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Sunday, December 2, 2007

Local, Local, Local

I've been at my new job at ABC radio for about a month now and it's great; I'm really enjoying the fact that as Vice President of ABC Radio Networks' Affiliate Relations department, I can interact with so many radio stations across our grand land.

The lessons I learned through my years of working at Bridge Ratings I brought with me and after a few weeks communicating with a much more diverse group of stations than I ever have before, here's what I've learned:

1. Regardless of market size everyone has the same problems and opportunities.

It wasn't always this way, you know. Before consolidation took our industry by storm, major markets and stations in the top 50 had far different considerations in operating their businesses than did operators in markets 51 and below. Pre-'96, top 50 market stations had operating budgets that included marketing, promotion and research. They also had personnel resources that allowed them to be extremely competitive and allowed them to keep their eyes on the various balls they had to juggle. Major market operators only recently have had to deal with managers overseeing multiple stations. Top 50 stations in those days actually had time to plan and strategize for the future and act upon those strategies. They also have years more experience operating multiple properties than do their big market cousins.

Medium and small market operators have always had to work harder at making their businesses work. They did so with good old fashioned sweat and creativity along with building relationships. They still do it this way today.

2. Medium and small market operators are more aware of the importance of reflecting the local audience.

While this has been a staple of broadcast operations for-ever, somewhere along the line major market radio pushed it to the back burner. Now, I'm generalizing here because there are some major market operators who have not only remembered this important element of serving the public interest, they use their major market resources to make a difference in their towns and cities.

Local radio has always been compelling. The genericizing of American radio which has been pushed along by companies with such huge footprints as Clear Channel have literally taken the spine out of these stations which no longer sound like their communities. These stations provide impetus for all listeners - not just Gen-X, Y and Z - to seek alternative entertainment by virtue of the obvious lack of interest in their local communities.

3. Major market management drink their own kool-aid.

These people are so impressed with their climb to the top many have forgotten their roots. I was visiting a small market operator a couple of weeks back and I was taken by his continued passion and optimism for our business.

On the other hand, not a phone call I have with major market managers doesn't include a doomsday outlook. Small market operators don't fear Internet and satellite radio like their big market brethren. Perhaps there is some legitimacy to this perspective since there seems to be wider consumer acceptance of these technologies in the larger markets, yet I have spoken with some major market management who understand that it is NOT Internet radio and it is NOT satellite radio that has caused terrestrial radio's ills.

My view of the radio landscape is undergoing some adjustment simply because I am now exposed to a broader perspective and I love that. In fact, this broader perspective has allowed me to share some of the small and medium market wisdom with the big boys who seem to react positively to a fresh perspective.

I look forward to being exposed to the inclinations of all of the broadcasters I come in contact with these days and sharing them with each other in a way that perhaps has never been done before.

After all the things I learned through the consulting work I've done through my Bridge Ratings experience, I didn't have the ability to share with the industry the insight of so many others.

The insight seems to be helping gain perspective which we can all use from time to time.

Thursday, September 13, 2007

What's Good for the Radio Goose....

Since February's announcement that Sirius satellite radio was interested in acquiring XM, we've seen many twists and turns in Mel Karmazin's effort to convince the FCC and others that a merger is in the best interests of consumers. In Mel's usual style, he has done an expert job of laying out the rationale and presenting it in an intelligent, non-offensive manner.

However, as we near the end of 2007, we seem to be very close to a decision on this event and as I mentioned in an earlier blog, my money now is on the merger getting approved.

The National Association of Broadcasters has done a respectable job of countering satellite radio's rationale in favor of a merger, but the time has come for the NAB to face the "Rule of Consolidation".

The fact is that the NAB has lobbied for consolidation of the radio industry since the early 90's and got permission for radio companies to begin buying up each other in a 1996 act of Congress.

The argument was that not only is consolidation good for the business - it's good for the consumer.

Now, eleven years later, many in our business - even on Wall Street - believe that this wave of consolidation has had negative repercussions on the financial well-being of the radio business.

Again, in the last two years, the major radio companies have been stamping their feet for further consolidation. It seems that owning 8 radio stations in the biggest radio markets wasn't enough. There are those who want to own 10 or more stations in the same market.

Yet when it comes to satellite radio consolidating, the radio industry says "no".

The radio industry is concerned about this proposed merger for many reasons...but none of them are truly onerous.

If the radio industry manages their business properly...

  • A merged satellite radio company will not significantly impact its listenership
  • A merged satellite radio company will not impact radio's revenues and profits
This deal has been examined every which way and in the end, there are no grounds to prevent it.

Bridge Ratings has been studying consumers' reaction to the proposed merger since it was announced in February. Over time and 5 studies, current satellite radio subscribers have become less concerned about the impact of such a merger. Potential satellite radio subscribers are confused, but most will delay their decision to subscribe until a decision is made. This is one reason why year-to-year satellite radio subscriber rates have fallen so precipitously in the last year.

The only negative impact the merger has had on the satellite radio companies is that the news of a potential merger has derailed the sector's growth. That's only temporary.

Satellite radio is a niche business and a merger will not automatically make it a broad-based appeal business.

If consolidation was good for the radio goose why isn't it good for the satellite gander?

Wednesday, September 5, 2007

Will Traditional Radio be Invited to the Wi-Fi Party?

As a proud owner of an iPhone I was thrilled to hear that Steve Jobs had cut the price of the 8 gig iPhone by $200 just in time for the upcoming holiday season. Boy, that makes me feel just great!

But radio broadcasters, we should we feel good or bad that Mr. Jobs didn't 'refresh' his new Fall iPods with FM radio receivers.

The radio industry shouldn't feel slighted that FM radio seems to be at the back of the line of applications that are waiting to be included in America's favorite audio toy. We need to be realistic; it's just never going to happen.

Why is this?

Bridge Ratings has conducted studies over the past two years on iPod and MP3 use and believe me when I say that very few users of these devices want a radio in them. It just is counter-intuitive. Focus groups have been asking why it would make sense to put a radio in an iPod.

Steve Jobs has seen the research too. He's not even contemplating adding a radio to his iPods. Because Mr. Jobs doesn't ever look back. He has the luxury of doing what radio management hasn't had the chance to do in over 7 years - look to the future.

Of more concern to traditional radio is the new iPod Touch which comes with Wi-Fi capability and a Safari browser - the best mobile device browser out there. It's on the iPhone and it makes surfing the Internet effortless.

And now a music-playing device has the ability to go to iTunes and download music direct to the player. How far away are we from a time when these same devices can surf over to an Internet radio website and in a Wi-Fi hot zone listen to Internet radio. Not very far.

Generally, the radio industry has done a decent job and has dedicated some resources to its Internet radio efforts. This has occurred in mostly large and some medium markets. The remaining markets/stations haven't taken the step because they are intimidated by the streaming/copyright expense issue and they really don't know how to do an effective job of delivering an Internet radio product.

But if you can feel that Wi-Fi enabled MP3 player train bearing down on you, you are not alone, traditional radio. It's coming and coming fast and as far as Internet radio is concerned, traditional radio's greatest weakness is the vast choice (thousands) of stations available on the Internet. Practically every taste is served. And soon it will be served in a small hand-held device.

Traditional radio's greatest strength is its brand and the current distribution system of blasting its programming across metropolises (is that a word) up and down our great land. Radio's bright leaders should take these Steve Jobs press conferences to heart because each time Jobs steps on that stage, radio's exclusivity and relevance shrinks.

If you have not instituted an Internet radio effort for your company or station, don't wait too much longer. The pervasiveness of portable devices that can bring the world of radio to a hand-held music player or mobile phone is on the horizon. In fact, some already do.

You want to be invited to that party.

Monday, August 27, 2007

The Radio Fortune Teller: Teen Radio to Return

I received two interesting calls in the last 24 hours - from 'kingpins' at high levels at two of the biggest advertising agencies in the land. They wanted to apologize.

Apologies from such lofty men and women who control so much of the advertising dollar in the U.S. are hard to come by, so I promised that comments I may use in my blog or in research we do at Bridge Ratings would be anonymous.

One of biggest - and quietest - radio industry issues to come out of the last ten years has been the theory that one key reason radio is experiencing such attrition from teens and young adults is the perfect storm that was created as technology eclipsed radio's lack of compelling youth radio content. The logic goes that if radio had been a bit more aggressive with radio programming geared to 13-24 year olds over the last ten years, it is possible that radio time-spent-listening among this group would not have fallen so sharply.

But, the chicken-and-the-egg fairytale dictates that radio would have gladly pursued such a course of teen programming if ad agencies would have supported it. No big ad dollars for teen radio - not likely money-hungry broadcasters would spend the resources required.

So, what about those calls from ad agency big-shots?

The calls (I just got another while writing this blog) were about the just-released report by TRU, a subsidiary of Research International, that revealed that teen spending in 2006 had reached $179 billion. That amounts to about $180 in disposable income per average teen per month. These media buyers have apparently awoken from a deep sleep (or deep denial) and were asking poignant questions about the possibility of a rebirth of youth radio and what would I recommend.

