Will Apple Remove Your Ads?

There's a lot of buzz about a patent Apple just received for technology that will allow them to selectively remove unwanted elements in music streams as people listen on various devices. Will that impact radio listening and radio?

A first reaction to this news might be, "There are billions of radio devices in homes and cars that won't be impacted by this technology. Radio has nothing to worry about." At first glance, I'd agree. After all, radio reaches almost every household, with most families owning several radios and 100 percent penetration in cars.

Yet I think we had the same reaction when Apple announced their first MP3 player and later announced they would be selling music. Most people in radio initially wrote those things off as non-events, and few of us understood Apple's vision -- which turned out to be a giant success. The same thing happened with the iPhone and apps, which again changed the game. But why would Apple bother with technology to remove commercials? Perhaps they have a vision we cannot see.

Radio may have a huge advantage for a while, until this technology is implemented in the streaming environment, where it could potentially remove spots that are inserted into streams. From what I can tell by reading the patent, it doesn't appear the technology can detect a commercial inserted in real time (though I may be wrong). In other words, the spots in your live stream would play, but those in a stream where ads are inserted individually could be removed. Of course, most of our streamed content includes inserted ads.

My biggest concern about this technology is that about half of all Internet activity takes place in a mobile environment, and a big chunk of that is on iPhones. Mobile makes up a significant portion of streamed listening, so radio has vulnerability there. And if Apple licenses this technology to other mobile devices, then the impact will be ever greater.

Perhaps an even bigger concern is that radio is about to lose its command of the automobile. Yesterday Sirius XM announced that 50 million cars are now satellite radio-enabled. (This is not a subscriber figure.) My prediction was that it would take satellite years to dominate the car. And I was wrong, it took 10 years. But satellite radio isn't my concern. An increasing number of new cars are now Internet-enabled and have iHeartRadio and TuneIn and Pandora on the dash, no subscription required. Radio's biggest listening takes place in the car. So as these devices and services penetrate, eventually, most radio listening will be streamed listening, in the car.
 
The New York Times Magazine recently reported that the current car fleet averages 11 years old and that the majority of cars will be replaced -- in fact, it's expected that 2015 will be the biggest car sales year in history because of that need to replace old vehicles. And that means that, by the end of 2015, virtually all cars will have in-dash Internet radio.

Do you see where this is going?

It's possible that all in-car listening by 2015-2020 will be online listening. Suddenly that transmitter's reach is reduced to in-home units. If Apple's commercial-replacement technology covers all your ads, then radio's business model is broken.

Perception may be the biggest problem we face. Advertisers seeing this announcement may naively think that audio advertising is dead or dying and switch to other alternatives. We all know how consumers and advertisers perceive Pandora, often based on inaccurate and exaggerated press reports. They continue to buy that story, and there's no reason to think they won't eventually believe that audio ads will be covered in all environments.

What Should Radio Do?

A natural reaction would be to fight this and find a way to prevent it. That would be a typical NAB approach. After all, no one should be allowed to alter our broadcasts -- though I'm not sure it can be prevented.

Another reaction would be to make consumers suddenly like commercials. We all know from focus groups that ads are disliked, even though in the same breath listeners will tell us ads are often how they find out about things going on in their communities. Though we can make commercials better, and should, I don't think that solves this problem.

Radio needs to take a serious look at its business model. Though commercials aired over the transmitter will likely continue to be heard, we need to assume mobile and in-car listening will dominate. And therefore we need to find new ways to generate income.

Radio needs to dig deeply into its creative soul and find out how we can generate new forms of revenue on our strengths: our relationships with listeners and our ability to move products. Though we may never see the radio spot die, we should assume it will die and seek new ways to replace that revenue.

We need to look at ways of placing audio advertisements seamlessly into our programming, so they can't be detected by this technology -- and we need to do it in ways that won't alienate our listeners. Perhaps that's a product-placement strategy; television increased product placement in response to the DVR, which allowed consumers to skip ads. Or perhaps the strength of some talent or some formats will allow us to command subscription revenues?

Chances are what needs to be done has not yet been invented, and it's time to start inventing it. If these predictions hold true, the clock is ticking, and we'll need to develop a new approach within the next couple of years.

