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Monday, January 29, 2007

Keeping Up with Gen-Y

I can't tell you how long the alarm has been sounding for terrestrial radio to get its act together to save its future by developing new programming and content that will be compelling enough for today's under-25 year olds, but I do know that Bridge Ratings has been publishing studies about this for at least four years. And I know several other highly-respected researchers who have been doing it longer.

Yet have we seen any creativity on this front? I can't say I have. There are some youth-oriented attempts on HD radio, but these kids don't care about HD. Even satellite radio hasn't developed any programming that will attract this hard-to-reach generation. Is everyone just giving up? Knowing how important it is to develop future audiences, one would think both traditional broadcasters and the satellite radio companies would dig in their heels and get with it.

I was invited to present some findings at three corporate retreats last year. Bridge Ratings was commissioned to find out what terrestrial radio could do to make its business relateable to Generation-Y. Everyone nodded their heads, slapped me on the back to thank me for opening their eyes, yet nothing's been done!

Frankly, perhaps the reason nothing has surfaced that is compelling is because technology and Gen-Y tastes are a moving target and they are moving too fast for radio to keep up. First there was P2P music file sharing; MP3 players, iPods, iTunes, then Myspace, Facebook, YouTube - it can be exhausting for some. This I get. Now comes something new that will blow your mind: Mobile Social Networking Software or MoSoSo which is essentially the sophisticated reach of cyber-social networks like MySpace combined with the military precision of GPS.

New cell phones equipped with this software were marketed to the college-aged life-group by Rave Wireless last year. It's mobile GPS technology that enables students to find like-minded buddies (Bored? Love Indian food? Meet me under the clock!), it also offers a cyberescort service linked to campus police. If the student doesn't turn off a timer in the phone, indicating safe arrival at a destination, police are dispatched to a GPS location. Your friends can find where you are at any given moment and can keep tabs on your whereabouts all day long if they want. Fortunately, the locator function is strictly "opt-in", meaning users can turn it on and off at will.

The point here is that the more time that goes by, the more convinced I am that terrestrial radio - even satellite radio - are being left in the dust as today's youth clamor for more customized, on-demand, "what I want - when I want it" media which includes the high-speed train known as mobile phones. Cell phones are becoming, if they haven't already become, the new 'radio'. Cell phones serve the same function today as portable radios did two generations ago; they are just more sophisticated social technologies that are empowering groups of our youngest consumers.

Technology will not slow down. Shelf-life for any of these things grows shorter and shorter. The first wave of MySpace users long ago abandoned it and have moved on. Fodder for technology companies to stay ahead of the game. In fact, most highly-focused consumer-oriented tech companies have divisions of brainiacs whose only job is to work on what's next.

Has radio invested in anything similar for its future? Or has it given up on keep up with Gen-Y only to be satisfied with an aging listener base? This is what keeps me up at night.

Friday, January 26, 2007

The "End" of Innocence

The time has unfortunately come in our industry where one event defines a tipping point that has been coming for some time. I speak, of course, of the radio contest incident at KDND-FM, Sacramento in which a listener lost her life after consuming nearly two gallons of water competing to win a computer game.

Enough has been written about what happened and debate has been swirling as to what the lawsuit and any potential FCC action may bring. With this unfortunate situation comes clarification of what's wrong with the radio industry.

Fingers have pointed at consolidation as one of the principal reasons the radio industry is in its current state. Much has been said about how combining radio assets in a given market in order to save money has eliminated many hard-working, creative and effective people from management to on-air personalities, traffic directors and support staff. From my perspective having spoken with managers on a daily basis since consolidation (1996), there has been this undercurrent of concern expressed to me about deteriorating effective performance by station managers.

Where once one manager oversaw one station's operations (General Manager), one Program Director creatively built one station's programming, one Sales Manager oversaw one sales department, the late 90's saw a proliferation of multiple stations or staffs falling under one manager. It has been expressed to me on numerous occasions as far back as 1999 that this type of structure was a defensive approach to management, i.e. too much was going on within the radio stations for management to effectively keep their finger on the pulse, to effectively plan ahead and lay the groundwork for smooth operations and excellent communication.

