Navigate the Future

The Performance Rights Issue Means More Work for Programmers

2010-10-29T14:02:00.000-07:00

Despite what you may read or think about the music royalty payment debate for terrestrial radio, it is highly likely, in this reporter's opinion, to become a reality soon.

This will result in at least three significant changes in the radio industry:

#1

Stations paying more for the right to play music - especially new music - will force hundreds of stations to choose to change formats to no music/more talk or radio formats that will take advantage of the wealth of unlicensed, independent artists and groups that are producing some darn fine music.

This move will inspire the rise in acceptance on FM of some current non-music formats such as news, news/talk, the new comedy radio format that was introduced in September and others that haven't been thought of yet.

This will help radio operators in at least two ways:

a) they will not be subject to unrealistic increases in music licensing fees and

b) the move to non-music formats will save stations over 50% in their current music licensing fees (BMI/ASCAP/SEASAC).

What a deal!

#2

More creativity. Added performance fees for stations that continue to program music will force those stations to play fewer songs in order for their business models to function in a positive zone.

And as a very good friend and I were discussing over lunch the other day, playing fewer songs will force/encourage stations to develop other programming content that will not fall within the performance rights category.

In other words, the performance royalty fee increase will force today's programming people to be more creative - to rely less on the easy use of music to fill the space between commercials and actually create new content that will be compelling for listeners.

Imagine being compelled to listen to terrestrial radio because it will be offering exciting, fun, entertaining and interesting content that is proprietary and not available elsewhere.

This is starting to sound pretty OK!

What the industry may lose on the added royalty fee it will surely benefit from with fresh "compelling content" which should generate more audience which should increase advertising billing!

#3

New music formats that take the added royalty into account. There are at least three never-before-heard radio formats ready to go that have been vetted in the field by Bridge Ratings & Research. Maybe some radio companies will find the courage to save themselves some money with exciting new radio programming.

What a concept!

So, ultimately, while the majority of the radio industry stands opposed to or at least doesn't see the fairness of the much-discussed performance royalty agreement, the industry will benefit from this forced "tax" by causing it to work harder to be better.

Perhaps this is the straw that finally pushes terrestrial radio to the point of action after at least ten years of stifled creativity.

Perhaps this will generate more jobs for the creative-minded programmers who have either lost their jobs over the last few years or left the business due to frustration.

And perhaps it will even open the eyes of young music-fans seeking employment who will once again see terrestrial radio as a viable platform to present their ideas and bring fresh blood into a radio industry that has been struggling to find new talent.

Yes, it's quite possible there is a silver lining to this whole new royalty thing...

Who's up for the challenge?

Why Do You Keep Asking That Question?

2010-07-29T13:40:00.000-07:00

"Is radio ready for a digital future?"

It's a question that has had high visibility over the last six weeks.

"Is radio ready for a digital future?"

It's been the title of a Bridge Ratings Study that was released on June 30, 2010.

And the title of a webinar I presented in July.

So, why did I give the title to this blog and why should you care?

Because after six weeks of disseminating this data across the web and in person, I'm finally ready to answer the question for you.

This was the most important graphic from the study and my webinar:

[click image to go to study]

This chart represents just how well terrestrial radio is satisfying radio listeners' Internet needs.

Not too good. (Pardon my grammar, mom)

The answer to the question is....

No. Radio is not ready.

Why?

Though its perception among radio listeners is poor, radio has all it needs to make it right.

Radio is having a good year. That's what I read and that is what market managers tell me.

Why not reinvest some of that new profit into the cost of setting up a qualified digital department?

Remember the story of the squirrel storing his nuts for a cold winter?

That's what radio's owners and operators are doing. Very few are taking the new found (and temporary) flushness and sinking it back into the product where it needs it.

Radio is gathering its profit nuts after a dismal 2009.

Who can blame them?

But still, the industry has the money to make some effort to build out a respectable digital division.

It can hire the right people.

It probably has the right equipment.

If it doesn't have the know-how, it can hire that, too.

So, if all of this is true, why does radio management avoid making the commitment?
Because it takes courage!

Yet, COURAGE is precipitated by a perceived threat. That's what Daniel Webster tells me.

So, "this must be it", I think to myself. This is why the industry as a whole is not moving itself forward fast enough.

No courage.

Because there is NO PERCEIVED THREAT.

And despite the fact that the threat is clear from digital entertainment options, by the time terrestrial radio perceives the threat and act, it will be too late.

The industry does have its handful of owner/operators who are investing as they are able.

And, for that, I am grateful.

But, it's the industry that is the concern.

Time is running out and the radio industry's place may well be marginalized by this time next year.

So, there. Asked. And answered.

Losing the Great Advantage

2010-06-21T12:47:00.000-07:00

Businesses have been trained for decades to beat the competition and to make a killing. Management principles are often taught using military strategies as analogies.

Yet in the natural order of things, being at the top and having the competitive advantage is merely transitory. In the realm of entertainment, new technologies are part of the evolutionary process. And because we are not returning to the way things used to be business, media in this case, is being called upon to be different and to operate differently.

The competitive advantage mass media such as radio have possessed for decades, is slipping away.

In a study conducted earlier this year on listener streaming trends as well as a report published in 2007, Bridge Ratings analyzed music consumption among radio listeners as well as new music discovery.

The essence of the 2007 study was that if traditional radio didn't respond to the new music discovery needs of its youngest listeners (12-24 year olds at the time), those listeners would find it elsewhere....and without hesitation.

This has happened.

The recommendation was for youth-oriented radio formats to take a much greater foreground approach to presenting and offering new music. At the time, and continuing to today mind you, programmers of these stations have done little to capture this new music curiosity exhibted by young music fans once the Internet introduced us to Napster, iTunes, Pandora and the dozens of other websites and applications that allow customized music consumption.

But the Bridge Ratings study uncovered a jewel. Young listeners to traditional radio who had wandered to other sources for their new music habit, had higher expectations from terrestrial radio and actually wanted radio to offer more new music.

Why?

Because while searching on-line and using Pandora, etc., can be fun, it is also fatiguing and takes time. Young listeners to traditional radio kept coming back to FM radio to check in and see if there was more new music content. Unfortunately, what they found was uninteresting to them.

And in the intervening time since that study was published, little has been added to youth formats to return them to traditional radio.

And now I fear it is too late.

A soon-to-be published Bridge Ratings study will continue to show significant usage (time-spent-listening) attrition for traditional radio among young listeners. That may not come as any surprise to you.

What may surprise you is those 12-24 year olds we surveyed in 2007 are now 15-27 year olds and radio's appeal to the 18-34 year olds is also fading.

Over time these listeners have gotten used to going elsewhere for this music discovery. They want to learn about what's the best of the best new music released each week and use that knowledge to guide them as to what to download.

It's no different, really, from when I was growing up. Seems my friends and I were trained by our Top 40 stations that on Tuesdays at 2pm, the new songs of the week would be featured in a countdown. We'd listen.

And we went down to our favorite record store and purchased the ones we liked.

Nothing has changed.

Why does traditional radio ignore the signs that many research companies like Bridge Ratings continue to publish?

I do not know.

I know this much though.

Contemporary music radio is rapidly becoming marginalized - pushed out to the farthest reaches of awareness and interest - because its audience is not being served. And as more alternatives become available, there is less desire to discover whether FM radio is responding.

