Why Do You Keep Asking That Question?

"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

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".

Optimism: 2010's Secret Weapon

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

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!

2010: A Radio Odyssey

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

It was released in 1984. Good times.

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

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

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

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

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

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

Running out of time to remain competitive.

Running out of time to develop its people.

Running out of time to adapt to the digital universe.

Running out of time to learn how to microtarget.

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

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

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

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

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

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

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

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

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

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

Radio: A Great Place to Work?

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

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

* The Credibility Index
* The Respect Index

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

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

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

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

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

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

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

CBS Radio: Righting a Sinking Ship

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

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

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

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

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

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

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

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

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

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

Open Letter to Radio CEO's

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

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

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

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

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

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