In order to accommodate this demand for one's time, managers delegated responsibilities. After all, there were only 18 hours in a workday and not enough time to pay attention to the minutiae that often makes these businesses work.

This is at the heart of what happened in Sacramento. General Managers used to participate in weekly promotion meetings, if only to be aware of what the station was up to and to provide guidance in the event there were any questions about legal or ethical issues related to promotions or contests. With consolidation these promotion meeting appearances by GM's began to disappear. If the GM was interested enough, he/she would have notes about the meeting submitted to him afterwards and if the station was fortunate, he would actually read them.

I know programmers, sales managers and general managers today who submit weekly or monthly reports to their bosses and believe their reports are never read. There just isn't time.

And in Sacramento, the lack of General Management involvement with the promotion department has exposed how one person can only do so much. Entercom owns six Sacramento stations. Entercom Sacramento GM David Lichtman likely was not involved enough to be aware of KDND's "Wee for a Wii" promotion. In all likelihood his non-involvement was rooted in his time management. From what I know, Mr. Lichtman is a good man and has been a good executive for Entercom. He just couldn't be everywhere he needed to be.

And while they may not be as significant on the surface as his missed opportunity to stop this promotion before it started, it is quite possible that Lichtman's involvement with 6 stations caused other important decisions, strategies or personnel issues to fall through the cracks.

This single event has brought to the forefront a significant symptom of what's wrong with the radio business whose managers used to be proactive, where general managers would see the future and plan for it - not only react to the here and now. Where sales managers would spend time with their staff and train to excel. Where program directors would have time to consider ways to improve programming and stay ahead of their listeners.

The implications of consolidation become more clear each day, but nothing crystallizes how consolidation has contributed to distraction of management more than what happened at KDND-FM, "The End", in Sacramento.

The industry can learn from this event. But will it?

Monday, January 22, 2007

HD Radio: The Battle for Your Mind

Bridge Ratings' just-released consumer study on HD radio isn't cause for too much excitement for the radio industry. iBiquity Digital Corporation, which created HD radio to bring AM and FM radio into the digital 21st century, recently confirmed that the number of HD radios sold through 2006 numbered in the 'several hundred thousands'. Our study confirms that the radio industry's massive ($400 million) HD radio marketing campaign of 2006 has helped raise awareness of the term "HD radio" but has done little to motivate consumers to want or purchase the technology.

Why is there such little consumer interest in the technology that terrestrial radio seems to be depending on to move it into the digital era?


Our study of 3000 consumers of terrestrial radio reveals one thing right off the top: they don't understand what the benefits of this new technology are and why they should make an investment into a new radio. The marketing pros who have done the creative for the $400 million campaign have not been able to communicate this simply and effectively to the masses.

Thus far it is still the audiophiles and early adopters who show interest and that is where the 'several hundred thousand' units sold comes in to play. Even more discouraging is that consumers understand the benefits of and need for satellite radio. With less than a million HD radios in use, satellite radio's 13.5 million subscription numbers appear overwhelming. And while 4 in 100 persons in the U.S. subscribes to satellite radio, less than 2 in 100 are considering it. With interest in HD radio substantially less than satellite radio, perhaps HD's challenges are becoming more clear.

It is only speculation, but part of HD radio's growth problem is hinged on the fact that satellite radio beat it to the punch - was first to the market, and with such a sliver of a market available, there is little room for second players or sub-niches such as HD radio.

HD radio's problems are complex but the root lies in simple marketing. Marketing gurus Ries & Trout have clarified product 'positioning' in many of their books. In their classic "Positioning: the Battle for Your Mind", Al and Jack point out that there is just so much information 'noise' that is trying to get into your head that our minds try to simplify the onslaught by creating ladders where we just naturally rank all sorts of information. For some of us, Hertz is at the top of the rental car ladder and Avis is second, Coke is at the top of the soft drink ladder - Pepsi is second.

