Radio Futures 2010 Report

Report Radio April, 2010 1

Contents Introduction 3 Key Findings 7 Changing Role of Broadcast Radio 11 Leading Web Radio/Streaming Services 17 What Kind of Web Radio/Streaming Service 21 Generates the Most Interest? Going Mobile 23 Impact of HD Radio in the US 28 Implications 31 APPENDIX 33 The Online Consumer—Audio Profile About the Study and Vision Critical 2

Introduction 3

Peeking Around the Corner... It’s often said that research works better as a rear view window than as a windshield. You gain insight into what’s happened, but you get precious little on what will happen in the future. Radio Futures 2010 is a modest attempt to change that. To get a glimpse of the future, we surveyed a representative sample of 3,021 engaged online consumers from Vision Critical’s global panels in the US, Canada and the UK. By talking to consumers who are one small step ahead in their digital behaviour, we can, if not exactly predict the future, at least observe change in progress. 4

Study Objectives Radio Futures 2010 provides a strategic overview of the evolving audio landscape for broadcasters, webcasters and other industry stakeholders. This report looks at the following issues: – the extent to which the role that broadcast radio plays in listeners’ lives is changing – the impact of new audio alternatives on this role – the types of Internet-only audio services that are gaining traction – the relative use of Internet-only and broadcast radio applications on the mobile platform, and – the impact of HD radio in the US By surveying online consumers in the US, Canada and the UK, the study observes changes in the audio landscape through the lens of different regulatory and competitive environments. 5

How the Research was Conducted Online survey Total sample: 3,021 online consumers, aged 18+ US (n=1,007) C (n=1,001) UK (n=1,013) Email invitations were sent to members of Vision Critical’s proprietary global panels—providing a representative sample of online consumers in each country. Survey dates: February 26-March 8, 2010 Final results weighted to represent the age, gender and regional distribution of the online population of each country Developed in association with RAIN (Radio And Internet Newsletter) 6

Key Findings 7

Key Findings 1 of 3 Reports of broadcast radio’s death are greatly exaggerated. – On the whole, in the US and Canada, online consumers say that broadcast radio plays the same role in their lives today that it did a couple of years ago. – In the UK, broadcast radio actually has modest momentum, with more listeners saying that radio now plays a bigger rather than smaller role in their lives. Audio alternatives are gaining significant momentum. – In particular, many online consumers report that personalized audio alternatives are playing a bigger role in their lives. – Specifically: MP3 players Streaming services that offer songs on demand (e.g., Spotify) Podcasts Personalizable Web-only radio (e.g., Pandora) 8

Key Findings 2 of 3 At this point, the growth of these new audio alternatives appears to be independent of and/or complementary to broadcast radio. – Past week listeners to Web-only radio or streaming services, podcasts and even mp3 players are as likely as other online consumers to say that radio is playing a bigger as opposed to smaller role in their lives than it was two years ago. – American and Canadian listeners to SIRIUS/XM satellite radio are however more likely to say that broadcast radio is now playing a smaller role, suggesting that satellite radio is more of a displacement medium. Pandora is the dominant webcaster in the US, while Spotify leads UK online services. – More than 1-in-4 listeners to Web-only radio/streaming services in the US name Pandora as their favourite music service. – Spotify has a somewhat narrower lead in the UK, with 11% naming it as their favourite service. – Canada, where neither service is legally available, is an underdeveloped market with no dominant player. 9

Key Findings 3 of 3 Listeners to Web-only services express a clear preference for personalized vs. one-way broadcast streams. – Online consumers who have turned to a Web-only music or streaming service in the past month show a particularly active interest in services that offer some degree of control. – This is consistent with the strength shown for Pandora, Spotify and other personalizable web services. Reflecting Pandora’s early success with its iPhone apps, smartphone and iPod Touch users in the US are more likely to listen to apps for Web vs. broadcast radio services on their device. – In Canada and the UK, smartphone and iPod Touch users are more likely to use apps for broadcast radio than web-based radio. Five years after its launch, HD radio in the US has yet to make a significant impact. – A little over one-quarter (26%) of online consumers show confirmed awareness of HD Radio—and fewer than 1-in-10 (9%) know anyone who has HD Radio. 10

