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.

Keeping Up with Gen-Y

I can't tell you how long the alarm has been sounding for terrestrial radio to get its act together to save its future by developing new programming and content that will be compelling enough for today's under-25 year olds, but I do know that Bridge Ratings has been publishing studies about this for at least four years. And I know several other highly-respected researchers who have been doing it longer.

Yet have we seen any creativity on this front? I can't say I have. There are some youth-oriented attempts on HD radio, but these kids don't care about HD. Even satellite radio hasn't developed any programming that will attract this hard-to-reach generation. Is everyone just giving up? Knowing how important it is to develop future audiences, one would think both traditional broadcasters and the satellite radio companies would dig in their heels and get with it.

I was invited to present some findings at three corporate retreats last year. Bridge Ratings was commissioned to find out what terrestrial radio could do to make its business relateable to Generation-Y. Everyone nodded their heads, slapped me on the back to thank me for opening their eyes, yet nothing's been done!

Frankly, perhaps the reason nothing has surfaced that is compelling is because technology and Gen-Y tastes are a moving target and they are moving too fast for radio to keep up. First there was P2P music file sharing; MP3 players, iPods, iTunes, then Myspace, Facebook, YouTube - it can be exhausting for some. This I get. Now comes something new that will blow your mind: Mobile Social Networking Software or MoSoSo which is essentially the sophisticated reach of cyber-social networks like MySpace combined with the military precision of GPS.

New cell phones equipped with this software were marketed to the college-aged life-group by Rave Wireless last year. It's mobile GPS technology that enables students to find like-minded buddies (Bored? Love Indian food? Meet me under the clock!), it also offers a cyberescort service linked to campus police. If the student doesn't turn off a timer in the phone, indicating safe arrival at a destination, police are dispatched to a GPS location. Your friends can find where you are at any given moment and can keep tabs on your whereabouts all day long if they want. Fortunately, the locator function is strictly "opt-in", meaning users can turn it on and off at will.

The point here is that the more time that goes by, the more convinced I am that terrestrial radio - even satellite radio - are being left in the dust as today's youth clamor for more customized, on-demand, "what I want - when I want it" media which includes the high-speed train known as mobile phones. Cell phones are becoming, if they haven't already become, the new 'radio'. Cell phones serve the same function today as portable radios did two generations ago; they are just more sophisticated social technologies that are empowering groups of our youngest consumers.

Technology will not slow down. Shelf-life for any of these things grows shorter and shorter. The first wave of MySpace users long ago abandoned it and have moved on. Fodder for technology companies to stay ahead of the game. In fact, most highly-focused consumer-oriented tech companies have divisions of brainiacs whose only job is to work on what's next.

Has radio invested in anything similar for its future? Or has it given up on keep up with Gen-Y only to be satisfied with an aging listener base? This is what keeps me up at night.

HD Radio: The Battle for Your Mind

Bridge Ratings' just-released consumer study on HD radio isn't cause for too much excitement for the radio industry. iBiquity Digital Corporation, which created HD radio to bring AM and FM radio into the digital 21st century, recently confirmed that the number of HD radios sold through 2006 numbered in the 'several hundred thousands'. Our study confirms that the radio industry's massive ($400 million) HD radio marketing campaign of 2006 has helped raise awareness of the term "HD radio" but has done little to motivate consumers to want or purchase the technology.

Why is there such little consumer interest in the technology that terrestrial radio seems to be depending on to move it into the digital era?

Need.

Our study of 3000 consumers of terrestrial radio reveals one thing right off the top: they don't understand what the benefits of this new technology are and why they should make an investment into a new radio. The marketing pros who have done the creative for the $400 million campaign have not been able to communicate this simply and effectively to the masses.

Thus far it is still the audiophiles and early adopters who show interest and that is where the 'several hundred thousand' units sold comes in to play. Even more discouraging is that consumers understand the benefits of and need for satellite radio. With less than a million HD radios in use, satellite radio's 13.5 million subscription numbers appear overwhelming. And while 4 in 100 persons in the U.S. subscribes to satellite radio, less than 2 in 100 are considering it. With interest in HD radio substantially less than satellite radio, perhaps HD's challenges are becoming more clear.

It is only speculation, but part of HD radio's growth problem is hinged on the fact that satellite radio beat it to the punch - was first to the market, and with such a sliver of a market available, there is little room for second players or sub-niches such as HD radio.