However, for minor niches there are fewer 'rungs' on these mental product ladders; some may have only two products or brands - others, such as beer, could have as many as 7 if you're a beer drinker. In the last few years, the radio product ladder has added rungs for Internet radio and satellite radio along with AM/FM radio. HD radio's tiny niche doesn't have a rung on most consumers' product ladders. For most it doesn't exist yet! That is the marketing dilemma facing this new technology.

If HD radio is going become the solution to terrestrial radio's battle with digital technology options, a significantly greater sum will have to be spent on educating the public. It'll take time. Positioning HD radio in the minds of consumers is at the heart of our conservative growth estimates for HD radio. (see

The radio industry needs a realistic, tempered expectation for what HD radio can do for its expansion into the digital 21st century.

Saturday, January 13, 2007

The Merger of Satellite Radio & What's Wrong with Business in America

Once again the spectre of the two satellite radio companies merging into one business unit that would theoretically enjoy the fruits of 'consolidation' is gaining attention. Both companies are bleeding red ink so why not merge?

Because it is not in the public interest. A new group calling itself the Consumer Coalition for Competition in Satellite Radio was founded by a group of George Washington University law students whose take is "if the only two satellite radio companies are permitted to combine, consumers will be totally at the mercy of a monopoly provider." Yet, once again it doesn't seem to matter where the public interest lies; Wall Street's mouth is beginning to water over the implications of these two behemoths combining to form what they think is a viable business model.

The proposed merger of satellite television's Echo Star Communications and Hughes Electronics was grounded by the FCC on the basis that the companies did not "demonstrate that the merger would serve the public interest." Critics of the proposed deal said the merger would create a satellite television monopoly by combining the nation's number one and two DBS operators. Sound familiar?

The FCC Chairman at the time, Michael Powell stated "If economic history has taught us anything, it is that healthy competitive markets not regulated monopolies, maximize consumer welfare."

Proponents of an XM-Sirius merger claim that a single satellite radio entity would be optimal for both parties. The combined firm would have more pricing power, lower operating expenses and would no longer face the risk of bidding up the cost of exclusive content and distribution agreements.

It seems to this writer that the reasons for the merger don't consider the interest, use or preference of the consumer. The reasons seem to offer an exit strategy for two companies that have mismanaged and miscalculated the sector's potential.

During the holiday season of 2006, Bridge Ratings' satellite radio study revealed that during the course of 2006 despite all of the hype, marketing and special promotions, consumer interest in satellite radio was slipping. Satellite Radio's "Brand stimulation" diminished after Howard Stern's blockbuster 2005 holiday season introduction; consumers were finding it more difficult to find reasons to subscribe. We discovered that satellite radio's product lifectyle became stunted during the critical "Introduction" and "Growth" phases; the sector's growth stage fell victim to consumer apathy which has caused both satellite radio companies to reconsider their marketing plans for 2007 and beyond.

Yet despite the increasing costs of subscriber acquisition, spending more to keep the satellite radio boat afloat is really their only option. The boards of both companies will likely approve multi-million dollar increases in these budgets plunging both further into the net loss abyss creating louder cries from Wall Street for a merger to save the sector. And it goes 'round and round.

But aside from the financial and consumer apathy side of the equation, there is the distressing thought that a potential merger would likely swallow the culture and essence of XM. Its better programming and image I believe is founded in an in-house culture rich in music appreciation and a desire to push the envelope of radio programming. The product is clearly king at XM, spilling out of the creative mind of Senior Programming Officer Lee Abrams. The hallway culture of the Mel Karmazin-run Sirius reeks of corporate oversight. If you ever want to discover for yourself the difference in these two companies, go for a tour.

For whatever reason, somewhere along the way, in many business sectors, the consumer's interest is no longer the focus of business. As consumers we have lost something integral to our enjoyment of products and services in America. There are exceptions (Starbucks), but we have entered an age where investors and Wall Street have overwhelmed the importance of consumer satisfaction (traditional radio), and I wonder if we will ever find our way out of the woods.

