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

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

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

“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

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

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