The Bridge Ratings Report - The Impact of Wireless Internet

 

For Immediate Release:
Wednesday, September 12, 2007

Summary

Wireless Internet growth in the U.S. to nearly 100 million users

In-car Wi-Fi to grow slowly at first, will reach only 10% of Americans 5 years after mass market introduction

In-car Wi-Fi will gradually erode radio time-spent-listening

Satellite radio will take the greatest TSL hit from Wireless Internet radio

Wireless Internet Radio should help traditional radio revenues

 

Much has been written about the potential of Wireless Internet and the flexibility that comes with more wireless devices and increasing Wi-Fi locations.

But what about the impact on traditional radio listening of Wi-Fi or its wide-area cousin, Wi-Max, once the technology is available in-car?

During July/August 2007, Bridge Ratings undertook a broad-based national study of this question by interviewing consumers and device and auto manufacturers to better understand the implications of wireless Internet and the availability of Wireless Internet Radio.

Today 30 million Americans use wireless Internet access and it will grow to nearly 45 million by the end of 2007. Wi-Fi locations are sprouting up across the U.S. making wireless Internet access a comfortable reality for millions of consumers.

Of the estimated 30 million users of wireless access technology in the U.S., 75% or 23 million have wireless accessed Internet radio. In fact, 48% of those accessing the Internet via wireless technology seek out Internet radio. The number of Internet radio listeners accessing wirelessly will grow to 77 million by 2010 as wireless technology penetrates the average U.S. lifestyle.

ABI Research forecasts that the total number of Wi-Fi-enabled consumer electronics devices will grow from just 40 mln shipped in 2006 to nearly 249 mln in 2011.

Mobile WiMAX customers will grow at an annual compounded rate of 64% between 2009 and 2012, when telecoms embrace WiMAX as a fixed wireless broadband service, according to Pyramid Research.

Wireless Internet use in-car faces hurdles based on Wi-Max technology development, how quickly auto manufacturers are able to equip new cars and what type of early adopter consumer will want the technology.

In our study of 2200 persons 16+ we asked consumers who define themselves as "innovators" or "early adopters", how likely they would be to buy a car or equip a current vehicle with a wireless Internet device.

Because manufactures remain uncommitted at press time to establish a date to introduce this technology, growth projections are shown in the chart below for year one of availability and beyond.

How will this increasing number of Internet radio listeners affect weekly listening to traditional radio?

By year 5 of in-car Wi-Fi acceptance, traditional radio can expect to see the amount of time spent listening to fall below 19 hours a week and by year 8 when we project that more than 23% of the U.S. public will have adopted wireless Internet technology in-car, weekly time spent listening to traditional radio will fall below 18 hours per week.

What about satellite radio?

Satellite radio has found its greatest audience in-car but has the most to lose with wireless Internet radio reception. This study as well as previous Bridge Ratings studies conducted for the satellite radio industry, show that satellite radio subscribers consumer satellite radio at a far greater weekly rate than do listeners to traditional radio.

As wireless in-car becomes more accepted, weekly time-spent-listening to satellite radio will also be impacted.

According to our sample, satellite radio should experience a more severe drop-off in weekly time-spent-listening due to the wide variety of programming available on Internet Radio and the lack of comparable subscription expense.

During the focus groups that accompanied this study, monthly subscription costs was of lesser concern than the quality and variety of available content. It was generally assumed that the monthly cost of satellite radio and in-car Wi-Fi reception of Internet Radio would be comparable. Yet, those who currently subscribe to satellite radio expected to listen less if they had wireless Internet radio in their cars or they would cancel their satellite radio subscription.

Will In-car Internet Radio Hurt Traditional Radio Revenues?

Bridge Ratings expects that traditional radio revenues will be enhanced by Wi-Fi Internet Radio only if the radio industry vastly improves its advertising sales techniques and commits to dedicated Internet radio sales teams. This is the model that is working best now for traditional radio and in order to off-set other ad revenue attrition, traditional radio can recoup and exceed the amount lost if the industry is more aggressive in this area.

With dedicated sales teams experienced in selling the Internet, traditional radio can expect to see a return to 3-4% revenue growth after consumer acceptance of in-car Wi-Fi surpasses 7% of the population (see chart):

By the ninth year of market availability the combination of natural market growth (1-2% per year) and a more effective effort at selling its Internet radio channels, traditional radio revenues could reach over $26 billion.

Final Thoughts

The availability of wireless Internet in-car poses a signficant threat to traditional as well as satellite radio. This study projects that the growth of Wi-Fi in-car should reach more than 50% of the U.S. population after nine years of market availability.

It is important to note that adoption by the masses of new technologies is often slower to penetrate the mass market. New technologies take time to be widely adopted and it is important to note that innovators and early adopters who jump on new technology often receive an inordinate amount of press which quickly raises awareness of the adopted technology.

The adoption of in-car Internet service and the spread of Internet radio across all consumer types will begin to be a factor 9-10 years after market introduction.

Diffusion* of technology through to the mass market, rather than the innovation ultimately determines the pace of acceptance and this is the reason for the generally long growth pattern you see in this report's projections.

*Diffusion is the cumulative result of a process whereby varying consumer types (innovators, early adopters, early majority, late majority and laggards) sample, compare and decide upon use of the new technology over long periods of time.

Nonetheless, the results of this study show that early adopting consumers are looking forward to Wireless internet in-car and current listeners of Internet radio have a very high probability of adopting the technology when it becomes available and is affordable.

Methodology: Random Digit Dialing + Internet polling

Sample:2200 Persons 16+. Margin of error: +/- 2.1%
Interviews conducted July 5 - August 31, 2007

For more information or questions, contact Dave Van Dyke at Bridge Ratings. dvd@bridgeratings.com or 818.291.6420.

 

 


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