Radio remains a tremendous industry because of our loyal audiences, but we should not get complacent or arrogant. Because of our success, everyone wants to take our audiences away -- and it's predictable that fickle listeners will follow innovative solutions they feel better meet their needs. The promise of radio with few or no commercials is inviting, and it's one of the strengths of Pandora. Plus, as the generation of baby boomers fades and the Internet generation gains a foothold, there is perhaps less loyalty to radio, and that will impact listening and advertising.

Radio has a promising future. These things should not frighten us, but they should not be ignored. A proactive response is what will help us remain strong.

 

Comments

[Mary Quass]

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us..." (Charles Dickens, 1812-1870)
Eric, you and Mr Dickens share an interesting perspective...
And it is always great to hear what is in that brain of yours....so does it come down to spectrum and if you are paying for access what do you chose to spend it on??? Or is it what is going on in my world, today? Do I really care how the content is delivered? Questions...Questions..and is it that we are all about us? Don't we act from enlightened self interest? History would suggest that we have and continue to act in this manner....perhaps we need to become students of the human condition and adapt the wonders of the present to the fundamental and age old core of who we are as people...to matter, to be liked, and to be a part of the "us" that is our community??? I think I need more coffee....thanks Eric.

[Ed]

"In other words, the spots in your live stream would play, but those in a stream where ads are inserted individually could be removed. Of course, most of our streamed content includes inserted ads."

If this means stations using third party vendors and software to do their instream ad insertion, then the third party vendors have more to worry about with this technology than radio stations do. Though it is still a concern to stations that stream.

There are many radio stations that do their own ad insertion. Most of the sophisticated automation systems can do it seemlessly. As other have pointed out, live reads combat this technology too.

[Walter Sabo]

Those 50 million cars with Sirius radios also have AM and FM. The best show wins. (Sirius has commercials.)

[Rick Hayes]

Eric

Good piece. I hope it scares the hell out of everyone in our business. Ad replacement doesn't really concern me as I see loads of issues concerning such things as piracy of intellectual property. What does concern me is that too many in our industry still think of ourselves as being in the radio business . We really need to think of ourselves as a lot more than that. The postal service missed the Internet boat and is now a redundant message delivery service that's 15 billion in debt, this year. It could have been at the front of the entire email revolution. Could there have been a more logical and obvious connection?
The other thing that bothers me is that too many of us are waiting for the big players in our industry to lead the way into this new internet medium. Waiting for the large companies to lead the way is a mistake.  The large, national broadcast companies are looking at the marketplace through a wide-angle lens, nationally.  Clear Channel’s I-Heart Radio is a national approach to using the Internet.  Those national strategies don’t offer much to a local broadcaster with an AM/FM combo in a small market.  The local guy needs local opportunities.  The changes will come from innovative, creative “local” thinkers.  Radio is loaded with creative and innovative people and there is no limit to what can be achieved.  We are now in the most exciting time, ever, in our industry. (If I were back in sales, I could clean up!!!)

My blog has just begun a five part series on Internet Strategies for the Local Broadcaster. Key to the blog is comment from readers. Please feel free to join the discussion at www.rjhayes.com

Great work, Eric. Your latest piece was more than a wakeup call, it was a shot across the bow.

Rick Hayes
Communications Attorney

[Sean Kelly]

We should also be concerned not just with what Apple might take out of our streams, but also what they might put in. The very same technology could allow Apple to put an ad in our stream. That's a pretty far reaching implication as well, perhaps giving Apple a hammer to "force" radio to carry some of their ads in order to have your ads get through on a stream going through Itunes.

Apple already forces a "nominal" app fee to get a station on Itunes, and operates it as a closed ecosystem so that there's no way around it.

People who look at Apple and say "well they're not really in the advertising business..." have short memories. 15 or so years ago, Apple wasn't really in the Ipod business either, nor the Iphone business, nor Itunes, etc.

And 20 years ago, Google wasn't in the ad biz either.

Mr. Rhoads is correct, we need to re-evaluate our business model. Apple won't get into our business to compete with us, they will get into our business to OWN it.

Collectively, we need to find a way to stand up to Apple (and Google) or we will end up paying them some sort of "Apple tax".