Thursday, January 11, 2007

Wall Street's Delusion

Banc of America securities analyst Jonathan Jacoby has just returned from CES in Las Vegas with some good news and some "bad news" for terrestrial radio. He also returned exposing his ignorance of true listener behavior.

Mr. Jacoby says that he "found many new devices/systems that are making it easier to use cell phones and MP3 players in the car." He continues, "several products on display integrate the iPod and cell phone into the car. Our negative outlook for terrestrial radio is based largely on our view that radio's in-car listening base will be eroded by compelling alternatives.

"On the plus side," he adds, "the supply of HD radio units seems to be building. There were more HD radios on display than at last year's CES," and many major audio manufactures have gotten into the game."

Let's address these comments:

1. Mr. Jacoby, as substantiated by Arbitron's People Meter technology and more granular research by Bridge Ratings, terrestrial radio has evolved into more of a reach medium. Radio stations have larger weekly audiences than previously thought. From a radio sales perspective, sales managers will have to finesse a new approach to selling air time with reach as the emphasis over "average quarter hour", but that's not a major river to cross.

The point here is that in spite of the in-car alternatives Mr. Jacoby mentions, Americans still listen to the radio and attrition overall is slight. Terrestrial radio is still a key viable in-car option and only the very young early adopters and innovators in the 16-22 year old age group are significantly more likely to turn off the radio for longer periods of time. But they still listen.

Terrestrial radio competes quite well in-car with other alternatives. The amount of time spent in-car with terrestrial radio depends on quality of content.

2. HD Radio units available seem to be building. Not pertinent. Bridge Ratings estimates that by this time next year, there will be 1.9 million HD radio units in the hands of consumers in the U.S. an increase of some significance over the approximate 1.1 million we estimate were sold by the end of 2006. But it's not enough. The growth is disappointing. We project less than 9 million HD radio consumers by 2010. Hardly something to be excited about when satellite radio will have 30 million and Internet radio will have 147 million.

Let's look at consumer interest in HD radio. In a soon-to-be-released update to its 2006 study, Bridge Ratings reveals that mainstream America, a life group we call "mainstreamies", has little understanding of what HD is or what its benefits are. A disappointing 26% of this group are even familiar with the term and less than 1% know that you have to purchase additional hardware in order to use it. 63% of the entire mainstreamie life group think they already have it!!

No, Mr. Jacoby, your visit to Vegas doesn't seem to have clarified anything for you. It would appear that if Mr. Jacoby represents common attitudes on Wall Street, terrestrial radio has a different problem: those who lead investors by the nose don't have a clear, informed understanding of consumer interest or behavior. That may be the biggest hurdle terrestrial radio has to face going forward.

Monday, January 8, 2007

Predictions of Demise? Not!

After years of managing radio stations at both the programming and general management levels, and more recently having my thumb on the pulse of what media consumers truly think about all their options - especially traditional radio - I am dumbfounded by the hard-line predictions being made by some of my contemporaries and/or dear friends in the business.

My thoughts on what I'm hearing and what you may be reading:
  • The big one: The death of traditional radio
This concept is so far-fetched that one must wonder if those who are shouting it from rooftops have some ulterior motive - or those that speak of it with such certainty are just clearly ignorant. If I've learned one thing in this business of consumer behavioral research it's that trends in consumer behavior take longer than most realize, that technological advancement is usually slower in coming than expected, but once technological advancement reaches critical mass changes occur more quickly than previously thought.

Yes, terrestrial radio has competition for listeners' time and interest, but everything we see at Bridge Ratings indicates that industry 'experts' are not looking at the whole picture. Yes, the younger generation is listening less than they used to, but over 85% of them are still tuning in terrestrial radio and 2007 may very well be the year that this attrition trend actually stabilizes or improves slightly. This, of course, depends on whether the traditional radio industry programs better for the young generation and changes its thinking on not developing new formats and programming because 12-24 year olds is not a sellable demographic. Bah!

