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Video may have killed the radio star but the internet has barely hurt its popularity.
Radio remains the world’s most popular form of media in terms of audience, with listener figures at their highest levels in decades.
The industry, which generated revenues of $44bn last year, up more than 2 per cent on the previous period, continues to attract advertisers. Incumbents such as Clear Channel, Sirius XM and Global Radio have largely survived the rise of digital focused start-ups such as Spotify, Deezer and Pandora.
But broadcasters face some of their fiercest competition for years as the world’s biggest technology companies – including Apple and Google – take aim at their business.
Only two months have passed since Apple’s iTunes Radio launched in the US but already 20m people have listened to the service, which plays songs selected by a computer algorithm rather than a DJ.
The maker of the iPhone and the iPad, which reports annual results on Monday is especially well placed to challenge the broadcasters thanks to the ubiquity of its devices, its deep pockets, and its number one position in the music download market.
“Radio has a big future ahead of it,” says Mark Mulligan, an independent music analyst and radio expert. “But that doesn’t necessarily mean a big future for broadcasters.”
Global spending on radio advertising rose more than 2 per cent to about $34bn in 2012, according to PwC’s global entertainment report. A further $10bn of industry revenues came from public licence fees and satellite radio subscriptions.
In most of the world, and particularly in emerging markets such as India and China, traditional radio masts still have greater reach and reliability than the internet, and will continue to do so for some time.
In the UK, where commercial broadcasters such as Global Radio and Bauer Media are dwarfed by the BBC, nine in 10 adults tune in to radio every week, according to Rajar, the official body measuring radio audiences in the UK.
For the world’s largest broadcasters, the business is profitable if not booming. Clear Channel Media and Entertainment, which operates 840 stations as well as a digital service iHeartRadio, generated an operating profit of $400m for the six months to the end of June, on revenues of $1.46bn.
Yet online, interactive radio is growing even faster. Pandora now accounts for 7 per cent of all radio listening in the US. Its revenues, mainly from advertising, rose 46 per cent to $233m in the six months to the end of July, though its net loss widened to $36m.
Rapid adoption of smartphones and mobile broadband across the world is making it even easier to stream radio over the internet while on the move and in cars, where radio is in its element.
Few expect that broadcast will be superseded by broadband soon but it is telling that carmakers are installing online services such as Pandora and Spotify in their dashboards alongside the traditional radio dial.
What irritates many people in the broadcast industry is a conviction that Apple, Pandora and other algorithm-driven music services are being misleading in their use of the word “radio”.
“They’ve stolen our brand,” says James Cridland, a veteran of the UK radio industry who has helped the BBC and several commercial broadcasters develop their digital strategies. “A list of songs produced by a computer program is not radio,” he says, articulating a widely-held view. “Radio is something that gives you companionship, it surprises you, it gives you news.”
But while Apple’s version of radio may lack the human touch provided by traditional broadcasters – and occupies a totally different realm to spoken word stations such as BBC Radio 4 – that may change.
According to documents leaked by record labels in June, iTunes Radio will in future provide more than just music. It will provide “talk, weather and news” as well as “announcer lead-ins” naming the sound recording and artist that is about to be played.
While Apple’s algorithms are still in their infancy, they will be constantly refined over the coming years with the aim of providing just the right blend of content for each user.
Unlike broadcasters, which can only estimate the nature of their audience, internet companies are able to collect the usage patterns of each listener for mass data analysis.
To defend against the threat, broadcasters are increasingly streaming content over the internet and experimenting with new formats such as podcasts and video.
BBC Radio this month introduced a feature called Playlister, which allows listeners to tag any songs they hear and export them to an outside streaming service, such as YouTube or Deezer, where they can be played back in full.
“Digital platforms are gradually replacing terrestrial radio,” says John Donham, chief executive of TuneIn, which connects listeners via the internet to more than 100,000 radio stations from Antarctica to Jamaica.
TuneIn, which this year raised funding from investors including Google Ventures, is betting that given the choice, people will prefer to listen to traditional stations rather than interactive radio.
“The thing that’s fundamentally missing from iTunes Radio, Spotify or Pandora is that human connection,” he says.
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