It is remarkable that in the face of so much new technology and alternative entertainment, there is generally a lack of aggressive content development and technical adaptiveness at traditional radio headquarters.

CEO's have forgotten their business training. They have lost their courage to compete aggressively.

Whether it is a product of false security or just obtuse planning, terrestrial radio is in a position to lose its traction with a dominant audience most digital businesses covet.

A friend of mine at Harvard Business School has advised me that it is a good thing that radio is losing the competitive advantage.

Why?

Because, he says, sustainability in the new world order of digital media requires that the "old" lose their competitive advantage in order to shake its owners and management out of its doldrums and sense of security. This, in turn, is supposed to fire them up - dig deep within its creative teams to reinvent themselves.

This, I am told, is how business in 2010 faces shifting competition.

I have yet to see this "digging deep" that is supposed to reinvigorate the radio business.

If it doesn't happen soon, traditional radio may find itself not only marginalized, but it may find that it is included in a business course case study called "Terrestrial Radio: How it Lost the Great Advantage".

Retracting a Mistake

2010-05-24T10:17:00.000-07:00

Back in August of 2009, I wrote a blog called "Optimism: 2010's Secret Weapon". At the time, the point was that optimism will help turn around the business environment. And that would lead to clear thinking on the part of management.

I think it's time I retracted that blog because optimism is steering management down a rocky road.

As it turns out, optimism and an improving advertising climate have so far turned 2010 into a fairly positive environment for many businesses, and certainly for the media industry.

First quarter advertising improved 6% for traditional radio and was off the charts for Internet advertising expenditures, including Internet radio. A good sign, right?

Wrong.

The mood among corporate CEO's, terrestrial radio group heads and regional managers is positive but cautious. As they should be.

The revenue increases published for the first half of 2010 bring smiles to many broadcast operators, but comparisons to 2009 are deceiving.

The second half of 2010 will compare a bit less favorably with its 2009 counterpart and as 2010 closes in on another holiday season, the "comps" with 2009 will be less invigorating.

I think broadcast leaders understand this.

And that is why many are not reinvesting into their businesses this year; a year which is thus far the best revenue year in quite a few.

Not reinvesting some of 2010's profit is a natural strategy for business operators who found their companies down 20-25% in revenues in 2009 and 15-20% in profits. They now find themselves in positive territory for the first few months of 2010 - they are making up some of the ground lost last year and they want to hold on to it.

A fairly powerful argument can be made for that strategy - in a normal year.

But as 2010 goes skipping into the future, perhaps you have noticed the ferocious pace at which digital media is galloping along, breaking down the barriers to consumer adoption and putting the squeeze on traditional media.

My concern is that the optimism that began blooming at the end of January of this year, has morphed into a conservative spending mentality which will leave traditional radio marginalized - at best - as 2010 turns into the year of the Rabbit.

Digital media consumption has reached a tipping point; more average consumers are discovering all sorts of cool ways to get their media fix. And with radio's final bastion - the car - quickly being penetrated by Internet radio and devices that make it easy to consume, traditional radio could have an uphill battle in 2011.

Bridge Ratings will soon publish its revenue projections for 2011 and the forecast is not as rosie as 2010.

2009 revenue was down 18%.

2010 traditional radio revenue will be up 4%.

2011 revenue will be down 2%.

Comparisons to 2010 will not look as strong as they do this year.

The political advertising infusion which many are expecting during the second half of 2010 will be missing in 2010.

Investment in traditional radio operations (digital development and advancement) will be hard to find. This cycle could be sustained for at least another two years.

See what I mean? Marginalization of traditional media is a very real possibility with no aggressive business development in sight.

Optimism is certainly refreshing after 5 or more years of dismal business trends.

It's time to turn that optimism into purposeful re-investment and rapidly enhance traditional radio's ability to compete.

The Clock is Ticking

2010-04-23T08:52:00.000-07:00

First quarter revenues for the radio industry are UP. UP big time. Depending on whom you ask, advertising revenues are up close to 10% and the rest of the year is looking just as good!

Time to celebrate, right?

Not so fast.

Just think about this for a moment.

"Comps" or comparisons to last year's revenue are out of whack, i.e., 2009's growth percentages were in negative territory right out of the gate with double-digit numbers in negative territory. So comparing this year's revenue gains to last year's horror movie is deceptive, if anything.

Then there's the aura that was pervasive at this year's National Association of Broadcasters annual meeting in Las Vegas in April. The mood was light and there were smiles and optimism all around.

That's a good thing. Traditional radio took it on the chin mightily in 2009 and it wasn't that great for several years prior to that.

Yet, the good natured radio broadcasters were not only pleased with advertising 'traction' thus far this year, but the implication that a large political advertising revenue windfall was forthcoming for this fall's elections.

It may still happen. And should it be so, that is also a good thing.

But then what?

2011 is only a few months away and if 2010 ends up with double-digit revenue growth what will happen when the 2011 "comps" don't live up to 2010's growth?

Here's a straight-forward note to radio operators: THE CLOCK IS TICKING.

Your industry is still facing stiff competition for both audience and revenue. Digital appeal for both is accelerating while you read this.

A recent Bridge Ratings study called "Device Usage", shows traditional radio making some inroads into the digital landscape and capturing some lost AM/FM listening on their digital streams.

It isn't nearly enough.

The time is now for radio companies to significantly increase their investments into their digital businesses.

Time cannot be wasted. The year is already rapidly moving along.

Reinvest while Dr. Feelgood is dispensing his positive revenue growth.

Because it is likely to be short-lived and if it is, radio operators will not feel in the mood to invest next year or even the year after.

And if there is no significant investment this year, radio's ability to compete will be deflated and the industry will be sequestered to the fringes.

Left behind.

And in a world of rapidly expanding technology and digital capability where millions can create entertaining content in their bedrooms far cheaper than corporations can, if traditional radio loses one step more, it will be extremely difficult to keep up.

THE CLOCK IS TICKING.

Save your industry now while you have the resources, the know-how and the audience.

Hire a vice president to oversee digital operations. Let them do their job. Give them time to make it work.

Times seem to be good right now. Terrestrial radio cannot afford to let this opportunity - perhaps its last - to slip away.

Radio Needs a Re-mix

2010-03-01T13:42:00.000-08:00

I was recently listening to the soundtrack to the Beatles' Las Vegas Cirque du Soleil show called "Love". In-person, it's a fantastic buffet of lights, sound and images in the typical Cirque way coupled with an amazing soundtrack of Beatles tracks remixed by the genious of George Martin and his son Giles.

The soundtrack to this show is available on CD and when turned up, the music reminds you of how great this band was/is, but the remixes which took pieces of other Beatles songs in the same keys added to basic tracks we've heard hundreds of times, leaves the listener with a revitalized listening experience.

This leads me to why I named this blog "Radio Needs a Re-mix".

Traditional radio, like the Beatles, has been around for a great many years. And like the Beatles radio is a comfortable place for its millions of listeners to visit. According to many research studies, 93% of Americans still visit, but they just aren't spending as much time as they used to.

So, why not a Radio re-mix?

Like the Beatles "Love" soundtrack, radio's inspiration needs to be a few sessions of revitalization. I'm not suggesting, like the Martins did, to bring back some of the great old radio wisdoms of the past and insert them into today's programming.

