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Consumers Ignoring Radio For The Web

Online music services are drawing an increasing number of U.S. consumers from traditional radio stations, threatening to decrease the latter's advertising revenues.
Online music services are drawing an increasing number of U.S. consumers from traditional radio stations, threatening to decrease the latter's advertising revenues, a market research firm said Tuesday.

The largest number of defections from music radio has been among young adults between the ages of 18 to 24, which are a favorite among advertisers, TechnoMetrica said. However, a survey of more than a 1,000 U.S. consumers has found that people of all ages and economic groups are migrating to the web for music, either to buy individual songs or sign up for subscription services.

"Young adults are more inclined to go to the web than to traditional radio," TechnoMetrica analyst Constantine Kambanis said. "But we're also finding that the whole U.S. population is starting to prefer the web. The shift is going up the age brackets and down the economic ladder."

Currently, about 1 in 7 adults, representing 15 million households, say they listen to music from the web, rather than on the radio, the research firm found. Among young adults, that number jumps to nearly 1 in 3, or about 9 million people.

With those numbers expected to increase over the next decade, the impact on radio-station revenues could be extreme.

"Without listeners, radio stations can't attract advertisers to make money," Kambanis said.

A major attraction of online music is customization, TechnoMetrica said. People can choose the music they like and listen to it immediately, rather than listen to commercials and wait until their favorite song makes it way on a DJ's play list.

"Customization is what's really hurting traditional radio," Kambanis said.

In addition, downloading music on to a PC or digital music player, such as Apple Computer Inc.'s popular iPod or Dell Inc.'s Digital Jukebox, gives a sense of ownership and permanence to the music.

With people chasing only the music they want, radio stations will need to focus on specific musical genres or artists in order to attract listeners, Kambanis said.

Satellite radio is an example of a business model that can compete with the web for music lovers. Programming offered by companies like XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. target specific audience with content that can't be found anyplace else. The shows are also commercial free.

"Satellite radio happens to be at the right place at the right time," Kambanis said. "It's not part of the modern music experience, but it's well-positioned to take advantage of the trend."

Talk radio, on the other hand, is expected to hold its own in the digital age, and even music radio can stabilize their listener base, with the right changes in format.

"There will always be people who want to listen to radio, but the numbers will be getting smaller," Kambanis said.

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