet Radio Fairness Act in 2012, Pandora opted not to pursue royalty relief through Congress.

It’s the less-noted events that keep Pandora ahead of the game. The company’s audience data is now integrated with two popular media-buying platforms. It improved the user experience on iPad and Android tablet apps. It added two new platforms, Google’s Chromecast and Microsoft’s Xbox. Automotive partnerships struck years ago have quietly produced results. By midyear, 13% of Pandora’s listener hours came from an “other” category that includes automobiles.

Perhaps most important are the constant improvements that go unseen but enhance the service’s ability to guess which song is best for a listener at a particular moment. “It’s something that needs constant innovation,” Pandora CFO Mike Herring says.

Imitation isn’t just a form of flattery: It’s a sign that a marketplace is working. In September, Apple launched its eagerly awaited radio service, iTunes Radio. It attracted 20 million listeners in slightly more than a month, according to figures released by Apple. A survey by investment bank Canaccord Genuity found that about 2% of iOS device owners and 8% of iTunes Radio users were using the service exclusively about a month after its release.

Subscription services are following Pandora, too. They’re either improving their radio features or creating editorial and other features to do the heavy lifting of music discovery for their on-demand listeners. The subscription services of yesteryear were time-consuming, hands-on products that required a serious commitment in time and energy to use properly. Today’s subscription service is far less demanding.

Rhapsody was one of the on-demand services that improved its radio offerings in 2013. The value of the on-demand service is simply to allow people to choose what they want to hear at any given time.

But Rhapsody users still want radio. In a survey the company conducted among existing users, 76% said radio was either important or very important to the Rhapsody experience, senior VP Paul Springer says. However, just 30% were using the old radio features. That let Rhapsody know there was untapped potential.

One Internet radio service not borrowing from Pandora’s playbook is Songza. The small service offers contextual playlists—songs for waking up, working at the office or having a party — rather than copy Pandora’s method of personalized radio. But like Pandora, Songza found advertising and Internet radio can work together. Such brands as Samsung and Taco Bell use Songza’s “native” advertising built into the user experience rather than “shouting between songs,” CEO Elias Roman says.

Near the end of the year, an important threshold was quietly reached. For the first time since making its financials public, Pandora’s royalties had taken less than 50% of revenue. That shows a profitable, sustainable Internet radio business is attainable given a combination of business model, product and perseverance. It could have been the breakthrough of the year.

originally posted at billboard.com

25/02/2014
Business Matters: Study Shows Why iTunes Radio Lacks Big Impact on Download Sales

A new report by Music Forecasting shows why iTunes Radio isn’t the boon to track sales people thought it could be. Listeners of Internet radio aren’t opposed to buying music. They simply don’t want to interrupt the listening experience to hit the buy button.

Music Forecasting believes it knows the problem. Based on interviews with 40 to 50 people in Philadelphia and Raleigh, N.C., a new Music Forecasting report claims that iTunes Radio listeners use the service for a “lean-back” listening experience. Like other forms of radio, iTunes Radio provides listeners a variety of music for very little effort. Such an experience is not conducive to building a music collection.

This finding should deflate some of the optimism that originally surrounded iTunes Radio. Launched Sept. 18, Apple’s answer to Pandora was thought by many in the music business to have potential for incremental track purchases. The service tightly integrates a buy button that allows the listener to buy a track from the iTunes Music Store. It got off to a quick start, attracting 20 million listeners in about a month.

But no sales boost ever materialized. As I noted in November, a dip in track sales coincided with the launch of the service. Track sales were down 12.9%% year-over-year in the fourth quarter and fell an equal amount in the first three weeks of 2014.

Buying music on iTunes Radio clashes with the nature of radio. Users simply don’t want to lean forward to buy music when they’re enjoying iTunes Radio’s lean-back listening experience. The availability of free music doesn’t prevent people from buying tracks, explains Sam Milkman, executive VP at Music Forecasting. The interviews revealed that most people still buy music — both digital and physical — and want to own a music collection.

iTunes Radio will result in some level of purchasing. People interviewed for the study are “very aware” of the button and think it’s a good idea. Other Internet radio services such as Pandora have long had buy buttons that take the listener to either iTunes or Amazon MP3. But Milkman doesn’t believe iTunes Radio’s buy button will result in a large increase in incremental purchases. Instead, purchases will be casual and sporadic.

“It seems more like a trickle than a flood,” he said.

Music Forecasting discovered that listeners enjoy some things about iTunes Radio. People interviewed like that iTunes Radio is part of their devices’ operating system. In other words, less time is required to find the iTunes Radio app than other streaming music apps. They also like that iTunes Radio has fewer commercials — although a streaming service’s advertisement load typically increases over time.

But iTunes Radio will face difficulties grabbing share from existing services. Music Forecasting found “a large, large number” of people were already using music streaming apps such as Pandora, Spotify and iHeartRadio. Pandora specifically may have the advantage of high switching costs. Milkman says Pandora users are hesitant to switch services and abandon years of feedback, the “thumb up” and “thumb down” ratings given to songs that helps Pandora fine tune the listening experience.

Could iTunes Radio, and other music streaming services, eventually have a positive impact on download purchases? It must be noted that iTunes Radio is young and its ability to sell music could improve over time. Music Forecasting has specific suggestions for Apple to implement over: emphasize the benefits of owning music, offer discounts or other purchase incentives and explain how features, such as a user’s listening history, can help users find music to buy.

