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".

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 Decade of Radio Cannibalism

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.

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!

Indiana Jones & Terrestrial Radio

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?