For Immediate Release:

Friday October 27, 2006

Where Are My Listeners Going?

In November, 2004, Bridge Ratings & Research released initial results from a multi-year-long Audience Attrition project. The results in that report reflected audience erosion from terrestrial radio due to generally less time spent with AM/FM radio and more time spent with a variety of digital media, including MP3 players (including iPods), Internet radio, satellite radio and Compact Disc.

As part of Bridge Ratings’ on-going studies of radio listening behavior, the company updates the report quarterly. This overview reflects the findings relevant to Q3 2006 audience behavior.

This latest study, reveals more detail than ever before regarding the highly active youth group defined as 12-21 year olds which has had the greatest impact on listening attrition to traditional radio. Over time this youth group's behaviors change dramatically as their media interests go through the following stages:

• Discovery
• Enthusiasm
• Saturation
• Fatigue
• Burn
• Abandonment

Alongside these behaviors we have discovered that this "life group" of 12-21 year olds is composed of four distinct cohorts or groups whose behaviors and ideas support each other.

• Revolutionaries - 4.5% of the life group
• Evolutionaries - 16.5%
• Moderates - 30%
• Passives - 49%

During the last 9 months, but more in evidence during the third quarter of 2006, media behaviors by these four cohorts vary significantly and this is the focus of this quarter's report.

The most aggressively advanced segment of this life group, Revolutionaries, are three times more likely to adopt new technologies, ideas and things than the mainstream. Members of this cohort are the very first to go through the behavior stages listed above and do so at an accelerated rate compared to the other cohorts. This group represents a very small portion of the entire life group but for this quarter's report Bridge Ratings update they, more than any other group (except the "Evolutionaries") show the sharpest behavior changes compared to six months ago. It is these first two cohorts who drive behavior changes most researchers and analysts assign to the entire (12-21 year old) life group. We have discovered that because the behaviors are so extreme for these first two cohorts, they impact the entire group's behavior measurement though the "moderates" and "Passives" have far different attitudes and behaviors and go through the behavior stages much more slowly.

For example, in the area of weekly listening to terrestrial radio, here is a sample of our findings by cohort:

The significance of this chart is the wide gap in listening to terrestrial radio between the largest (Passives) group and the small but influential Revolutionaries and Evolutionaries. Only 10% of the Revolutionary cohort said they listened to a terrestrial radio station during the week of the survey. We believe this matrix provides much-needed insight into the complexity of consumer behavior among 12-21 year olds; the cohort structure remains consistent regardless of consumption, i.e. audio entertainment, the Internet, television, video gaming, MP3 player use, cell phones and movie attendance.

It is for this reason that Bridge Ratings debunks previous sociological assumption related to media consumption by this group. While we see a significant drop-off in terrestrial radio listening by these first two cohorts, both "Moderates" and "Passives" show very different attitudes about traditional radio; 82% of this youth life group continue to tune in to traditional radio programming and their time-spent listening levels have maintained compared to our second quarter statistics.

This life group, in general, and the entire sample at large, consumed less audio media during the third quarter perhaps due more to inherent lifestyle differences associated with summer than anything else.

Traditional Radio Audience Erosion to New Media    Q3 Update

Number of weekly quarter hours listened or used     

4. Competition for traditional radio time-spent-listening continues. Time spent listening to terrestrial radio is fighting for its share of time with a multitude of digital options. Television networks gained viewership based on this quarter's data which is counter-intuitive based on historical summer trending. However, television networks have learned that content is the best medicine in fighting viewership attrition during summer months and those networks which engaged the audience with new programs actually reversed or minimized typical third quarter drops in viewing. Meanwhile, music-intensive radio stations are vying for the attention of their constituencies as MP3 players continue to be more pervasive than ever (80 million sold). Though Podcasting showed evidence of cannibalizing radio time-spent-listening, we are seeing this behavior adjusted slightly this quarter as Podcasting continues to gain acceptance especially among radio listeners who are using terrestrial radio podcasts as a way to stay connected to radio programming or personalities. .

Podcasting is now showing strong signs of aiding terrestrial radio tune-in under certain format circumstances. Last quarter Talk radio and NPR specifically experienced the benefits of coordinated podcast use between specific programming content and time-shifted podcast use. As explained the Bridge Ratings Podcast Report increase in podcast use overall during the third quarter quarter was driven by listeners to terrestrial radio. Professional broadcast marketing and content is leading users of terrestrial radio to adopt podcasts in many ways as a "Tivo" device for radio. Interest in amateur podcasts, or podcast content created by what is perceived as the "average person" with the technical know-how to produce podcast content, continues to wane.