[Mike Brooks]

Eric, Thanks for the thoughtful piece regarding radio's dashboard future. Your points are all well taken but I believe that there is an elephant in the room, infact two, that we are all ignoring. Bandwidth! I recently saw a quote from PAndora's CEO stating that he was hoping that Pandora's subscriber growth would slow down so that revenue would have a chance to catch up to the increasing costs of their operating expenses (Remember: Pandora is still loosing millions of $$ per quarter). It's a nasty fact that as streaming listenership goes up so will the providfers expenses. No doubt technology improvements will help the situation but it remains a hurdle none the less. Additionally as mobile providers sunset those lucrative "unlimited data plans" consumers will have to start paying for those mobile Pandora streams. That may well have a dampening effect on mobile streaming's growth. The old radio model of "one to many" broadcasting still holds a great deeal of business sense. NOW it's up to broadcasters to tyransmit programming that is compelling to their audience. Give them something that Pandora and others can not. Local and live is the answer. But that's a topic for another day! Thanks for listening.

[Nate]

There are many different ways for advertisers to reach out to customers besides forcing customers to watch their ad-content. I would much rather listen to music that I enjoy during commercials then having to watch them. I got Dish's Hopper because of its Auto Hop feature that allows me to skip my recorded commercials. My job (Dish) let me try the Hopper out before it was released to customers and it works just as seamlessly as Apples ad-skipping feature.

[Damon Collins]

It looks like "adlets" might return. The personality (DJ)would do the ad over a 10 to 15 second song intro, and the music keeps rolling. Also, the return of live reads out of a stopset? I thing radio is way off base when it comes to less talk (communication with the listener). Social sites have become so popular with younger demos because radio stopped communicating with them. Listeners have become educated about the voice tracked world, and know the studio is empty. When is the last time you heard "This is DJ _____ live on W____ I'm here to take your requests or comments, AND...you reach me now on FB, Twitter, chat...etc. Radio needs a complete interactive experience starting on air, and moving to social media etc.

[Bill Goldsmith]

Good stuff. Eric, you're the first radio professional of your stature that I've heard embracing the obvious (to me, anyway) truth that radio needs to think outside of the spot advertising box if it wants to flourish -- or even survive -- in the emerging media environment.

The days when listeners would remain loyal to & passionate about a station that inflicted a dozen or more (often many more) units of advertising on them every hour are pretty much already over.

People may still be listening (or at least have the radio on) but without loyalty and passion radio cannot survive. Soon even the passive listening that is all today's 2nd-rate programming can attract will end. There are just too many other choices; choices that are increasingly easy for non-technically-inclined listeners to access.

Disclosure: I'm a guy who already makes a very good living providing free programming with no advertising whatsoever.

[Greg Smith]

"It's possible that all in-car listening by 2015-2020 will be online listening."

I doubt that will ever happen, but smartphones will definately have an impact on OTA broadcasting. That is why the nasty NAB is tring desperately to get HD Radio chipsets mandated into cell phones, but that will never happen. The NAB board members are also investors in iBiquity.

I say great to Apple removing ads, especially all HD Radio ads. But wait, even Clear channel is no longer advertising for the HD Radio Alliance:

http://www.allaccess.com/net-news/archive/story/94631/hd-radio-alliance-s-radio-advertising-presence-on-

Cheers to ANYTHING that helps to kill the HD Radio scam!

[Mark]

This new technology could mean the only way around it is by having more live reads - that means less produced spots that can be removed from the stream. How does this technology work? Will it be as successful in removing spots from spoken word formats as it is in music formats? I'd like to see that issue addressed.

[Dick Summer]

This is a brilliantly written and important piece, Eric. Technology is going to force a new wave of actual on air artistry...ALA William B. Williams, Don Imus, Howard Stern. Or will it ?

With the total concentration on "Gimmie $ Now" that persists with the big consolidators, it may be time to turn out the lights.

[Richard Fusco]

The bottom line is people have to either pay for content or advertisers have to pay for it. I have a way to get people to not only like commercials but want them and listen to them. I'd be happy to share that info. This is not a quick fix but a long term strategy for all advertiser-supported media to change the perception of advertising.