Consumers appear unwilling to pay for music downloads, but a study by Arbitron and Edison Media Research found that attitudes change when it involves streaming audio content.
According to the study, "Internet 8: Advertising vs. Subscription - Which Streaming Model Will Win?", approximately 9 million consumers who have ever listened to Internet audio said they would be willing to pay a small fee to listen to the one audio channel they most listen to online. Forty percent of audio streamies – those who have listened to Internet audio – would be willing to pay a small fee for commercial-free content, high-quality audio or content they can't find anywhere else.
"This study presents important evidence about the consumer's willingness to pay a subscription fee for streaming content," said Bill Rose, vice president and general manager, Arbitron Webcast Services. "For streaming subscription models to be successful, however, content providers must follow the time-tested model of offering something extra to the consumer: no commercials and great, exclusive content. In essence, Webcasters must bring the HBO model for cable broadcasting to the Internet."
Approximately 40 million Americans (17 percent) listened to audio or watched video in a typical month, compared to 13 percent last year, the study found. Overall, approximately 80 million Americans age 12 and older (35 percent) reported having ever accessed streaming audio or video online. Just two years ago, 24 percent of Americans had ever listened or watched online.
The study also found that 45 percent of audio streamies said they use the Internet to listen to audio content they cannot find on traditional over-the-air radio. Similarly, half of video streamies said they watch online video content that is not available via existing TV or cable.
Like Internet users in general, the age composition of those who listen or watch online in the past month has become remarkably balanced among all age groups from 12 to 54 years old. These streamies are more likely to live in homes with $50,000 or more in annual income (49 percent) than the national average (34 percent). They are also more likely to have made an online purchase in the last month (42 percent), compared to 31 percent of all Internet users.
Not surprisingly, the study found that broadband access and streaming media consumption go hand-in-hand. Nearly six in 10 people (59 percent) who live in homes with broadband Internet access watch or listen online compared with 47 percent among those who live in homes with dial-up Internet connections. Monthly and weekly usage of streaming media is also significantly higher in homes with broadband. Despite a difficult economic climate and other issues impacting the broadband business sector, the study found that consumer adoption of super-fast Internet broadband connections continues to rise sharply (see also Broadband the Bright Spot in Access Market). In one year, the proportion of people reporting at home broadband Internet access surged from 12 percent (January 2001) to 21 percent (January 2002).
The Arbitron study also examined how consumers view online ads that use streaming technology compared to banner ads. It found that the proportion of users who have clicked on a banner ad in the last month plunged from 31 percent in January 2000 to 14 percent in January 2002. When asked which they find more annoying between banner ads and audio ads on the Internet, 52 percent said banner ads are more annoying and 30 percent said audio ads are more annoying. When asked whether banner ads or video ads were more annoying, 53 percent of online Americans said banner ads were more annoying while 25 percent chose video ads.
The increasing number of Internet users interested in streaming media also represents an opportunity for hardware and software suppliers. According to a study by AccuStream iMedia Research, hardware, software, systems and applications investments made by more than 70 companies to support interactive broadcasting and streaming media will total $560 million dollars over the next two years. The AccuStream study covers interactive broadcast and streaming media market categories including datacasting, on-demand networks (on-air and online), production services, IP TV/VOD solutions providers, enhanced TV service providers, content distribution networks (CDNs), overlay networks, asset management providers, Internet and broadband audio/video, measurement and custom monitoring services and digital ad insertion.
"There are key fundamentals driving investment going forward," said AccuStream iMedia's product development director Paul Palumbo. "Despite all the market turmoil, demand for on-demand programming on-air and online represented by both audio and video file formats is growing at triple-digit rates. Wherever and whenever audiences have convenient access to quality programming, they take advantage of it."
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