What I am suggesting is that radio owners, operators, managers - all of its employees, should shake themselves out of the creative quicksand of the last ten years.

It's about time that radio leadership discontinue its sense of dread and investigate the creative juices that each company most surely has locked up in each of their employees. I believe that for most of them, the creative outlet may have been a part of the reason they are in the business.

Creative brainstorming sessions used to be one of the most enjoyable parts of the radio industry.

Egos were left at the door, people got into a room with other people they liked, and they started talking...about anything. Then someone in the room known for their 'crazy' view of things, allowed their stream of consciousness take over from the conversation and suddenly there was an idea on the table for a new promotion. People would start laughing at some of the more extreme ideas, but that laughter spawned further discussion until an hour or two later, the group emerged from the meeting with several new ideas and a sense of team effort which only created a more enjoyable working environment. And they'd do it again the next day, next week or next month.

There's no reason this cannot happen today. In fact, it does happen today just not nearly in enough cities. Some of the greatest call letters in the land go through exactly this process weekly and their success and low personnel turnover reflect this culture.

So, a remix is in order.

The radio industry's potential is tied to its past in many ways.

By overdubbing the technology and what we know about today's consumers on top of radio's foundation just might produce a renewed compelling listening experience listeners would never have expected until they listened to it again in a slightly new light.

Planting Brand Seeds

2010-01-21T13:40:00.000-08:00

Radio - all radio, AM/FM, Internet-Only/Internet Simulcast Streaming - is about to learn about its next great challenge for listeners in-car.

It's no secret that AM/FM radio's final bastion of exclusivity - the car - is up for grabs.

Today's smart phones have legitimately removed the need for Wi-Max/Wi-fi for streaming radio consumption in-car. With my iPhone, I can listen to any Internet stream through my car sound system.

Ford's Sync system developed by Microsoft will be capable of providing in-car passengers the great personalized experience of Pandora.

So, how does traditional radio or any audio content found on the Internet get a leg up on its competition?

Ford's Sync system is a pioneer in in-car audio content delivery and its voice-activated capabilities, though limited for the moment, will expand very soon to provide for safer driver-audio system interaction. Most auto makers are making a 'reasonable effort' to minimize in-car distractions for motorists.

Paul Green, a professor at the University of Michigan Transportation Research Institute who studies the effects of distractions for motorists says that Ford's system should make it easier for drivers to keep their attention on the road.

This is why voice activation for selection of your personal audio entertainment is coming and all audio content providers must figure out how to tackle this challenge.

If I want rock music and I simply say "Rock" to my in-car system, what type of Rock music will it select. Who will categorize these descriptors? Which streaming station will be fed to me? How will this work?

All indications now are that motorists will preselect a limited bucket of 'stations' or channels they wish to have access to and thus the system will recognize the voice command. This may be as many at 50 preselected channels.

So, brand continues to be the secret sauce in this ever expanding "infinite dial" of options for in-car entertainment and strength of brand will continue to dictate popularity.

Meanwhile, radio's electronic measurement system - Arbitron's Personal People Meter - seems to be confining what traditional radio offers. The science of the device does not seem to encourage experimentation in programming and radio brands are becoming too generic which may inevitably hinder stations' ability to compete in the new world of voice search in-car.

But the branding process starts long before the new car owner uses this voice activated system.

Frankly, it starts long before now. It started yesterday.

Consumer habits are being formed every day and brand trust and expectation will go a long way for any content provider to land-grab in-car real estate.

If your company is competing in this brave new world, brand development and the delivery of the brand's promise should be job One starting today.

Because what you sow today will surely bear much fruit far down the road.

The Decade of Radio Cannibalism

2009-12-16T06:22:00.000-08:00

What is the most interesting/startling/eye-opening thing I've learned this year about the radio business?

There are no leaders - only followers.

The conversion of a highly independent-thinking, proactive industry to a defensive, lack-of-self confidence one didn't happen overnight. It's been nine years in the making. Sort of like James Cameron's "Avatar", only this time it ain't pretty.

Up until 2000 when the Internet bubble burst, the radio industry was robust, creative and ballsy, i.e. it took on all 'comers' who wanted to threaten its very existence and it took each and every one on with gusto. It thrived in that environment and it made its members love their business that much more.

The bubble burst and there were no more $1000 spot rates from Internet start-ups.

9-11 halted everyone's business, but radio never recovered because around the same time Napster taught our kids that they didn't really need radio...

The Internet proliferated as high speed access surpassed the tipping point of 50% of households...

Internet radio, You Tube, Smartphones, subscription radio, technology and...

Arbitron's PPM. The last straw.

Audience measurement systems for any consumer product have always been a reflection of usage; no more-no less. Once delivered, it was up to the customer to interpret the data.

What changed with the introduction of Arbitron's PPM service?

The methodology influences the business.

PPM is arguably more accurate, yet it has its limitations just like the diary-system does.

It allows programmers and managers alike to dissect audience movement down to the minute and to over-react to changes in listening behavior. The cause of that change in listening is not measured, yet programmers can make assumptions which may not prove accurate.

The science of Arbitron's meter system has taken advantage of radio management's building inferiority complex by eliminating the 'long-tail' or product variety evident among radio's vast potential listening audience.

The most mass-appeal stations are the victors in PPM rated markets.

The stations that take the least risks to create exciting, compelling listening perform best in this metered world.

PPM has surgically removed radio's best traits: it's abilty to respond quickly to consumer trends and to offer entertainment faster than any other medium. This ability to read its audience from gut and sound research, kept interest in radio at high levels before technology brought new competition.

Perhaps the worst part of this is that the industry has been led by its nose into this quagmire without a fight. And now it has a ratings system which does not fully support its business potential.

If the motion picture industry followed this path, we would be presented with only the most bland, smallest common denominator movies. And while there's certainly a place for them, consumers would never have been exposed to such interesting films as "Momento", "Eternal Sunshine of the Spotless Mind" or "Requiem for a Dream" over the last decade.

And this secret sauce which the radio business held in high esteem is what is missing in today's newly competitive landscape.

A new study from Bridge Ratings suggests that radio is not dying on the vine it's just sharing usage with other media and tune-in is as high as ever.

This is the time for creativity, risk and reward. Results of this study show that radio consumers like the ease-of-use and the pervasiveness of over-the-air radio. In fact listeners of all ages are pulling for radio, and want it to be better, funnier, more stimulating.

Consumers are pulling for radio because they know it can do better.

The industry is ending a decade of cannibalism. We have seen the disease of "no confidence" coupled with "less courage" seasoned with a measurement system that doesn't support the creation and delivery of many potentially popular radio formats.

During times like these it is strength, courage and the ability to think independently that is needed.

Perhaps it is not too late to embrace those traits that brought the radio industry its greatest successes. There are options to Arbitron's meter methodology; options that would measure the totality of the interests of radio's consumer base.

For 2010, we look for a more positive landscape for all business to operate, and the radio business, specifically, has a chance to be reinvigorated.

Radio's New Music Fantasy

2009-10-23T07:21:00.000-07:00

The recent headline "Google and MySpace will challenge radio’s music-discovery position," got me asking the question "What music-discovery position?"