HD radio's problems are complex but the root lies in simple marketing. Marketing gurus Ries & Trout have clarified product 'positioning' in many of their books. In their classic "Positioning: the Battle for Your Mind", Al and Jack point out that there is just so much information 'noise' that is trying to get into your head that our minds try to simplify the onslaught by creating ladders where we just naturally rank all sorts of information. For some of us, Hertz is at the top of the rental car ladder and Avis is second, Coke is at the top of the soft drink ladder - Pepsi is second.

However, for minor niches there are fewer 'rungs' on these mental product ladders; some may have only two products or brands - others, such as beer, could have as many as 7 if you're a beer drinker. In the last few years, the radio product ladder has added rungs for Internet radio and satellite radio along with AM/FM radio. HD radio's tiny niche doesn't have a rung on most consumers' product ladders. For most it doesn't exist yet! That is the marketing dilemma facing this new technology.

If HD radio is going become the solution to terrestrial radio's battle with digital technology options, a significantly greater sum will have to be spent on educating the public. It'll take time. Positioning HD radio in the minds of consumers is at the heart of our conservative growth estimates for HD radio. (see www.bridgeratings.com).

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

Predictions of Demise? Not!

After years of managing radio stations at both the programming and general management levels, and more recently having my thumb on the pulse of what media consumers truly think about all their options - especially traditional radio - I am dumbfounded by the hard-line predictions being made by some of my contemporaries and/or dear friends in the business.

My thoughts on what I'm hearing and what you may be reading:

• The big one: The death of traditional radio
  

This concept is so far-fetched that one must wonder if those who are shouting it from rooftops have some ulterior motive - or those that speak of it with such certainty are just clearly ignorant. If I've learned one thing in this business of consumer behavioral research it's that trends in consumer behavior take longer than most realize, that technological advancement is usually slower in coming than expected, but once technological advancement reaches critical mass changes occur more quickly than previously thought.

Yes, terrestrial radio has competition for listeners' time and interest, but everything we see at Bridge Ratings indicates that industry 'experts' are not looking at the whole picture. Yes, the younger generation is listening less than they used to, but over 85% of them are still tuning in terrestrial radio and 2007 may very well be the year that this attrition trend actually stabilizes or improves slightly. This, of course, depends on whether the traditional radio industry programs better for the young generation and changes its thinking on not developing new formats and programming because 12-24 year olds is not a sellable demographic. Bah!

Adults are still listening. The attrition in 25+ adults is a trickle but still visible. There's more going on in people's lives that media - a fact that most prognosticators simply forget. In most cases, media options - including traditional radio - are like utilities to the masses, like the electric light switch on the wall of every room in the house. Not much thought is given to how the power gets to the house and how it lights up the room when you flick the switch. Media is the same way unless it's more engaging, foreground media like television. But generally, most media is treated as a utility. So, the masses do not think much about it, how much they use it, what they are viewing or listening to and how much they care about it. And the more choices we have, the more the apathy about media choices increases. So, traditional radio is not dead - far from it. There are certainly indications audience attrition could lead to some bad fate, but this is not a given.

• MySpace is over - See above. MySpace is evolving and their claims of 100 million users is deceptive if not incorrect. More than 50% of those who visit the URL don't visit again after a month. The number is closer to 40 million actual core users who visit daily or weekly. These are the people who make up this virtual community and previous estimates as to user counts were wrong to begin with. And MySpace's demography is changing, too. With more parents and adults aware of what it is, they are setting up accounts for any number of reasons. If anything, MySpace is becoming more mass appeal and early adopters visit less often but still have accounts.
• Email is over - Spam certainly has ruined the enjoyment of this wonderful communication too, but 2007 should be another banner year for Email. Again, IM'ing and texting are the tools of communication for the under 21's who find email to be a non-immediate way to stay in touch. They like the idea of real-time communication and email doesn't deliver. Adults find email to work just fine. From marketers to business communication to personal contact, there's nothing better these days. Those who are predicting the downtrend in email use are once again not considering all the facts.

Consider this when reading about consumer trends. The masses move slowly. Their changing ways are certainly impacted by early adopters and innovators who don't always set mass trends. Most consumer behavioral trends move slowly...slow enough for some of them to be reversed.