Media Review: Music Streaming Services Market Profile

Transcription

1 Media Review: Music Streaming Services Market Profile May Larimer Street Suite 640 Denver, Colorado

2 Research Objectives Music Streaming Market Profile Develop a volumetric profile (e.g., number of users, actual spend) of the US music streaming services market opportunity Determine the current share of wallet held by each of the major music streaming service providers and forecast how these shares are likely to shift through the end of 2015 Profile the factors determining success and failure in the music streaming services market and the strengths and weaknesses of each player in fulfilling these market drivers Profile the price elasticity of music streaming services Develop segment specific views of these data for the four major age cohorts composing the US market (e.g., silent generation, baby boomers, generation x and millennials) 2

3 Methodology A random cross-section of 1,010 US consumers* was recruited to participate in a twenty (20) minute on-line survey exploring their music listening habits and music channel utilization and preferences. A what did you do yesterday sampling approach was used to capture music listening activities and use of alternative music delivery channels. This previous day time frame was used to provide to minimize potential recall related reporting errors. Respondents were recruited using a sampling protocol that produced a sample evenly balanced across all seven days of the week. The rolled up view of these individual daily music consumption profiles provides the foundation of our volumetric market estimates. Spending behavior was captured using a last month frame of reference. Results of the 1,010 interviews are subject to a 95% confidence interval of +/- 3%. *Sampling frame limited to those with Internet/Web access & an active account. 3

4 Definition of Terms Channels Satellite Radio: radio service broadcast from satellites primarily to cars or other dedicated devices. The U.S. satellite radio industry is now a single company, SiriusXM. Digital music: refers to technology that records, stores, and reproduces sound by encoding an audio signal in digital form instead of analog form. Physical Music: CDs/LPs/Tapes YouTube/Vevo: non-subscription ondemand video sharing website launched in (Vevo: music focused videos, launched in 2009) TV Music Channels: television programming focused on playing music or music videos, usually on dedicated television channels broadcasting on satellite or cable as part of a subscription. Streaming: is music that plays from an online source. The music may be played on a downloaded player on a compatible device or on a player embedded in the website from which it is streamed. Streaming Sources Google Play Grooveshark iheartradio itunes radio Pandora Rdio Rhapsody Slacker Spotify TuneIn 4

5 Sample Profile Data was weighted to align the research sample with the age and gender composition of the US as of 2013 Gender (n=1010) 100% 90% 80% 70% Age Cohort (n=1010) 28% Millennial s: % 53% Female Male 60% 50% 40% 34% Generatio n X: % 20% 10% 0% 28% 10% Baby Boomers: S2. Please indicate your gender. S3. And what is your age? 5

6 Executive Summary Despite recent year-over-year listener growth, streaming services ranks fourth out of six essential channels in frequency of use or share of ear. About two-in-three US consumers (67%) listen to the first-ranked channel, traditional AM/FM radio, on a daily basis, while only about one-in-three (31%) listen daily to streaming services. Advertisers should take these figures into account when making their media buys. Barring further innovation that allows for greater customization and/or expanded use scenarios, listener growth for streaming services will likely slow in the coming year. The vast majority of US consumers (96%) are aware of streaming services and many have already made up their minds about whether to use one or more of them. About one-in-four consumers (28%) have considered but never used a service, meaning they re looking for an attractive come-on or a different type of experience. Customization is the key to attracting listeners. The most influential factor in the choice of a streaming service is the degree of customization it offers. The term customization here means the ability to configure playlists, to skip disliked songs and to listen to and/or download a wide range of music. Single track digital music represents the ideal in this regard and the closer streaming services can approach it, the better their market performance. So-called hybrid services like itunes Radio and Google Play that combine personally selected digital music with streaming options have a clear advantage here. 6

7 Executive Summary Ease-of-use is a threshold factor at this point in the market s evolution. In the early days of a market, motivated consumers are often willing to put up with usability issues in order to realize the benefits of superior functionality. That time has passed for the streaming services market. Consumers will no longer tolerate poorly designed interfaces or unreliable features. There are simply too many acceptable alternatives now. Mobility is a critical going-forward factor in the adoption of streaming services. Consumers want the convenience of listening to streaming services anytime, anywhere. Most, however, are limited by the current technology, e.g, few have car stereo systems that can accommodate a smartphone or MP3 connection. Services that break down these barriers will substantially improve their competitive position, in part, by converting consumers who have tried and dropped streaming services and by converting new-to-the-market consumers who remain beholden to traditional radio and other situation-specific channels. 7