In the years I have been analyzing consumer use of media, including broadcast radio, Internet and more recently smart phone behavior, radio has had the potential to capture the new music discovery crown.

Unfortunately, it never has lived up to this potential.

In 2007, Bridge Ratings conducted a series of deep studies of music consumers of all ages and, as you might suspect, found that 18-30 year olds were most interested in discovering new music though any means possible. In the category of where most of this discovery was occurring, broadcast radio followed peers and the Internet as the place to go to find great new music.

However, in focus groups to dig deeper, radio had the greatest potential of all three for new music discovery due to its primary benefits: ease of use, accessibility and the fact that radio is free.

Yet radio never took the initiative.

In the last two years I have discussed this notion of new music discovery with at least 100 radio programmers in the formats of Contemporary Hit Radio (CHR), Adult Alternative and Alternative.

Would it surprise you to know that none of them saw the wisdom of claiming the "new music" position in their markets by proactively promoting and playing new music by either established performers or undiscovered talent.

Radio's belief that it is the new music discovery destination is pure fantasy.

There's a fabulous on-line worldwide talent competition called "Fame Games" which boasts two million worldwide listeners; 70% listen in the U.S. alone. I have had an interest in this five-shows-a-week talent competition and thought it would suit American radio just fine.

"Fame Games" features unsigned artists of any cross-over genre competing for best track of the week and ultimately a major record contract.

This is a well-produced, fun feature that pits two songs against each other vying for the votes of listeners and the program's judges. So, I took it to U.S. radio.

American programmers won't go there.

Aggressively marketing one's radio station as the "place for new music discovery" would greatly bulk up a station's image if done properly and perhaps even draw young listeners back to a medium that is having its problems holding on to this important demographic.

So, when I read that Google or MySpace will challenge radio's music discovery position, or when I read the RAB's Jeff Haley's concern about how radio has to protect this turf, I have to shrug my shoulders.

As far as radio's listeners are concerned, there is no new music turf to protect.

Radio had the opportunity to claim this territory for itself at least two years ago when audiences told us that radio's convenience would make it the most likely place to go to discover new music.

It never took the opportunity and very well may find itself pushed out by new media which seems to take every opportunity to infringe on radio's weaknesses.

This all points to radio's biggest challenge: getting back to creating and presenting engrossing and compelling programming....for all ages.

The radio industry must build upon its rich history of being listener-focused.

In its confusion in recent years, radio has simply forgotten how to compete.

What's Really Next?

2009-10-20T12:23:00.000-07:00

What's really next for media companies?

Smaller - leaner - more outsourcing.

The chart to the right reflects a related growth curve between staffing and corporate efficiency, or productivity.

The way this applies to radio is at the core of its frustration with attracting more loyal listeners.

There just has not been any investment in the product in over a year at a time when radio is competing with media that understand the importance of creative content.

Radio has its own set of rules and at this point, generally, most radio companies can ill afford to invest in the one thing that will help their business grow: personnel and content creation.

Economies such as the one we're experiencing in late 2009 no longer lend themselves to the operations models which allowed companies to staff more robustly.

The benefit to that kind of structure is that if companies staff responsibly, employees reach their maximum potential to deliver for the company by reaching their own competency levels.

What has led to this redesign of culture is the reduction in staffing and a reduction in quality output. Once highly-competent employees have found themselves delegated more and more work often outside their area of specialty or comfort.

This tends to result in staff that are not competent at the new tasks and somewhat less competent at their old tasks. This amounts to a severe reduction in efficiencies and production which further drives down business cash flow.

This cannot be sustained.

Something's got to change. And this is what we're experiencing.

Change can be uncomfortable.

Ultimately, change is for the best.

Therefore, the best option is to reduce workload to a more comfortable level where talented employees can do their jobs at levels that will again produce positively for companies. Operating in this culture will allow companies to regain traction and begin to rebuild.

This means a shrinking of the business as a whole in every aspect.

It may be "circle-the-wagons" time for the media industry - certainly it is for terrestrial radio - and concentrate on core competencies until things return to a less volitile marketplace.

Yet, despite this reduction in services, companies must also understand they cannot grow by cutting. Business development can continue to be a part of the mix.

For radio, an industry that still experiences respectable profit margins, this will mean figuring out a way to reinvest some of that profit margin back into their businesses.

I'll reveal how to do that, in my next blog.

Optimism: 2010's Secret Weapon

2009-08-30T07:32:00.000-07:00

2009 has been a most difficult year.

Most business leaders - including media professionals - have found themselves unable to lead.

Perhaps for the first time in their careers. And when they lie awake at night in their own space they are terrified.

They watch their organizations crumble under the weight of an unforgiving economy.

They've cut their workforces so much that once-competent employees have been unable to perform due to overwork and distraction.

But there is a way out and it starts with the organization's leader.

Leaders are their most affective when they are most in touch with reality, and this happens when they are almost viscerally in sync with the people and markets they lead and serve.

It's about being able to absorb reality and being able to lead accordingly.

So, despite what you know, the mood your employees experience, is so important.

An optimistic mood will help you communicate in a more effective manner.

A leader's mood is infectious. It can spread like wildfire through an organization.

You, as a leader, can poison or uplift the mood without realizing it.

Be very aware of how your slightest signals can affect people when you are in a position of power (that's for all you formal leaders) or people look to you for a lead (for you informal leaders).

No one wants to work for a grouch. Research has proven it: optimistic, enthusiastic leaders more easily retain their people compared with those bosses who tend towards negative moods.

Numerous studies show that when the leader is in a happy mood, the people around him view everything in a more positive light. That, in turn, makes them more optimistic about achieving their goals, enhances their creativity and the efficiency of their decision-making, and predisposes them to be helpful.

In more than one sense, then, leadership is truly viral.

Become an optimist of the will and your organization can pull itself up.

An Open Letter to Investors in the Radio Business

2008-08-09T15:11:00.000-07:00

Dear investor-person:

I have tremendously good news to share with you.

Our great national nightmare is over.

After 12 years of consolidation that is the universal field theory of why the radio industry is in its current state of woe, the business that for decades was not only delivering better cash flow than just about any business you could find, but was also growing, is set for a renaissance.

I haven't been hitting the tequila; I'm referring to the sudden flood of radio properties - generally excellent properties - that are on the market. With Clear Channel setting free 60 stations and Dan Mason & CBS putting up their 50, immediate reaction from some might be "the radio business must really suck, look at these major players bailing!"

Not so fast.

Finally, the radio industry is experiencing the first phase of its rebirth and that is the return to the transition phase of its business cycle to what amounts to 'circling the wagons and concentrating on the segment of the business that is delivering the best financial results.' Clear Channel and CBS should be proud of the fact that they actually have significant numbers of stations they can operate that are throwing off cash flow. By trimming the fat, these two companies can concentrate on running a number of stations that may be more comfortable for them.

These 110 radio stations up for sale now offer an opportunity for two things to begin occurring: 1) the return of more intelligent operators who one way or another were no longer needed by those companies that were so greedy in 1996-2000 that they grabbed up as many radio properties as they could without a consideration as to whether they could operate them all effectively. They THOUGHT they could...but time has proven them wrong.

