The State of AM/FM Radio: What Advertisers Need to Know

If you’re a marketer looking to advertise in audio, you’re in luck. There are plenty of options for you to choose from, especially if you want to align with the passion point of music or the burgeoning area of podcasting. But there also seems to be equal confusion around how to choose the right platform for your brand and message. This is, in fact, one of the most common questions we get from our advertisers.

While we’d all like to think that music is music, and audio is audio, it’s just not that simple when it comes to buying media. Not only do you need to consider how your target audience listens to audio, you also need to be thinking about where they listen most.

True, America’s oldest electronic mass medium--AM/FM radio--is still alive, kicking and serving throngs of listeners every day, but it’s also being disrupted by today’s growing digital media landscape. Radio has prospered for so many decades because it’s free, easy-to-use and there are tons of them around. In fact, it used to be the only way to enjoy music without having to invest in a record collection or to hear news, sports and traffic information on-the-go.

But AM/FM now faces serious competition from personalized, digital alternatives. Waze and Google Maps, for example, offer real-time traffic updates on individual routes; sports fans can choose the play-by-play team of their choice online, even if it’s out-of-market; and streaming apps like Pandora serve up music that’s personalized for each listener.

Despite what some media pundits say about broadcast media, radio isn’t dead yet. However, we can expect time spent listening to continue its downward trajectory as consumers take advantage of unlimited mobile data plans, acquire more digital media devices in their homes and cars, and as radio’s most loyal demographic--Americans aged 50+--embrace the digital revolution. The latter is something we’re already seeing come to fruition. Currently, people between the ages of 50-60-years-old who have mobile devices are spending more time with mobile apps than they are listening to AM/FM radio.[1] For decades, the car has been a haven for music and audio content, as evidenced by the fact that AM/FM radio still captures 70% of all audio listening time in the car. While this is largely thanks to the ease of operating station presets and other controls,[2] we’re seeing a series of long- and short-term challenges to that dominance, driven mostly by changes in our transportation choices.

First and foremost, there’s been a noticeable decrease in the number of Americans choosing to drive. Just 69% of 19-year-olds earned a driver’s license in 2014, compared to 87% in 1983.[3] No longer is jumping in the car and hitting the open road synonymous with American freedom. Now, younger generations see car ownership as more of a burden than anything, citing the high cost of acquiring and operating a car as the top reason for not getting licensed.

Additionally, ride and vehicle sharing--as well as autonomous driving--are rapidly being seen as preferable alternatives to traditional car ownership. Both Uber and Lyft are barely seven years old, yet the two services booked 97 million rides in December 2016 alone. Even vehicle sharing, most notably by the Avis-owned company, ZipCar, has gained significant traction in the marketplace for users who have opted not to buy a car of their own.

And autonomous driving, once considered a far-off dream relegated to sci-fi movies, is actually becoming a reality. Uber is currently testing driverless cars for hire in Pittsburgh, and Lyft expects to launch a fleet of self-driving cars using technology from its part-owner, General Motors. Tesla is saying a fully autonomous car, where a driver could literally sleep during the ride, will be ready in 2019.

Radio’s in-car challenges are not just lodged in the future, however. AM/FM alternatives are already present in many of the cars on the road currently, and usage is growing.

Satellite radio is installed in about a third of the cars in the U.S. and comes with 75% of new cars. SiriusXM’s more than 32 million paying subscribers[4] are voracious users of the service, accounting for 70% of their daily in-car audio time.[2]

Streaming services like Pandora can also be easily accessed in connected cars. On our platform, we’ve found that nearly 10 million Pandora active listeners access the service through a built-in infotainment system in their dashboards--and this doesn’t include the millions more who listen in their cars via a wired smartphone connection like AUX or USB.

New stats from Edison Research shows that drivers of the newest car models, which are more likely to include advanced media options, are listening to 40% less AM/FM radio than drivers of older cars.[5] This confirms that drivers who have access to AM/FM alternatives indeed use them, thus loosening radio’s firm grip on in-car listening with each new model sold.

While automakers are not planning to take AM/FM out of the dashboard just yet, they do recognize that drivers have an increasing desire to use smartphone features while in the car. And without a robust digital strategy in place for most broadcasters, we can only expect that listenership for AM/FM radio will diminish over time.

Brands that currently rely on reaching their customers this way will need to rethink their approach. Developing a strategy to capture attention across the number of alternative listening sources--including those present in the car--will not only provide greater reach, but also more effective targeting options, a better user experience and a higher level of accountability overall.

To gain an even deeper understanding of what your choices are for advertising in audio and in the car, stay tuned for the upcoming launch of the second edition of Pandora’s Definitive Guide to Audio, coming in early October. Just like the first edition, this detailed white paper will provide you with everything marketers need to know about audio--from the current landscape to the latest trends, along with interviews with the experts that know it best.

And, good news! If you didn’t get a chance to check out the inaugural edition of the Definitive Guide to Audio, there’s still time. Click the image below to download your copy today, and walk away with immediate knowledge about how audio advertising that can be applied to your next campaign.

^{Sources: 1 Nielsen Total Audience Report, Q1 2017 2 Edison Research, Share of Ear Study, Q2 2017, Persons 13+ 3 University of Michigan, “Recent Decreases in the Proportion of Persons with a Driver’s License Across All Age Groups,” by Michael Sivak and Brandon Schoettle, January 2016 4 SiriusXM Q2 2017 earnings report 5 Edison Research Share of Ear Study, Q1 2017. AM/FM listening online is credited to AM/FM category. Other includes satellite radio, streaming audio and podcasts.}