8 Executive Summary Pandora s rank as the leading provider of streaming services is in jeopardy. There are two main factors working against Pandora s continued market leadership: While awareness of streaming services as a whole is nearly universal, awareness of specific services is relatively low. So far, Pandora has benefited disproportionately from this phenomenon. Awareness of Pandora stands at 88% of US consumers a level rivaled only by itunes Radio at 87%. Its next closest competitor in this regard iheartradio is familiar to 73% of the potential market. Awareness declines from there, with the least known service Rdio at only 30%. But as the market approaches saturation and competition heats up, awareness of Pandora s competitors will invariably rise, leading to an erosion of its market position. Increased competition as growth levels out and the market tightens. Three competitors itunes Radio, Spotify and Grooveshark are poised to challenge Pandora. itunes Radio has made tremendous gains since its launch in September of last year. About 15% of US consumers report using it putting it in the same league as iheartradio and Spotify over a much shorter period. The main driver of this service s appeal is the ability to customize playlists using a combination of personally owned itunes tracks and streamed music keyed to similar songs. Spotify and Grooveshark offer more traditional, but nonetheless appealing alternatives to Pandora based largely on their customization options. 8

9 Executive Summary Streaming services can increase prices and ad exposure incrementally without fear of significant losses in audience. Price and exposure to advertising exert the least influence on the choice of a streaming service. This is likely a function of the current marketplace in which most streaming services are roughly comparable along these dimensions. But unless service configurations change dramatically, incremental increases in price and ad exposure would be tolerated by most users. News and sports represent new content opportunities for streaming services. There s substantial overlap among consumers of music, news and sports. Music-only services could see a significant bump in audience numbers if they incorporate news and sports into their offerings. 9

10 US Consumer Music Consumption Profile 10

11 Device incidence US consumers are using more than sixteen different types of devices to access music and other audio content Car stereo Radio Laptop computer High definition TV Desktop computer Landline telephone Music TV channels Tablet/Reader Gaming console MP3 music player Android mobile phone iphone Feature phone (non- Streaming device Other smartphone 3D TV Other Device Incidence (n=1010) 68% 68% 67% 65% 61% 50% 45% 39% 37% 37% 30% 26% 21% 13% 7% 7% 4% 0% 50% 100% Q1: Which of the following do you currently have? 11

12 Audio category by device Music accounts for approximately two thirds of the total time spent listening to audio content in the US, with 97% of consumers listening to music daily Incidence of Listening to [ ] Yesterday Share of Time Spent Listening Music 97% News/weather/traffic/tal 64% Sports events/sports 29% 0% 50% 100% Average Number of Hours Spent Listening to [ ] Yesterday Music % 11% 25% Listening to sports events/sports commentary Listening to news/weather/traf fic/talk radio News/weather/traffic/talk radio Sports events/sports commentary Q2. How many hours did you spend listening to each of the following audio categories 12

13 Audio category by device The car stereo is the most commonly used device for accessing music in the US; news and sports listeners rely primarily on radio Car stereo Desktop computer Laptop computer Music TV channels MP3 music player Android mobile Tablet/Reader Gaming console Streaming device Other smartphone Percent of Time Listening to [ ] Using the Following Devices Yesterday Radio iphone 0% 2% 3% 1% 1% 1% 1% 1% 2% 1% 1% 1% 4% 4% 4% 3% 4% 6% 7% 6% 6% 6% 6% 8% 10% 10% 12% 10% 10% 13% 23% 23% 27% 27% 0% 5% 10% 15% 20% 25% 30% 35% 28% 32% Music (n=979) News/weather/traffic/talk radio (n=646) Sports events/sports commentary (n=289) Q3. Approximately what percentage of your time did you listen to the [ ] audio category using each of the following on [target day/a typical day]? 13

14 Audio Consumption Profile 14

15 Most Preferred Audio Genres Genre preferences are extremely fragmented with the most popular audio genres falling into traditional categories rock, oldies, country and pop Rock Oldies Country Pop Easy Listening Alternative Classical R&B Hip Hop Christian & Gospel Blues Metal Love Songs Jazz Dance Other Comedy Songwriters/Folk Reggae Decades New Age Electronic Indie Family World Latin Workout Top Three Audio Genres Preferred* 2% 3% 3% 3% 3%4%5% 1% 2% 2%2% 6% 7%7% 31% 33% 40% 14% 15% 15% 19% 30% 14% 8% 8% 8% 13% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q5. Please select the three audio genres you prefer most 15

16 Where Audio Category was Listened to Most music consumption takes place outside the home, particularly in cars 100% 90% Percent of Time Listening to [ ] at the Following Locations 80% 70% 45% 48% 49% 60% 50% Home Car 40% 30% 20% 10% 0% Music (n=979) 39% 40% 31% 11% 10% 7% 4% 3% 8% 1% 1% 2% News/weather/traffic/talk radio (n=646) Sports events/sports commentary (n=289) Work Gym/Outside sporting activity Other Q4. What percentage of your time did you listen to [ ] at the following locations on [target day/a typical day]? 16

17 Audio Channel/Source Utilization Used yesterday provides insight into the frequency with which each of these channels is used; none of the channels have more than half of the share of ear * held by traditional radio Traditional AM/FM radio Channel/Source Currently Used (n=1010) 67% 84% YouTube/Vevo & TV Music Ch. 36% 69% CDs/LPs/Tapes 19% 60% Streaming 31% 54% Currently use Used Yesterday Digital music Satellite 17% 19% 11% 41% 0% 20% 40% 60% 80% 100% *Share of ear represents the portion of total listening time using a device or channel Q6. What is your level of familiarity with the following audio channels and sources? Q6B. Which of the following audio channels and sources did you listen to on [target day/a typical day]? 17

