-
Jeff Thramann & Bill Freund
August 13, 2019
Have an opinion? Add your comment below. With the growth of podcasting and the fragmentation of content, we expect a social platform to develop around shared audio as people recommend content and discuss topics and show episodes. This user-generated content will itself become high-value content a user may want to have cover commercials. Going from a one-to-many to a one-to-one content delivery capability introduces new content and business opportunities. Clip's platform is architected to optimize flexibility
-
If there's any anchor that has brought down the consumers' perception of radio over the years, it's the all-too-common complaint of "too many commercials," as lengthy stop sets prompt scores of listeners to tune out. Clip Interactive believes it has a solution that takes the SiriusXM and streamers' subscription model and offers consumers a choice - pay a fee to replace all or most of radio's commercials for content they want to hear. It's the brainchild of a former neurosurgeon, Founder/Exec. Chairman Jeff Thramann, who along with EVP/Chief Business Development Officer Bill Freund and the Clip Interactive team, will launch pilot and beta tests for their innovative service this fall. Here, Thramann and Freund discuss the development and potential of Clip Interactive.
Jeff, one would think that not many neurosurgeons leave their profession to get into entrepreneurship as an inventor. How did that come about for you?
Although it is not common, it is probably not as rare as you might think. A lot of advances in the field of medicine are driven by physicians who launch companies or join entities to enact change. I have always gravitated towards solving problems and trying to facilitate improvement. Within neurosurgery I had a number of ideas and patents focused on improving spine surgery. Ultimately, I founded a company around these ideas. The government has restrictions related to surgeons owning a private company where they can use the company's products on their patients. I essentially had to choose between medicine or building my spine company. I went the company route.
Was there a moment, a brainstorm about an invention or innovation, perhaps, that prompted you to go full-time into this field?
I was driving down the road and heard an ad on the radio about an Ice Capades event I wanted to bring my girls to. About a month later I thought about why I didn't go and realized one of the problems with radio is you hear about something of interest but then you forget. I thought it would be great to press a button on your phone and have those Ice Capades tickets show up.
After talking to a few radio advertisers and hearing how important direct attribution would be for OTA ads, I hired some engineers to see if we could build a solution. That was the beginning of the Clip journey that has kept me focused on the audio space for the past seven years. -- the same amount of time I spent in my residency program learning neurosurgery.
Bill, after years in radio sales, what promoted you to go into the digital realm with Triton?
Back in 2006 I founded Triton Digital with Neal Schore and Mike Agovino because we saw a huge opportunity for radio to expand its platform to the digital space. For the seven years I was with Triton, we became the largest and most successful streaming audio solution provider for radio. Now the digital space is growing in so many areas -- streaming, video, social, podcasts and OTT -- radio has a big opportunity to leverage its listener base and content through all these channels to grow revenue. One of the biggest opportunities for radio is to create a commercial-free on-demand radio experience for its local, exclusive content and that is what Clip is enabling for radio, to truly differentiate the experience for listeners vs. Pandora, Spotify and SiriusXM.
Could you see where the business was headed then, or have you been surprised at how the digital revolution has impacted radio?
I don't think anybody could have predicted how the digital revolution has impacted radio. We knew digital represented the future, but we didn't know how the future would unfold. We still don't. On one hand, when you look at the number of listeners tuning into radio and the share of ear compared to streaming properties, the digital revolution has had less of an impact than most people realize. On the other hand, when you look at ad dollars flowing into digital and the attribution expected by advertisers, the impact of the digital revolution has been profound.
The greatest impact, and the force that I believe will drive the bulk of changes going forward, is the unstoppable trend towards consumer choice and customization in the on-demand environment created by digital. More and more listeners are wanting to create personal audio content experiences across music, talk, sports, news and entertainment. They want to access this experience whenever they want, and many want to do it in a commercial-free environment.
Over 70 million listeners are currently subscribing to commercial-free on-demand music and content, so radio should look to lead this space by implementing the commercial-free subscription platform that Clip has developed for radio. With radio's 270 million listeners, there is a huge revenue opportunity in the subscription space for radio to increase revenue dramatically. Currently, subscription radio for these others are generating $11.5 billion each year. Radio listeners are willing to pay $12 per month to get a commercial-free radio experience and access to all their favorite local and national shows, so radio needs to truly embrace this opportunity to grow their revenues and valuations.