I pointed them to a Bridge Ratings' study we published earlier this year that glancingly mentioned some new youth radio formats that had tested extremely well. Not really a mystery since the radio formats were put together and researched with the help of a pretty smart group of average 13-21 year olds.

Formats of particular interest to these media buyers had working titles of "Youth News" and "Current Blend".

"Youth News" is fairly easy to figure out - only you wouldn't believe how good it sounded in testing. That's because this new youth information format was written and delivered by no one older than 24 and it had music throughout.

"Current Blend" is a bit more difficult to decipher. However, I can tell you that it's a music-focused radio format that is not currently heard anywhere on the planet on traditional, satellite or Internet radio!

So, I'm excited because there seems to be a glimmer of anticipation on the part of some of the smarter media buyers about radio formats that focus on 13-21 year olds.

It would seem that they have just been waiting for something like this to come along.

I asked these buyers if radio stations began popping up around the country with these two ideas (and more), would they send more dollars - many more dollars - their way, and these buyers gave a profound "yes"! response...."...but only if they get ratings..." they concluded.

I asked, "Where have you been placing youth ad dollars over the last few years?".

They replied, "CHR and Rock stations, primarily. But we know we're missing a tremendous number of these kids because many of them don't listen to those formats."

I have no doubt that traditional radio can regain some of the lost youth listening it has been faced with in recent years. And these formats will do amazingly well with both of Arbitron's methodologies (diary and People Meter).

Which broadcaster(s) have the courage to step up?

I'm waiting for your call. 818-291-6420.

Monday, August 20, 2007

HD Radio: Why Marketing Matters

I was impressed with the British Invasion in the 1960's. "Those Brits are real good", I thought to myself as the whole string of music successes starting with the Beatles came across the 'pond' to invade America.

Now, they're showing up America once again, but this time it's in the area of HD radio - or "Digital Radio" as they package it.

In a survey just released by Britain's ratings service RAJAR, more than 25% of the British population listen to digital radio, defined as Digital Audio Broadcasting, Digital Television and the Internet.

At first glance, this is rather impressive. However, when combining those three digital radio sources in the U.S., the percentage of the American populous that listens to some form of digital radio is closer to 50%:
  • Internet radio - 60 million
  • HD Radio - 500,000
  • Digital TV - 90 million homes
What is intriguing is the marketing of digital radios (comparable to the U.S. HD concept).

Unlike the U.S. where broadcasters must market HD radio by themselves and with the help of the National Association of Broadcasters, the United Kingdom has a dedicated body: the Digital Radio Development Bureau.

It has become clear in our studies at Bridge Ratings that there is considerable consumer confusion in the U.S. about HD radio and its benefits. Three quarters of the U.S. population has heard of "HD Radio". Less than 5% really want it.

So, the Brits and their Digital Radio Development Bureau are taking the U.S. broadcasters to school about digital radio. Here are some of the ways Digital Radio is marketed in the UK:

  • More Choice - "Because of the way it transmits a signal, DAB Digital Radio can double the number of radio stations you can get on FM. Many cities will pick up around 40 stations, and in London you can receive more than 50!

There are national, local and regional stations on DAB Digital Radio, and more than 85% of the population is covered by the DAB signal.

It's not just more of the same... there are new, unique stations on DAB with programmes designed for different segments of the population. So, rather than trying to be all things to all people, DAB means you can have stations dedicated entirely to dance, hip-hop, garage, rock, jazz, big band, country, pop, soul and disco. Or your can get stations specifically for young children, the mature listener, ethnic communities, news junkies, sports fans, lovers of the spoken word, world music and environmentalists, gays, classical buffs, other words, something for everyone."
  • No Interference - "DAB Digital Radio means interference free listening in digital quality sound. There's no hiss, crackle, or pop, no fading, no overlap, just great radio all the time. We've surveyed thousands of DAB owners and nearly 90% reckon DAB sounds great."
  • Ease of Use - "Quick, what's the frequency of your favourite FM radio station? You'd be surprised how many people know the name, and kind of, sort of where it is on the dial, but waste time searching around for it. Some people are even afraid to change stations because they worry they'll never get back to their favourite. Others mark the dial with a pen, or sticky tape so they'll always be able to find their way home... a bit like a trail of breadcrumbs.

    With a DAB Digital Radio there are no frequencies. Just choose the station you want by name from the text display screen. It's easy every time and you don't need to worry about getting lost."
  • Control Time - "With some DAB Digital Radios let you pause and rewind live radio. And with some of the latest models, you can record radio to a memory card. For the first time this puts you in control of when you listen to the radio. You can stop time, go back in time, or set a timer to record a future programme."
  • No Re-tuning - "National DAB Digital Radio stations, both commercial and BBC, are broadcast on the same frequency across the country, so you never need to retune when you're on the move."
Does all this sound vaguely familiar to you? It should because it is almost exactly the Satellite Radio model. In the UK, though, the contemporary evolution of radio is focused on Digital Audio Broadcasting (DAB) services, such as HD Radio rather than satellite radio.

Much has been said of American radio's indecisiveness when it came to moving into the 21st century with HD/Digital Radio. It took so long, Satellite Radio took the position right away from U.S. Broadcasters. And now the fight to insert HD radio into the lives of Americans has become an offer of another product where there already is one.

Yet, marketing may solve this problem - but it also may be too late.

In our society we thrive on choice - too much choice - and the successful products that have identical competitors are the ones that market and position themselves most skillfully. Has anyone read Ries & Trout's The 22 Immutable Laws of Marketing"?

Oh, and one more thing. Digital radios in the UK start at about $58 (29 pounds).

So, while the UK has managed to effectively launch Digital Radio, U.S. Broadcasters - who should know better - are fighting a positioning battle which, frankly, is over.

HD Radio in the U.S. is a niche market out sized by Internet Radio and Digital TV music services. And portable digital radio will be real with the arrival in the near future of wide-area-wireless Internet or Wi-Max.

This lesson has been difficult to learn - but it is time to face the facts.

Wednesday, August 15, 2007

The Last Brand Standing

Choice is a good thing, right? Not so fast.

Having choice has its place, but the staggering array of consumer goods from which we must choose overwhelms the average consumer, and in a 2005 book psychology professor Barry Schwartz argues that that's not such a good thing.

In the book "The Paradox of Choice", Schwartz tells us that constantly being asked to make choices, even about the simplest things, forces us to "invest time, energy, and no small amount of self-doubt, and dread." There comes a point, he contends, at which choice becomes debilitating rather than liberating. Did I make the right choice? Can I ever make the right choice?

It would be easy to write off this book as merely an extended riff on that well-worn phrase "too much of a good thing," but that would be a mistake.

Part of the professor's point in the book is that rules and constraints in society help us make decisions and this is a good thing and should be embraced.

The book's concepts are easily applied to media consumption as well. Because of the growing number of choices we are presented with, consumers of media don't always have the time to look at all the information out there to make the best choice or to even consider all of the options. People expect certain decisions to be made for them.

The term "decision stress" has also been tossed around by marketers over the years and Professor Schwartz's concepts hinge on similar rationale that when faced with too many choices a consumer will often "short-circuit" with too much information overload and tend to decide on what to purchase or read or listen to using the easiest method.

In most cases brand is the balm that soothes decision stress.

And it is for this reason that those of us running media companies in 2007 should consider just how powerful our brand is - or should be.

In our recent studies of media consumption - especially in the Internet radio space - Bridge Ratings has discovered that with tens of thousands of Internet radio options, most average consumers of Internet radio will gravitate to a brand they are familiar with. In many cases they do this to reduce or eliminate the "decision stress".

We have seen new consumers interested in Internet radio go directly to for their Internet radio experience without much thought about what else is out there. Why? It's a brand they know and it makes the process of deciding easier.

This process of "going to the brand" is more prevalent in media than in other consumer products and services. Why? Because in most cases, media is simply a utility, something that doesn't hold significant importance to our lives and like the light switch on the wall, we as consumers of media tend to "throw the switch" on whatever media we are consuming without much thought.

Of course, this is a generalized perspective. There are passionate consumers of media that give great thought to what they watch or listen to, but generally, we have found that the average consumer has too many decisions they need to make each day and any time the decision process can be eliminated or reduced, most consumers will take that road.

Certainly, deciding on which radio station to listen to doesn't hold the significance in consumers' lives that selection of which doctor should be seen or which food product will enrich health, and therein lies the most key of all of the factors leading to "decision stress". The hierarchy.

To make the process of decision easier, consumers have an internal mental product ladder upon which they have placed their favorite brands.

They go to a store looking for a product and, in most cases, when faced with too much choice, a consumer makes the easy choice - almost without thought - and goes for the brand they know.

If brand building has not been a part of your business strategy, it is time to invest time, energy and yes, even financial resources, into building, maintaining, supporting and/or strengthening your brand.

Because media consumption isn't getting any easier for the consumer. Whether you run a radio station, and Internet radio business or produce content for other digital and mobile media, your brand will be they key to unlocking consumer use and recall.

The easier you make it for the consumer to make that choice, the more likely they'll choose you.

