Professor Larry Miller Loves Music Radio But ......
I have known Larry Miller since we both worked at NBC's youth network, The Source in the early 80's. Larry's experience is wide and varied from Production Director at Z100, New York to a partner in the media and entertainment practice at LEK Consulting. Today Larry is a Clinical Associate Professor and Director of the Music Business Program at NYU and hosts Musonomics, a succesful podcast about the business of music.
He has done extensive research on both the radio and music businesses which gives him a unique vantage point to peak around the corner. Last fall Larry issued a white paper which generated some noise in radio circles but was a realistic view of the significant changes in audio choice and consumption.
I caught up with Larry shortly after his appearance at The Country Radio Seminar:
Best Buy recently announced they won’t sell CD’s any longer. Streaming now tops downloads and streaming revenue was up some 53% last year. You track all of this — where is the music business headed?
The music industry has reorganized itself to address the market opportunity that exists today, and the market for monetizing recorded music is now led by streaming. So although a substantial physical business remains, what's left isn't sufficient for the largest big box retailers to allocate floor space to the category which we're seeing at Best Buy, and Target is forcing the industry to accept an all-consignment model for whatever titles they continue to stock. And people love to talk about vinyl which continues to grow about 10% a year, but it's still only about a $500 million business in the US against an $8 billion recorded music business in the US. Downloads are collapsing at a faster rate than the worst years of the CD decline curve. And streaming is growing fast enough to offset all the declines in physical and permanent downloads, enough to drive 6% global recorded music revenue growth. Streaming drove more than half of the industry's revenue in the US in 2016, and more in 2017. We know that smartphone penetration drives streaming more than anything. Much more streaming will drive much more music consumption and monetization. I've been obsessed with the Spotify prospectus which provides more transparency on Spotify and the streaming industry than we've previously had. Key takeaways: they're growing fast, it cost a lot to run, user engagement is incredibly high, churn is incredibly low, most every metric is headed in the right direction, the future is pretty bright. I noticed Spotify listed radio companies first as competitors and other music services second.
Talk about the significance of playlists and curators like RapCaviar who have over 8 million followers.
And how interesting that Rap Caviar programmer Tuma Basa left Spotify for YouTube the day after the company's prospectus was filed. But yes, Rap Caviar has a much bigger, heavily engaged audience than any radio station.
How, in your view, does this affect commercial radio? It seems like, while still significant, radio is not the only gatekeeper of what gets heard and what becomes popular any longer?
We know radio is paying close attention to new artists or tracks getting initial traction on the streaming services, YouTube and Shazam. Anyone who's ever programmed a commercial station knows the newest, unfamiliar track is not radio's best friend. Lack of familiarity drives tune-out, and programmers and their employers hate that. So adding new music is risky and programmers have to play new music to stay relevant to their audiences, but they have to mitigate that risk. It's a hard job. In certain genres like pop, radio has the potential to drive streaming activity -- up to a point. So, yes, labels still pay attention to radio, but radio is not the exclusive gatekeeper it once was.
The car isn't a walled garden anymore
What does radio need to do to stay relevant and vital, or with all of the change occurring around them, can they? The 30 page white paper you wrote this past summer was pretty grim.
Now as ever, radio loves to talk about reach. And radio does reach a lot of people. But TSL is declining about 5% a year and is stuck in an unforgiving, inflexible business model. At my CRS panel Mike McVay said "we are committing genocide with our cluttered presentations and high commercial loads" although I think he meant suicide. But either way, radio isn't servicing listeners, advertisers or itself. The car isn't a walled garden anymore. And yes, automotive dashboards take a decade to reconfigure. But autonomous cars are coming and as I said in my paper, unless radio starts innovating now, the industry runs the risk of becoming like the wax cylinder or 78 RPM record -- fondly remembered but no longer relevant to an audience that has mostly moved on. At CRS I urged programmers to remember what got most of them in the business to begin with: authentically connecting with audiences, storytelling, painting pictures with sound. And build new content natively designed for the new platforms on which audio content is being consumed.
We are entering a new era of voice with smart speakers. It looks like Amazon’s own music service has benefited greatly as people engage with music via these devices.
Yes indeed. Amazon's Prime Music is the #3 service behind Spotify and Apple Music, and growing. And even though there is data that suggests some listeners will ask their smart speaker to play their favorite radio station, and lean back, those same listeners are also using on-demand music services and other audio programming like podcasts. When I was in radio I remember the execs of the time used to pound on the table about the power of radio's strong, resilient local brands. In an unbundled digital environment, we'll finally going to find out how strong and resilient radio's local brands really are.
Some listeners will ask their smart speaker to play their favorite radio station, and lean back, those same listeners are also using on-demand music services and other audio programming like podcasts
We see data that shows that millennials are still significant radio users, yet anecdotally, and in my house, that does not seem to ring true. As a professor, it seems to me you have a great view of what your students are listening to and what devices they are using. Where does commercial radio fit in?
I love this question, and I hate this question. I have hundreds of students from around the country and around the world. They live in New York City, where almost none of them drive. They are hipsters almost by definition, and I love them. The vast majority of them do not listen to commercial, AM/FM radio at all. Only a handful of them have a favorite station at home or here in New York. Most of them are on Spotify premium, Apple Music and Soundcloud, or all 3. Fewer of them are on Pandora than I would have guessed a year ago.
Bonus Q — You were there at the early days of Z100 in New York. What was that like?
I've thought about this a lot in the almost 35 years since sign-on. It was a rocket ride, and although I've done a half dozen startups since then, I never worked so hard in my life. But what Z100 had and what Scott Shannon taught by example was how to be authentic. Scott was a once-in-a-generation super-communicator who imbued the station with his common sensibility. The entire audience felt it. So did everyone who worked there or visited the station. I've still not seen anything like it.
Thanks Larry. New choices, new devices, new terrain indeed.
I was a guest on the most recent Musonomics podcast where we discuss strategies for radio stations.
I will be moderating a session at the upcoming NAB, Las Vegas: Ahead in 2018: This Year in Podcasting. My fantastic all-star panelists include John Rosso, Triton Digital; Brendan Monaghan, Panoply; LexFriedman, Midroll, Rob Walch, Libsyn. Wednesday, 9am.
In just two years, according to comScore, 50% of all search will be done via voice. Voice is happening with remarkable speed. Here is a copy of our new Sonic Ai e-Book on going beyond skills and developing strategy for smart speakers.