In a way, isn't Clip Interactive's appeal is that it's radio's antidote to other media issues such as digital ad blocking and cord-cutting for TV?
As we look at the media space in general and the audio space in particular, we look at it from the perspective of the consumer because the consumer is really all that matters. Consumers are all about content. As content options and new delivery platforms have evolved, share of ear for radio has remained remarkably resilient. This would not be possible if consumers did not desire the content radio is producing.
What is so special about radio's content? The answer is that radio is the only audio platform with a local focus. There is no other publisher that comes close to the infrastructure and capability of radio when it comes to local. Evidence of the value of local radio content to the consumer is the fact that consumers have proven they will overcome a major ad load hurdle to access the content.
The appeal of Clip Interactive is we give consumers an ad-free way to access this content and personalize the experience by supporting skipping and on-demand. We believe this is the most highly differentiated audio experience to hit the market since the me-to music players.
Please describe how it would work - for the listener and for the radio parties?
For the listener it is a simple and proven subscription model. For $12/month, consumers can listen to any AM/FM radio station through the app. They can skip content they don't want and request content on-demand. There are lower-priced tiers that allow up to four ads or eight ads.
For radio, there are two options. They can have a branded app at the station, cluster or group level with only their stations available and they also make their stations available in the aggregation app.
We understand radio's need to focus on brand and we respect their relationship with their listeners. We support that relationship by pricing our platform at a lower cost to radio for a branded solution compared to the aggregated solution. This maximizes radio's ability to drive their primary listeners to their branded solutions as they can offer a lower subscription price compared to the aggregation price.
The station aggregation app is for each station's more casual listener. Within the aggregator, we let radio continue to mine these more casual listeners to move them to their branded solutions. As opposed to all other digital aggregation platforms, we are the only one that provides an advantage for stations to drive audience to their brand instead of the aggregator.
On the branded platform, broadcasters pay us a flat monthly fee per user. They price how they want and promote how they want. In the aggregation environment, Clip pays all streaming and content costs and the net subscription pool is split 50/50 based on TSL for each station.
You mentioned that "PPM panel members are unlikely to be subscribers." Can you see a time when they would want to become subscribers? What would have to happen?
We only say that because free will never go away completely. If someone is going to go through the trouble of being a PPM member for a little extra cash, we're assuming they are probably not a great candidate for a subscription product and will remain on the free tier. We don't ever see the power of free diminishing in a significant way. Only a cultural shift would change that in my view.
Say a long commercial break on a station is replaced by songs from another similar-formatted station. Would those songs be counted by Mediabase as if it was part of the station's normal programming?
The OTA broadcast is unchanged by Clip technology so Mediabase's monitoring of airplay would not be impacted.
Are there measures in place to assure that the songs being used during those times have already been added to the station or were approved by that station's PD/MD?
The brand has full control of what gets placed during the fill, but we will have all kinds of options available for the consumers to fill if the station permits. Remember, for the first time radio is going from a one-to-many format to a hybrid that incorporates one-to-one. It is all about the consumer, so the station continues to control the content when the listener just wants to lean back and trust the programming, but the station can then cede control when the consumer prefers to interact. It is about making the listening experience as solid as possible for the consumer.
Who will be responsible for finding and inputting the non-music local content that will be made available to the stations' listeners?
There are multiple options available for content. Stations can use the extra programming time to add more depth to their current programming, fill with their owned content, create new shows like the introduction of local artists or distribute new content segments of specific interest to individual listeners. This could include things like resort-specific snow reports for skiers or audio versions of text messages the listener chooses to consume. Or radio can leave it to the AI to find the most relevant content for each user.
As the audio ecosystem continues to expand and AI platforms get better at automating the process of understanding and tagging content with metadata, audio marketplaces are beginning to form for the distribution of content. As our platform learns what a consumer likes and dislikes, the AI will get really good at scouring these marketplaces and distributing the ideal piece of content the user wants next.
With the growth of podcasting and the fragmentation of content, we expect a social platform to develop around shared audio as people recommend content and discuss topics and show episodes. This user-generated content will itself become high-value content a user may want to have cover commercials.