And 2) many of the profoundly intelligent general managers, program directors and owners who got out of the radio business because they were forced or just gave up, will now start re-entering a business they have loved for years and who had become sickened by what we all have witnessed - the gutting of a business that lost its way.

Yes, I am giving all you investors out there a BIG early tip now so you can start realigning your portfolios or - even better - if you've got money to lend and you've given up on the industry, now is the time for you to feel inspired.

I can count on all my fingers and toes a partial list of highly qualified radio managers who at this moment could take a cluster of any of these soon-to-be-sold groups and make them profitable, compelling to listen to and maybe most importantly, return the fun to working in the radio business that got skewered by operators who saw an opportunity in the late 90's and 2000's but never had a clue as to the 'secret sauce'.

Me and my compatriots who have been in this business since the good times (pre-1996), completely get what made the business such a great investment then and why it attracted some of our country's most creative minds through the years. The time may be coming when you see the return by these individuals to the business as operators. Smart operators.

Expect those who have been on the sidelines in recent years to begin pulling money together and buying some of these stations. I know because I've spoken with them!

Expect those Clear Channel and CBS stations that will be sold to out-perform under these new owners.

Expect this to be the watershed we've been waiting for. 2009 will be the year of the turnaround.

2009 will prove to be a great year for investment in the radio business.

These new independent owners know more about the terrestrial side of the business than most of their peers who seem to have no clue what to do with this vast new frontier.

They have been cooking up digital solutions that will expand the radio business.

If they haven't been scared away for good; if they haven't given it up through disgust, this infusion of lifeblood into station ownership will be the beginning of a return to pre-consolidation days when men were men and radio ROCKED!

Indiana Jones & Terrestrial Radio

2008-07-04T15:02:00.000-07:00

Interesting title for a blog, eh?

If you're an Indiana Jones fan - or at least have seen one or two of the franchise movies - you know there is always a moment when Indie is faced with being left alone behind a sliding door with spiders or snakes. But, at the last second, he manages to pull out that trusty whip of his and snag it on a branch on the other side of the closing door and he is able to swing himself through to be alive for another day! Hurray!

This happens in the latest Indiana Jones movie as well and it enabled me to visualize what is happening terrestrial radio. The industry is at a significant crossroad and is in severe danger of being left behind a impenetrable door.

I've been researching the radio industry in earnest with my company Bridge Ratings since 2002 and have watched trends from a vantage point few have. Our projects cover everything component of radio listener usage. Over the last six years there were actually moments when radio's pulse increased as if its efforts to postpone or stop listening attrition were beginning to find traction, only to learn in a project 3 or six months later, that what I witnessed was a false revival or it was still-born.

Now with six years 'visibility', and with multiple signposts struggling to show improvement, the industry's efforts may now be too little too late.

What signposts do I pay attention to?

Young listeners' time spent with the medium
The multiple alternate media listeners of all ages are using over time
Strategies used by media companies and how they play out
Stock price of terrestrial radio companies and how that price has been affected by corporate decisions
Media coverage of terrestrial radio
Changes in consumer interest in Internet, Satellite and HD Radio

Of late, the most revealing signpost has been that of corporate radio's decision-making. In the period of 2002 to 2008, we tracked a greater number of missteps or no-decisions that hastened a company's inability to compete.

Poor programming decisions, lack of marketing resources, reduction of key management personnel and slowness to adapt to changing technologies; these are all key contributors to terrestrial radio's current malaise and more of these contributors have had as their source the poor decisions and lack of focus at radio's corporate headquarters (a generalization). There remain a handful of broadcast executives who 'get it', but not enough. It's like an V-8engine running on one cylander.

An objective observer to these trends would perceive (almost) that in many cases the industry had given up the fight or is simply resting on its aging laurels. And that wouldn't be far from the facts.

Terrestrial radio can learn at least one thing from Indiana Jones and that is courage. Our fictional hero never seems to give up even in the face of some of the ugliest circumstances placed before him. And while terrestrial radio as a whole has a tougher time reacting to change than our celluloid hero, the industry cannot afford to be left behind that slowly closing door without a whip.

Certainly the radio industry is hobbled by new technologies it simply cannot compete with, but it is being forced to change with the times which is a good thing. It can offer young and old a new blend of media that is better than its version before there were MP3 players, the Internet or satellite radio.

It only requires the old Indie courage. Where will our heroes come from?

Local, Local, Local

2007-12-02T14:26:00.000-08:00

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.

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

2007-09-13T08:17:00.001-07:00

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?

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

2007-09-05T16:32:00.000-07:00

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 wait....as 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.

The Radio Fortune Teller: Teen Radio to Return

2007-08-27T17:48:00.000-07:00

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.

HD Radio: Why Marketing Matters

2007-08-20T12:23:00.000-07:00

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, ...in 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.

The Last Brand Standing

2007-08-15T07:51:00.000-07:00

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 AOL.com 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.

The Radio Airplay Debate

2007-08-06T07:53:00.000-07:00

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.

The Little Merger That Could

2007-07-29T18:37:00.000-07:00

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.

2010: A Radio Odyssey

2007-07-23T07:51:00.000-07:00

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.

How to Guarrantee HD Radio's Success

2007-07-13T07:57:00.000-07:00

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?

Radio Moves Consumers to Buy

2007-07-09T08:54:00.000-07:00

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.

Survivor: Internet Radio

2007-07-01T15:14:00.000-07:00

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.

Radio: A Great Place to Work?

2007-06-20T13:40:00.000-07:00

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.

Chicken Little?

2007-06-10T17:12:00.000-07:00

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.

Radio Ownership: The Minority Gap?

2007-06-06T08:42:00.000-07:00

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.

Nostalgia: Everybody's Sgt. Peppering

2007-05-28T10:30:00.001-07:00

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.

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

2007-05-23T12:33:00.000-07:00

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!

Tivo For the Radio? It's Here!

2007-05-07T17:14:00.000-07:00

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.

Terrestrial Radio:The Old Dog is Resilient

2007-04-26T16:11:00.000-07:00

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.

Copyright Royalty Board: Wiping out a Lifestyle

2007-04-17T18:08:00.000-07:00

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?

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

2007-04-09T08:06:00.000-07:00

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?

Radio Gets a Military Strategy Lesson

2007-04-04T16:39:00.000-07:00

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!

CBS Radio: Righting a Sinking Ship

2007-03-28T16:45:00.000-07:00

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.

Has the Music Industry Reached the Tipping Point?

2007-03-21T11:57:00.000-07:00

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.

Portable Digital Radio - What Will They Think of Next?

2007-03-14T16:10:00.000-07:00

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!

Open Letter to Radio CEO's

2007-02-28T10:42:00.000-08:00

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.

The Truism of Knowing Your Audience

2007-02-23T09:35:00.000-08:00

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.

XM/Sirius - a Consolidation Misstep

2007-02-19T12:02:00.000-08:00

News of the XM and Sirius satellite radio merger sent tremors through both the business and media world. But at this early stage the jury seems confused, if not out, on whether this is a good idea.

Certainly from a business perspective, the saving of $7 billion annually is a good start to pulling this business back from the brink of disaster. And placing Mel Karmazin in control is another good move since Mel's proven his prowess at goosing his media enterprises with operational effectiveness.

But what of the consumer? Is a monopoly such as the one potentially created by this merger good for the consumer?

