Today's issue features the second segment of our RAIN Las Vegas Summit recap, here. (Our first recap piece was in Friday's RAIN, here.) Don't forget, if you'd like to get a first-hand look at the Summit, you can watch streaming video of the speakers and panels at TV Worldwide. xx

From a column written by Skip Pizzi for Radio World Online:
"Many of the competitive concerns on broadcasters' minds today involve fear of satellite radio's further incursion into a marketplace formerly held exclusively by terrestrial AM and FM stations.

"It's easy to downplay the similar threat from Internet radio, because it seems like such a different animal... given its predominant usage on computers today -- whereas satellite radio lives primarily on a multiband (AM-FM-satellite) receiver; so its directly competitive nature to traditional radio is overt and in plain sight. Further, satellite radio is actively stealing talent and other content (such as major league sports), and even some advertising dollars, from terrestrial radio.

"In its stealthy way, however, Internet radio continues to pose a threat, which ultimately could deal an even more damaging blow to the prospects of terrestrial radio in a digital world. Yet if properly managed by broadcasters, Internet radio can become an ally.


Internet radio advantages over satellite, HD
"One of Internet radio's biggest advantages over satellite radio is the lack of a requirement for any new hardware purchases by consumers. Internet radio leverages the world's existing personal computers, and... the rapidly growing worldwide broadband penetration has greatly increased the value of Internet radio. Most Internet radio services also do not require a subscription, making them far more accessible for sampling (and ultimately more palatable) to traditional radio listeners...

"When it comes to satellite or HD Radio, consumers need to buy new equipment from scratch, and there are a lot more computers in use that can hear Internet radio today than there are satellite or HD receivers... By such 'availability' analysis, it's clear that Internet radio is in the strong second position, with satellite radio lagging behind. For now at least, HD Radio isn't even on the chart yet...

"Notwithstanding the point just made regarding Internet radio's leveraging of existing hardware, there is continuing, slow growth among devices that serve as 'Internet radios.' Many of these double as MP3 players, either as audio-only nodes of a home media network... or as standalone WiFi radios...

"What's really different about today's latest models is their broadband, and particularly, their wireless capabilities, bringing them ever closer to duplicating real radio's functionality. It's conceivable that the  differences between regular terrestrial broadcast radios and Internet radio appliances will continue to dwindle until they are negligible, and most listeners don't even notice the difference. The coming of WiMax and Mobile WiMax service may speed this transition...

"Again in sharp contrast to satellite -- or even terrestrial -- radio, the Internet is a wide-open marketplace, allowing many operators and types of services to co-exist...

"An important component of all of these approaches is the incremental growth opportunity they afford to their providers. Internet broadcasters and content aggregators can build their online radio services gradually, adapting to fast-changing audience needs and trends, and adjusting business models accordingly. Therefore growth or tweaks of an operator's online offerings can occur continuously...

"This high degree of flexibility and scalability may become the greatest advantage of Internet radio, and could ultimately bring it to a dominant position in the digital media game...


Internet radio is still open to broadcasters
"The good news for terrestrial broadcasters is that they can easily hedge their bets and get into the online services game alongside Internet-only providers, while using their on-air signals for cross-promotion of any Internet radio channels they choose to offer. (Of course, the Internet-only providers do not have the inverse option.)

"As Internet radio's star rises, it naturally thwarts satellite radio's growth. Thus by joining the Internet radio party, terrestrial broadcasters may indirectly keep the competitive forces of the Death Star at bay...

"Thus local radio should explore the ever-expanding Internet radio environment. If its success continues, terrestrial radio broadcasters could share its wealth, and protect their businesses' future stability in the bargain."

Read this entire column by Skip Pizzi in Radio World Online here.

BY PAUL MALONEY
The Music Genome Project was the successful result of a venture-capital-funded six-year effort to build a human taxonomy of music: 400,000-plus songs categorized by 400 different individual characteristics by a team of professional musicians. Tim Westergren now needed to give the project a reason to exist.

After a few false starts with business models that proved unviable, Westergren and team founded Pandora, the customizable online music streaming service.

Introduced by RAIN publisher Kurt Hanson as the founder of the service with the most visibility and "general-all-around-coolness in 2006," Pandora's Westergren [pictured] related the history of the service, and explained its goals, in his keynote speech at last week's RAIN Las Vegas Summit.


Finding the 'need' the Music Genome met
How many songs was that again?

"400-thousand songs," Westergren revealed in answer to a question. A "completely ridiculous" undertaking -- but one that now had a purpose.

In March, 2004, Westergren and his team believed they had found the proper consumer application for the Music Genome. Armed with a new round of financing, by the midpoint of that year the team began developing the online streaming service, and Pandora officially launched in November, 2005.

"We thought, 'We could do something a little differently,' Westergren said. "Radio was adding the 'connected' (element), and PCs and devices were becoming the new radio. There's something that we could do very different here in terms of personalizing that experience," that leveraged the Music Genome Project."

Westergren explained that the first goal of Pandora would be a service that would bridge the gap between instant-access "programmed" online channels, and time-consuming but personalizable "build-your-own-playlist" on-demand services -- an "instant, on-target" listening experience.


"Thanks for reminding me
that I love music so much"
A musician himself with considerable experience on the "famine" side of the "feast-or-famine" reality of the modern music industry, Westergren was especially sensitive to the breach he perceived between artists and music lovers that had become disconnected to music. Thus, another goal for Pandora was to enable "music discovery," which he called "the single most important factor for an enduring love affair with music.

"There's this enormous group of people... 22 (years old) and up... who have not lost their love of music, but they're not buying new music." These music-starved listeners "with disposable income and cool new gadgets to listen to" hadn't lost their passion, but their connection, to new music.

User feedback Westergren presented shows Pandora is meeting this need in spades. An internal survey indicates that 35% of registered users are now buying more music as a result of their Pandora use (Pandora partners with Amazon and the iTunes Music Store). One e-mail Westergren received succinctly put it as, "Thanks for reminding me that I love music so much."

"There's a 'sea of great music' that never sees the light of day," outside of the 2-3% of artists that drive music industry sales. Westergren characterized this as a "huge loss of a revenue opportunity;" the inefficiencies of the music business making it a "$100-billion industry in $10-billion clothes. It's not my term, but I use it all the time: I think we can create a 'musicians' middle class'" where quality artists could make a decent living at it without the need to reach superstar status.

In response to an audience question, Westergren revealed that about 70% of the music Pandora now plays comes from "unsigned" independent artists (though it receives major label service). "We have a team of people working full-time" to listen to and find quality, indie music," he explained.


Build a quality service,
and users will handle the marketing
Pandora's growth to a cumulative 1.8 million registered users (ages teens to 70s, with about 40% in the 22-36 demo; 60/40 male/female, but "moving towards" 50/50), according to Westergren, has been entirely driven by word-of-mouth. Upward of 14,000 blogs have written about the service, providing the most powerful marketing Pandora has enjoyed. Positive user reviews on sites like SlashDot.org and Digg.com have also driven use.

But what about the great mainstream press reviews, like in the Chicago Tribune and Canada's The Globe and Mail?

"Those really didn't move the needle in terms of growth of our service," Westergren explained. "One thing we've learned: Print press really pales in comparison to the power of the online community."

But to enjoy the "no-cost" benefits of word-of-mouth marketing, Westergren says you need to rely on people enjoying the real benefits and quality of your product.

"The online community is not something you can 'market to.' You put your service out there, you do as good a job as you can with it, and you hope they fall in love with it, but you really have no control over this."

Look for more recaps of the panels and speeches from the RAIN Summit in the coming days in RAIN.