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.

Radio Needs a Re-mix

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.

The Little Merger That Could

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

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

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

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

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

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

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

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

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

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

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

The second reason I think this merger will go forward?

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

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

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

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

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

Your comments are always welcome.

Radio Gets a Military Strategy Lesson

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

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

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

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

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

The Pincer Movement

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

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

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

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

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

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

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

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

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

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

Think about it!