A streaming service pushing the benefits of music ownership may seem like a mixed message — especially for a streaming service that lacks a complimentary download store such as iTunes. Consumers tend to use a service for either streaming or purchasing but not for both. Milkman counters that some consumers won’t fully buy into the access economy. Music Forecasting’s study found that most people want to listen to both Internet and broadcast radio and listen to their own music collection.

“I don’t think we should abandon the ownership model because it still works for some people,” Milkman says.

originally posted at billboard.com

20/02/2014
Listen to Pandora, and It Listens Back

Pandora, the Internet radio service, is plying a new tune.

After years of customizing playlists to individual listeners by analyzing components of the songs they like, then playing them tracks with similar traits, the company has started data-mining users’ musical tastes for clues about the kinds of ads most likely to engage them.

“It’s becoming quite apparent to us that the world of playing the perfect music to people and the world of playing perfect advertising to them are strikingly similar,” says Eric Bieschke, Pandora’s chief scientist.

Consider someone who’s in an adventurous musical mood on a weekend afternoon, he says. One hypothesis is that this listener may be more likely to click on an ad for, say, adventure travel in Costa Rica than a person in an office on a Monday morning listening to familiar tunes. And that person at the office, Mr. Bieschke says, may be more inclined to respond to a more conservative travel ad for a restaurant-and-museum tour of Paris. Pandora is now testing hypotheses like these by, among other methods, measuring the frequency of ad clicks. “There are a lot of interesting things we can do on the music side that bridge the way to advertising,” says Mr. Bieschke, who led the development of Pandora’s music recommendation engine.

A few services, like Pandora, Amazon and Netflix, were early in developing algorithms to recommend products based on an individual customer’s preferences or those of people with similar profiles. Now, some companies are trying to differentiate themselves by using their proprietary data sets to make deeper inferences about individuals and try to influence their behavior.

This online ad customization technique is known as behavioral targeting, but Pandora adds a music layer. Pandora has collected song preference and other details about more than 200 million registered users, and those people have expressed their song likes and dislikes by pressing the site’s thumbs-up and thumbs-down buttons more than 35 billion times. Because Pandora needs to understand the type of device a listener is using in order to deliver songs in a playable format, its system also knows whether people are tuning in from their cars, from iPhones or Android phones or from desktops.

So it seems only logical for the company to start seeking correlations between users’ listening habits and the kinds of ads they might be most receptive to.

“The advantage of using our own in-house data is that we have it down to the individual level, to the specific person who is using Pandora,” Mr. Bieschke says. “We take all of these signals and look at correlations that lead us to come up with magical insights about somebody.”

People’s music, movie or book choices may reveal much more than commercial likes and dislikes. Certain product or cultural preferences can give glimpses into consumers’ political beliefs, religious faith, sexual orientation or other intimate issues. That means many organizations now are not merely collecting details about where we go and what we buy, but are also making inferences about who we are.

“I would guess, looking at music choices, you could probably predict with high accuracy a person’s worldview,” says Vitaly Shmatikov, an associate professor of computer science at the University of Texas at Austin, where he studies computer security and privacy. “You might be able to predict people’s stance on issues like gun control or the environment because there are bands and music tracks that do express strong positions.”

Pandora, for one, has a political ad-targeting system that has been used in presidential and congressional campaigns, and even a few for governor. It can deconstruct users’ song preferences to predict their political party of choice. (The company does not analyze listeners’ attitudes to individual political issues like abortion or fracking.)

During the next federal election cycle, for instance, Pandora users tuning into country music acts, stand-up comedians or Christian bands might hear or see ads for Republican candidates for Congress. Others listening to hip-hop tunes, or to classical acts like the Berlin Philharmonic, might hear ads for Democrats.

Because Pandora users provide their ZIP codes when they register, Mr. Bieschke says, “we can play ads only for the specific districts political campaigns want to target,” and “we can use their music to predict users’ political affiliations.” But he cautioned that the predictions about users’ political parties are machine-generated forecasts for groups of listeners with certain similar characteristics and may not be correct for any particular listener.

Shazam, the song recognition app with 80 million unique monthly users, also plays ads based on users’ preferred music genres. “Hypothetically, a Ford F-150 pickup truck might over-index to country music listeners,” says Kevin McGurn, Shazam’s chief revenue officer. For those who prefer U2 and Coldplay, a demographic that skews to middle-age people with relatively high incomes, he says, the app might play ads for luxury cars like Jaguars.

In its privacy policy, Pandora describes the types of information it collects about users and the purposes — music personalization and ad customization — for which the information may be employed. Although users may elect to pay $36 annually to opt out of receiving ads, advertising on the free service accounts for the bulk of Pandora’s revenue. Out of $427.1 million in revenue in the 2013 fiscal year, advertising generated $375.2 million.

Pandora’s inferences about individuals become more discerning as time goes on. How we think about the ethics and accuracy of algorithms is another matter.

“I’m optimistic that the benefits to society will outweigh the risks,” Professor Shmatikov says. “But our attitudes will have to evolve to understand that now everybody knows more about who we are.”

Originally posted at NYTimes.com

18/02/2014