18 Audio Channel/Source Utilization Pandora currently holds a clear advantage in terms of its share of ear over all other streaming competitors Pandora iheartradio itunes radio Spotify Google Play Rhapsody TuneIn Slacker Grooveshark Rdio Channel/Source Currently Used (n=1010) 5% 5% 5% 3% 5% 2% 5% 2% 4% 1% 4% 2% 3% 1% 10% 16% 15% 15% 14% 34% 0% 10% 20% 30% 40% Currently use Used Yesterday Q6. What is your level of familiarity with the following audio channels and sources? Q6B. Which of the following audio channels and sources did you listen to on a typical day? 18

19 Audio Channel/Source Awareness & Experience 96% of US consumers report awareness of streaming services Channel/Source Awareness and Utilization (n=1010) Traditional AM/FM radio 84% 16% Currently use YouTube/Vevo & TV Music Ch. 69% 14% 13% 4% Have used in the past but no longer CDs/LPs/Tapes 60% 24% 16% Have considered but never used Never heard of Streaming 54% 14% 28% 4% Digital music 41% 15% 44% Satellite (SiriusXM) 19% 23% 53% 5% 0% 20% 40% 60% 80% 100% Q6. What is your level of familiarity with the following audio channels and sources? 19

20 Audio Channel/Source Awareness & Experience Pandora currently benefits from a relatively low level of awareness of its competitors; this position will be subject to ever-increasing competition as brand awareness grows Pandora iheartradio itunes radio Spotify Google Play Rhapsody TuneIn Slacker Grooveshark Rdio 14% 10% 8% 5% 15% 15% 5% 5% 4% 9% 4% 8% Channel/Source Awareness and Utilization 34% 17% 12% 12% 10% 24% 21% 3 6% 20% 27% 15% 42% 46% 46% 49% 59% (n=1010) 38% 66% 67% 70% 59% 27% 34% 35% 29% 12% 13% 0% 50% 100% Currently use Have used in the past but no longer Have considered but never used Never heard of Q6. What is your level of familiarity with the following audio channels and sources? 20

21 Devices used to listen to Channel Use of physical formats, e.g., CDs, is limited to cars; streaming media has the broadest set of listening devices, but is concentrated in the computer category Digital music (n=181) Traditional AM/FM radio (n=667) Devices used to listen to Channel CDs/LPs/Tapes (n=139) YouTube/Vevo & TV Music Ch. (n=218) Satellite radio (SiriusXM) (n=95) Streaming (n=306) Average Across All Channels Car stereo 0% 46% 80% 1% 67% 4% 35% Laptop computer 20% 8% 7% 37% 7% 27% 17% Desktop computer 10% 7% 11% 30% 5% 18% 13% iphone 18% 0% 0% 9% 4% 18% 8% Radio 0% 39% 0% 1% 0% 0% 7% Android mobile phone 15% 0% 0% 6% 3% 13% 6% MP3 music player 29% 0% 0% 3% 2% 3% 6% Tablet/Reader 5% 0% 0% 6% 2% 9% 4% Music TV channels 0% 0% 0% 0% 9% 0% 2% Streaming device 1% 0% 0% 2% 1% 4% 1% Gaming console 1% 0% 2% 3% 0% 1% 1% Other smartphone 0% 0% 0% 1% 0% 3% 1% Total 100% 100% 100% 100% 100% 100% 100% Q7. Approximately what percentage of your time on [target day/a typical day] did you listen to [audio channel/source] using each of the following devices? 21

22 Devices used to listen to Source Mobile listening (outside the home) is supported primarily by smartphones; suggests the opportunity for a smartphone-to-car stereo connection Pandora (n=159) Spotify (n=55) itunes radio (n=46) Devices used to listen to Source iheart- Radio (n=53) TuneIn (n=15**) Rdio (n=10**) Grooveshark (n=19**) Google Play (n=32) Slacker (n=14**) Rhapsody (n=14**) Laptop computer 26% 36% 19% 22% 15% 11% 39% 10% 42% 14% 23% Average Across Source Desktop computer 17% 25% 17% 21% 15% 21% 12% 11% 10% 17% 17% iphone 18% 18% 42% 16% 21% 13% 9% 13% 9% 6% 16% Android phone 13% 7% 0% 6% 14% 18% 14% 39% 11% 21% 14% Tablet/Reader 12% 8% 11% 10% 6% 2% 10% 8% 9% 10% 8% MP3 music player 2% 3% 6% 4% 0% 14% 6% 6% 13% 5% 6% Car stereo 4% 2% 0% 12% 10% 7% 2% 0% 1% 4% 4% Streaming device 5% 1% 5% 4% 2% 11% 3% 5% 2% 1% 4% Other smartphone 1% 0% 1% 4% 16% 1% 2% 1% 0% 10% 4% Gaming console 1% 1% 0% 2% 2% 2% 3% 7% 3% 13% 3% Radio 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Music TV ch. 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Q7. Approximately what percentage of your time on [target day/a typical day] did you listen to [audio channel/source] using each of the following devices? 22