Adults are still listening. The attrition in 25+ adults is a trickle but still visible. There's more going on in people's lives that media - a fact that most prognosticators simply forget. In most cases, media options - including traditional radio - are like utilities to the masses, like the electric light switch on the wall of every room in the house. Not much thought is given to how the power gets to the house and how it lights up the room when you flick the switch. Media is the same way unless it's more engaging, foreground media like television. But generally, most media is treated as a utility. So, the masses do not think much about it, how much they use it, what they are viewing or listening to and how much they care about it. And the more choices we have, the more the apathy about media choices increases. So, traditional radio is not dead - far from it. There are certainly indications audience attrition could lead to some bad fate, but this is not a given.
  • MySpace is over - See above. MySpace is evolving and their claims of 100 million users is deceptive if not incorrect. More than 50% of those who visit the URL don't visit again after a month. The number is closer to 40 million actual core users who visit daily or weekly. These are the people who make up this virtual community and previous estimates as to user counts were wrong to begin with. And MySpace's demography is changing, too. With more parents and adults aware of what it is, they are setting up accounts for any number of reasons. If anything, MySpace is becoming more mass appeal and early adopters visit less often but still have accounts.
  • Email is over - Spam certainly has ruined the enjoyment of this wonderful communication too, but 2007 should be another banner year for Email. Again, IM'ing and texting are the tools of communication for the under 21's who find email to be a non-immediate way to stay in touch. They like the idea of real-time communication and email doesn't deliver. Adults find email to work just fine. From marketers to business communication to personal contact, there's nothing better these days. Those who are predicting the downtrend in email use are once again not considering all the facts.
Consider this when reading about consumer trends. The masses move slowly. Their changing ways are certainly impacted by early adopters and innovators who don't always set mass trends. Most consumer behavioral trends move slowly...slow enough for some of them to be reversed.

Wednesday, January 3, 2007

The Missing Link

Gen Y Americans (those aged between 18 and 26) spend 12.2 hours online every week, 28% longer than 27-40-year-old Gen Xers and almost twice as long as 51-61-year-old Older Boomers. Gen Yers are also much more likely to engage in social computing activities while online.

Inside these powerful numbers is a key for terrestrial radio - or any business with the need to capture this moving target demographic. There are a handful of broadcasters who understand not only the need to pursue Gen Y, but also who have begun to figure out that the Internet is a god-send. Up until very recently, it has been difficult, at best, for any marketer to capture the attention of the all-too-critical 18-26 year old consumer. But they live on the Internet. They are mobile consumers most of the time, but when they sit still for 12 hours a week in order to surf on-line, the opportunity to reach them is glaring.

2006 was the year in which traditional radio discovered they needed to get traction in their efforts to attract Gen Y back to traditional media. There are those who say this generation is lost forever to traditional media, but they really are referring to the early adopters and innovators among this group who are the leading edge of those who have gravitated away from traditional radio, for example, because there was/is nothing of compelling substance for them. Well folks, it's not too late.

By our observations of the entire spectrum of 18-26 year olds (38 million of them), the dark ages of traditional radio are far from evident. 17% or 6.5 million Gen Yers have mentally committed to new technologies that have replaced traditional media. MP3 players and the Internet consume most of this commitment and they will be difficult to re-attract. But 83% of this group, in our analysis, is either still listening to traditional radio or is sharing their listening with new technologies. It is this group broadcasters should target.

2007 should be the year of re-investment by traditional broadcasters in their products (radio stations). There are a few broadcast companies that never stopped doing this and whether small or large, these companies - over the long term - are profitable companies which attract excellent talent and management and...they are winning. They believe in spending money today even though it may mean less profitability in the short term in order to insure a more stable workforce environment and an on-air product that caters to the local community and gets results for its advertisers.

The word "courage" is found at the core of what is missing from much of the management employed at today's broadcast companies. There really is a shortage of people who have the quality of mind or spirit that enables them to face difficulty, danger, pain, etc., without fear. It's a trait lost on many but it is one that is sorely missing from management skill sets.

If you are in a position to hire, motivate and direct your workforce, look for courage as an asset along with the other skills you require of your managers. Finding courage in yourself and reflecting it back on your staff is the missing link to sustaining and protecting the future of traditional media.