February 12, 2013
Few people have their fingers on the pulse of the music-buying and listening public than Russ Crupnick of the NPD Group. Overseeing a regular series of research projects that monitor how American consume their music, as well as where and when they consume it, Crupnick and NPD offer the industry realistic snapshots of where this business is and where it looks to be going.
Why did you leave Nielsen to join NPD?
That was a long time ago. I actually worked at NPD earlier in my career, when I got out of college. I was young and gained a lot of respect for the NPD management and their direction. The first time I was there, my focus was account management. When I returned, I ran NPD's new business development function, which was a big change. The idea of building new things was very compelling at that point.
How did you segue into your current role?
It sort of evolved. I started our entertainment practice around 2000. As you can imagine, when you're in a pretty entrepreneurial situation, you always look for new ventures. We were a small team, developing music products first and video products later, and we wore many hats -- GM, sales, and research analysts. Then the media started calling us, asking about trends in music. In the early 2000s, between file sharing, declining CD sales and emerging digital models, there was an awful lot of interest in music. So in addition to general management and business development, I took on additional duties as an entertainment industry analyst, and I eventually moved into doing that full-time. It's been an evolution.
What kinds of parties are interested in your work today, and what kind of things do you offer them?
We do not name the specific clients we work with, but I can say we work with everyone from the record labels to various trade associations to tech companies, as well as some radio groups. It's a pretty diverse client base. What we offer really depends on what the client wants. NPD has significant databases and expertise that helps to understand what consumers are doing and thinking with regards to entertainment. We have clients who simply take all of our databases internally to do lot of their own analyses. We also have clients that have a particular problem, and want us to research the best ways to solve it. So we can do everything from provide data for large, complex engagements to very issue-specific engagements.
A NPD study released last November found, among other things, that terrestrial radio's audience slightly eroding, while Net radio's listenership was significantly up. In general, how should one respond to such data?
Remember, we take things from a music perspective. Despite all of the emerging listen models in music, radio -- traditional, terrestrial radio -- is by far the most ubiquitous form of music listening. It's very powerful in terms of audience reach ... and that power has continued over some time. The other important factor to keep in mind is if you ask people where they first learn about new music, far and away it's still traditional radio. In many ways, it continues to be the engine of the music industry. Even for young kids on Facebook, Twitter and YouTube, radio is still the most important way for them to discover new music.
The interesting thing about entertainment is that people are living in so many parallel universes. What I mean by that is you have established forms of engagement along with emerging platforms. In music it's listening in AM/FM radio and CD radio along with using Pandora, Spotify or YouTube. In gaming, core gamers still use their consoles while using their phone for lighter games.
Often, though, a lot of the media tends to latch on to the new things and dismiss the old or existing things. That's a real mistake, because most consumers haven't made that transition quite yet.
Are their demographic differences in that study's conclusions? For instance, are younger listeners abandoning terrestrial radio more than older listeners? Are there ethnic differences as well?
It depends on the media. What intrigues me is that in general, the listenership for Internet radio is democratic. What I mean by that is when so many things that come out, the initial appeal is to the "early adapter audience" - usually young males. The thing about Net radio is that it has attracted a very democratic audience quite early. Listening to it are relatively equal amounts of teens, college-aged, Gen X and Ys, and baby boomers. Of all the new technologies I've looked at -- file sharing, YouTube videos, iTunes - what's fascinating about Net radio is that it very rapidly went from a profile consisting of early adopters to attracting more mainstream listeners.
On-demand radio such as Spotify and Pandora, as well as YouTube, is a little different in that they do get a younger audience. Part of the reason for that is their audience usually has more time to invest in building playlists, and like to sit with friends to look at music videos.
When, if at all, do you expect Net radio and music streaming services to rival, let alone pass AM/FM radio and CD sales?
We're not quite there yet. I suspect it's coming in perhaps three stages. What we experienced over the last couple years was a real growth spurt. You get the early folks to use the services -- rapid device penetration -- all the things that drive adoption. Content doesn't hurt either; for example Adele spurs listening among older consumers, while Taylor Swift and others keep kids engaged. At some point, maybe in the next year or two, because you already have such high levels of usage, the business may grow more slowly -- that's stage two. But at some point, you'll move to that last stage when you have hyper-mass adoption.
I think about this from a music listening standpoint. In essence, the main use of AM/FM radio and CD listening is that they're done in cars. They're still the consumers' choice in automobiles. The next real growth will come when a critical mass of cars on the road have Pandora, Spotify or whatever service people want pre-installed. Once you can get beyond people plugging in wires, adapters and so on to get that alternate experience, that's when things go to mass adoption. When that actually happens ... I think we're talking about three to five years.
So if you're an AM/FM radio operator, how should you respond to such a trend?
Personally I love what Clear Channel is doing in terms of iHeartradio. I love the idea that I can listen to an Austin station or a Nashville station, or a station in Detroit, no matter where I am in the country. I love the fact that they're increasingly starting to build features similar to the features from the other services. Then there's the challenge of being mobile. Pandora did a wonderful job using their leverage to get on the iPhone platform in 2008.
But the biggest challenge for radio is building multi-platform awareness. We still see a major deficit of people who are aware of the available services. They know what Pandora is; the younger listeners know what Spotify is. The real mission for radio is to make people aware of some of its great alternatives out there ... things that could be complementary to the main radio signal. Remember, nobody listens to just to one station or platform. The challenge is to make more people aware of you on all those different platforms.
