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Today, our ears are crowded, given the many additional choices for our listening time, compared to traditional radio of just a few decades ago. Our smartphones are packed with downloaded songs and albums and apps that provide us with access to streaming music services, such as Pandora, Spotify and iTunes Radio. In addition, all these choices are available in most new cars, including Sirius XM satellite radio.

This has resulted in the state of the traditional radio medium to be essentially the same as Radio traditional broadcast (and even cable) TV: Both continue to hold their strong positions as major sources of news, entertainment, sports and other content and major generators of network and local advertising revenues, but digital is quickly closing the gap.

If media ad spending is any measure of consumers’ interaction with any specific medium, A Special Report from THE MEDIACENTER then digital will remain radio and TV’s biggest 2015 challenger moving forward. For 2015, ad spending in digital media will increase 13.0 percent, but just 1.8 percent for radio and 1.7 percent for TV. In addition, as radio and TV’s share declines through 2018, digital’s will increase, finally surpassing TV during 2018 and having more than 5 times the share of radio.

It’s absolutely critical that you, as a TV account executive, understand the current state of radio. Not just because it is a competing medium, but maybe, more importantly, because you’ll have an advantage over your competition when you present yourself as a local media consultant and expert to your prospects and clients. Being able to share insights and data about radio’s strengths and weaknesses will put you in a better position to influence how and where local businesses allocate their advertising budget – and, with the support of THE MEDIACENTER will make you a winner in the long run.

THE MEDIACENTER 7000 Kennedy Blvd. East, M-9 Guttenberg, NJ 07093 866-921-1026 [email protected] Loyal Listeners

Just as TV can show an almost ubiquitous penetration of American life, radio delivers Radio similar numbers, with 243 million Americans, 12+, listening to radio each week, which calculates to more than a 91-percent weekly penetration rate. The daily reach of radio for persons, 12+, was 66.2 percent and the total weekly time listening was 13 hours, 24 2015 minutes, according to Nielsen’s June 2015 RADAR® report. Radio’s Daily Reach by Age and Gender, 2015 Age Range Persons, 12+ Men Women 12+ 66.2% 66.9% 65.4% 12–17 56.0% 53.1% 59.0% 18+ 67.2% 68.4% 66.0% 18–24 61.2% 59.2% 63.4% 18–34 64.6% 63.2% 65.9% 18–49 67.6% 67.3% 68.0% 25–54 70.1% 70.7% 69.6% 55+ 65.1% 68.6% 62.2% 35–64 71.3% 73.0% 69.5% 65+ 60.6% 64.2% 57.8% Radio Advertising Bureau (Nielsen RADAR), June 2015

Parts of the table above are highlighted to bring attention to the fact that teens and male teens, specifically, have the lowest radio penetration rate while the highest is among adults, 35–64.

Radio’s almost total penetration is further revealed when comparing more detailed data of the three primary generations – Millennials, Generation X and Baby Boomers – and two of the major ethnic groups – Hispanics and . Comparison of Three Major Generations’ Radio Use, Q4 2014 Millennials Generation X Baby Boomers Metric (18–34) (35–49) (50–64) Total weekly listeners 66.6 million 57.9 million 57.9 million Men 53% 53% 53% Women 47% 47% 47% Weekly penetration 91.3% 94.0% 93.5% Total weekly time listening 11:26 13:45 15:06 Top daypart 3pm–7pm 6am–10am 10am–3pm Top format Country Country Country Listening in the home 27% 27% 34% Listening outside the home 73% 73% 66% Nielsen, State of the Media: Audio Today, March 2015

www.mediacenteronline.com Comparison of Two Major Ethnic Groups’ Radio Use, Q4 2014 Another important data point is the amount of time the African full-time employed of the three major generations and two Metric Hispanics Americans major ethnic groups listen to radio weekly: Millennials, Total weekly listeners 39.9 million 30.9 million 12.25 hours; Generation X, 13.7 hours; Baby Boomers, 15.25 hours; Hispanics, 14.0 hours; and African Americans, Men 53% 48% 12.75 hours. Women 47% 52% Weekly penetration 93.1% 91.0% On an annual basis, radio listening peaks during the spring and fall months. For the entire 13-month period from January Total weekly time listening 12:43 12:59 2014 through January 2015, however, the range was very Top daypart 10am–3pm 3pm–7pm narrow, with January 2015 having the smallest number of Mexican Urban Adult listeners, at 10.3 million persons, 6+, for an average quarter Top format Regional Contemporary hour, and May 2014 having the largest, at 11.4 million. Listening in the home 32% 38% No other medium puts the majority of listeners closer to Listening outside the 68% 62% retailers and other businesses, since the majority of radio home users are not home during all dayparts. Nielsen, State of the Media: Audio Today, March 2015