Monday, August 6, 2007

The Radio Airplay Debate

Since Bridge Ratings was one of the first to expose the truth about how radio airplay affects music sales, I think it only appropriate that I weigh in on this latest controversy that is brewing.

Seems the music industry has forgotten the "partnership years" when radio and records virtually changed the way music was consumed. Performers and labels alike believe radio has a one-side relationship with the music industry.

Programming radio stations was one of the favorite aspects of my career and a large part of those years was spent in the company of some of the record industry's best, most creative people. Most of the time those people where record company promotion people, whom I loved working with.

Many of the relationships I had with these people turned out to be much more than the typical program director/record label promo people relationship where they would come by the radio station on Tuesday's and wait outside my office until it was their turn to "pitch" their latest and greatest artists or albums.

Many of these people became good friends and I had the chance to learn just how hard they worked and how difficult their jobs were.

But in the seventies and eighties, radio and records worked as a team of sorts. The record promotion people would provide data or insight as to the record's benefits. Remember, this was before the Internet so airplay data was difficult to come by - part of record promo people's gigs was to enlighten, and the program directors and music directors of the industry would assimilate that information and determine whether songs and albums were worthy of airplay.

One music was added to radio playlists the relationship didn't end there. There were concert promotions, music store promotions and artist interviews, the two industries were connected at the hip in an effort to give momentum to careers of worthy performers. Sure it helped sell records, but the radio industry benefited just as well.

The world seems to have changed since then and now it's coming back to bite the radio industry in the butt. Those that represent the music industry - both corporate and performers alike - feel it is time that radio's "free ride" is over. They want their money.

See, radio pays licensing fees to ASCAP, BMI and SESAC based on the station's revenues. The better a radio station's revenue, the more fees that station pays. It has always been a common belief that radio stations that rely on music for their ratings should pay music publishing houses for the right to use the music that drove revenues for the stations. Fair enough.

Now, the performers - who have not been receiving any special licensing or royalty from radio - want to pluck from the "money tree" they think radio is. It is, they claim, time for the performers of songs to benefit from the years of airplay.

Radio's argument is that the two industries have worked in tandem to benefit the music industry. Radio has - and continues to be - a wonderful promotional vehicle for artists who write and perform music no matter the genre.

In 2005 Bridge Ratings conducted a study to determine the influence radio airplay, Internet airplay and MP3 plays have on the consumer. Due to this current controversy, we just completed an update on this study.

Here are a few facts:

*88% of radio's total audience listens to music radio at least once a week

*50% of these listeners consider music radio to be their primary radio experience.

*Nearly 90% of these "music primaries" agree with the phrase: "I have purchased music I have heard on the radio."

*32% of these radio consumers have purchased music through brick and mortar stores or on-line in the last 30 days.

Does this sound like the radio's relationship with the music industry's artists and performers is one-sided? No.

Perhaps the more appropriate step is for the music labels to offer all performers new or updated agreements in order to include them in the cash flow from music sales.

Radio influences music purchase. There is no doubt in my mind.

Sunday, July 29, 2007

The Little Merger That Could

Here we are six months down the road from the first announcement by XM and Sirius that they intended to merge these two companies to form a singular satellite radio company.

From the beginning, Bridge Ratings has examined the response by the consumer - both current and potential satellite radio subscribers - to better understand the perceptions about such a merger.

From the start, the mood among both groups of consumers was not positive. In fact, they were very near equal. The general consensus was that it would be bad for the public. The current subscribers we interviewed were more concerned than the potential subscriber group, but I think that had more to do with the passion current subscribers have for their preferred service and an emotional response to change.

Now, six months later, the mood has generally moved to the more positive side by current subscribers while potential subs have not moved much off their initial "monopolies aren't good for consumers" position. Perhaps the difference in perceptions by these two consumer groups has more to do with the satellite companies marketing to these subscribers. I think they simply did a better job internally marketing the coming merger.

And as Congress considers Mel Karmazin's statements and all the supportive paperwork associated with both sides' reasons for merging or not, there are two signs now that are much clearer for me which point to the approval of this merger.

1) God love David Rehr, President of the National Association of Broadcasters (NAB). He has been on the job only a short time and done a great job. He has certainly made a case for his passion for the radio business and his willingness and ability to be direct and confrontational in defense of all things radio.

As a great consumer products CEO once told me about products of all kind, "Products have strengths and weaknesses...and in most cases, one's strength is also one's weakness."

In the case of the NAB and Mr. Rehr in particular, he doth protest too much.

In his passion to protect radio in the case of a satellite merger, Mr. Rehr has firmly crystallized Mr. Karmazin's point that a merged satellite company is not a monopoly because the "marketplace" is varied with many competitive offerings.

The whole merger approval likely will hinge on a singular point: the definition of the competitive market in which satellite radio competes. Is their market satellite radio? Or is it all audio radio which today is defined not only by satellite radio, but traditional radio, Internet radio, iPods, iPhones, Podcasts, cell phones, etc., etc.

Mr. Rehr's enthusiasm has confirmed for Congress that terrestrial radio is so concerned about the possibility of a merger, that the louder Mr. Rehr protests, the more obvious it is that traditional radio considers satellite radio a competitive medium thereby defining the market.

The second reason I think this merger will go forward?

The early departure of XM's brilliant CEO Hugh Panero. He was to leave his post at the point the merger occurred, but the news is so encouraging, Hugh has set an August date for vacating his office in order for the cleaning crews in DC to get his office ready for Mel. There's confidence there that cannot be denied and it is backed by encouragement from Capitol Hill.

Now with everything I know, I believe that between XM & Sirius, the combined entity will offer a solid consumer product, will not diminish the current experience and will encourage potential subscribers - especially those buying cars and trucks - to go forward with their choice.

And, oh yes, I forgot: Howard Stern will attract an additional 500,000 to 800,000 new listeners over the next 18 months. XM subscribers who have missed him.

Was the approval of this merger terrestrial radio's to lose? I think so. The strategy was wrong. The NAB made the case for the other side.

Radio should now forget about satellite radio as a competitor, get back on track (it's been distracted for five years) and look to developing better content, re-hire its best talent that has left the business and market its digital platforms.

Your comments are always welcome.

Monday, July 23, 2007

2010: A Radio Odyssey

Did you see the film "2010", the sequel to 2001: A Space Odyssey? A joint American- Soviet expedition is sent to Jupiter to discover what went wrong with the U.S.S. Discovery against a backdrop of growing global tensions. Among the mysteries the expedition must explain are the appearance of a huge black monolith in Jupiter's orbit and the fate of H.A.L., the Discovery's sentient computer.

It was released in 1984. Good times.

That was before the Internet, before rap replaced pop, before iPods replaced discmans, file sharing changed music purchase habits, satellite radio, digital music, Internet radio, and terrorism was something that happened overseas.

Hard to believe we're closer to 2010 now than we are to 2001.

And 2010 will be a tipping point for radio in many ways.

From developing behaviors of radio listeners, changes in the ways they use radio are occurring more rapidly than perhaps is commonly known. Much like time-lapse photography where you don't recognize change unless you piece together views of behavior over long periods of time, the change in media has truly been a rapid development over a short period of time and radio's 'light at the end of the tunnel' is more likely to be an on-coming train than an end to difficult times.

And like the movie "2010", if radio had had the ability to send a probe into the future back in 1984 to learn what went wrong, hindsight would most surely have kick-started an industry wide reaction that would have perhaps led to a different outcome.

For here we are a mere 29 months from 2010 and radio is running out of time.

Running out of time to remain competitive.

Running out of time to develop its people.

Running out of time to adapt to the digital universe.

Running out of time to learn how to microtarget.

Looking back over the last 6 years of work with clients of Bridge Ratings, it is becoming agonizingly clear that while the radio business has made solid efforts to grow its industry and to adapt it to the changing technological realities, it truly has not done enough. And this is what concerns me: current senior management at radio's best companies is not embracing the fact quickly enough that the future of our business rests solely on their shoulders - on their watch.

Today's senior radio managers will be long gone leaving their trainees the keys to the kingdom. It is the opinion of many that the next generation of radio leaders, in general, do not have the technical and operational knowledge or experience to lead this business into the future.

Left in the hands of less experienced, inappropriately trained and myopic junior management, the industry will struggle to maintain status quo.

There is little going on in the area of strategic development in our business: programming development, creative sales development, new revenue stream development, marketing development and personnel/management development.

Frankly, I'm flummoxed (great word) about why this industry doesn't respond to the implications of its future.

Certainly, there has been plenty of coverage of multiple future forecasts about impending change and how fast it is occurring and the impact of audience attrition. So, it isn't non-awareness - and it isn't stupidity.

It is inertia more than actual resources that is the problem. And inertia in many ways is a much more difficult quagmire to be free of.

Yes, 2010 is coming fast and radio seems less prepared to exist in a technologically accelerating world.

It does, however, have a resource most of its competitors covet: its people. And its people are what just might save the radio industry from being swept over by the tide of change.

Let us hope that the powers that be know this too.

Friday, July 13, 2007

How to Guarrantee HD Radio's Success

What's 2 years old and doesn't get any respect? HD radio.