23 Audio Channel Length of Use Streaming services are definitely at the front end of the product lifecycle, suggesting extreme market volatility as the category grows Channel/Source Length of Use CDs/LPs/Tapes (n=613) 93% 3% 1% 3% 3 years or more Traditional AM/FM radio (n=858) YouTube/Vevo & TV Music Ch. (n=701) Digital music (n=430) 71% 70% 92% 18% 20% 4% 2% 2% 7% 4% 7% 3 More than a year, but less than 3 years More than 3 months, but less than a year Less than 3 months Satellite (SiriusXM) (n=194) 42% 31% 15% 12% Streaming (n=570) 32% 45% 15% 7% 0% 20% 40% 60% 80% 100% Q8. Approximately how long have you been using the following channel/source for listening to audio content? 23

24 Audio Source Length of Use About one-third of streaming services customer base has used their provider less than a year, providing more evidence of market volatility Length of Use Pandora (n=362) Grooveshark (n=45) 36% 33% 40% 40% 17% 19% 7% 8% 3 years or more Rdio (n=31) 23% 26% 27% 24% More than a year, but less than 3 years Rhapsody (n=54) TuneIn (n=52) 23% 21% 48% 43% 17% 22% 11% 13% More than 3 months, but less than a year Less than 3 months iheartradio (n=161) 20% 40% 29% 10% Slacker (n=44) 17% 49% 18% 16% Spotify (n=146) 16% 41% 26% 18% Google Play (n=105) 9% 41% 20% 30% itunes radio (n=150) 85% 15% 0% 50% 100% Q8. Approximately how long have you been using the following channel/source for listening to audio content? 24

25 Audio category by Channel Traditional AM/FM radio is still the preferred channel for listening to music. Music (n=965) News/weather/traffic/talk radio (n=568) Sports events/sports commentary (n=230) Traditional AM/FM radio 48% 73% 71% YouTube/Vevo & TV Music Ch. 13% 16% 13% Streaming 13% 4% 7% Digital music 10% 0% 0% CDs/LPs/Tapes 9% 0% 0% Satellite (SiriusXM) 7% 7% 9% Q9. Approximately what percentage of your time was spent listening to the audio category using the following channel/source [ ] on [target day/a typical day]? 25

26 Audio category by Source Pandora has nearly half of the online streaming services share of ear. Music (n=965) News/weather/traffic/talk radio (n=568) Sports events/sports commentary (n=230) Pandora 46% 0% 0% Spotify 14% 0% 0% iheartradio 11% 65% 52% itunes radio 9% 0% 0% Google Play 6% 0% 0% Grooveshark 4% 0% 0% Slacker 4% 13% 18% TuneIn 3% 22% 30% Rdio 2% 0% 0% Rhapsody 2% 0% 0% Q9. Approximately what percentage of your time was spent listening to the audio category using the following channel/source [ ] on [target day/a typical day]? 26

27 Streaming Services Price Elasticity 27

28 Interpreting Price Elasticity Streaming services are extremely price elastic up to $2/mo. (you can buy market share by discounting price); pricing over $2/mo. is inelastic (increase in price will not impact subscription rates significantly) Total Market 30% 25% 20% 15% Difference between take rate at lowest and highest price point determines elasticity. Elasticity curves do not vary significantly across brands, Pandora is the consistent market leader. Pandora share iheartradio share itunes Radio share Google Play share 10% Spotify share Rdio share 5% TuneIn share 0% $0/Month $2/Month $4/Month $6/Month $8/Month *Ad exposure was held constant in share calculations. 8 sources were placed in the market competing for shares at each ad exposure level. *The shares % below were averaged across 4 ad exposure levels. Q11. Approximately how much did you pay in subscription costs LAST MONTH for access to the following audio channel/source? 28

29 Price Elasticity by Age Cohort The $2/mo. price elasticity cliff is found across all age cohorts, but is most pronounced among Millennials Millennials 25% 25% Generation X 20% 20% 15% 15% 10% 10% 5% 5% 0% $0/Month $2/Month $4/Month $6/Month $8/Month 0% $0/Month $2/Month $4/Month $6/Month $8/Month 25% Baby Boomers 25% Silent Generation 20% 20% 15% 15% 10% 10% 5% 5% 0% $0/Month $2/Month $4/Month $6/Month $8/Month 0% $0/Month $2/Month $4/Month $6/Month $8/Month Q11. Approximately how much did you pay in subscription costs LAST MONTH for access to the following audio channel/source? 29