Changing Role of Broadcast Radio 11

The role played by broadcast radio in the lives of engaged online consumers is largely holding steady. How Role of Broadcast Radio Has Changed Over the Past 2 Years Net Momentum Bigger role in my life Same Smaller role in my life % bigger — % smaller US 28% 45% 28% even Canada 22% 54% 24% -2% UK 32% 47% 22% +10% Qa4 Thinking back over the past couple of years, how has the role that [(AM/FM (AM/FM/DAB in the UK)] radio plays in your life changed? 12 Base: Online consumers, age 18+,in each country—has listened to AM/FM (AM/FM/DAB in the UK)

Momentum for broadcast radio shows different age splits, by country. Net Momentum: % saying broadcast radio plays bigger role in life in past couple of years minus % saying smaller role Total even -2% +10% Male +1% -3% +10% Female even -2% +10% Age 18-44 +5% -8% +9% Age 45+ -5% +4% +11% Qa4 Thinking back over the past couple of years, how has the role that each of the following play in your life changed? 13 Base: Online consumers, age 18+, in the US, Canada and the UK - has listened to AM/FM (AM/FM/DAB in the UK)

Most non-broadcast audio alternatives are gaining momentum. How Role of Each Medium Has Changed Over the Past 2 Years (3-country average) Net Momentum Bigger role in my life Same Smaller role in my life % bigger — % smaller mp3s or digital music files on mp3 player/mobile device 56% 30% 14% +42% Online service that lets you 41% 40% 19% +22% stream songs on demand Podcasts—audio programs +22% downloaded or streamed 39% 43% 17% mp3s or CDs through +20% your computer 42% 36% 22% Internet-only radio 36% 44% 20% +16% Audio-only music channels +9% w/ digital/satellite TV* 31% 48% 22% SIRIUS/XM satellite radio* 30% 47% 23% +7% CDs on your stereo -18% or portable player 18% 36% 46% * Asked in US and Canada only Qa4 Thinking back over the past couple of years, how has the role that each of the following play in your life changed? 14 Base: Online consumers, age 18+,in the US, Canada, and UK; has listened to audio medium

Momentum of audio alternatives largely similar by country—except Web-only and streaming services Net Momentum: % saying medium plays “bigger role” in life in past couple of years minus % saying “smaller role” The only jurisdiction where mp3s or digital music files on +36% +46% +44% Spotify is your mp3 player/mobile device legally Online services that let you available +16% +7% +36% stream songs on demand Podcasts—audio programs +17% +28% +20% downloaded or streamed mp3s or CDs through your +18% +16% +25% computer Internet-only radio +22% +11% +13% The only Audio-only music channels +7% +10% n/a jurisdiction w/ digital/satellite TV* where Pandora is SIRIUS/XM satellite radio* +4% +10% n/a legally available CDs on your stereo or -19% -28% -35% portable player * Asked in US and Canada only Qa4 Thinking back over the past couple of years, how has the role that each of the following play in your life changed? 15 Base: Online consumers, age 18+, in the US, Canada and the UK - has listened to each audio medium

Satellite radio is the only clear displacement medium for broadcast radio. Net Momentum (3-country average): % saying broadcast radio plays bigger role in life in past couple of years minus % saying smaller role Among Past Week Listeners to... Net Momentum for Broadcast Radio SIRIUS/XM satellite radio* -15% mp3s or digital music files on mp3 player/mobile device -1% mp3s or CDs through 0 your computer Podcasts—audio programs downloaded or streamed +2% Internet-only radio or streaming services +5% CDs on your stereo or portable player +7% Audio-only music channels +10% w/ digital/satellite TV* * Asked in US and Canada only Qa4 Thinking back over the past couple of years, how has the role that each of the following play in your life changed? 16 Base: Online consumers, age 18+, in the US, Canada and the UK - has listened to AM/FM (AM/FM/DAB in the UK)

Leading Web Radio/Streaming Services 17

In the US, Pandora dominates. Leading mentions (unaided)—among past month listeners to Web-only radio/ music services 42% 27% 6% 2% 5% 3% 5% 2% 4% 3% 4% 1% 3% 2% 3% 1% Listened in past year 3% Favourite service 1% 2% 1% QD1. Which online radio stations or music streaming services do you remember listening to in the past year? QD2. And which one would you say is your favourite—the one you listen to most often? 18 Base: Online Consumers in the US, age 18+; listened to online-only radio/ streaming in past month & named a service listened to.

Spotify has made a big impact in the UK, though not on the scale of Pandora in the US. Leading mentions (unaided)—among past month listeners to Web-only radio/ music services 20% 11% 9% 3% 6% 3% 3% 1% 2% 1% 2% 1% Listened in past year 2% 1% Favourite service 2% 2% QD1. Which online radio stations or music streaming services do you remember listening to in the past year? QD2. And which one would you say is your favourite—the one you listen to most often? 19 Base: Online Consumers in the UK, age 18+; listened to online-only radio/ streaming in past month & named a service listened to.