The Workday’s Companion Radio continues to deliver peak audiences during the Radio Listening Location by Daypart, Persons, 12+, Q4 2014 traditional dayparts: AM drive, 6am–10am; midday, 10am– Daypart Not Home At Home 3pm; and PM drive, 3pm–7pm, with 7am–8am, the highest- Mon–Sun, 6am–midnight 64% 36% rated hour during the weekday and midday, 10am–3pm, the AM Drive, 6am–10am 61% 39% highest-rated daypart. Midday, 10am–3pm 72% 28% In addition, the total number of listeners, 12+, increased PM Drive, 3pm–7pm 72% 28% every weekday during spring 2014: Monday, 176.1 million; Evenings, 7pm–midnight 53% 48% Tuesday, 178.0 million; Wednesday, 177.1 million; Thursday, Weekends, 6am–midnight 55% 45% 186.3 million; and Friday, 184.9 million. The weekend days have the fewest total number of listeners: Saturday, 156.0 Nielsen, State of the Media: Audio Today, March 2015 million, and Sunday, 137.6 million.

www.mediacenteronline.com Radio 2015 Formats’ Fortunes and Future

News has always been major programming Radio content on all radio stations; however, according to the latest Radio Television Digital News Association (RTDNA)/Hofstra University 2015 Survey, the amount of time stations scheduled for local news and the number of stations with any on-air news reports continued to decline – and has likely done so for decades.

Conducted during Q4 2014, the study found local news lost another two minutes from the average weekday time stations scheduled news broadcasts, decreasing to 75.6 minutes. In addition, the number of stations with local newscasts decreased 3.8 percent during 2014, to 66.25 percent of the 868 stations responding to the survey, which is half of 2013’s decrease of 7.7 percent.

The number of US all-news stations has also declined from 37 during 2012 to 31 for 2014, and the all-news format is the lowest ranking format on Nielsen’s Top Formats of 2014. Number two on that list is the news/talk/information format. The number of stations with this format has varied during the past five years, from a low of 1,922 stations during 2010 to a high of 1,994 during 2013. There four fewer news/talk/information format stations during 2014, or 1,990.

Country is the clear #1 with a total listening share that is almost 50 percent more than the #2 format, news/talk/information. America’s Top Radio Formats by Total Listening, 2014

Format Percent Format Percent #1: Country 15.2% Contemporary #12: 3.0% #2: News/Talk 10.6% Hit Radio (CHR) Pop Contemporary Hit #13: Mexican Regional 2.6% #3: 8.0% Radio (CHR) #14: 2.0% #4: Adult Contemporary (AC) 7.6% #15: Adults Hits + ‘80s Hits 1.9% #5: Classic Rock 5.6% #16: Alternative 1.8% #6: Classic Hits 5.5% Album-Oriented Rock #17: 1.7% Hot Adult (AOR) + Mainstream Rock #7: 5.3% Contemporary (AC) #18: Classical 1.5% Urban Adult #8: 4.3% Spanish Contemporary Contemporary (AC) #19: + Spanish Hot Adult 1.3% #9: Contemporary Christian 3.5% Contemporary #10: All Sports 3.3% #20: Religious 1.3% #11: 3.2% #21: All News 1.3%

Nielsen, State of the Media: Audio Today, March 2015

Despite the country format’s lofty position, Keith Hill, one of the most experienced and respected radio consultants, created controversy during spring 2015 when he declared that country stations played too many songs by female artists. He said he had the data to prove that when a station’s total playlist is more than 15 percent female, its ratings decrease. According to Hill, whenever he recommends this change to any station that has requested his programming guidance, its ratings increase. www.mediacenteronline.com Ad Sales Angst The findings of January–May 2015 research from Borrell Associates added to the radio industry’s advertising angst. Envision media ad spending as a mountain range. TV and Of the 7,228 small, local businesses (SMBs) Borrell radio are the two tallest peaks. Newspaper once rivaled the surveyed, 37 percent said they wouldn’t be buying any height of TV and radio, but it, and all other traditional media, radio advertising, compared to 23 percent during 2010. have eroded significantly. Although TV and radio have According to these SMBs, even the online/digital medium weathered the ravages of time, there is a new peak growing would receive slightly less of their advertising buys than at a rapid rate – digital – and it is about to stand shoulder to for 2010. All other media registered a decline in ad buying, shoulder with TV and radio. comparing 2010 to 2015.

