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Kurt Hanson: 2015 Predictions

kurt hanson 300wThe start of the new year means it’s prediction time for 2015! Here are some of mine:

CONTINUED MOVEMENT TO ONLINE RADIO: Consumers will slowly but steadily continue to spend less time with radio delivered via AM and FM and more time with radio delivered to their smartphones, tablets, and other connected systems (e.g., Sonos, Roku, etc.), much of which will be personalizable (for music) or on-demand (for talk), and all of which will have a lower spot load per hour.

CLEARER DATA ON AM/FM TRENDS: Between Edison Research’s “Share of Ear” study and Nielsen Audio becoming more forthcoming with its trove of national data, we’re going to start getting a clear picture, for the first time in years, of the exact size of the slow but steady decline in weekly Time Spent Listening (TSL) per capita that AM/FM radio is experiencing.

SATELLITE RADIO PEAKING: The growth in satellite radio listening will start to plateau, as the number of “late adopters” who finally decide to subscribe to it are cancelled out by the number of “early adopters” who abandon it for Internet-delivered products streamed from their smartphones into their car dashboards.

SUBSCRIPTION MUSIC SERVICES: Subscription music services (Spotify, Rhapsody, Rdio, Apple/Beats, Deezer) will continue to grow in popularity as consumers embrace the “celestial jukebox” and excellent value that they offer. However, record industry revenues will be challenged for the next year or two, since the early adopters of subscription music services (at $120/year) will, logically, be the consumers who were spending MORE than $120/year on CDs and MP3 downloads. (In the long run, as the mass market signs up for subscription music services, it will be a positive for record companies — just not initially.)

PODCASTS: Podcasts like Serial, Adam Corolla’s daily show, and Marc Maron’s WTF interviews with comedians will remain to some extent a trendy niche product, but will continue to grow both in popularity and as an art form.

SMARTPHONES: Smartphones will become an ever more integral part of consumers’ lives in the year ahead. Looking at the apps you have open at this moment on your iPhone, for example, you may see that yours has replaced ownership of a telephone, a pager, a calculator, a couple of paperback books, a calculator, a camera, an FM Walkman, a photo album, a bus schedule, several maps, several remote controls, a pager, a credit card (when you’re at Starbucks, at least), some magazines (especially if you subscribe to NextIssue), a bedroom TV with DVD player, a notepad, an address book, and a whole lot more.

NEXTRADIO: As data plan prices continue to drop, NextRadio will be challenged to succeed as a “FM chip in cell phone” product. (The prospect of maybe conceivably saving a couple of bucks a month on data costs is not going to motivate very many Android smartphone buyers to change which smartphone they choose to buy, nor to give up listening to a personalizable radio app for listening to an FM signal.) However, in a successful business pivot, NextRadio will see new life and success as an AM/FM tuning app for car dashboards.

Pandora cube canvas 160wPANDORA: Pandora will continue its growth in listenership and its even-greater growth in monetizing its audience, as its sales staff of hundreds of top radio salespeople will continue to get higher and higher CPMs as advertisers realize its effectiveness (thanks to short stopsets, accompanying visuals, and targeting).

iheartradio canvasiHEARTRADIO Although it will continue to be a highly ranked service, its growth will be hampered by the fact that it’s a somewhat-uncomfortable merging of two completely different types of services (i.e., AM/FM simulcasts and personalized streams) that appeal to two completely different types of consumers.

APPLE/BEATS: Apple’s $3 billion purchase of Beats will start to look like a questionable business decision, since (A) Apple was perfectly capable of launching a line of audiophile headphones under its own brand name, and (B) Beats’s contracts with record labels for a subscription music service will be revealed as non-transferrable upon sale of the company.

ONE RADIO GROUP WILL GET INNOVATIVE: Sometime within the next year or so, at least one AM/FM broadcasting company will decide to go head-to-head with Pandora, launching its own multi-genre personalizable radio brand. (iHeartMedia and Cumulus have that functionality within their iHeartRadio (as discussed above) and (minority-position-owned) Rdio products, respectively, but in both cases personalizable radio is a feature in a product whose focus is elsewhere.)

gavel canvasROYALTY RATES: For the first time in U.S. history, the Copyright Royalty Board (CRB) will issue a decision that reasonably balances the interests of webcasters, copyright owners, and the general public, thanks to the fact that is this the first time in CRB history that both sides (webcasters and copyright owners) are represented by matching-quality legal representation.

CPMS FOR ONLINE RADIO WILL IMPROVE: After several years of stagnancy (for everyone but Pandora), I believe we’ll see CPMs for online radio start to improve, driven by increased demand from advertisers (as they see the effectiveness of advertising on Pandora and want to expand their buy to other webcasters) and limited supply, at least among pureplays (which run only 3 to 5 units per hour).

LOCAL RADIO PERSONALITIES: There have been a large number of major local radio personalities who have been “on the beach” in recent years, perhaps due to a mismatch between what stations are willing to pay for talent nowadays and the salary expectations of the talent. Given the fact that strong live and local personalities can be one of AM/FM radio’s key strengths as consumers move to online radio, I think we’ll see this trend reverse as broadcasters become willing to pay more and talent is willing to take a bit less. (See Steve Dahl’s return to the Chicago airwaves and Bubba the Love Sponge’s return to the Tampa airwaves as two early examples of this trend.)

IN-HOME HI-FI: Wireless speaker systems (e.g., Sonos) will break through to mass-market popularity, as consumers replace the crappy bookshelf speakers they’ve been buying for the past couple of decades with the kind of rich, full sound that was popular on hi-fi systems in the ‘70s. One unexpected but positive consequence of this for labels and musicians is that it will spark a revival of interest in recorded music as an entertainment medium!

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Kurt Hanson

One Comment

  1. Interesting, particularly your observations on the Apple/Beats merger. Satellite radio will continue to be very profitable because it’s the only monopoly on your list. The radio personalities you cited are legacy performers and they, like all others, are dependent on their delivery platforms. Having a multi-dimensional approach is no guarantee of success, financial or otherwise. One key area to watch is the cost of wireless data plans. Those prices need to drop in order to drive increased consumer appetites.

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