Canada, where neither Pandora nor Spotify is available, has no dominant Web radio/music service. Leading mentions (unaided)—among past month listeners to Web-only radio/ music services 9% 7% 4% 2% 4% 3% 3% 1% 3% 2% 3% 1% 2% 1% 2% 2% 2% 1% 2% Listened in past year 1% Favourite service 2% 1% 2% 2% QD1. Which online radio stations or music streaming services do you remember listening to in the past year? QD2. And which one would you say is your favourite—the one you listen to most often? 20 Base: Online Consumers in Canada, age 18+; listened to online-only radio/ streaming in past month & named a service listened to.

What Kind of Web Radio/Music Service Generates the Most Interest? 21

Active interest is highest for Web music services that offer customization. % Very interested (3-Country average)— among past month listeners to Web-only radio/ music services Personalized Streaming where you can play songs on demand 53% Radio that offers a wide range of channels you can customize by promoting or deselecting artists 37% Radio that plays recommendations based on your preferences & others like you 34% Radio that plays recommendations from music 33% experts based on your preferences Radio that plays recommendations based on your preferences using computer algorithms 26% Radio that plays music mixes designed by music experts 24% Scheduled Q3a-D3f How interested are you in each of the following types of Internet-only radio and music streaming services? 22 Base: Online Consumers, age 18+, in the US, Canada, and UK; listened to online-only radio or streaming services in past month

Going Mobile 23

Just under one-third of online consumers use a smartphone or iPod Touch. Use a smartphone or iPod Touch for any purpose 32% 29% 32% Qc1/c2 Do you currently use any of the following for any purpose?/Do you currently have access to the Web on the [smartphone / mobile phone / either the smartphone or mobile phone] that you use? 24 Base: Online consumers, age 18+, in the US, Canada and the UK

Smartphone platform varies by country—Blackberry leads in North America, iPhone in the UK. 29% Use 21% smartphone Use BlackBerry 11% 12% 6% 27% US Canada Use iPhone 8% 6% 13% UK 10% Use another type 10% 3% 11% Use iPod of smartphone 12% Touch 12% Qc1/c2 Do you currently use any of the following for any purpose?/ Do you currently have access to the Web on the [smartphone / mobile phone / either the smartphone or mobile phone] that you use? 25 Base: Online consumers, age 18+, in the US, Canada and the UK

Reflecting Pandora’s impact, US smartphone/iPod Touch users are more likely to have apps for Web- only services than for broadcast radio. Has broadcast radio app Has web-only radio/streaming service app 48% 43% 37% 33% 24% 20% US Canada UK Qc4 Do you have any of the following types of applications on your smartphone or iPod Touch? 26 Base: Online consumers, age 18+, in the US, Canada and the UK

More US smartphone/iPod Touch users stream Web- based radio than broadcast radio on their apps. Listened to broadcast app / past week Listened to web-only service app / past week 31% 31% 21% 19% 14% 7% US Canada UK Qc4 Do you have any of the following types of applications on your smartphone or iPod Touch? 27 Base: Online consumers, age 18+, in the US, Canada and the UK

Impact of HD Radio in the US 28

Half of all online consumers in the US claim to have heard of HD, but just 1-in-4 can state the benefits. Benefits stated (unaided) Better, cleaner sound quality 67% Have heard of HD Radio; can state benefits More stations 28% 26% It's better/quality (general) 9% 50% It's free/ no monthly fees 7% Have never heard of HD Radio 24% Less talk, fewer commercials 5% High definition/like HD TV Have heard of HD Radio; (benefit unspecified) 5% can't name benefits; not clear on what it is Better music/variety 4% Other 7% Qb1a/b Have you ever seen, read or heard about 'HD Radio'?/Based on what you've heard about HD Radio, what would you say are the main benefits to potential listeners? Please be as specific as possible. 29 Base: Online consumers, age 18+, in the US

Under 10% of online consumers have an HD radio in their household, or know anyone who has one. 2% Have an HD Radio 1% Someone else in HH has one 6% Someone else I know has one 91% No one I know has one Qb1c Do you, does someone in your household, and/or does someone you know have an HD Radio? 30 Base: Online consumers, age 18+, in the US

