Boxing In Pandora by L8190G


									Boxing In Pandora
First and foremost, listeners come to Radio with very different expectations of an
entertainment experience than they do to Pandora. Listeners go to Pandora with the same
entertainment experience expectation they have of their iPods, their cd players, Spotify and
iHeartRadio’s custom service – music. They come to radio looking for interaction, local
information (including commercials) and responsive connections on a personal and emotional
level. These are very different entertainment experiences and should be valued differently by

1. Radio Delivers. Pandora…not so much. Comcast spent $214,000 and received .64% CTR on
   Pandora versus iHeartRadio .08% CTR. A local Lasik client ran a $10,000 test and received terrible
   lead response. Pandora has two success stories. Radio has tens of thousands this year alone.

2. Local Ratings are not the same as local radio. Our lives are locally focused. Pandora is not. There
   is no local content, no community connection, no personal appeal with Pandora. It is a music
   delivery service with commercials. A growing number of commercials at that – most of their hours
   now carry 4 commercials. And those are often the same commercial by the same advertiser, often
   repeated for hours at a time.

3. Radio stations embody engagement. Pandora doesn’t. “Liking” or “disliking” a song is not
   engagement. And it’s the only form of “engagement”, outside of listening to or watching
   commercials, that they offer. There is instant, active, emotionally based engagement between
   radio stations’ personalities and their listeners. You can engage with them on Facebook and
   Twitter, at live appearances and events. Radio stations talk about and relate to your world, many
   select and play music selected for a certain sound, presented in a certain way for you. Pandora
   plays music. These are different entertainment experiences that come with very different
   entertainment expectations on the part of the listeners.

4. Commercials Aren’t Welcome Content on Pandora. A new study by Bridge Ratings done with
   4,399 Pandora users between January3 and March 15, 2012 shows that the #1 reasons their
   satisfaction with Pandora is dropping and keeps dropping as time goes by is “commercial
   interruptions spoil mood.” It also shows that the “not liking it as much as I used to” levels have
   shot up 200% since 2009 among their core target, Adults 18-34. That’s likely why their Premium
   (commercial free, $6/month) members increased by 50% from Q4 2011 to Q1 2012. Think
   “entertainment experience expectations”.

5. Why do 2/3 of Pandora’s registrants not use the service at all in any given month? Pandora
   claims over 150+ million registrations, yet admits that it has only about 50 million active listeners
   (or about 1/3 of registrants) who use the service in a month. And that percentage has trended
   down (it was 38% last quarter). Ask them what percent of their total registrants in any given
   market use them on a weekly basis. See if you can get an answer. ComScore ratings show that
   only about 40% of Pandora’s active listeners are average daily users – only about 15% of their total
    registrants. Contrast that with Radio’s 93% weekly reach of virtually every demo and 75% of them
    use Radio on an average day, for over 2-1/2 hours a day. That’s the difference between the need
    for music and the need for connection.

6. “Registrants” are not necessarily unique people. Pandora noted in their most recent investors’
   call that once they removed the monthly usage limits, the number of new registrations declined
   sharply. Apparently people no longer needed to create 3 or 4 identities to be able to continue
   listening beyond the set usage limits. So just how many of those “registrants” are real? Blue, Inc
   just released a study showing that in 2010, 76% of consumers gave incomplete or incorrect
   information and that in 2011, 88% of consumers did. There is virtually no truth in registration.

7. Reach/Frequency Strategies Don’t Work on Pandora. With radio, advertisers can control
   exposure timing and exposure levels and use radio to generate word of mouth buzz, especially
   through personality endorsements. A radio spot is one reaching many simultaneously. None of
   this can be done on Pandora. A commercial can’t run at 10:52AM across all the thousands of
   Pandora’s playlist users simultaneously. The average listener to Pandora tunes in often enough to
   hear a total of only 3-4 commercials every other day. What kind of frequency or relationship can a
   brand build with that limited an opportunity for exposure? The average listener to radio tunes in
   more than 20x a week and averages over 2:40 minutes a day with 60% of that listening going to
   their favorite station alone.