Going from a one-to-many to a one-to-one content delivery capability introduces new content and business opportunities. Clip's platform is architected to optimize flexibility.
If the CI consumer has the on-demand ability to dump unwanted content and use alternative content, that would seem to imply that a LOT of "alternative" content be at the ready to the consumers' whims. True? If so, who chooses all this alternative content and where/how is it accessed? Is it all stored on a cloud to be called up by the consumer? Or is that access to what the individual CI station has chosen to offer?
A lot of alternative content will need to be at the ready to optimize the listening experience. This ecosystem of readily available content is just now starting to be created. With the advent of smart speakers and voice-interface technologies, audio search coupled with artificial intelligence is required to identify, retrieve and deliver requested content. In the early days, this content will mostly be music, user-generated content, station-owned audio inventory and consumer-owned libraries. As the platform evolves, advanced search capabilities will scour audio marketplaces for content, users will follow social audio feeds that flow into the station and short-form audio segments will likely develop as a new audio format. All of this will flow into a station as the consumer desires and the station permits.
Have you heard any feedback from Radio sales, whose clients would lose a portion of the station's audience who would listen to Clip Interactive content instead of their spots? Did you offer any advice to mollify that situation?
We have not heard any feedback from sales related to this issue as of yet. Most of our discussions have been with C-level corporate executives who, for the most part, were already entertaining the idea of offering a premium subscription service when we initiated discussions. Many in the field have commented that a premium subscription offering is inevitable, although how it happens and what it looks like is up for debate. We are starting the debate and offering our view of what we think is the best solution.
With respect to radio sales, audience decline only becomes an issue once there is enough listening on the subscription platform to matter. In essence, there is only an issue if consumer demand for the product is high, so this is actually a good problem to have. Remember that there is a premium $12/month tier with no commercials, but there is also an $8/month tier with four commercials and a $4/month tier with eight commercials. These products offer a very targeted and uncluttered ad environment that supports premium CPM's along with fantastic attribution data that can be used to inform on the performance of OTA broadcast campaigns. This gives Radio sales additional premium inventory and data that can be leveraged to drive the value of standard spot.
We imagine Radio teams will explore all kinds of options if subscription success is so strong that it creates an audience problem for the broadcast. We can see Radio leveraging the opportunity to decrease OTA ad load while increasing CPM, or providing a discount on the premium CPMs across the four and eight ad-tier products to provide data on the audiences, ad types, stations and geographies that are driving the best ROI. The bottom line is this would be a great problem for Radio to have because it means they are well on their way to giving consumers a futuristic listening experience they really want. And with that success comes all kinds of opportunity for Radio to leverage OTA spot, targeting and attribution against known spot listening to optimize ROI for advertisers. We see this as a high-value problem that would prove Radio is well on its way to dominating the future of audio.
How did you get to the varied price points for levels of service?
Varied price points are common across the music players and are a natural fit for radio. Four and eight ads per hour follow some of what we see in ad-supported platforms. These numbers tested well through the initial market studies we conducted. Ultimately, we will see how the market responds and adjust according to what the data tells us is optimal.
At first glance, Clip Interactive seems like a local radio programmer-curated version of Spotify. Does that mean your rates have to be competitive, if not a better deal than Spotify?
Spotify and all the music players are essentially commoditized "me too" music players. You would be hard pressed to find a consumer that can sight one meaningful point of differentiation. For the most part, the same content is available on every platform.
Radio content is far more diverse, and it is the only audio content that is local. So, from a content perspective, there is no comparison between what radio can produce and what Spotify puts out on their platform.
Because of the value of local content, our thesis has always been that the price point should be higher for our product than the commoditized content on Spotify. The Van Westendorp pricing analysis we conducted through the Harris Poll proved out this assumption as $12/month for the premium service was the ideal price established by consumer inputs.
Another great proof point of the value of diverse content is Spotify's somewhat desperate attempt to drive non-music listening. It reminds me of Shazam's futile effort to get their users to do anything besides identify a song. I see Spotify going down the same path. They provide a point solution, which is to listen to music. Music is a commodity available across any number of platforms and access to music should be priced lower than access to more diversified, more relevant and harder to curate local audio content. Based on our Harris Poll results, consumers seem to agree.
