The Radio Airplay Debate

Since Bridge Ratings was one of the first to expose the truth about how radio airplay affects music sales, I think it only appropriate that I weigh in on this latest controversy that is brewing.

Seems the music industry has forgotten the "partnership years" when radio and records virtually changed the way music was consumed. Performers and labels alike believe radio has a one-side relationship with the music industry.

Programming radio stations was one of the favorite aspects of my career and a large part of those years was spent in the company of some of the record industry's best, most creative people. Most of the time those people where record company promotion people, whom I loved working with.

Many of the relationships I had with these people turned out to be much more than the typical program director/record label promo people relationship where they would come by the radio station on Tuesday's and wait outside my office until it was their turn to "pitch" their latest and greatest artists or albums.

Many of these people became good friends and I had the chance to learn just how hard they worked and how difficult their jobs were.

But in the seventies and eighties, radio and records worked as a team of sorts. The record promotion people would provide data or insight as to the record's benefits. Remember, this was before the Internet so airplay data was difficult to come by - part of record promo people's gigs was to enlighten, and the program directors and music directors of the industry would assimilate that information and determine whether songs and albums were worthy of airplay.

One music was added to radio playlists the relationship didn't end there. There were concert promotions, music store promotions and artist interviews, the two industries were connected at the hip in an effort to give momentum to careers of worthy performers. Sure it helped sell records, but the radio industry benefited just as well.

The world seems to have changed since then and now it's coming back to bite the radio industry in the butt. Those that represent the music industry - both corporate and performers alike - feel it is time that radio's "free ride" is over. They want their money.

See, radio pays licensing fees to ASCAP, BMI and SESAC based on the station's revenues. The better a radio station's revenue, the more fees that station pays. It has always been a common belief that radio stations that rely on music for their ratings should pay music publishing houses for the right to use the music that drove revenues for the stations. Fair enough.

Now, the performers - who have not been receiving any special licensing or royalty from radio - want to pluck from the "money tree" they think radio is. It is, they claim, time for the performers of songs to benefit from the years of airplay.

Radio's argument is that the two industries have worked in tandem to benefit the music industry. Radio has - and continues to be - a wonderful promotional vehicle for artists who write and perform music no matter the genre.

In 2005 Bridge Ratings conducted a study to determine the influence radio airplay, Internet airplay and MP3 plays have on the consumer. Due to this current controversy, we just completed an update on this study.

Here are a few facts:

*88% of radio's total audience listens to music radio at least once a week

*50% of these listeners consider music radio to be their primary radio experience.

*Nearly 90% of these "music primaries" agree with the phrase: "I have purchased music I have heard on the radio."

*32% of these radio consumers have purchased music through brick and mortar stores or on-line in the last 30 days.

Does this sound like the radio's relationship with the music industry's artists and performers is one-sided? No.

Perhaps the more appropriate step is for the music labels to offer all performers new or updated agreements in order to include them in the cash flow from music sales.

Radio influences music purchase. There is no doubt in my mind.

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.

2010: A Radio Odyssey

Did you see the film "2010", the sequel to 2001: A Space Odyssey? A joint American- Soviet expedition is sent to Jupiter to discover what went wrong with the U.S.S. Discovery against a backdrop of growing global tensions. Among the mysteries the expedition must explain are the appearance of a huge black monolith in Jupiter's orbit and the fate of H.A.L., the Discovery's sentient computer.

It was released in 1984. Good times.

That was before the Internet, before rap replaced pop, before iPods replaced discmans, file sharing changed music purchase habits, satellite radio, digital music, Internet radio, and terrorism was something that happened overseas.

Hard to believe we're closer to 2010 now than we are to 2001.

And 2010 will be a tipping point for radio in many ways.

From developing behaviors of radio listeners, changes in the ways they use radio are occurring more rapidly than perhaps is commonly known. Much like time-lapse photography where you don't recognize change unless you piece together views of behavior over long periods of time, the change in media has truly been a rapid development over a short period of time and radio's 'light at the end of the tunnel' is more likely to be an on-coming train than an end to difficult times.

And like the movie "2010", if radio had had the ability to send a probe into the future back in 1984 to learn what went wrong, hindsight would most surely have kick-started an industry wide reaction that would have perhaps led to a different outcome.

For here we are a mere 29 months from 2010 and radio is running out of time.

Running out of time to remain competitive.

Running out of time to develop its people.

Running out of time to adapt to the digital universe.

Running out of time to learn how to microtarget.

Looking back over the last 6 years of work with clients of Bridge Ratings, it is becoming agonizingly clear that while the radio business has made solid efforts to grow its industry and to adapt it to the changing technological realities, it truly has not done enough. And this is what concerns me: current senior management at radio's best companies is not embracing the fact quickly enough that the future of our business rests solely on their shoulders - on their watch.

Today's senior radio managers will be long gone leaving their trainees the keys to the kingdom. It is the opinion of many that the next generation of radio leaders, in general, do not have the technical and operational knowledge or experience to lead this business into the future.

Left in the hands of less experienced, inappropriately trained and myopic junior management, the industry will struggle to maintain status quo.

There is little going on in the area of strategic development in our business: programming development, creative sales development, new revenue stream development, marketing development and personnel/management development.

Frankly, I'm flummoxed (great word) about why this industry doesn't respond to the implications of its future.

Certainly, there has been plenty of coverage of multiple future forecasts about impending change and how fast it is occurring and the impact of audience attrition. So, it isn't non-awareness - and it isn't stupidity.

It is inertia more than actual resources that is the problem. And inertia in many ways is a much more difficult quagmire to be free of.

Yes, 2010 is coming fast and radio seems less prepared to exist in a technologically accelerating world.

It does, however, have a resource most of its competitors covet: its people. And its people are what just might save the radio industry from being swept over by the tide of change.

Let us hope that the powers that be know this too.