Despite strong growth, the industry will struggle with profitability due to royalties.
Los Angeles, California (PRWEB) August 26, 2013
The Internet Radio Broadcasting industry grew rapidly during the past five years, as consumers increasingly turned to the internet and mobile devices as an entertainment option. The number of mobile internet connections grew at an annualized rate of 53.0% during the five-year period. “As such, internet radio's audience increased an annualized 16.5% during the same period, far outpacing traditional radios,” according to IBISWorld industry analyst David Yang. Consequently, internet radio broadcasters have taken a larger slice of advertising revenue from the $17.3-billion Radio Broadcasting industry (IBISWorld report 51311). In the five years to 2013, IBISWorld estimates industry revenue to grow an annualized 42.0% to $766.7 million, including growth of 13.0% in 2013 alone.
Internet radio has gained increased consumer acceptance during the past five years. According to research from Arbitron, a radio ratings measurement firm, the average time consumers spend with internet radio increased from 6.2 hours per week in 2008 to 11.9 hours in 2013. “Smartphones and data-enabled mobile devices have made it easier for consumers to access internet radio on the go,” says Yang. In 2010, 6.0% of cell phone owners streamed internet radio in their cars, compared with an estimated 21.0% in 2013. The rising number of internet radio users made it a more attractive advertising platform during the past five years, which bolstered advertising revenue for the Internet Radio Broadcasting industry.
Firms struggled with profitability during the past five years. Due to music royalty regulations, internet radio broadcasters often spend more than 50.0% of revenue on royalty payments. In contrast, traditional radio broadcasters spend about 10.0% of revenue on royalty. Internet radio music royalty fees are paid on a per-play basis, and royalty payments increase proportionally to the number of listeners. Industry firms unsuccessfully attempted royalty regulation reforms in 2012.
The Internet Radio Broadcasting industry is highly concentrated. In the five years to 2013, this high concentration level has been steady, and because the industry is still relatively young, Pandora will continue to dominate the marketplace as new entrants will have a difficult time attracting listeners away from well-established services. When Apple releases its iTunes Radio service in September 2013, it will likely capture market share from the established players in the industry, which also include Clear Channel Broadcasting’s iHeartRadio. Moving forward, concentration in the industry will remain high as new entrants will hesitate to enter the industry due to the inability of major players to operate profitably.
In the five years to 2018, the Internet Radio Broadcasting industry is anticipated to grow. Growth will slow, compared with the previous five years, as internet radio usage becomes more saturated. However, rising disposable income will increase the number of internet radio subscribers. Economic growth will also bolster advertising expenditure. As subscription and advertising revenue grows, IBISWorld expects industry profitability to moderately increase. Nevertheless, without music royalty reform, it will be difficult for the industry to achieve significant profit growth.
For more information, visit IBISWorld’s Internet Radio Broadcasting in the US industry report page.
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IBISWorld industry Report Key Topics
Industry operators provide internet radio broadcast, including music and other media programs. This industry only includes firms that control noninteractive internet radio platforms and generate revenue through subscription and advertising. Small independent radio channels that do not generate revenue are excluded. On-demand online music streaming services are also excluded.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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