The topic of a satellite radio sector merger has been floating around for months and Bridge Ratings has conducted some preliminary research on what effect such a merger would have on the satellite radio consumer both current and prospective.

1. The "why" factor

Over 90% of those currently subscribing to either or both services had no opinion on a proposed merger other than what such a merger would do for them.

Will it mean that they have to get new equipment?
Will their current radio work with the 'other' service
Will prices go up or down now that there is no competition?
56% of both current and prospective satellite radio subscribers are confident that monthly subscription prices will increase - certainly for new subscribers and likely for current subscribers when their current contracts expire.

67% of current subscribers don't understand or appreciate the business reasons why such a merger would take place. That's left to those who understand Profit and Loss statements and subscriber attrition reports. Most consumers don't understand why such a merger would be necessary so soon. Many of those we surveyed perceive the satellite radio business as new, vibrant and exciting. Unaware of their financial difficulties, most current and prospective subscribers can't rationalize why such a combination of two strong companies is necessary at such an early stage of the industry's development. For many consumers, satellite radio is still perceived as a brand new technology and service.

2. Subscriptions

In three different studies conducted between August 2006 and January 2007, it was confirmed that a combined entity of a singular satellite radio business would not garner as many total subscribers as two distinct competitive entities over the first two years of the enterprise. The reasons are many, but primarily the culprit is the elimination of consumer choice in the manner these services have been sold. The previous combined impact of two companies heavily marketing their benefits to the masses tends to generate increasing market awareness and interest. Marketing budgets will likely be trimmed - this is one of consolidation's nasty little secrets. However, reducing marketing is not in the best interest of satellite radio at this time. In fact, among those consumers who have expressed interest in satellite radio but who have yet to subscribe, 62% need a better reason to purchase. As yet, they have not been 'sold', 'convinced' or 'motivated' by the marketing to make that purchase decision. Marketing is a key to sustained subscriber growth.

As of this writing, Bridge Ratings has re-evaluated its growth projections for the satellite radio industry. Should the merger proceed and be completed by the end of 2007 (an unlikely event), we see 2008 subscriber counts for the combined entity to be 8% lower than if both companies were to continue operating separately.

3. The Monopoly Model

The creation of one superSat company provides some new opportunities for Mel Karmazin and the new combo's shareholders and Wall Street watchers. One is monopoly power. Monopoly power is usually defined as the ability of a firm to earn high profits by raising and keeping the prices of its products substantially above the levels at which those products would be priced in competitive markets. That is, a firm with monopoly power can charge high prices and get away with it - the market will not punish it for doing so. In a competitive industry, in contrast, the market will punish a high-price firm by the loss of its customers to rivals with lower prices.

Karmazin has hinted at subscription price hikes long before this latest wrinkle and now has the power to do just that despite the fact that the new merged company is considering a tiered pricing model with an a la cart approach for the consumer. But monopoly power is undesirable for several reasons, some of them obvious:

High prices reduce the wealth of consumers. The use of monopoly power is obviously undesirable to consumers because no one likes to pay high prices. Such higher prices may make the firm with monopoly power rich and make the consumers of its products poor. These effects on the distribution of wealth are generally considered undesirable. Even the current subscription rate of $12.95 per month has had most consumers think twice about why they need satellite radio.
High prices lead to resource allocation. Economists give greater emphasis to a second undesirable effect of prices that exceed the competitive level. Such prices tend to reduce quantities of the products that consumers demand. Allocation of profits is not necessarily guaranteed to be in the public interest.
Monopoly power creates an obstacle to efficiency and innovation. A company with monopoly power is one that does not face much effective competition - and consequently it does not have much reason to fear loss of business to others. Where this is so in the satellite radio business, there be less incentive for management to make the effort to produce efficiently with a minimum of waste or to undertake the expense and risks of innovation such as was experienced during the two company's competitive battles. The result is that the coming product from a merged satellite radio business may be of poorer quality than it would if the company possessed no monopoly power.

While this is not intended as a class on economics, the point is that in many instances, monopoly power has provided a solution to struggling businesses and has inevitably been a disservice to the consumer.

4. Programming & Culture

In research Bridge Ratings has conducted, XM has consistently been considered the service with the better original programming. Satellite radio is a music medium and in the opinion of thousands of consumers studied by Bridge Ratings, no one does a better job at it than XM. What will happen to the creative structure in place at XM once Mel begins with the consolidation scythe? After all, as with terrestrial radio, consolidation of these two satellite radio companies should save billions a year. Those cost savings will have some bearing on the quality of the product much like personnel and resource cuts have negatively impacted terrestrial radio in the last ten years.

No, it seems to me that once again the American consumer will get a front row view of where they stand in the eyes of U.S. regulatory agencies. This proposed merger must pass muster with the FCC, the DOJ and others. And when one looks at the business end of this deal, and how government bail-outs have been common, clearing regulatory hurdles is a safe bet to save the failure of another space venture.

5. The Balance Sheet

The balance sheets represent the biggest problem for these companies.

Sirius has almost $1.1 billion in long-term debt. At XM that number is over $1.3 billion. Sirius has cash and securities of $350 million. XM has $285 million. So, combined debt would be $2.4 billion against about $600 million in cash. Payables and accrued expenses of the combined company would be over $500 million. To have a significant value to shareholders, the combined business would have to pay down at least $200 million in debt per year. None of the debt is due until 2009, but the majority is due by 2013. The combined company would be able to partially use cash on hand and could go to the capital markets with a new debt issue with the sole purpose of refinancing that amount due in 2009 (and with convertible debt if they were smart and/or able). All of this if revenue growth can continue at 10% quarter over previous quarter and expense growth can be held to 5%.

Mel Karmazin is a smart, strategic business operator. He will find a way to make this work. Wall Street and investors - even the government - will see the immediate benefits of such a joint-relationship. What will take more time will be confirmation of whether such a merger is in the public interest.

What's Wrong with This Picture?

2007-02-12T10:07:00.000-08:00

Have you ever been apprehensive about some piece of information that you assumed was true but hadn't any statistic to confirm it? The fine folks at Inside Radio revealed such a stat during the RAB festivities in Dallas last week.

Many radio industry observers, including myself, have drawn conclusions about the consolidation of the radio business that point to the "C" word being responsible for much of the industry's problems of late. Whether you are a sales person at a radio station or a management expert, one of the arguably key issues facing the industry is the lack of focus that comes with one manager overseeing multiple stations, staffs or budgets.

As I pointed out in a recent missive here, the problem of too much on one's plate could be at the root of the listener death in Sacramento where a station's promotion staff approved what became a deadly promotion that involved the consumption of gallons of water by its listeners all in the name of winning an electronic gaming system. Had the general manager been more aware of what was going on 'down the hall', I believe this promotion would never have made it to air. The GM (and perhaps other managers) just had too much to keep track of.

Now we know just how prevalent is this issue of consolidated management and staff. Inside Radio reports through their analysis that there is one General Sales Manager in our business handling 13 radio stations. Another's doing 12 and another 11. Four GSM's handle 10 stations, 11 oversee 9. 34 have eight stations, 48 have 7 stations.

129 General Sales Managers handle 6 stations, 198 have 5, 325 have four, 509 have 3 and 1359 GSM's have two stations. Interestingly, there are still 2477 GSM's out there that still handle just one station. There are 3921 situations out there where the GM is also the GSM!