Radio's theoretical saving grace is five years too late and by all the data we can see at Bridge Ratings, it will be a smaller consumer niche than satellite radio...if it continues down the path it is currently on.

And with the hundreds of thousands of dollars being spent by American radio companies to upgrade their existing equipment for HD capable broadcasts, there is a dire need for HD to be the technically next great thing for terrestrial radio. But how does this get done?

The answer lies in taking a look at the FCC's mandate for HDTV and applying it to radio.

The FCC notified U.S. television broadcasters that the standard for transmitting TV over-the-air would permanently change from analog to digital. While there are many technical, political, and economic reasons for and implications of this change, the end-result for the American TV audience is a dramatic improvement in picture and sound quality.

According to the original FCC rules, all full power stations were to convert to digital by the beginning of 2007, followed by shutdown of analog broadcasting. An escape clause stipulated that 85% of receivers in the service area must be "capable" of receiving digital signals before the shutdown could occur. At the time of analog shutoff, one of the channels (digital or analog) would then be returned to the government, with the other channel remaining as a digital station; the freed spectrum could then be used for other TV stations, with UHF channels at the high end of the band being decommissioned and sold for other uses.

The 2007 deadline could not be satisfied under many interpretations of 85% "capability" of digital signal reception. So....

On February 8th, 2006, President Bush signed into law the "Digital Television Transition and Public Safety Act of 2005". This law mandated a hard shut-off date of February 17, 2009 for the end of all analog (NTSC) TV transmissions in the U.S.

A similar hard shut-off date for the end of all analog FM radio must occur in order for HD radio to get past its current consumer growth doldrums. The forced shut-down of analog radio will give America the incentive to adopt HD radio.

Perhaps more importantly, like HDTV, a forced shut-off will force consumers to become more familiar with HD radio's offerings and benefits which will, in turn, motivate broadcasters to develop stimulating content.

This is really the only way to quickly stimulate the rapid adoption of this new technology. One wonders why this wasn't the FCC's plan all along. Why place a mandatory transition deadline on television stations and not radio?

Even our British broadcast neighbors are beginning to lobby their FCC equivalent (Ofcom, the Office of Communications) to turn off the FM band by 2015 in order to force British broadcasters to become digital. They have said they fear being antiquated in the face of all digital audio technologies.

They have a point.

What do you think?

Monday, July 9, 2007

Radio Moves Consumers to Buy

Once again, radio gets a bad rap.

This one comes from the University of Texas professor Stan Leibowitz who claims in a paper first published in January of this year that radio airplay can actually hurt music sales. I'm not sure what, if any sample, he used to come to this conclusion, but study after study we've done at Bridge Ratings is more than enough to convince me that radio moves music product. A variety of other industry research confirms this notion.

Both physical CD's and digital downloads are positively impacted by radio airplay; that's what our consumer samples have told us. We've been doing these types of studies since 2002.

In fact, let me reiterate a quote from the summary section of a study Bridge Ratings conducted in 2005 and confirmed again in '06: "Radio airplay - especially of new music - directly and positively affects consumers interest in listening to and subsequently buying new music. Digital downloads are the primary media of the young and early adopter young adults, and CD sales are still the media of choice for adults, especially those with younger children."

Our studies have gone on to establish that a radio format leaning heavily on new music and structured in such a way as to allow listener input on the songs being played, would be highly successful with the 13-21 year old age group with bleed-over into the upper 20's. This is because (we discovered) that no matter what the age group, consumers use traditional radio stations to satisfy their need for "surprises" in the form of either unexpected programming or new music.

And it is specifically the stations currently airing a predominance of current music that garner an audience whose number 1 reason for tuning in is music discovery. Consumers of this type of radio use those radio stations as a filter, screening out the poor and playing the best of the rest.

Yes, radio does sell music - and it sells tons of other consumer products. Music just happens to be easier to sell on the radio because the product is the commercial.

Here's a calculation the record labels might want to consider:

A Los Angeles radio station with average ratings playing 8 current songs an hour is, in essence, playing 8 commercials for those artists and the record labels. We've proven music moves product.

Over the course of a typical week, if that radio station received compensation as it would for its typical commercials, it should receive $2,150,400 for the value of the airtime that week alone!

Now, of course, these radio stations benefit greatly from accessibility to that music product given so generously by music labels. It is, after all, the station's programming content. And, truthfully, those stations garner ratings that generate revenue that generates profit. True. It's a symbiotic relationship this thing that radio and the labels have, but it works - has worked - and will continue to work.

To say that radio airplay hurts music sales is a misguided statement which either needs to be recanted or at least better explained.

Sunday, July 1, 2007

Survivor: Internet Radio

Last month's "Day of Silence" was an eye-opener on two fronts. First, it is clear that through the significant support of thousands of Internet radio stations - small and large - a message came through loud and clear to Congress, to the Copyright Royalty Board, music performers and the American public that the numbers don't lie, i.e. there is a huge passionate audience out there for Internet radio. That's the good news.

Those I've communicated with at political levels were impressed by the thousands of calls but they don't think the noise created by unhappy Internet Radio fans will change congressional opinion. Congress is already convinced that something must be done to save the industry that could be wiped off the face of the earth with the Copyright Royalty Board's rate increases. It just needs to come up with a suitable compromise.

The second eye-opener has to do with the data we collected at Bridge Ratings over the three days surrounding the "Day of Silence".

1. We learned that 21% of the American public listens to Internet Radio on a weekly basis. That's up from 19% earlier this year.

2. We learned that of this 21% that listen weekly, more than half (55%) did NOT listen to Internet Radio on Tuesday, the "Day of Silence".

3. More interestingly, we found that 45% of that 21% DID listen.

4. 62% of the sample found their preferred Internet Radio station silent on Tuesday.

5. What did this 62% do when they found out their preferred Internet Radio station was silent? 72% of them found another Internet Radio station to listen to.

6. By Wednesday, the day after, audience levels returned to normal. 89% of the 21% had listened.

What's clear by this study is that even if the majority of Internet Radio stations go 'dark' should the royalty rates force them 'off the air', the consumer will find replacements in other surviving Internet Radio stations.

Perhaps this is what some of the big boys who did NOT support the "Day of Silence" have been thinking. Elimination of the majority of the Internet Radio competition will generate larger audiences for those still standing.

And even if the royalty rates skyrocket, perhaps it is feasible that these larger audiences will allow the remaining Internet broadcasters to monetize sufficiently to make the business work.

This may be what SoundExchange and the performers are hoping for, but in all likelihood the consumer will once again get the short end of the stick.

Wednesday, June 20, 2007

Radio: A Great Place to Work?

I have just completed reading a massive study on the Best Places to Work. Guess what? Radio doesn't fare very well.

It's fascinating in that the study takes into account issues that get to the root of what makes employees happy and productive:

* The Credibility Index
* The Respect Index

The study consists of approximately 40 statements that cover company credibility, respect, fairness, pride and camaraderie as well as agree/disagree statements about the work experience and satisfaction of the work along with how the company itself contributes to employee feelings of fulfillment.

The radio industry performs so poorly on employee job satisfaction, job fulfillment and company credibility that it has a negative score. This means that more people are leaving the industry than are joining it and a high percentage (29%) of those who remain employed in the business are either worried about their future with the company they are with or are seeking other employment.

When one considers all of the issues facing the radio industry mid-2007, I don't believe companies place employee satisfaction or fulfillment near the top of the list. The most important matters of financial and legal stability remain at the top of lists.

In one intriguing comparison report, company management rank "employee morale and job fulfillment" as one of their top three most important issues.

The same questionnaire filled out by company employees ranks "employee morale and job fulfillment" out of the top 10 most important issues employees believe are considered by their employers.

The radio industry has its problems whether it be audience attrition or technology challenges but it has become so myopic in its view of the world when it comes to the welfare of its most important resource - its people - that until the industry returns to treating its people with respect, caring about their futures, and motivating employees all of the other challenges the industry faces will hardly have a chance of being overcome.

Many of managers and radio industry employees I speak with have known for some time that radio is no longer an industry that lives up to the promise it did 30 years ago, but to see the industry I love rank so low in black & white, truly brings home where things stand.

Sunday, June 10, 2007

Chicken Little?

I just returned from the "New Media Seminar 10" in New York City. It's an event sponsored by industry publication "Talkers Magazine" published by long-time industry visionary Michael Harrison. The event draws about 600 programmers, managers and related people who are tied to the news/talk radio industry.

Great group of people. Excellent seminars. Thought-provoking commentaries. Stimulating cocktail party discussions.

Yet, some of the buzz being dispensed to the attendees this year is that "terrestrial radio"is in serious trouble if it doesn't get its act together. There was a sense among those there that news/talk and talk radio is the salvation of terrestrial radio primarily because music radio is dead, dead and more dead. It's this MP3 player thing that's going around.

I respect all of those in attendance who got up on the dais and the podiums and tossed out this theory, philosophy or prediction, but they're just plain wrong. And I'm getting fatigued with "bloggers"and journalists who continue to spout this incorrect theory.

It's a matter of degree really. Certainly, people are finding multiple audio alternatives for their audio listening enjoyment. They're all good and serve a distinct purpose and fulfill a specific need and mood. And the "pie" is being divided up into more pieces.