5. Terrestrial radio continues to benefit from Internet radio and MP3 use. We found in this analysis that there are specific radio formats that lend themselves better than others to increased tune-in and time-spent-listening. More detail on this phase of the report can be found here.

6. Satellite radio time spent listening among satellite users stabilized this quarter. Satellite radio consumers who have been subscribers for longer than 6 months are actually spending less time than they were six months ago with their satellite service of choice. However, satellite radio TSL from "newbies" or new subscribers of less than three months is increasing and for this reason when combined this quarter's overall satellite time-spent-listening was flat last quarter. According to our panel, during the second quarter of 2005 average time spent listening to satellite radio was 16 hours per week. During the period of January 1 through March 31, 2006, weekly TSL for satellite radio was down to 12.6 weekly hours. During the second quarter of 2006, time-spent-listening among new consumers was 17.5 hours per week. Among those who have subscribed 6 months or longer TSL fell again - from 10 hours to 9.25 hours per week. See chart below for combined time-spent-listening trending.

7. HD radio showing signs of cannibalizing terrestrial. While still very early in the life of HD radio, 1% of this quarter's panel had spent time listening to HD radio. Those innovators and early adopters who have purchased HD equipment indicated that they were spending fewer hours per week listening to terrestrial radio because of the time they were spending with HD. A small percentage of HD radio consumers also indicated they subscribed to satellite radio at the time of this study. Data returned over the third quarter indicate that their time-spent with satellite radio was somewhat impacted by their use of HD. Quality issues continue to plague HD from a time-spent-listening perspective. What is revealing is that for those who are have positive experiences with High Definition radio, see advantages over satellite radio:

• Programming - HD options are more limited than satellite and if there were more HD options, more time would be spent with HD
• Price - HD radios are currently more expensive than satellite radio but there is no monthly fee as there is with satellite.
  HD penetration would increase significantly if radios were priced at or below satellite radio equipment.
• Quality - While many in the study cite poor reception and difficulty finding HD stations as reasons they did not use HD
  more, those who had none of these problems found HD quality comparable or even better than satellite radio.

8. Time spent listening to terrestrial radio was down slightly quarter to quarter and is 30 minutes lower than a year ago. See chart below for other media trending.

Methodology. Bridge Ratings measures CUME SHARE and FAVORITENESS rather than CUME and Average Quarter Hours.  AQH is a fabricated mathematical measurement of cume x an average quarter hour number composed of 'best guesses' by diary keepers.  Thus, the AQH number tells a station or its client nothing about the capability of the station to deliver listeners.

FAVORITENESS is a better measurement of loyalty especially when combined with the Cume number. The cume number divided by the favoriteness number yields a conversion number which more accurately measures station loyalty.  In Bridge Ratings studies, stations that convert their cume audience to favoriteness at the rate of 40% or more are powerful instruments in their communities. This is powerful information for both station and advertisers alike.

For the “Erosion Studies”, Bridge Ratings selected a 6000 person panel over six national markets to be interviewed on a weekly basis regarding the listener’s use of AM/FM radio and, where applicable, their use of digital media players, Internet Radio, CD’s, Podcasting, HD radio or satellite radio. Questionnaires were structured to seek overall daily use of the aforementioned media with short recall requirements. Panels allow us to accurately trend like users over time.

The results represent the multi-market sample’s behavior and reflects quarter hours of usage per week.

Where Does the Time Come From?

Looking at other media use among 25-49 year olds for example, daily use of television fell in Q3 2006 with the average U.S. adult spending 5.3 hours a day viewing television programming. From our consumer interviews, this figure was impacted by more out-of-home activities likely due to summer vacations. Conversely Out-of-home television viewing increased this quarter to 65 minutes a week - an 18% increase over Q2!. Restaurants, bars, sporting events, mobile devices, computers and even grocery stores are credited with out-of-home viewing minutes which Bridge Ratings is now trending on a quarterly basis.

Internet use was up last quarter (+4 mins per day), listening to personal music collections continued its upward trend up 5 minutes per week overall and reading books and magazines saw an increase to 30 minutes per week.

*Behavior or listening locations changed, i.e. more time in-car/more listening in-office. Columns total more than 100%.

An update of data collected during Q4 2006 will be released by Bridge Ratings during January 2007.

For additional information, contact Dave Van Dyke at 818.291.6420.

Markets measured: Los Angeles, Phoenix, Chicago, Miami, Boston, St. Louis, Portland, Seattle.

Sample size: 6000 persons 12+. Sample error: +/- 1.2%

Bridge Ratings is a ratings and research company based in Glendale, California. We are dedicated to providing on-going, immediate, reliable, useable and affordable audience measurement services for the radio industry. Our methodology is based on sound consumer research principles. We are in the business of tracking listeners - not listening. Because we are a true research company we offer flexibility