30 Price Elasticity Comparison Streaming Providers Pandora has the most elastic price curve of any of the seven stream service providers evaluated during this research; its customers are five times as price sensitive as the customer of Spotify $0/Month $2/Month $4/Month $6/Month $8/Month Elasticity Delta Pandora share 19% 10% 9% 8% 5% -14% iheartradio share 15% 5% 5% 5% 4% -11% itunes Radio share 11% 7% 6% 5% 4% -7% Google Play share 7% 5% 4% 4% 4% -3% Spotify share 7% 5% 5% 4% 4% -3% Rdio share 6% 6% 3% 4% 4% -2% TuneIn share 4% 3% 3% 2% 1% -3% 30

31 Market Driver Modeling Process Detailed Understanding of Competitor Strength and Weakness Brand specific ratings of vendor selection criteria Factor Analysis Derive the statistically distinct clusters of selection criteria representing individual market drivers Structural Equation Modeling Measure the influence of each market driver over brand affinity 16 Selection Criteria Rating Scales Created Six Distinct Market Drivers With Brand Equity Impacts Ranging from.55 to.15 0 = WORST IN THE MARKET 5 = ON PAR WITH THE MARKET AVERAGE Capacity to listen to music I want Capacity to listen to music I want = BEST IN THE MARKET 1. Reasonable set-up fees 2. Advertising linked to listening experience 3. Capacity to listen in a car 4. Capacity to listen while mobile 5. Easy to Use 6. Compatibility with multiple devices Reasonable on-going subscription cost Ease of use Mobility Ease of sharing Ease of use Mobility Ease of sharing Price/Value Price/Value 0.18 Advertising Exposure Advertising Exposure

32 Six Statistical Market Drivers Who Will Win and Who Will Capacity to listen to music I want Ease of use Mobility Impact % within Factor Influence Capacity to optimize content based on your likes and dislikes % 9% Wide range of music available to listen/download % 8% Ability to build customized play lists % 8% Option to skip to next song or segment % 7% Appropriate time and effort required to discontinue service % 7% Easy to Use % 6% Reasonable time and effort required to set-up % 6% Compatibility with multiple devices % 8% Capacity to listen while mobile % 6% Capacity to listen in a car % 4% Ease of sharing 0.20 Ability to share songs with friends % 7% Ease of sharing access with others % 5% Price/Value 0.18 Reasonable set-up fees % 6% Reasonable on-going subscription cost % 5% Advertising Exposure 0.15 Option for commercial free listening % 5% Advertising linked to listening experience % 4% 32

33 Six Market Drivers Influence Over Market Share and Brand Equity: Customizability is Key Individual Driver Impact Over Brand Affinity Higher impact scores = Capacity to listen to music I want Ease of use Mobility Greater importance to decision = Increased opportunity to improve Brand Affinity Impact scores represent the brand affinity improvement forecast to result from a five percent (5%) improvement in driver ratings. For example, if a company were to improve its average rating for the selection criteria composing the Capacity to listen to music I want market driver by 5% (e.g., from 7.5 to 7.88); the company s overall brand affinity would increase by.55 %. Ease of sharing Price/Value Advertising Exposure However, effecting a similar 5% point increase on Advertising Exposure results in a.15 increase in revenue. Your company may derive one-third as much ROI by focusing here rather than on Capacity to listen to music I want. Impact score improvements are additive marketing strategies that impact multiple market driver categories produce market share improvements equal to the sum of the market impact scores from all affected drivers. 33

34 Market Driver Analysis Channel View Traditional radio usage will decline; physical media, e.g., CDs, and digital music will remain flat; streaming media has yet to establish a clear advantage relative to digital music; although growth will slow, streaming services will increase index scores as customization and ease of use scenarios improve Brand Affinity* Index Industry Average Traditional AM/FM Radio 1.05 (n=968) CDs/LPs/Tapes (n=857) Digital Music (n=583) YouTube/Vevo & TV Music Ch.(n=1358) Satellite Radio (SiriusXM) (n=431) Streaming (n=2187) Market Driver Summative Index 0.81 Industry Average Traditional AM/FM Radio (n=394) CDs/LPs/Tapes (n=373) Digital Music (n=252) YouTube/Vevo & TV Music Ch.(n=629) Satellite Radio (SiriusXM) (n=195) Streaming (n=1069) Q13. Please rate each channel/source on its ability to deliver on the statements below., Q14. Please rate your overall satisfaction with the following audio channel/source., Q15. What is the probability that you would recommend the following audio channel/source?, Q16. What is the probability that you would listen to the following audio channel/source in the future? 34