But all the research I've seen indicates that the public love this. You've heard that "Content is King"? For consumers "Choice is king".

Terrestrial radio will sustain whether it is Talk radio or music radio. Why would anyone listen to terrestrial FM music radio when they can provide themselves all the custom songs they want - whenever they want?

Because radio provides something MP3 players don't: surprises and music discovery. "Pandora's" more of a threat than MP3 players. God help us all if royalty rates slam the door shut on Pandora and others like it. The point is, music on terrestrial, when programmed properly, can easily provide a unique component that will cause people to continue to want to tune in when they are in the mood for it.

So, if you know someone trying to sell this bill of goods that music on FM is going to be extinct within 5 years (let alone 10), have them call me. My personal cell phone number is 323.829.3201. I'll be glad to explain it to them.

Meanwhile, you know what happened when "Chicken Little" cried "the sky is falling", right? Do you even know who Chicken Little is?

He was wrong.

Wednesday, June 6, 2007

Radio Ownership: The Minority Gap?

A new report was released this week indicating that women and minorities 'are largely absent from radio station ownership, thanks to a surge in media consolidation'.

Gloria Steinem led a conference call discussion about the study which is designed to urge the Federal Communications Commission to refrain from further relaxing restrictions on ownership of broadcast stations by large companies.

I'm not a big fan of consolidation - not after what the 1996 move has done to the industry. Consolidation is just one facet of a perfect storm of events that has led the radio industry to its current doldrums.

Based on an analysis Bridge Ratings conducted late last year as part of the 10th anniversary of the 1996 consolidation ruling in Congress, the act of consolidating properties by large companies has not been responsible for the lack of women and minority ownership. It's just not that easy to get funded! The funding process for any individual is grueling and - especially in the current industry revenue growth environment - delivering acceptable performance targets is a difficult task for any interested owner regardless of race or gender.

I don't think women and minorities have necessarily been systematically cut off from media ownership. The public-interest group study released this week thinks they have.

Women own 6% of all full-power commercial radio stations nationwide and racial or ethnic minorities own 7.7%.

And while Ms. Steinem and others - including the two Democratic members of the FCC - would like to see a closer parity in ownership to women and minority population percentages - it just won't happen anytime soon.

Yes, I agree that there should be changes in ownership rules in order to give more individuals the opportunity to own and operate radio stations. Hold ownership rules where they are currently or reduce the number of stations that can be owned, but the women and minority percentages won't change significantly because of it.

When the financing environment changes significantly or special preferences are offered by the financial funding community to women and minorities who prove they are able to operate, only then will this imbalance improve.

Consolidation has little to do with it.

Monday, May 28, 2007

Nostalgia: Everybody's Sgt. Peppering

Hard to believe that June 4 is the 40th anniversary of the monumental "Sgt. Pepper's Lonely Heart's Club Band" album by the Beatles. And, rightly so, in this world of 'everyone-gets-to-voice-their-opinion-blogs', everyone is writing about it.

"Sgt. Pepper's" changed so much for so many, but in particular it had the power to change the thinking of a generation of young people. It influenced worldwide culture. 1967 was a watershed year and the release of such a creative musical endeavor represented a lifestyle shift to a higher gear.

Some of the people who were in their formative years (between 16 and 20 years of age) at the time eventually would find themselves in the radio business and "Sgt. Pepper's" systematically and ethereally had an impact on the early direction of rock radio.

When the album first was released on June 4, 1967 radio was all about the single; pop hits penetrating listeners' ears on powerhouse stations like WABC-AM in New York, WLS in Chicago and KHJ in Los Angeles. Suddenly, fans of the Beatles noticed something changed with their favorite band. The group had created an entire statement with their album; all of the songs seemed to tie in with the theme of the album and suddenly we all started listening to music differently - seeking subtle tie-ins between song and concept and realizing that "With a Little Help From My Friends" really sounded like crap on AM, but sounded like technicolor on FM.

And like many like me at the time, "Sgt. Pepper" opened a door in my mind about how cool radio could be.

What is amazing about this entire "Sgt. Pepper" experience is that while the Beatles stretched themselves to be creative with the recording of this album, they didn't really appreciate at the time of the recordings what affect these songs would have on the world. The only thing they cared about each day going into the studios was that they recreate on tape what they heard in their heads, consistently pushing George Martin to produce what they heard and seeking guidance from engineer-extrordinaire Geoff Emerick to make it sound unlike anything anyone had heard before.

The album took six months to record - a huge detour in music recording in those days. Prior to "Sgt. Pepper", the Beatles - and most other artists - would more often record an album's worth of songs in a week and get it pressed and out to the public within the month. "Pepper" was different because the 'boys' had decided just prior to recording the album that they would stop touring and devote their time to quality recordings. They were focused and on a mission.

On this 40th anniversary of such a superb creative effort which influenced active and passive music lovers alike, it's with melancholy that I think of the general lack of creativity that is presented in the music and radio business these days.

Generally, the music released by record labels seems uninspired. And while there are some very interesting things happening on the Internet with Indie bands, in general the malaise that has stricken the radio industry has infected the music industry - or vice versa.

There are a small number of creative radio stations popping up around the country, but there is also a tiredness that is pervasive in the radio industry - including satellite radio - that also overcomes people in their 60's when they realize they just don't feel the same when they get out of bed in the morning.

When "Sgt. Pepper" was released, rock radio and the music industry were bound together in an adolescent growth period for both industries. The two businesses seemed to work more closely together to make "it" work. As a program director for rock radio stations in the early 70's, I can attest to a different relationship program directors had with their music company reps. At least I felt we were on the same team with the goal of getting the best music (on vinyl) out to the masses.

"Sgt. Pepper" opened the door and a flood of interesting new albums followed:
  • "Bookends" by Simon & Garfunkle, "Wheels of Fire" by Cream, "Waiting for the Sun" by the Doors and "Cheap Thrills" by Big Brother & The Holding Company (Janis Joplin) - all in 1968.
  • "Blood, Sweat & Tears", "Blind Faith", "Zeppelin II" and "Abbey Road" in 1969.
What will it take to revitalize the music and radio industries' in 2007? It's anyone's guess. Inspiration can come from anywhere.

But we need another "Sgt. Pepper" event.

I, for one, don't think we'll ever experience such a cultural phenom again, which is a shame because it literally changed the world.

Wednesday, May 23, 2007

And in this corner....Pandora Mobile Radio!

Sprint Nextel Corp and Pandora Media Inc., have teamed up to offer the personalized streaming radio service to its mobile phone users. And Pandora is likely not going to stop there. We figure Sprint is just the first of many mobile carriers. Pandora also announced this week an up-coming Wi-Fi music player. Uh-Oh! Faster than you can say "Here comes wireless Internet Radio", we've got a new contender.

In fact, Pandora founder and all-around nice guy Tim Westergren was quoted as saying "We knew that if we wanted to be radio with a capital 'R', we have to be everywhere, and not just on the Internet. We knew we had to make it mobile."

And so, with this announcement, the wireless Internet radio era has begun. I believe that in the future this watershed announcement will be known as the moment everything changed. You are witnessing history in the making.

For as Bridge Ratings has been projecting for at least three years, wireless Internet radio poses the greatest threat to terrestrial radio for just the reason Mr. Westergren stated - it had to be available everywhere.

And while our studies also show that about 25% of Americans are highly interested in some form of radio on their cell phones, the true flood will begin when portable Wi-Fi Internet Radios begin selling at Walmart and Target.

But what it comes down to for traditional radio is not to get spooked by all this technology. At the end of the day, it comes down to how good your product/content is. As radio consultant Walter Sabo has said, "every day every medium available to the consumer starts from scratch to win an audience."

HBO proves this content rule almost every week. Fox figured out a way to get 30+ million viewers to tune in for "American Idol" despite of all the competition. It's true.

The word "compelling" is thrown around a lot these days but it's becoming clear that regardless of the medium, whatever the content, it's got to grab the audience because it's a dog-fight out there. Every day - every tune-in - every moment has got to have elements of fascination to it.

And while terrestrial radio is bound to have some issues with wireless Internet radio, we're finding that given a choice between a wireless Pandora and an MP3 player, almost 50% of the digital player owners we researched think that Pandora can give them something their iPod can't: surprises and music discovery.

Welcome to the new frontier; it's only going to get more interesting!

Monday, May 7, 2007

Tivo For the Radio? It's Here!

I've been invited to participate in a grand new advancement in technology which marries radio and cell phones together in a way that's never been done before.

It makes radio interactive with its listeners and gives its listeners on-demand content!

Imagine listening to your favorite talk show personality on your way to work in the car. They just hit a great patch of compelling programming that pulls you in when your road trip is over. You've got to get out of the car. But you really would like to hear how this talk segment goes. Sorry. You turn off the radio and move on with your day.

But what if you could pick up listening to that radio show where you left off and time-shift that program to whenever you have some time later on.

Or maybe you want a news update now, not at the top of the hour when the local station's news comes on. Wouldn't it be great if you could access national or local news when and where you wanted?

How about that local traffic report you missed.

Or the weather alert.