I know radio is doing some of that done through social networking and media, but that's not what people use social media for; they mainly use it to share pictures and family experiences. From a marketing perspective, radio should be thinking about how to get their full service out to more mass markets.
How often should studies like this be done to illustrate the pace of change?
At NPD we do a variety of studies on an ongoing basis. The one you cite from November, we do twice a year. This includes monitoring music behaviors and device usage, among other things, but we also do a large annual overview of the whole state of the music industry that looks at buying, sharing, listening, devices, and the role of factors such as music discovery and social media- very comprehensive.
Perhaps one of my favorite studies is a semi-annual survey on the entire entertainment landscape -- all the activities consumers partake in, from music to movies, games and television. One of the really big things the music industry today needs to realize is that consumers have so many choices and distractions - mobile, games, different technological devices, social media, Netflix, 300 cable channels - it's imperative to look at what the total landscape looks like. Where does music and music listening fit in to that whole ecosystem?
Recently, you posted a "2013 Year In Review" column, where you predicted music trends. The overriding one is that 2013 will be the year of the device instead of content. In that light, would it be appropriate for the radio and music industry to focus their sights on smartphone listening?
Let me put it this way: A year from now, I think we'll look back at the start of the year and realize 2013 became the year of the device, when we realized, among other things, just how many people started or continued to use music on smartphones and tablets. That keeps me up at night; the whole thing about music today is that customers can access it in everything from a video game to YouTube and Facebook; I think it's wonderful that so many new devices keep consumers engaged with music, but it's a bit chaotic as well.
Will streaming services grow in popularity to rival terrestrial radio in the near future?
If the near future is 12-24 months, probably not, but you have to define popularity. It's not linear. I'm passionate about Pandora and MOG, but I'm equally passionate about sports on WFAN in New York. If we're defining popularity as "music listeners," no, not compared to AM/FM radio, but it has a good chance of topping CD listening this year. People are always surprised to find out that the second-most-popular way of listening to music is CDs; a lot of that is due to having CD players in cars. This could be the year where you start to see streaming and CD listening compete for that second position.
The conundrum seems to be the facts that streaming services such as Spotify are still losing boatloads of money, while at the same time the artists are complaining that they're barely making pocket change from streaming service royalties. If no one's making money off it, how can these services survive?
Look, I'm not an attorney, I don't represent artists and I don't have a seat at the royalty rate setting board, but I do a lot of research. At some point, the industry - and by that I mean all of the parties - has to sit down and figure out a way to make this work. There has to be a way to adequately pay the artists, while making Pandora, Spotify and iHeart profit centers.
To his credit, Bob Pittman made some outreaches to the labels and has done some revenue sharing deals that could make this work - because sooner or later, the CD will go away and we're going to see a maturity in iTunes sales. As it is, the majority of consumers in the U.S. don't pay for downloads from iTunes or anywhere else.
At some point, there has to be something left for radio. Maybe I'm being a bit dramatic, but the reality is if they don't figure this out -- how to set rates and licensing that compensates the artists and makes the companies and publishers a fair profit - they're looking at a very dismal long-term perspective. I would argue, just as a researcher, that the time is really now to start doing that.
That 2013 overview predicted the demise of CDs. Will it go the way of 8-tracks, or will it find its own niche, much like vinyl is nowadays?
It will always be around in some form. In my lifetime, we'll always be able to buy CDs. The difference is just what you're going to get when you walk into a retailer. It's going to be not unlike what you see in vinyl today - a lot of special editions, box sets, bonus things. It'll probably cost a lot more, but CDs will be geared towards super-fans of the artist. Mr. and Mrs. Mainstreet won't be buying individual CDs at Wal-mart and Best Buy in the long term. This isn't going to happen tomorrow, but I wouldn't be surprised that in three to five years, CD retail will become more of a collectible and fan format as opposed to a mainstream format. The economics of production and distribution are bad enough today; it won't get any better.
Your studies and 2103 overview both omit the presence of HD radio. Why is that?
We don't really study it. I will say to you that I have a premium stereo system in my car and that has HD in it. I sort of pay attention to these things, but I still don't understand what it is ... that's just a sample of one.
Your overview also predicts that this will be the last season of "American Idol." That's a pretty bold statement for what's still a top-10 show.
Obviously, I wrote that more as a predictor of trends, not as a guarantee. Just look at what happened last weekend, when Beyonce did the Super Bowl halftime show. Within one day, her sales go way up. At the same time, we're seeing ratings for "Idol" continue to diminish. One of the reasons for that is that it has been on a long time; the format is getting old.
The format needs to do something new. What I would love to see - and I keep thinking that it ages me to say this -- is more in line with the old-time variety shows. Unlike today's shows, where you're often looking at contestants who have questionable talent, the variety shows I'm thinking about would have Beyonce, Bieber, Taylor Swift and Adele ... a variety of established stars all on the same show.
Music really needs TV. For a lot of people, TV is a very important source for music discovery. The "Idol" amateur contestant-type shows are running their course, so what's going to replace them? Why shouldn't we be seeing the really top talent in our industry ... who better to promote music than your true stars?
It kinda sounds something like a prime-time "American Bandstand" of superstars...
I'm not really talking about kids; they have YouTube, VEVO, Fuse and MTV for that. I wonder if there's any room for an update of the '70s-style variety show; I'm thinking about the old Andy Williams and Sonny & Cher shows ... combining proven music talent with the occasional emerging artist. Even an Ed Sullivan format, where you could mix music stars with a Louie CK. Again, I'm clearly not a TV producer and I realize that "Idol" has been so important to the music industry, but there's no doubt it has been losing its luster. So what's next?