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.

Planting Brand Seeds

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.

Radio's New Music Fantasy

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.

Survivor: Internet Radio

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.

Nostalgia: Everybody's Sgt. Peppering

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!

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!

Copyright Royalty Board: Wiping out a Lifestyle

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

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

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!