All of this to say that pulling back the covers to reveal to the light of day these statistics brings a certain soberness to this whole discussion about whether multiple stations under one manager is truly the most effective way of bringing the radio business out of its doldrums.

According to these stats, of the approximately 10,000 commercial radio stations in the U.S., only 25% are managed by one general sales manager. You do the math: that means that 75% of the country's commercial radio stations either have one GSM overseeing multiple properties or the GM, serving also as the GSM, has other issues on his/her plate.

Operational efficiency (and bottom line improvement) is at the heart of why this development occurred. Perhaps it has helped with the bottom line - at least from a personnel cost perspective - but do you think it has done much for efficiency?

Part of my job involves speaking with many members of station management on a weekly basis. Most of those I speak with tell me they are not being more efficient and there is frustration that these managers can't be more efficient that they just can't be proactive.

I doubt we'll see a change in this strategy on a mass scale any time soon. Along with efficiency problems with station management, consolidation has also brought with it higher purchase multiples and higher debt on one side and Wall Street analysts on the other both squeezing the ability of the radio business to operate effectively. This pressure will likely prevent most broadcast companies from returning to yesteryear's station management structures. They simply can't afford to.

One can only hope that more wisdom enlightens our industry's leaders and a solution to this madness can be found.

The Telephone Game

2007-02-06T15:29:00.000-08:00

Remember when you were a kid when you had several friends together in a row one of you would whisper a word or phrase in the ear of the kid seated next to you and he whispered what he 'thought' he heard you say into the ear of the kid next to him and so on and so on? The fun part of this game was when the last kid in the row repeated what he was told. Invariably, what that last kid repeated was considerably different from the original message. Oh what fun we had!

Did you know this game is still going on?

Yes sir, and the thing to worry about is that it's being played primarily by members of the print media and the words they are butchering directly impact the image and perception of the radio business.

I must receive at least three calls a week these days from print journalists seeking answers or advice that can help them write a column. Typically, the first question out of their mouths is "So, is it true that radio is dead?" Before responding, I ask why they ask. I can't remember one of the 15 or so journalists I've spoken with this year telling me that they ask because they had found reliable statistics supporting this claim. Their sources have 100% been other print journalists. Even better, they tell me they'd read it on Internet blogs!

This telephone game emaciates the truth as one journalist after another not only repeats a story that is not true but that is often embellished.

The truth is that for the third year in a row our research at Bridge Ratings shows that the number of people listening to AM/FM radio stations on a weekly basis has slipped only slightly in recent years. Between 2001 and 2006 our information indicates this number has gone from 96% to 94% of the U.S. population using traditional radio in a typical week. Use among younger listeners has been reduced more noticeably (92% to 89%), but there are still 34 million 15-24 year olds still listening every week.

It is only fair to mention that time-spent with traditional radio is falling slightly with 15-24 year olds overall - only about thirty minutes a week over the last three years. A small percentage (known as innovators or early adopters) of this younger generation has turned off traditional radio faster than their 'mainstream' counterparts. This is an audience segment radio may never see again unless broadcasters accelerate their adoption of new technologies and get counter-intuitive and rehire some of the key programming minds that have been lost due to consolidation. But there is no significant decline in listening overall.

Traditional radio has gone from being an exclusive club with only one member to a club where multiple players have joined. The Internet, MP3 players, satellite radio - digital technology in general has joined the club in a voting block that is hard to deny. But the club member with the biggest clout remains traditional radio.

Even in-car, long the safe haven for terrestrial radio, is being invaded by these new technologies, but not at levels that would cause any right thinking individual that traditional radio is dead. In a new updated Bridge Ratings study of in-car media use, 74% of those interviewed said that radio was still the medium of choice in-car even when other technology was available including satellite, MP3 players and cell phones!

So, when you read another news story about the demise of traditional radio, remember the days of the telephone game and how much it made you laugh back then; how silly it was that communication along a line of friends could get so mangled that the original message bore no resemblance to the words repeated by the last kid in line. In general, perhaps due to competition for column inches today's journalists write what they think will get published often without regard to truth or reliability.

The truth is out there - it just may require more digging to find it.

Keeping Up with Gen-Y

2007-01-29T17:06:00.000-08:00

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.

The "End" of Innocence

2007-01-26T08:52:00.000-08:00

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?

HD Radio: The Battle for Your Mind

2007-01-22T08:39:00.000-08:00

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?

Need.

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 www.bridgeratings.com).

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

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

2007-01-13T10:58:00.000-08:00

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.

Wall Street's Delusion

2007-01-11T07:42:00.000-08:00

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.

Predictions of Demise? Not!

2007-01-08T09:06:00.000-08:00

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.

The Missing Link

2007-01-03T17:21:00.000-08:00

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.

Decision Stress - Traditional Radio's Friend

2006-12-27T13:19:00.000-08:00

2006 has been the year of extensive reportage about the demise of traditional radio. Many of these stories focus on all the wonderful choices listeners to traditional radio now have and how these choices will whittle away at radio's tune in and time-spent.

Research we have conducted this year with over 12,000 listeners of traditional radio all across the U.S. has uncovered a little secret that I'll let you in on. Radio's got a friend called "decision stress". Not a new term, this marketing term originally coined by Alvin Tofler in the classic book "Future Shock" gets to the heart of choice in the human brain. In his book written in 1970 about life in the future, Tofler examines what he foresaw as the overstimulated individual, the bombardment of the senses, information overload and the decision stress associated with all of this over stimulation.

If traditional radio has done anything right, its brands are comfortable and recognizable.

Related to today's entertainment choices, decision stress plays a major part in how the average consumer selects what they will view, read and listen to. When faced with too much decision, the average person will respond by attempting to postpone decisions or reduce the choices - sometimes logically, other times emotionally. In most cases, most consumers faced with this decision stress, will gravitate to brand strength to aid in easing the decision-making process. It clears the stress of making a decision even though considerable thought may allow them to choose more wisely. Nonetheless, brand strength can be the antidote to decision stress. In study after study this year, over 80% of the time consumers we interviewed about their radio and digital options chose brand over generic.

Why is this important? If traditional radio has done anything right, its brands are comfortable and recognizable by the average consumer and when placed in a position to remember or choose, for example, from among thousands of Internet sources for music and their traditional radio station(s), they choose to recall terrestrial radio brands. As you know, building brand takes years and there are only a handful of products competitive to radio whose brands have broken through the consumer psyche - Apple's iPod is one.

Reading media reports this year, you'd think traditional radio needs all the friends it can get in order to succeed into the future. Perhaps one of radio's most important friends, decision stress, has not been considered by those in and out of the business when considering all of the tools from which radio benefits.

2007: Content is Not King; Distribution is

2006-12-26T09:15:00.000-08:00

Content was king for a while, but it's fallen to #2 on the hit parade of what's going to garner listeners, viewers or readers in the foreseeable future. Now distribution is king! It's not that content doesn't count; it's just that in 2006 distribution became more available to the masses thus surpassing content in importance.

We heard good news last week that year-end statistics reflect that traditional radio's on-line listening hit something of a tipping point this year with significant increases in listening to terrestrial radio's on-line streaming - and that's a good start.