35 Market Driver Analysis Streaming Services With the exception of Pandora, none of the streaming services have established brand identities stronger than traditional media (as a whole) and many are delivering unsatisfactory customer experiences; three services appear poised for growth: Pandora, Spotify and Grooveshark Streaming Average 1.00 Brand Affinity* Index Streaming Average 1.00 Market Driver Summative Index 1.16 Pandora (n=526) 1.09 Pandora (n=333) 1.01 Spotify (n=248) 1.09 Spotify (n=150) 1.01 itunes Radio (n=275) 0.94 itunes Radio (n=149) 1.03 iheartradio (n=283) 0.91 iheartradio (n=155) 0.93 TuneIn (n=99) 0.80 TuneIn (n=60) 1.01 Rdio (n=93) 0.90 Rdio (n=40) 0.87 Grooveshark (n=124) 1.29 Grooveshark (n=27**) 1.06 Google Play (n=181) 0.97 Google Play (n=107) 0.90 Slacker (n=131) 0.85 Slacker (n=27**) 0.69 Rhapsody (n=227) 0.87 Rhapsody (n=21**) **NOTE: Small sample size, analyze data with caution *Note: Brand Affinity=average of Overall Satisfaction, Likelihood to Recommend, Likelihood to Use in Future Q13. Please rate each channel/source on its ability to deliver on the statements below., Q14. Please rate your overall satisfaction with the following audio channel/source., Q15. What is the probability that you would recommend the following audio channel/source?, Q16. What is the probability that you would listen to the following audio channel/source in the future? 35

36 Market Driver Impact Channel View Streaming services currently don t match the capacity of physical media, e.g., CDs, or digital music to accommodate consumers collective desire to customize their libraries Market Driver Impact Capacity to 0.55 Ease of use 0.31 Mobility 0.28 Ease of sharing 0.20 Price/Value 0.18 Advertising 0.15 Trad. AM/FM Radio (n=394) Summative Index (Indexed against Industry Average) Trad. YouTube/V Satellite AM/FM Digital evo & TV Radio Radio CDs/LPs/Ta Music Music Ch. (SiriusXM) Streaming (n=394) pes (n=373) (n=252) (n=629) (n=195) (n=1069) Market Driver Index (Indexed against Industry Average) CDs/LPs/Ta pes (n=373) Digital Music (n=252) YouTube/V evo & TV Music Ch. (n=629) Satellite Radio (SiriusXM) (n=195) Streaming (n=1069) Q13. Please rate each channel/source on its ability to deliver on the statements below. 36

37 Market Driver Impact Streaming Services View Only two streaming services Pandora and Spotify deliver the level of customization desired by consumers; many of the services struggle to meet consumer ease-of-use requirements Summative Index (Indexed against Streaming Average) Market Driver Impact Capacity to 0.55 Pandora (n=333) Spotify (n=150) itunes Radio (n=149) itunes Radio (n=149) iheart- Radio (n=155) iheart- Radio (n=155) TuneIn (n=60) Rdio (n=40) Grooveshark (n=27**) Pandora Spotify TuneIn Rdio Slacker Rhapsody (n=333) (n=150) (n=60) (n=40) (n=27**) (n=21**) Market Driver Index (Indexed against Streaming Average) Grooveshark (n=27**) Google Play (n=107) Google Play (n=107) Slacker (n=27**) Rhapsody (n=21**) Ease of use Mobility Ease of sharing Price/Value Advertising **NOTE: Small sample size, analyze data with caution Q13. Please rate each channel/source on its ability to deliver on the statements below. 37

38 Attribute Index Score Channel View Streaming services don t deliver any significant advantage relative to digital music; creating that point of differentiation will ultimately determine the long-term size of this market opportunity Top Box % Indexed against Streaming Average Attribute Capacity to listen to the music I want to listen to Total (n=2912) AM/FM Radio (n=394) CDs/LPs/Tap es (n=373) Digital Music (n=252) YouTube/Vev o & TV Music Ch. (n=629) Satellite Radio (SiriusXM) (n=195) 8% Wide range of music available to listen/download 60% % Ability to build customized play lists 44% % Option to skip to next song or segment 46% % Capacity to optimize content based on your likes and dislikes 49% Advertising Exposure 4% Advertising linked to listening experience 30% % Option for commercial free listening 45% Ease of sharing 5% Ease of sharing access with others (letting other folks use your subscription) Streaming (n=1069) 35% % Ability to share songs with friends 40% Ease of use 6% Easy to Use 69% % Reasonable time and effort required to set-up 54% % Appropriate time and effort required to discontinue service 45% Mobility 4% Capacity to listen in a car 52% % Capacity to listen while mobile 53% % Compatibility with multiple devices 42% Price/Value 6% Reasonable set-up fees 42% % Reasonable on-going subscription cost 37% Q13. Please rate each channel/source on its ability to deliver on the statements below. 38