Radio listeners, on the other hand, go to radio for all kinds of local content, music included. We are giving radio a platform to move this content consumption towards customization. Where Spotify wins today is in the customized user experience; that is it. They lose with diversity of content. They lose with local content. They don't differentiate with music. All they have is a technology advantage and that is only with customization.
It is far easier for radio to solve the customization problem on our platform than it is for Spotify to solve their content problem and single-point solution problem. We see this as the huge opportunity for radio. The premium subscription product we are bringing to market is hands down the most differentiated audio experience to arrive since the slew of "me-too" music players came to be over the past decade.
How long do you use the Beta version before you decide if it's a go or that tweaks need to be made?
The alpha pilot for the aggregation app will run for one to two months and be limited to one station and about 1,000 users. This will begin in October.
The beta could start in November, but we are sensitive to the holiday period, so we will likely move the beta launch to January. It will run for two months in one market, ideally with all broadcasters in that market participating. Full commercial launch will follow.
These are pilot launches and the timelines can easily shift depending on what we learn. We have a ton of experience delivering top-tier technology solutions to consumers, so we are not expecting any major surprises.
In addition to the alpha and beta trials for the aggregation platform, we expect to partner directly with groups to run alpha and beta trials for branded solutions within their existing app environments. We expect the timelines for these trials to parallel the aggregation app trials.
Obviously, you're pitching this to radio as we speak. Have you made plans for marketing campaigns to the public for CI stations? If so, how do you plan on promoting it?
We are expecting radio promotion to be the main avenue for marketing, especially for the branded solutions. We will also be targeting SiriusXM listeners and music streamers through digital campaigns because our marketing studies show a commercial-free radio product will pull a greater percentage of subscribers from SiriusXM and other streaming properties than from radio itself.
New platforms like this (as seen with Pandora, Spotify, etc.) can take a long time to turn a profit. Are you at all concerned about having enough funding to give this all the time it needs to do so?
No. First off, the margins for this product are significantly better than the music players because there are no content costs for radio's non-music content. This is another reason Spotify is aggressively pursuing non-music content.
Second, once we demonstrate users want the product, it repositions radio within the modern audio ecosystem. Suddenly, the largest producer of audio content on the planet is back on offense and well positioned within the new on-demand audio environment, while simultaneously continuing to dominate the free ad-supported audio market with the only profitable model. I expect these dynamics will be quickly recognized by investors and the huge opportunity inherent in recurrent subscription revenue for broadcast radio will virtually guarantee the availability of continued financing if needed.
I realize you're knee-deep in getting this off the ground, but have you also given any thought to what needs to come next ... and how you plan on being involved in that?
We have thought a lot about what comes next and our technology is architected to move towards that vision. It is really about a vision we call AudioXplore, where consumers engage trusted curators of audio content while retaining customization through skips and on-demand. Our AI for Audio platform is built to enable a future where all audio content can be consumed in a customized stream, whether the content is the local content of radio, the long tail of podcasting, user-generated social content or a new category of shareable short-form audio. We expect local content to maintain its value and we expect the radio brands of today to evolve into being the quarterbacks that guide consumers through the audio clutter of the future.
Our commercial-free radio product lays the groundwork by focusing on customized content only for the 16 minutes allocated to commercials each hour. It just so happens that this first application creates an opportunity to bring a tremendous amount of new revenue to radio. So, we provide the lure of immediate new revenue and a path towards dominating the future of audio all in one technology platform.
As I have said over and over, it is all about the consumer and the consumer is all about content and customization. As radio repositions itself technologically to offer premium services and generate recurrent revenue, radio will be able to dramatically increase investment in content.
Where's the next fertile ground for innovation in radio?
As radio gains expertise in customizing the audio experience for their listeners, there is an incredible opportunity for radio to help brands learn how to leverage audio to have high-value communications with their customers. Communications where brand content transcends from a commercial interruption to a sought-out piece of valuable content because it solves a real need for a consumer.
I don't want to give away too much of what Clip is doing in this area as it is premature, but brands are looking to figure out the audio world beyond the standard spot. The Clip platform introduces a new opportunity for brands and radio stands to benefit significantly if they secure a central role in the delivery of customized audio content.
We refer to this as distributed radio and think it is the next area of innovation for radio, both across the ad-supported free tier and the subscription supported premium tier.
-
-