8. Pandora is a music feature. In a 70 page analysis of Pandora as an investment, Morgan Stanley
   cited only other online music delivery sites as Pandora’s competition. Pandora was not positioned
   as competing with Radio. Most other analysts, a January 18, 2012 USA Today article, Forbes and
   Stifel Nicolaus also compare Pandora only against Sirius/XM, Spotify, iHeartRadio’s customizable
   listening feature, Slacker and other non-radio, internet only entities. It is comparable in appeal
   and function to your iPod on random or iTunes’ Genius feature. Except you don’t have to own the
   music to listen to it.

9. Pandora is not one stream, but is a collection of different individual streams. The Pandora
   website has dozens of formats, music collections and playlists, covering dozens of different music
   genres. Aggregating all the different Pandora streams together and then trying to compare them
   to the ratings of a single, focused-format radio station in a market is an invalid comparison. Or
   comparing all of Pandora to only one customized offshoot of an entire network like Premiere or
   Dial Global is ludicrous. Pandora’s site reach is one-to-one, as opposed to a Radio station’s reach
   of one-to-many simultaneously. Pandora redefines not radio, but the terminology that would
   allow buyers to compare Pandora the way it should be compared, to whole networks or to station

10. Broad, Aggregated Ratings or Targeting? Not Both. Pandora’s “ratings” mean something only if
    buyers are willing to forego targeting beyond Adults 18-34 or 18-49. If Pandora were to offer men
    18-34 in certain zip codes listening to a given set of music genres, the “ratings” they publicize no
    longer apply. Pandora claims its primary benefit is its ability to provide finite targeting. But any
       finite target can bear no resemblance to the “ratings” they are pushing. Have they offered to
       produce ratings that match the customization an advertiser is doing? Why can’t they?

   11. Digital listening is only 6.4% of total radio listening. Sourcing Arbitron’s March 2012 RADAR
       reports (sample size of 395,000+) and Triton Digital’s April 2012 ratings (factored up to represent
       all digital listening), digital comprises 6.4% of the total hours spent listening to radio. Pandora
       claims a 45.9% share of total hours listened, but available data puts them at maybe 3.7%. And
       that includes their premium (commercial free) usage.

   12. Is Anybody Listening? The problem with online counts is that they truly have no idea whether or
       not you are there. Pandora claims to have a system that asks every 20 minutes, but several
       people who tested it said it is not consistent. One of their largest usage times is overnight. Can
       there really be that many insomniacs out there? Or are they going to sleep by Pandora and their
       computers remain connected?

   13. Pandora is not taking listeners away from radio. Since Pandora doesn’t offer the same
       entertainment experience as radio, it doesn’t take much from radio (at least, not from the people
       who listen to radio for the personalities, the live input and the transmedia local connections or
       talk or news – which is the overwhelming majority of them). Pandora is being used along with
       radio, not in place of radio for the overwhelming majority of people, according to the very
       research company Pandora originally used to create their “ratings” (Edison Research) in The
       Infinite Dial 2012. That’s also the findings of the May 2012 Jacobs Tech 8 study, the May 2012
       Target Spot white paper, the April 2012 iHeartRadio Study, USA Touchpoints Feb 2012, February
       2012 Mark Kasoff & Co. survey and the Feb 2012 NPD study. Heavy users of Pandora are heavy
       users of Radio. A comparison the past 3 quarters of RADAR data show that total Radio listening is
       consistent at 14.6 billion hours per month. And a comparison of Q2 and Q4 PPM market data
       shows that, from 2009 to 2011, Radio’s reach remained consistent at 93% and its daily TSL
       fluctuated up or down an average of around 3% -- or about the amount tolerated for “standard
       deviation” in ratings projections.

       This was said best by Pandora itself:

       “Pandora is really a companion to radio, not a replacement. “

               --Doug Sterne Director of Audio Sales Pandora
        January 7, 2010

May 26, 2012
KRG/Mary Beth Garber

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