As noted on page 1, as traditional media’s share of total US ad spending continues to decline through 2018, digital is grabbing those shares and will become the #1 media in total ad spending by that year.

Total US Media Ad Spending Share, 2014–2018 Media 2014 2015 2016 2017 2018 TV 38.1% 37.3% 36.9% 36.2% 35.7% Digital 28.2% 30.9% 33.2% 35.3% 37.3% Mobile 9.8% 14.0% 18.7% 22.6% 26.4% Print 17.7% 16.5% 15.5% 14.7% 14.0% Newspapers 9.3% 8.6% 8.0% 7.5% 7.1% Magazines 8.4% 7.9% 7.5% 7.2% 6.9% Radio 8.6% 8.2% 7.8% 7.5% 7.1% Outdoor 4.0% 3.9% 3.8% 3.7% 3.6% Directories 3.5% 3.1% 2.8% 2.5% 2.3% eMarketer, June2014

Based on this analysis, radio’s share of all 2018 US ad spending will be no better than newspapers, both at 7.1 percent. Radio’s total annual revenues, according to Data from the Radio Advertising Bureau (RAB) shows a decline in network and spot ad revenue from 2010 through 2014, but the decline has been much more long term. US Radio Annual Revenue by Sources, 2010–2014 % Change Source 2010 2011 2012 2013 2014 (2010-2014) Network $1.10 B $1.14 B $1.16 B $1.12 B $1.07 B -2.7% Spot $14.2 B $14.1 B $14.2 B $14.1 B $13.6 B -4.2% Digital $615 M $709 M $767 M $889 M $973 M +58.2% Off-Air $1.39 B $1.49 B $1.51 B $1.58 B $1.83 B +31.6% Total $17.3 B $17.4 B $17.6 B $17.6 B $17.5 B +1.2% Radio Advertising Bureau, 2015

www.mediacenteronline.com Radio 2015 The Digital Dial

Arguably, the most fundamental rule of advertising is that the dollars follow the consumers. Radio This has prompted one major brand advertiser to change the line item in its budget from “radio” to “audio,” because it sees more of its target audience and most target audiences 2015 listening to multiple audio sources, not just traditional radio. This movement toward digital radio is clearly reflected in the findings of research from the Pew Research Center: During 2010, 27 percent of all Americans, age 12 and older, had listened to online radio during the past month. This percentage will essentially double and surpass 50 percent for the first time during 2015, or 53 percent.

Of even more importance for advertisers (and radio station executives) is that 73 percent of digital radio listening during the last week of the month measured during 2015 was via smartphones, a 22-percent increase from 2014. Although 61 percent of persons, 12+, listened to digital radio via a desktop or laptop computer, it was a 6-point decrease from 2014’s 67 percent. In addition, digital radio listening is forecast to increase through 2019. US Monthly Digital Radio Listeners*, 2013–2019 Year Listeners % Change 2013 147.8 M +11.5% 2014 160.2 M +8.3% 2015 169.9 M +6.1% 2016 176.7 M +4.0% 2017 181.2 M +2.5% 2018 184.8 M +2.0% 2019 191.6 M +3.7% eMarketer, February 2015 * Internet users of any age

Another measure of digital radio’s popularity is the growth of specific channels. Sirius XM satellite radio had 18.8 million subscribers during 2009, but its subscriber base increased 45 percent from that year to 2014’s 27.3 million. Active users of the streaming audio service, Spotify, were 60 million during 2014, and 81.5 million for Pandora.

www.mediacenteronline.com Digital Radio Delivers Dayparts, According to data from Research and Markets, Internet/ pay radio services, such as Pandora, Spotify and Sirius XM Demographics and Dollars Radio, can expect revenues to increase 28.6 percent during According to Triton Digital research, listening to online audio 2015. Subscription revenue will increased 25.5 percent, increased 38.6 percent from April 2014 to April 2015 for primarily because subscriptions fees will be 20 percent Monday–Friday, 6am–8pm and 41.8 percent for Monday– less. Ad sales, however, will account for 62.4 percent of all Sunday, 6am–midnight. 2015 revenues and ad-supported listening will represent 78 percent of total hours listened. Online Audio Music Format Leaders*, The App Game March 2015 vs. April 2015 Prior to December 2009, radio stations that simulcast Music Format % Increase their programming on either a dedicated station app or an aggregation app (iHeartRadio, Radio.com, TuneIn, etc.) +5.6% accounted for the majority of online radio usage. By December Classic Rock +3.6% 2014, however, stations’ simulcasts had not increased Country +2.9% much, if at all, remaining in the approximately 250,000 to Alternative/ +2.1% 300,000 range for average active sessions, compared to Pandora, which had increased from approximately 250,000 +0.8% to two million during the same period. Inside Radio (Triton Digital), June 2015 *Mon–Fri, 6am–8pm This and additional research are revealing that Internet/ According to Edison Research’s Fall 2014 Share of Ear pureplay services are driving essentially all of the increase report, 64 percent of teens, 13–17, listened to 64 minutes of in the online audio space via mobile, and especially streaming audio daily, compared to 53 minutes of traditional smartphones. One of the reasons is that consumers are AM/FM stations and their online streams. used to repeated music during the “ten-minute-listening- span,” which is how traditional radio is measured, but expect Another interesting result from the Edison Research report much less repetition online and on mobile devices. is that a higher percentage of Americans, 13+, listened to podcasts, compared to all other audio sources.