39 Attribute Index Score Streaming Services View Streaming (n=1069) Pandora (n=333) Spotify (n=150) Attribute Capacity to listen to the music I want to listen to 8% Wide range of music available to listen/download 56% % Ability to build customized play lists 47% % Option to skip to next song or segment 44% Capacity to optimize content based on your likes 9% and dislikes 51% Advertising Exposure 4% Advertising linked to listening experience 26% % Option for commercial free listening 40% Ease of sharing Ease of sharing access with others (letting other 5% folks use your subscription) 33% % Ability to share songs with friends 37% Ease of use 6% Easy to Use 61% % Reasonable time and effort required to set-up 51% Appropriate time and effort required to 7% discontinue service 43% Mobility 4% Capacity to listen in a car 37% % Capacity to listen while mobile 53% % Compatibility with multiple devices 48% Price/Value 6% Reasonable set-up fees 44% % Reasonable on-going subscription cost 37% itunes Radio (n=149) iheart- Radio (n=155) TuneIn (n=60) Rdio (n=40) Grooveshark (n=27**) Google Play (n=107) Slacker (n=27**) Rhapsody (n=21**) **NOTE: Small sample size, analyze data with caution Indexed against Streaming Average (**NOTE: Small sample size, analyaze data with caution) Q13. Please rate each channel/source on its ability to deliver on the statements below. 39

40 Cross Metric Strength Analysis Streaming Services Have Not Achieved Parity with Digital Music Channels Audio Content Channel/Source LOWER RANK SCORE = STRONGER BRAND Market Driver Rank Audio Content Channel Brand Affinity Rank % of Time Listened to Rank Size of User Base Rank Length of Use Rank Average Rank Across Metrics Rank Traditional AM/FM Radio Physical Music (CDs, LP, Tape) Digital Music YouTube/Vevo & TV Music Ch Streaming Satellite (SiriusXM) **NOTE: Small sample size, analyze data with caution 40

41 Cross Metric Strength Analysis iheart Radio, Spotify and Grooveshark Have Compelling Points of Differentiation That Will Allow Them to Effectively Compete with Pandora for Market Leadership in the Future Audio Content Channel/Source Market Driver Rank LOWER RANK SCORE = STRONGER BRAND Audio Content Streaming Source Brand Affinity Rank % of Time Listened to Rank Size of User Base Rank Length of Use Rank Average Rank Across Metrics Rank Pandora iheartradio Spotify itunes Radio Google Play Grooveshark TuneIn Rhapsody Slacker Rdio **NOTE: Small sample size, analyze data with caution 41

42 Respondent Profile 42

43 Annual Household Income & Employment Status Annual Household Income (n=1010) Current Employment Status (n=1010) Under $25,000 17% Currently unemployed 17% $25,000 to less than $50,000 $50,000 to less than $75,000 $75,000 to less than $100,000 $100,000 to less than $150,000 $150,000 or higher 13% 10% 4% 23% 30% Work less than 35 hours per week Work 35 hours or more per week Retired Student 4% 17% 20% 40% Prefer not to answer 3% Prefer not to answer 2% D1. Which of the following best represents your total household income before taxes? D3. How would you describe your current employment status? 43

44 Race/Ethnicity & Employment Status Caucasian or White (Non-Hispanic) African-American Asian/Asian Pacific Hispanic Other Native American Prefer not to answer Middle Eastern Race/ethnicity (n=1010) 10% 7% 5% 1% 1% 0% 0% 76% California Florida New York Texas Pennsylvania Illinois Ohio Georgia Michigan North Carolina Indiana New Jersey Massachusetts Wisconsin Tennessee Kentucky Colorado Missouri Maryland Washington Minnesota Virginia Alabama Current Residence (State)* (n=1010) 7% 7% 6% 5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 11% *Arkansas, Arizona, Kansas, Connecticut, Oklahoma, South Carolina, Idaho, Nevada, Montana, Utah, West Virginia, Louisiana, Nebraska, Oregon, Hawaii, Iowa, Rhode Island, New Mexico, Maine, Mississippi, South Dakota, Wyoming, Delaware, New Hampshire, Puerto Rico & District of Columbia =<1% D2. What race/ethnicity do you most closely identify with? D4. In which state do you currently reside? 44

45 Household Configuration Average Number of People in Household Average Number in 2.64 Average Number by Age Group (n=1010) Under Ages Ages Ages 18 and older (including yourself) 2.07 D5. Including yourself and any children, how many people currently live in your household? D6. And how many of those people currently living in your household are in each age range below? 45

46 How To Interpret Market Driver Results 46

47 Interpreting Brand Strength Metrics Brand strength metrics provide a high level overview of the respective strength of the major audio content channel/source brands. These high level overviews are focused on comparing relative brand strength (AKA Brand Affinity) and brand performance responsible for this strength. Market Driver Analysis provides two perspectives of brand strength; the first comparing the degree to which each brand fulfills the criteria used to select audio content channel/sources and the second comparing the overall brand affinity resulting from that experience. Both metrics have been indexed ratings greater than 1.0 indicate performance and brand affinity higher than the industry average across audio content channel/source brands; ratings less than 1.0 indicate performance and brand affinity weakness and vulnerability. 47