Well, it's coming to a cell phone near you and you don't need to download any special software nor do you need a special phone. In fact, it works with any phone - any carrier - anywhere!

This miracle is forthcoming in a matter of weeks from a new media company called Cellecast. And while it's a concept that will work for any type of radio programming, it's my opinion that Cellecast was made for news/talk radio.

The cool thing about NewsTalk and other information programming is its relevance and immediacy to what is going on in the world right now. And while I will likely want to go back into the archives of some of my favorite talk radio personalities to hear portions of their shows I've missed or only heard about from friends, it's today's shows and today's commentaries, news, sports and entertainment information that I want to be aware of.

Cellecast finally breaks through the last wall that has prevented radio from offering its listeners on-demand content in an easy-to-use manner.

In fact, while radio has done an outstanding job of offering podcasts/webcasts of local station content, Bridge Ratings confirms that the growth of the webcast audience has been stymied by its lack of user-friendliness.

There are early adopters and early majority consumers who have spent the time to learn how to find and download their favorite podcasts to their computers and then on to their MP3 players, but frankly, folks, the majority of people who would love to listen to a podcast are put off by the clumsy nature of its "process of consumption". In other words, for most regular folks, it's too complicated.

But Cellecast's on-demand concept offers a solution. No more need to download a webcast/podcast to your computer or to your portable device. Just dial it up on your cell phone and listen! Genius!

Cellecast has also figured out how to offer music radio as part of its catalog of content while most companies are dealing with streaming royalty rates and record label authorization. And while the immediacy of music radio doesn't compare to that of Talk Radio, I can see the wisdom of wanting to go back to a point earlier in the day when I heard a new music release on my favorite station and I want to hear it again - now! As long as I can remember when I heard it, I can go back - time-shifting - and hear it again.

So, look for Cellecast to start making noise this summer and ask your cell phone company how you can get it.

I'm enthused about it not just because they've asked me to help advise them, but because it's such a smart idea and a good one for consumers and radio alike.

Thursday, April 26, 2007

Terrestrial Radio:The Old Dog is Resilient

How is satellite radio doing? Judging by Bridge Ratings' just-released data covering the first four months of 2007 - not too well. And now XM has issued their first quarter report by announcing that though they had a losing quarter financially, subscriber growth surpassed the 8 million mark.

XM, which agreed to be bought by rival Sirius, reported a loss of $122.4 million, or 40 cents per share, narrower than $151.4 million, or 60 cents per share, in the year-ago period.

Revenue rose 27%, to $264.1 million, from $208 million last year. Makes it sound like XM's making progress.

The company ended the quarter with 7.9 million subscribers, up from 6.5 million a year ago. Last year, XM forecast that subscribers would exceed 8 million by the end of 2006, but scaled back that target significantly as retail sales of its radios waned. XM now expects to have 9 million to 9.2 million subscribers by the end of 2007, with subscription revenue for the year around $1 billion. Bridge Ratings estimates that subscriber number will be closer to 8.9 million - but, wait, we still have the summer months to get through.

Summer '06 was a comparative dead spot for consumer interest in satellite radio in general and that was before a merger of the two services was announced. Typically, merger news tends to send a 'caution' sign to consumers and it's either that or something is terribly wrong with the public's opinion of satellite radio that is causing a lull.

How can I say that when XM reports Q1 growth of several hundred thousand subscribers?

XM announced that they had passed 8 million subscribers adding 868,000 paying subscribers. But they lost 584,000 who did not renew their subscriptions! Is this a good sign? I think not. So, XM's net gain in Q1 2007 was 285,000 subscribers and that's why the true number of XM subscribers comes to around 7.9 million.

Based on past quarters when Sirius has grabbed a 60 share of subscriptions, it's possible that we'll see a net gain for Sirius in the 427,000 range for a total sector quarterly net gain of around 712,000 subscribers which is comparable to satellite radio's worst 2006 quarter (Q3).

What's interesting is that these companies continue to sign subscribers but it's getting much more difficult as time passes. 67% of XM's hard-earned first quarter subscriber gains were wiped out by consumers who did not find the value in retaining their subscriptions.

Actually, this is not all that far off from the typical performance for new companies with sharp growth curves like those that have existed in the satellite radio space for the last three years. And while there are those in that industry that underscore the fact that satellite radio growth is the fastest new media introduction ever, we are now seeing that its growth is also flattening faster than any previous new media play. Satellite radio as an industry is maturing faster than one would expect from such a new technology. This is what Bridge Ratings has been projecting for the last few years. And while 2006 was a turning point for the sector, 2007 will be a more difficult year for satellite radio.

Only HD radio can make satellite radio look good at this point. Our latest study indicates that just about every consumer whom we asked whether they were interested in purchasing an HD radio in the next six months said they weren't because they couldn't see the benefits of it.

HD radio is almost still-born and the radio industry continues to invest heavily. Good news this week was that Best Buy would stock HD radios in all of their nationwide stores. That's a positive step. Only one problem: no one cares.

So, we're experiencing the flattening of satellite radio which will continue to experience growth but at a much slower rate than previously expected and we're seeing almost non-growth for HD radio.

Terrestrial radio continues to be challenged for its time-spent-listening by other new media such as MP3 players, Internet radio and cell phones, but if trends hold, satellite radio will not be the grim reaper it was once thought it would be.

Terrestrial is far more resilient than many on Wall Street thought. It will still have its challenges but because of its purest benefits it will stick around for quite a while longer: It's free. It's easy to operate. Everyone has one. Everyone knows its benefits. And the public doesn't seem to mind paying for it with commercials.

To paraphrase Charles Dickens "these are the best of times - these are the worst of times" for media consumers, but at least there's plenty to choose from and most consumers are the real winners.

Tuesday, April 17, 2007

Copyright Royalty Board: Wiping out a Lifestyle

Perhaps it's something in the water, but terrestrial radio just can't seem to get a break. It seems as though the industry is getting pecked apart by nuisance-media and forces beyond its control. It's like that water torture where little drops of water wear down even the mightiest soldier driving them crazy with the tap-tap-tap of dripping water on the forehead.

First Napster, then the Internet boom, then the Internet bust which sent the industry in a tail-spin around 2000. However, that was no one's fault but radio's as they asked for, and got, exorbitant ad rates for any and all Internet start-ups willing to spend prime rate just to try to brand their new businesses. Radio was still cool then. Then the bottom fell out.

Then 9/11 derailed every one's business, then MP3 players - especially the iPod - started nicking away at radio's precious time-spent-listening - even in-car. Satellite radio has barely even scratched terrestrial's dominance, but it's there nonetheless and attempting to merge.

Bridge Ratings has been conducting research on the importance of Internet streaming to terrestrial radio and when promotion is done properly on terrestrial, on-line listening improves. In fact, our just released study shows that terrestrial simulcast listening is growing faster than any other Internet radio component. The industry has been encouraged by this growth and what it means for the future of an industry that was somewhat late to the streaming party.

Now, another bite - perhaps the biggest yet - is looming. The new Copyright Royalty Board rates. The decision this week not to readdress the industry's objections and to carry on with the increases which at the new 2007 levels will surely send most webcasters folding their tents, but by 2010 the rates get so onerous it's difficult to imagine even the big boys (AOL, Yahoo, Pandora) surviving.

If the rates go into affect (payments based on the new rates are due May 15, 2007) and Congress doesn't step in, traditional radio will be sent back 5 years and its advancement into the digital age will be still-born.

But, wait a minute! What am I thinking? Aren't I advocating for webcasters the same government intervention to prevent failure as Mel Karmazin and the satellite radio companies are seeking for their troubled companies? Sure, Mel says both companies can survive - even flourish - if the merger doesn't take place, but that just doesn't make sense. In fact, Bridge Ratings' March satellite radio consumer tracking shows subscription rates and consumer interest in satellite radio is at an all-time low.

In fact, that's not what I'm advocating. From what I've heard this week at the NAB, only a handful of webcasters are making any profit at all from their business models - only a handful! The thousands of others are either breaking even or losing money! The new royalty rates will wipe out an industry. Even those making a profit, aren't making much.

Satellite radio has 15 million listeners - Internet Radio has 72 million a month based on Bridge Ratings' most recent information. We're talking about an industry that will grow to 100 million listeners within two years and it's about to be extinguished. Congress wouldn't be saving an industry as much as they would be saving a lifestyle. Internet Radio has become a lifestyle and millions enjoy it every day.

The Internet radio industry needs a spokesperson - an agency with some lobbying clout to get out there NOW and disrupt this steamroller royalty rate before it snuffs out an industry and a lifestyle. Unfortunately, I don't see anyone stepping up to take on that role.

And unless someone does soon, those who enjoy Internet Radio will have whiplash and deep withdrawal when all those webcast links go dead.

So, why hasn't terrestrial radio sent in their best to clarify the point? That's really the question, isn't it?

Monday, April 9, 2007

The Light at the End of the Tunnel: In-car Internet

Imagine my joy/shock when I read this week that the Internet is coming to automobiles later this year. And when it arrives it will start to change how we interact with each other and the world around us. And, oh yeah, that includes listening to the radio.