Comparison of Time Spent Listening to Audio Sources*, May vs. Fall 2014 Audio Source May 2014 Fall 2014 AM/FM radio 27.5% 21% Podcasts 25.9% 30% Owned music 22.3% 23% (CDs, digital music files, etc.) Internet only music/radio 10.6% --- Streaming audio --- 12% (Pandora, Spotify, etc.) Sirius XM satellite radio 6.0% 5% TV music channels 5.0% 9% Other 2.7% --- Radio & Internet News, January 2015 * Americans, 13+

www.mediacenteronline.com Radio 2015 The Battle Over the Car Radio: Automakers vs. Consumers

What may be radio station owners’ worst nightmare is that some analysts in both the Radio automobile and audio-listening industries are predicting that a day will come (and maybe sooner than later) when cars are not manufactured with a radio, but an entertainment 2015 system – and there is no guarantee that traditional radio will still be accessible. Edison Research found during its Q1 2015 research that 35 percent of the cellphone owners it surveyed said they had listened to online radio via their phone in the car at least once; during 2010, it was just 6 percent.

Another interesting 2015 data set from Edison Research is the audio sources that adults, 18+, used in a 2009 and older vehicle, compared to a 2010 to 2015 model that they either owned or was a passenger during the last month. Although the use of AM/FM radio and a CD were relatively the same, the owners or passengers of newer vehicles used an iPod/ smartphone, Internet radio or Sirius XM Radio significantly more. Comparison of Audio Sources Used Based on Age of Vehicle, 2015 Audio Source Vehicle, 2009 and Older Vehicle, 2010–2015 AM/FM radio 85% 85% CD player 60% 55% iPod/Smartphone 33% 51% Internet radio 18% 28% Sirius XM radio 9% 32% The Infinite Dial Blog, April 2015

February 2015 research from iHeartRadio and IPSOS seemed to support the Edison Research analysis. The elimination of any audio source in new Consumers’ Use of and Preference vehicles is very limited, to date; however, the new BMW i3 electric car is manufactured without for In-Car Listening Platforms, 2015 the AM radio band, but primarily because the % electric motor interferes with the AM signal. Platform Listened General Motors no longer includes a CD player in its Sonic and Spark models and Kia has done Standard AM/FM radio 84% the same in the Soul. CD player 64% Sources: TechCrunch Website, 6/15; eMarketer Website, Sirius XM radio 22% It’s difficult to know the direction of this trend since car manufacturers typically design new 6/15; Radio Advertising Pandora 18% Bureau Website, 6/15; Nielsen vehicles 18 months or more in advance and Website, 6/15; Pew Research iHeartRadio 8% they don’t tend to share design specifics until Center Website, 6/15; Inside HD Radio 7% new models are ready to roll into dealerships. Radio Website, 6/15; The Spotify 7% Washington Post Website, The underlying conclusion of this special report Standard AM/FM radio 80% 6/15; Radio & Internet News from THE MEDIACENTER is that radio is in a Website, 6/15; The Infinite Dial CD player 68% much more tenuous position than television. Website, 6/15; RadioWorld MP3 smartphone player Although more video content continues to be Website, 6/15; Automotive IT 48% News Website, 6/15. access viewed on mobile devices, watching television Satellite radio 45% is still the #1 activity in the home. Radio must Updated: June 2015 rely primarily on an audience that is willing to Streaming Internet radio/ 34% listen outside the home and if digital audio, streaming music service which can be accessed from anywhere with HD Radio 25% a mobile device, increases as predicted and, Other streaming audio more importantly, more new vehicles are not 5% service equipped with traditional radio access, then radio is destined to become as minor of a iHeartRadio/IPSOS In-Car Audio Study, www.mediacenteronline.com February 2015 medium as print, and even directories.