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".

What's Really Next?

What's really next for media companies?

Smaller - leaner - more outsourcing.

The chart to the right reflects a related growth curve between staffing and corporate efficiency, or productivity.

The way this applies to radio is at the core of its frustration with attracting more loyal listeners.

There just has not been any investment in the product in over a year at a time when radio is competing with media that understand the importance of creative content.

Radio has its own set of rules and at this point, generally, most radio companies can ill afford to invest in the one thing that will help their business grow: personnel and content creation.

Economies such as the one we're experiencing in late 2009 no longer lend themselves to the operations models which allowed companies to staff more robustly.

The benefit to that kind of structure is that if companies staff responsibly, employees reach their maximum potential to deliver for the company by reaching their own competency levels.

What has led to this redesign of culture is the reduction in staffing and a reduction in quality output. Once highly-competent employees have found themselves delegated more and more work often outside their area of specialty or comfort.

This tends to result in staff that are not competent at the new tasks and somewhat less competent at their old tasks. This amounts to a severe reduction in efficiencies and production which further drives down business cash flow.

This cannot be sustained.

Something's got to change. And this is what we're experiencing.

Change can be uncomfortable.

Ultimately, change is for the best.

Therefore, the best option is to reduce workload to a more comfortable level where talented employees can do their jobs at levels that will again produce positively for companies. Operating in this culture will allow companies to regain traction and begin to rebuild.

This means a shrinking of the business as a whole in every aspect.

It may be "circle-the-wagons" time for the media industry - certainly it is for terrestrial radio - and concentrate on core competencies until things return to a less volitile marketplace.

Yet, despite this reduction in services, companies must also understand they cannot grow by cutting. Business development can continue to be a part of the mix.

For radio, an industry that still experiences respectable profit margins, this will mean figuring out a way to reinvest some of that profit margin back into their businesses.

I'll reveal how to do that, in my next blog.