In-car Internet has been a future possibility now for several years. Bridge Ratings began projecting in-car Internet radio listening estimates back in 2004 when its arrival was still unpredictable. However, 2007 will be the year cars and tech really mesh, thanks in part to Ford's Sync, a hands-free cell phone gizmo. It will also let you control your MP3 player using voice commands. Sync will be available on about a dozen 2007 car models in the fall and, yes, it works with those 100 million iPods out there.

But this is only the beginning. Future versions of Sync will incorporate Wi-Fi so you can download your email while driving through a Net cloud and then have the system read them to you.

And there's something called Autonet Mobile that wants to turn your car into a rolling hot spot. It will allow for high-speed Internet reception and seamless data streaming; that means you can listen to Internet radio, or browse the Internet, or pick up your email without signal drop-out. It also means everyone in the car could share one connection.

You may have once heard the joke that you shouldn't always look at the light at the end of the tunnel as a good sign; after all that light might be coming at you. Well, in-car Internet radio with thousands of streaming options as well as most of your favorite terrestrial radio programming is on its way and by 2008 traditional radio will have yet another competitor.

What's terrestrial radio to do? Well, it can't do too much about this one, folks, but what it can do is step up in this battle against increases in streaming royalty rates. Traditional radio's objection to the massive increases in streaming costs has been luke-warm and timid. In fact, the loudest, most thought-provoking objections have come from National Public Radio because they understand the impact of these large increases on their business.

Once again the National Association of Broadcasters and/or whatever other lobbying group radio can put together, is failing radio. When all but the streaming initiatives of the largest radio companies will survive the many-fold cost increases proposed by the Copyright Royalty Board, radio, as an industry, will be unable to effectively compete.

Internet radio industry spokesman Kurt Hanson who knows this stuff in his sleep was recently quoted as saying, "The implications of this (rate increase) are potentially fatal for Internet radio as an industry..."

So, yes, there is something radio can and should do as the light at the end of the tunnel draws closer: it can preserve its right to distribute its content over the Internet so that it will be there when its audience arrives.

This would seem to need to be pushed to the top of radio's priority list - but will it?

Wednesday, April 4, 2007

Radio Gets a Military Strategy Lesson

Did you see the news item this month from ZenithOptimedia that Internet advertising will surpass radio spending next year! Another example of the old man getting beat up by a youngun. But this shouldn't be a surprise. The radio industry has seen this coming for some time. You don't witness 35%+ Internet advertising growth rates without feeling them breathing down your neck.

But poor terrestrial radio has really been getting the short end of the stick these last few years.

First it was the dot-com bust, then the 9/11 advertising pull-back, then satellite radio's big PR push between 2002 and 2005, alongside Gen-Y turning off their FM radio's so fast you can hear the massive click in unison.

The Internet started out as a tough sell to ad agencies. In the late 90's, my LA station, KCBS-FM was among the first radio stations to build a working Internet business model for a new radio revenue stream. We had to be creative because advertising agencies in the late 90's by and large didn't see the benefit. They couldn't relate to the Internet. It only took Advertising agency media queens 5 years to figure out that audiences were splintering off traditional radio and that it was prudent to follow them.

Now radio is smaller part of a pool of ad dollars that is only slightly larger than it was in 2000 and that pool is being spread around to as many media targets as possible and still be effective. Radio used to be the targeting medium, then the Internet (thanks to Google) taught ad buyers how to pin-point buys and traditional radio became a reach medium officially. Unfortunately, in today's consumer market, reach and frequency isn't as effective as it used to be.

The Pincer Movement

This reminds me of a classic military strategy that has been used to some extent in nearly every war in history. It's called The Pincer Movement or Double Envelopment and it has been played upon traditional radio perfectly.

The maneuver is mostly self-explanatory; the flanks of the opponent (traditional radio) are attacked simultaneously in a pinching motion after the opponent has advanced towards the center of an army (Satellite Radio) which is responding by moving its outside forces to the enemy's flanks in order to surround it. At the same time, a second layer of pincer attacks (on-demand audio such as iPods and the Internet in this example), so as to prevent any attempts to reinforce the target unit.

And like most armies caught in this pincer movement, radio never knew what hit them. They became distracted by the foe in front of them (satellite radio) and didn't see the second layer in the rear-view mirror.

Such battles often end in surrender or destruction of the enemy force, although the encircled force (radio) can attempt a 'breakout'. A breakout is done with the encircled forces (radio) attacking a weak point in the encirclement, with allied forces attacking the same weak point, until there is a breakthrough and the encircled forces can move again. Hmmm...does radio have any allies that can assist in this battle?

Once the Radio industry recognizes that it is encircled, it should be asking, "What are the weak points in the encirclement?" and can radio use any of its "enemies" to attack these soft points?

I can think of several - in fact, Bridge Ratings has been publishing studies for the past two years uncovering this exact strategy. As an industry, however, radio has performed an uncoordinated attack and as any general will tell you, a confused and unorganized enemy is that much weaker.

Is the radio industry a weak opponent? If so, why?

Could it be that we have had years of poor leadership from our industry 'generals' who have been mis-leading (or poorly leading) our major forces (Clear Channel, CBS) without an apparent understanding of strategy or even the battlefield?

Or could it be that our strategist, the National Association of Broadcasting, has failed the industry by not leading the charge?

In any case, while ad spending on Internet radio still lags far behind terrestrial radio (but is advancing), the squeeze is on and total Internet spending will surpass the radio industry by the end of 2008 with about $20 billion that in all honesty is mostly new money. Radio can benefit from this windfall by not assuming that it has been left standing at the starting gate. It needs to continue its aggressive approach to capture what used to be called non-traditional advertising - new media advertising which is about to become 2008's version of traditional.

Think about it!

Wednesday, March 28, 2007

CBS Radio: Righting a Sinking Ship

News of Dan Mason being named CEO for CBS Radio came as somewhat of a surprise this week, not so much because I don't think Dan is a good choice - in fact I think he's the best choice. The surprise comes from the wisdom shown by the company's fearless leader Les Moonves. And it's not Les specifically that's so surprising here, it's the fact that it took a TV guy - not a radio guy - to make the first major move at righting a troubled radio industry.

The radio industry has no shortage of brilliant minds. There are plenty on the beach who have suffered the slings and arrows of consolidation. There are many more who have slid into good jobs in related industries such as the Internet and other technology companies. And, yes, there are many still employed by the industry. In fact, the radio industry's 'bench' is so impressive that the consolidators out there have essentially decimated the brain trust that would've led them down the primrose path into a new era, and there are still plenty of good minds in the business.

Why, then, did it take a TV guy to make this kind of decision?

Traditional radio has lost its fighting edge. Consolidation has taken the courage out of the heart of middle and upper management. These are the people who, in the past, would've knocked on their boss's door and been invited in to discuss tough decisions and look to the horizon with senior level management and strike a path that would take their company, their radio station, their industry to a logical next step. There is little of proactive thinking left.

Instead, many middle and senior level radio executives have been emasculated. Their reason for being there has been eliminated or severely reduced in many cases. How do I know this? After more than 25 years programming and managing radio stations in mostly major markets, in recent years I have had the privilege of consulting programmers and general managers who, since 2000 have had their job descriptions changed - not necessarily on paper - but rather in real-world experience. Each week I spend several hours discussing management challenges, personnel issues, strategic and tactical solutions and discussions on 'how to manage up'. Their frustrations come from being highly paid, becoming ineffective managers who used to have autonomy over their stations and who could run their own businesses and deal with the fall-out depending on whether they failed or succeeded. These days every decision is second-guessed and because there is so many stations to manage, their management style has become one of defense. They miss the days when they could plan, plot and be proactive with their teams.

As consolidation's black shadow crept over our industry and settled deep within its joints, more and more top-down management style became the preferred centralized system of controlling so many stations. An arthritic management style became the norm. Clear Channel wrote the book on this subject. During my years with CBS, all of us general managers knew we were a fortunate lot because we actually had senior management who trusted us and gave us the resources we needed to win and run successful businesses. Many thanks to Nancy Widmann, CBS Radio President pre-consolidation, and Dan Mason, CBS Radio President immediately post-consolidation. Dan ran a different ship than Nancy, but his style still focused on fiscal responsibility and earned autonomy at the station level.

After Dan, there was Mel, then Joel and the rest is history.

It took a TV guy, Les Moonves, in one grandiose decision, put CBS radio, if not the entire radio industry back on track. It's because perhaps the TV guy is used to making bold decisions. TV is a different business than radio in many ways often because decisions about programming and people are made with the courage of making a bet on tomorrow, of seeing the positive side of trusting people and of giving good people the chance to prove themselves. Sometimes those decisions end up being wrong, but more often than not, those decisions generate exceptional results.

So, my hat's off to Les. I met him a few years ago at a CBS Radio managers' meeting. He struck me then - as he does now - as a bold decision maker who wasn't intimidated by the job; someone who had the courage to make bold decisions. He also had a supportive Mel Karmazin and then Sumner Redstone to give him room to make those decisions.