Implications 31

Implications The research indicates an ongoing role for traditional broadcast radio in the digital future. – As many online consumers say that radio is playing a bigger role in their lives over the past couple of years as say that it is playing a smaller role. But the greatest growth opportunities are most likely to come from other audio platforms and services. Design of new products and services should focus on delivering those benefits possible via IP, as opposed to traditional broadcast technology. – Specific areas most likely to meet with consumer acceptance: Personalizable music streaming On-demand functionality (e.g., podcasts or streamed programs) Compelling, interactive mobile apps 32

APPENDIX Online Consumers— Audio Profile 33

Past week listening to broadcast radio* AN AM, FM OR DAB RADIO STATION (TOTAL) 86% 91% 77% An AM or FM radio station over 83% 85% 68% a traditional radio An AM or FM radio station streamed over your 26% 23% 24% computer An AM or FM radio station on your 10% 4% 14% mobile phone or smartphone An AM or FM radio station on your 17% 10% 12% iPod or mp3 player An AM, FM or DAB radio station n/a n/a 21% via Sky/ Freesat** * Defined for respondents as "AM/FM radio" in US and Canada; as "AM/FM/DAB" in the UK ** Asked only in the UK 34 Base: Online Consumers, age 18+, in the US, Canada and the UK

Past week listening to Web-only radio or music streaming services MUSIC STREAMING OR WEB-ONLY RADIO (TOTAL) 32% 16% 32% An online service that lets you stream 22% 11% 25% specific songs on demand (total) Online service that streams songs on 18% 8% 20% demand over computer Online service that streams songs on demand 10% 2% 10% on mobile phone or smartphone An Internet radio station, available only online 26% 10% 18% (total) An Internet-only radio station over your 20% 7% 13% computer An Internet-only radio station on your 10% 2% 7% mobile phone or smartphone 35 Base: Online Consumers, age 18+, in the US, Canada and the UK

Past week listening to Sirius/XM satellite radio* SIRIUS/XM SATELLITE RADIO (TOTAL) 17% 12% Sirius/XM satellite radio over a 14% 10% regular satellite radio Sirius/XM satellite radio streamed 6% 3% over your computer Sirius/XM satellite radio on your 4% 1% mobile phone or smartphone * Asked only in the US and Canada 36 Base: Online Consumers, age 18+, in the US and Canada

Past week listening to other forms of audio CDs on your stereo or portable CD player 52% 49% 53% MP3s or CDs through your computer 46% 51% 50% MP3s or other digital music files on your iPod etc 45% 47% 50% YouTube music videos 36% 38% 37% Audio-only music channels w/ digital/satellite TV* 30% 25% n/a Podcasts—audio programs downloaded or streamed 19% 17% 21% HD Radio** 3% n/a n/a * Asked only in the US and Canada ** Asked only in the US 37 Base: Online Consumers, age 18+, in the US, Canada and the UK

APPENDIX About the Study and Vision Critical 38

About the Study Radio Futures 2010 is funded independently by Vision Critical to share insights with broadcasters, webcasters and other industry stakeholders. Key findings were presented at RAIN Summit conferences in Toronto and Las Vegas in March and April, 2010. The survey sample was randomly drawn from members of Vision Critical’s global panels in the US, Canada and the UK. – The rigorous recruiting practices used for these online panels ensure representation across a wide range of demographic and psychographic segments. Panel members pass through screening and a double opt-in process to ensure motivated and responsive panelists. – The margin of error—measuring sampling variability—on this study is ± 3.1% for samples drawn from each of the three country panels. Sampling variability would be higher on smaller subsamples. 39

About Vision Critical Vision Critical is a strategic interactive research company combining technology, researchers and global panels. We help companies reduce research costs while generating engaging and insightful relationships with their consumers. Vision Critical uses a visual approach, panel technology and our own global panels to embrace markets with the click of a mouse. The company has offices across North America, Europe and Australia. www.visioncritical.com 40

About the Vision Critical Radio Practice Vision Critical provides a new generation of radio research services designed to meet changing times. We combine cost effective, sound research practices with pioneering online research technology and panel expertise. The result is a new way of understanding why, in the face of so much change, so many people continue to listen to radio and what makes them choose one station over the other. You can find out more about our comprehensive range of research tools for radio at: www.visioncritical.com/radio Contact: Jeff Vidler Corina Death Senior VP & Managing Director, Radio Senior Research Manager, Radio jeff.vidler@visioncritical.com corina.death@visioncritical.com 41

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