But the public has access to all sorts of distribution. It could be the death of old time media if we don't get it right next year. Even my 89 year old mom is aware of new channels of distribution. THIS is the story. And it's magnified 100 fold for the youth generation that's losing interest in traditional radio as one of their distribution choices. Ever try to remember a dream when you wake up? You know how fleeting the memory of it is? That's what is happening to 12-21 year olds. They're slowly forgetting we even exist.

Get your brand, your best content & your most entertaining talent OUT THERE to the masses on as many channels of distribution as you can. It's distribution that will keep you competitive. What good does the best content in the world get you if that content can't be heard by the greatest potential audience. Guess what? Your 100kw transmitter alone can no longer compete! Today, the battleground is access to the public on as many distribution channels as possible. Traditional radio has a unique opportunity to spread its content. Let's not blow this one!

Traditional media and many new forms of digital distribution are not mutually exclusive either. Use them to power each other and expand your reach.

May your 2007 be your most exciting and successful yet.

The Reluctant Broadcaster

2006-12-22T18:34:00.000-08:00

For many of us who have been in this great radio business for more than three years, the idea that the paradigm is/has shifted out from under us is a bit like feeling your first earthquake. It's crazy! Unlike most natural disasters, earthquakes give you the feeling that you are no longer in control - that there is, indeed, a greater force at work and you can't do a damn thing about it. Welcome to the world of traditional radio 2.0 - the new reality.

Does traditional radio's senior management have trouble seeing that their legacy businesses can not only peacefully but constructively co-exist side-by-side with digital media? The combination can be quite potent:

Broadcast towers + any digital network = greater reach.
Professional DJ's/hosts + user-generated content = more compelling programming.
Being "local" + being virtually local, national, even global = vast audiences.
Scheduled programming + time-shifted content = convenience for listeners.
Over the air or streamed transmission + recorded, shared or networked = greater distribution.
Single programs with many listeners + many large niches of listeners = listener super-serving.
A radio receiver for AM or FM + many digital delivery devices = traditional radio can be everywhere.
Only ad revenue + content revenue + fees + upsells = multiple revenue streams and recovery of lost traditional dollars.
A 'receive only' or one-way system + an interactive system = greater listener satisfaction.

The transition from old to new requires a juggling act of sorts. Traditional radio must maintain its current "legacy business" while quickly adapting to this new reality. Develop the new with the resources of the old. It can be done - they are not mutually exclusive.

Yet when I sit in front of broadcast executives and try to help them navigate the future and we discuss how they have the power to adjust, they acknowledge that they need to do some or all of it, but they insist they can't! They just don't have the resources.

Sure, radio matured into a business some time in the 80's, and there's nothing wrong with being a business with positive cash flow and expenses. But, folks, business has sucked the life out of this business. In the 80's and 90's, before consolidation and Clear Channel and CBS Radio's scorched earth policies, broadcast companies figured out how to make money and how to spend it. Something bad happened in 1996. The last ten years have not been good to our business and now we're attempting to fight our way out. The industry has its visionaries who have carefully explained what to do. There's just not enough courage at the highest levels to do what needs to be done. Yet.

Three Reasons

2006-12-18T12:01:00.000-08:00

I must admit I'm stumped.

I've seen enough research over the last few months that has been predicting radio's woes for years. I saw a study originally released in 1999 that projected that 12-21 year olds of that year would be significantly alienated by traditional radio by 2005. While its specific time-spent-listening projections were off, the point was well-taken: terrestrial radio was not catering to this generation and by 2005 the 12-21 year olds of then (the 19-28 year olds of today), there would be striking changes to terrestrial radio because that generation would be losing interest.

'99 was the year of Napster, you'll recall, and though their P2P model eventually blew up, the damage had been done. The youth market was beginning to salivate over their power: getting what they wanted, when they wanted - on demand; they didn't need traditional radio.

I'm stumped because confirmation studies by this company (Bridge Ratings) and other highly respected radio research organizations during 2006 show conclusively that company operators, general managers and programmers have ignored the signs first seen 6-7 years ago and continue to shield their minds from the reality.

Are there any operators out there today who have the guts and conviction to try to win back these lost demographics?

"Why should we, Dave?" I hear you say. You think that the youth are gone and can't be salvaged so why try?

There are three potential reasons traditional radio has lost its way:

1. They are in denial
2. They don't know what to do about the attrition or are operationally unable to do anything
3. They don't care

Which do you think it is?

As we consider that another year has come and gone, the radio industry can look back on a year where, as a whole, radio stations began to rise to the challenge of all the new media surrounding it. The industry also now knows that it will be an up hill battle to slow the attrition that has seeped into Gen X and Gen Y; that these generations are not leaving because satellite radio is the answer or even that MySpace, Facebook or the iPod has changed communication forever.

The industry must accelerate its most aggressive tactics now - embrace as many new technologies as it can, reallocate its resources to support the understanding that it is a content business and that terrestrial radio is the best at creating content 24/7.

So, which of the three reasons listed above pinpoints the foundation of the lethargy the radio industry finds itself in?

Radio's 12-24 dilemma - Taking Less to Get More

2006-12-16T19:14:00.000-08:00

It's always interesting to follow the trades in our business, especially when the stories are old news. I'm referring to the headlines this week about the Arbitron "fly-in" in which was discussed the fact that the radio industry has ignored the 12-24 year old audience to the point that the very future of the business is at stake because traditional radio has offered this generation nothing for over ten years. This isn't new news!

Our research has shown this age group, in general, doesn't feel like there's any compelling reason to listen to terrestrial radio.

Other researchers have flown this flag, yet the radio industry has just ignored these warnings. Why?!

It should be no secret that the answer lies in top lines, bottom lines and senior management's ability to once again prove their short-sightedness and place the almight dollar ahead of their own future.

Yet, I can't really blame them. The real blame sits with advertising agencies and radio clients who have been brainwashed to believe that 12-24 year olds don't have disposable income. Maybe they understand that this age group has tons of money ready to spend on everything from movies and music to clothing and electronics; these buyers of radio time have simply following the "lemming law" and inadvertantly led the radio industry down a path of self-destruction.

While running radio stations for CBS not so long ago, I recall the frustration we had walking out of buyers' offices when they had explained that this younger generation wasn't their core target for some of the radio clients they represent, yet they had no problem spending money on youth cable networks such as MTV to promote movies, for example. The buyers just couldn't see the same relationship radio had with this active consumer group and so they wouldn't buy radio.

So, over the years, management at traditional radio followed the money and did not develop programming and personalities that would compel this generation of 12-24 year olds to stay glued to their radios like previous generations. Their rationale was, " if we can't get buyer support in 12-24's, we'll go where the money is: the 25-54 family reunion demo." Obviously, radio is a business and businesses need to make profit. But radio's always been in the business of making money and for some reason the industry has ignored the concept that it needs to develop future audiences.

Consolidation led to ownership concentration which led to the concept of cost savings and the dream of leveraging audiences on multiple stations for increased revenue. In other words, greed blinded an industry that couldn't see it had a future. Wall Street forced traditional radio to focus so much on this quarter, this month - even this week's sales, that it forgot its future.

In the words of humorist Kin Hubbard, "the hardest thing is to take less when you can get more," and traditional radio hasn't worked hard enough to take less.