48 Interpreting Market Driver Model Factor analysis was used to identify statistically distinct clusters of selection criteria that ultimately determine audio channel/source market share. Clusters (AKA Market Drivers) were identified which are found in different combinations across the audio content channel/source market driver models. Market Driver Impact= Market Drivers Relative Importance of Factors Determining Market Share Impact On Purchase Likelihood Higher Impact Score = increased preference/market share opportunity Market Driver Impact* Capacity to listen to music I want Ease of use For every one point increase in customer perception that your company can effect on Capacity to listen to music I want you will experience a corresponding 0.55 increase in purchase likelihood of your audio channel/source brand. The influence of each driver is expressed in terms of an impact score. Impact scores reflect the relative influence of different market drivers over attitudes, opinions, preferences, and future buying behavior i.e., outcomes. Drivers with the highest impact score represent attributes your company may wish to focus on to increase purchase likelihood. Mobility Ease of sharing Price/Value Advertising Exposure However, effecting a similar one point increase on Advertising Exposure results in a 0.15 increase in purchase likelihood of your brand/product. Your company may derive almost three times as much bang for the buck by focusing on Capacity to listen to music I want rather than on Advertising Exposure. *Derived by determining actual correlation between audio content channel/source brand ratings and ultimate brand selection decision. 48

49 Performance Rating Market Driver Influence Summative Index Interpreting Market Driver Summative Index The Summative Index shows the total impact of all drivers on Competitive Strength. Summative Index Calculation The brand top box percent (percent of respondents with 8 to 10 rating) is calculated and multiplied by the relative importance impact score for each attribute. Within each driver, the sum of the attributes for each brand is indexed against the sum of the attributes of the industry average and then multiplied by the average market driver influence for each brand. The summative index is calculated for each brand by adding the indexed scores for each individual market driver together. Summative Index Brand A: Industry Average: Brand B: The Summative Index represents the performance of each segment compared to industry average for each market driver, where 1.0 equals the industry average. Market differentiation is statistically significant if the summative index is greater than 1.05 or lower than Low scores on the summative index might indicate lack of competition or barriers in the market, whereas high scores on the summative index might indicate volatility/opportunity for high return. 49

50 ClearVoice Research Summary of Capabilities Capabilities Buyer Behavior Profiling: targeting research defining the who, what, where and how of consumer behavior Market Driver Profiling: defining the factors determining market share and measuring competitor performance Segmentation: traditional macro segmentation plus dynamic web behavior segmentation Opportunity Forecasting: Monetizing competitor brand value with two year opportunity forecasts Pricing: Determining market opportunity associated with alternative configurations of feature/function/price Strategy Optimization: Copy testing, positioning strategy development, promotion design Customer Experience: Tracking research typically focused on measuring customer satisfaction and brand awareness Product Testing: Calibration of new product concepts against established competitive benchmarks Innovation Research Online Quantitative Customer Satisfaction Indexing Brand Tracking Studies New Item Tracking Claims Testing Packaging Testing Concept Tests IHUTs (In Home Usage Tests) Custom Panel Builds Online Qualitative Bulletin Board Discussion Groups On line focus groups (IDIs and Group) In-person focus groups Traditional Qualitative New Messaging Online Quantitative Retail Kit; In Market Testing Ethnography and Shop-Alongs Other Services Strategy Consulting Shelf-Optimization Customized s on Proprietary Platform Unique Social Media Consumer Engagement Construct 50

51 ClearVoice Research Practice Leads Media & Entertainment Emily Keating (303) Emily Keating brings more that 8 years of experience from her global experiences working in Capital Markets, Corporate Finance, Business Analytics, and Risk Management to the team. She previously worked for Goldman Sachs in their New York office as a Credit Risk Management Advisor and in their Sydney office as Corporate Risk Management Salesperson. Emily earned her undergraduate degree at the University of Kansas. Healthcare Jerimy Hiltner jerimy.hiltner@clearvoiceresearch.com (303) Jerimy Hiltner brings more than 10 years of experience in developing client relationships, building dynamic teams, executing complex projects and delivering actionable insights that drive business results for clients. Prior to joining ClearVoice Research, Jerimy held management positions in corporate strategy, business planning, business development and product management in the telecom and technology sectors. Jerimy holds an MBA from the University of Denver Daniels College Of Business and an undergraduate degree from Amherst College. Finance & Insurance James Perkins, CFA james.perkins@clearvoiceresearch.com (303) James Perkins brings more than 13 years of experience in market research, investment research and financial advisory. Prior to joining ClearVoice, James worked as a Principal for Benedetto, Gartland & Company (BGC), an investment bank focused on financial advisory, private equity fundraising and corporate finance. Before joining BGC, he held various positions in equity research, institutional financial consulting and product management. James holds an MBA from Columbia Business School, earned an undergraduate degree in Economics from UC Berkeley and is a CFA charterholder. Consumer Products Kristine Hawthorne kristine.hawthorne@clearvoiceresearch.com (303) Kristine Hawthorne brings 15 years of consumer product experience. Prior to joining ClearVoice Research, Kristine held management positions in product development, operations, and marketing in the consumer products industry with Kraft, General Mills and Nestle. Her industry experience helps bring a unique perspective to design and execution of quantitative and qualitative research. Kristine hold an MBA from the Carlson School, an MS from Cornell University, and an undergraduate degree from Rutgers University. 51