Study: Streaming Media Subs, Ads Could Pay Off

By Ryan Naraine

Even as the jury continues to deliberate the ups-and-downs of the paid-subscription model for Web-based audio, a new audience measurement survey is painting a rosy picture of the sector, suggesting that a lucrative market is ripe for the picking.

A joint study released Tuesday by Arbitron Inc. and Edison Media Research said approximately nine million consumers would be willing to pay a small fee to listen their favorite audio channel.

The findings are based on a survey last month consisting of 2,508 telephone interviews with a randomly selected national sample of Arbitron’s Fall 2001 radio diary keepers. Arbitron’s numbers are widely recognized as the standard in the radio industry.

Even as it brought sweet music to the ears of streaming media firms, the findings of the study — titled “Internet 8: Advertising vs. Subscription – Which Streaming Model Will Win?” — confirmed the sad state of and consumer apathy toward the aging banner ad format. “The proportion of those who have clicked on a banner ad in the last month plunged from 31 percent in January 2000 to 14 percent in January 2002,” it said.

“In addition, many consumers said that banner ads are more annoying than online audio or video ads. When asked which they find more annoying between banner ads and audio ads on the Internet, more than half (52 percent) of online Americans said banner ads are more annoying and less than one-third (30 percent) said audio ads are more annoying.”

When asked whether banner ads or video ads were more annoying, more than half (53 percent) of U.S. Web users said banner ads were more annoying, while only a quarter chose video ads, according to the study.

On a conference call with journalists, Arbitron Webcast Services VP and general manager Bill Rose spent the time explaining consumers’ willingness to pony up a subscription to listen to audio online.

“This study presents important evidence about willingness of consumers to pay a subscription fee for streaming content,” Rose said, noting that four out of every 10 audio streaming fans, or ‘streamies,’ said they would pay a small fee for commercial-free content or content they can’t find anywhere else.

He suggested Webcasting firms adopt the HBO cable television model of offering subscription-based exclusive, high-quality, commercial-free content. “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.”

Edison Media Research president Larry Rosin, who co-hosted the call with Rose, said the streaming media business should be excited about the record growth of consumer interest. “The streaming media business sector has experienced growing pains in recent months, and it is facing new controversies regarding digital rights fees. Despite these issues, consumers continue to use streaming media in record numbers,” Rosin said.

The study, the eighth in a series between the two audience measurement firms, also showed growth in the regular use of online audio and video. It found that 40 million Americans (17 percent) listened to audio or watched video during a typical month, up from 13 percent a year ago. Overall, Arbitron and Edison’s research found that 80 million Americans over the age of 12 (35 percent) have accessed streaming audio or video online.

“Just two years ago, less than a quarter (24 percent) of Americans had ever listened or watched online. Therefore, Webcasters with the most compelling content and strongest brands should maintain their streaming efforts because they will be most capable of weathering the short-term obstacles and be best positioned for success when the market matures.”

Even as negative publicity has wracked the broadband sector, the survey found that consumer adoption of high-speed Internet connections continued to rise sharply.

In one year, the proportion of people reporting at-home broadband Internet access surged from 12 percent (January 2001) to 21 percent (January 2002).

“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,” it added.

Among other things, the study found that:

* Sixty-seven percent of African-Americans had Internet access in January 2002, compared to 51 percent in January 2001, effectively showing a narrowing of the digital divide. During the same period last year, the percentage of Hispanics with Internet access rose from 43 percent to 57 percent.

* Online shoppers among Americans have tripled over the last three years, jumping from 13 percent in January 1999 to 40 percent this January. It found that more than one in five Americans have made online buying a regular habit and more than 22 percent reported making an online purchase in the past month, an increase of 39 percent since last January 2001.

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