Courage. Faith. Confidence. This is why it took a TV guy to right a sinking ship. Many of us are optimistic about our industry for the first time in many years. We look forward to seeing how this plays out.

Wednesday, March 21, 2007

Has the Music Industry Reached the Tipping Point?

In a dramatic acceleration of the seven-year sales decline that has battered the music industry, compact-disc sales for the first three months of this plunged 20% from last year, the latest sign of the seismic shift in the way consumers acquire music.

The music industry is smack-dab in the middle of a tipping point.

Sales of CD's, which still account for more than 85% of music sold, has far eclipsed the growth in sales of digital downloads. Some say that the music industry finds itself almost powerless in the face of this massive consumer shift to digital music consumption. In recent weeks the music industry has posted some of the weakest sales it has ever recorded. One week "American Idol" runner-up Chris Daughtry's new CD sold just 65,000 copies - and it was the number one album that week. In prior years, it wasn't uncommon for a number one record to sell 500,000 copies a week!

Digital sales have countered this CD slide somewhat rising 54% from last year at this time to 174 million according to Nielsen SoundScan. Yet it's not enough to offset the 20% decline in CD sales.

In sociology, a tipping point is the event of a previously rare phenomenon becoming rapidly and dramatically more common. Much like in physics when a small amount of weight is added to a balanced object it can cause it to suddenly and completely topple. This is what is occurring today in the the music industry.

So, what's the music industry to do? They have been resentful of digital downloads - perhaps rightfully so when it comes to illegal or free downloading and sharing. And the digital protection (DRM) on files the industry does allow to be legally downloaded prohibits mass consumption because that protection is not always capable of playing on all types of digital music players.

Now is the time for the music industry to seriously consider Gerd Leonhard's "Music Like Water" manifesto.

This concept essentially calls for the music industry to realize that the more people who are exposed to music the more will buy. Lower prices, make the music ubiquitous, expand distribution.

  • Drop digital protection and release music files that can be enjoyed on any MP3 player
  • There are 75,000 different devices that play MP3 files and approximately 75 that play protected files.
  • "Music Like Water" = everybody uses and everybody pays (but not at each and every point of use). Tap water is ubiquitous and "feels free" as consumers pay a flat rate or a rate subject to actual use.
  • Ubiquity increases value. Sell access first.
  • Business models that empower the end user will be successful.
The music industry has been ignoring the inevitable as sales of its prime medium (CD's) continue to slide. Will the industry wait until it is literally forced to adopt this model? Or will they begin to move the paradigm toward this solution now to create a smoother transition and ultimately a significant increase in music sales.

Music remains important to the average consumer and we want to be in control. We want to program our own media - we don't want it to program us. The music industry has not accepted this transition of power to the consumer which has not occurred overnight. It's like plugging holes in an expanding dam - eventually the pressure will be too significant.

To the music industry I say: you're losing the war. It's time to face the facts. Your battle with consumers is reminiscent of the movie '300' - you're doing your best to hold back the Persians. Accept the change in the marketplace, develop a model for ubiquitous music access, charge me for use and watch distribution flourish.

This may be the music industry's last chance.

Wednesday, March 14, 2007

Portable Digital Radio - What Will They Think of Next?

As traditional radio faces a potential major issue with new Internet streaming royalty rates, the industry should do its best to fight the good fight because there are new companies launching business models every day, it seems, that will help traditional radio get technologically cool.

I'm referring, of course, to some of the new portable digital radio businesses that allow consumers to use their cell phones for more than just phone calls and email. Audio entertainment is rushing headlong to your hand-held phone devices and traditional radio as well as the consumer is the beneficiary.

Imagine being able to stream a customized radio station you create right to your cell phone and listen on high-quality ear plugs or headphones. I've tried it and you'd be amazed at how good it sounds. Now there is an option for consumers who love their MP3 players while jogging, for example, but want a different blend of music or, based on what you program, a completely new vehicle for music discovery, one of traditional radio's new-found strengths.

Imagine being able to time-shift your favorite air personality! I can't count the number of times I've been driving to an early morning appointment only to arrive at my destination right in the middle of a great talk radio segment or a funny-as-heck bit on the Kevin & Bean show on LA's KROQ! I'd love to sit in the car and listen through, but just can't. So, just like a TIVO device for radio, I can go back to that show later and pick up where I left off! Ain't technology grand? We certainly do live in an amazing time.

And there are more applications being introduced all the time. The key here is that traditional radio, even with all the recent woes that seem to crop up in misguided newspaper articles, is being served a glorious plethora of opportunities that can extend its life - even enhance its reach - and make it cool again. Just what the doctor ordered.

If you're running a radio group or know someone who is, make sure you're aware of all the ala carte opportunities that are being placed before you. Don't hesitate. Get on track to adopt these new technologies and take advantage of the genius that is out there thinking faster and smarter than you are.

After all, you never know what they'll think of next and you want to be out in front of it - whatever it is!

Wednesday, February 28, 2007

Open Letter to Radio CEO's

Are you working for or running a financially oriented organization? If so, you may be headed for trouble. Finance provides the capital to fund business development and tracks the results of operations, but it doesn't have that much to do with what comes in between. The bottom line is on the bottom for the simple reason that it is the result of operations, not the cause. Yet many managers focus on bottom-line financial results and thereby fail to manage the things that drive those results.

How do you know if you or your organization is overly financial in orientation? The most obvious clue is that everybody is held to "the numbers". That's how managers are evaluated, that's what the boss always wants to talk about, and that's what everybody manages for. If you find that you or your people are obsessed with "making their numbers", then you know you have a financial orientation. And while financial management needs to be a core activity in the organization, it cannot be permitted to displace other forms of management.

People and organizations that manage by the bottom line never perform as well in the long run as those that focus on the causes of bottom-line performance. An orientation toward your employees, customers, technologies, and business processes is much more likely to produce good bottom-line results.

Let's look at a real-life example. Radio group "X" hires a new GM for its major market cluster of 5 stations. This person is tough. That's why he was hired. This person insists that his sales managers make their numbers, even though the sales goals they were given were unrealistic. And so, these sales managers - constantly pressured to make their numbers did so - by "loading the trade" or unrealistically overselling the commercial unit limits, under pricing, throwing in "value-added" promotions that the programming department could not live up to and using other aggressive sales methods. The numbers that were seen by this new market manager looked great and subsequently they were passed on up the food chain to corporate. Confidence was high. Then it hit the fan.

Commercial inventory was so oversold and there were not enough cancellations 30% of the projected revenue evaporated. The lower priced spots that were sold and did get on in high-revenue day parts like morning drive did not enable the station to achieve budgets. So much for rubbing people's noses in the bottom line. It just doesn't produce long-term results.

Financial statements offer one of many possible views into the inner workings and end results of a highly complex business process that is itself a small part of a complex economic and social system. If you focus only on the bottom line results in your financial statements, you will be managing in the dark because you won't seek out and understand the variables that drive your systems.

Friday, February 23, 2007

The Truism of Knowing Your Audience

It's becoming more and more difficult to target consumers with advertising. Just ask former and current clients of traditional media. The concept of cohorts, defined as a group of subjects - most often humans from a given generation - defined by experiencing an event - typically birth - in particular time span, is one of the reasons. The splintering of audience and the scattering of their media consumption is at the heart of the advertising challenge.

Bridge Ratings has spent considerable time and money studying one of these cohorts - Gen-Y - over the past five years and have what we believe to be a fairly honest and eye-opening understanding of this group's media interests and needs and the best way for advertisers and content producers to reach them. (Gen-Y typically refers to those born between 1981 and 1999).

We've also been one of the few research organizations to dissect the podcast universe. After a rocky start and terrestrial radio's quick acceptance of the medium, podcasting is gaining ground as a viable manner to extend its reach, solidify its brand and improve its distribution. While there are certain roadblocks to the medium's expansion to a significant percentage of the masses, podcasting - or netcasting - is becoming one of the advertising solutions in reaching the hard-to-reach Gen-Y.

Fellow research firm eMarketer estimates that advertisers will spend $400 million on podcast advertising by 2011 - up from $80 million last year. And there have been numerous articles written about advertising solutions to reach Gen-Y on MySpace, YouTube and other such media where Gen-Y congregates. Yet, none of the 'experts' in advertising seem to know this audience well enough to make that $80 million or $400 million effective.

Based on what I've learnt when experiencing the advertising on these Gen-Y gathering spots is that commercial content, production and length seem generally not to be customized to the tastes of those that are trying to be reached. We understand through out Bridge Ratings work that 'commercials' of virtually any kind are potentially a turn-off to this hard-to-reach cohort and they will even give up or use less their beloved MySpace or YouTube if commercialization gets in the way of their experience. But there are ways to make it work - ways that have been suggested by the Gen-Y peers we study.

The point here is that billions are spent on advertising to try to reach Gen-Y and there is a growing interest in podcasting as a platform for such things. But all of it will be so much dust in the wind, ineffective audio or video, if clients, agencies and producers don't take the time to know this audience.

Through the years, understanding the consumer has always been at the forefront of marketing. Today, however, more than ever, knowing your audience is a critical component to being effective with advertising - even to the point of having your target audience fully embrace the product and its benefits.