| US radio - whither
or to wither?
As the competition from new technologies for people's time keeps
on increasing, the question it seems to us for radio, particularly
in the more advanced countries, is whither? - or wither!
Our view is that there will be some reduction in the share of the
pie that terrestrial radio takes - almost inevitable when new options
come along but the length of the day does not change - but the degree
to which happens depends far more on how terrestrial radio responds
to the threats than how smart the newcomers are.
If the radio companies concentrate on the strengths of the medium
and don't turn-off their audiences, the future is fairly bright
but if it, like so many business sectors before it, rests on its
laurels then it will hit hard times.
Whatever happens radio in the old-fashioned sense of an aural medium
without any of the distractions of video will remain in our opinion
a valuable medium and we see its problems as being much more those
of meeting inflated - read greedy and unrealistic - expectations
of return on investment from financial markets than of retaining
At the same time, there is a danger of financial institutions pulling
the plug on companies with cash-flow problems because they feel
they can get a better return through asset stripping: Already in
some places stations have closed down because the value of the land
they occupy is higher than the value of the business.
So where should radio be looking?
Radio's unique strengths.
The first part of any analysis in our view
should be to consider where radio has unique strengths and
in some ways we fear there aren't many unique strengths any
more: Although the combined package has many strengths, many
of its elements that were effectively available only through
radio - or wireless as it was before that word was linked
with computers and digits - can be had through other routes.
For example it's no longer in the music it plays - there's
much more of that available from other sources whereas 70
years ago for many households it was a prime source for music
since recordings and "gramophones" were much more
expensive than a wireless. Nowadays music is available from
a multiplicity of sources and, recording companies notwithstanding,
is much more affordable in the rich countries at least. And
of course, even if in the views of many, it's degraded the
sound, there's plenty of op music on cable TV nowadays for
those who don't think it's enough to just listen.
The same goes for sport where TV has long usurped the former
dominance of radio and also for news and drama, the latter
a genre that has almost died out in North America although
we're duly grateful that it remains strong in the UK (unless
BBC cuts clobber it of course!).
So after the litany of woes, what does radio have? Well there's
the combination of portability, comparative low cost, and
the fact that, although it shares this with many other portable
devices nowadays, the fact that a human can listen whilst
doing something else.
It's also universally accessible at the moment, meaning that
the transistor radio you buy anywhere in the world, can be
taken on a journey and still work - until of course governments
push to switch off analogue systems and end up with incompatible
digital systems as is currently happening: In North America,
the US has opted for iBiquity's in-band-on-channel system
and Canada, like most of the world, has gone for the Eureka
system, and the satellite radio companies have added two further
Perhaps the best that can be said for this is that cell phone
companies, a potential competitor for listening, have also
gone their own way in the US where the system used is not
compatible with that of most of the rest of the world.
Which takes us to another potential competitor, the internet,
which is already reaching a sizeable audience in homes as
broadband grows and which may well expend its range as future
wireless technologies are developed.
All these additional options mean much greater choice in theory
but in practice we doubt that most people will go to the trouble
to search for things that might interest them: Instead they'll
generally settle for the familiar and easy to get.
Inertia as strength:
Competition as a benefit.
The tendency to take the easy way - sometimes out of indolence,
often because the effort that has to be put into searching
for the new is too great for the returns it brings - means
to us that existing radio has a great strength unless it disappoints
What sane person, for example, would actively seek to replace
something available so conveniently with the comparative hassle
of, for example, searching the internet for a less reliable
stream that may or may not be better? Dip in and out to see
what is there? Certainly! If you find something you like,
listen to it for some of the time? Certainly, especially if
in an office and it's available through a company broadband
and terrestrial radio is not. Supplement what is there? Again,
for sure! Replace it? Unlikely.
Thus we see the equation as one much more of radio being likely
to damage itself than of new competitors having the power
to massively damage radio. Indeed we'd contend that the growth
of satellite radio in the US is as much a function of dissatisfaction
with what listeners were getting from terrestrial radio as
of gaining extra choice from satellite: The problem of course,
to quote the old saying, is "how can you get them back
on the farm once they've seen Paree? "
The answer to that of course, is that you often can't. In
other words, notwithstanding Clear Channel "less is more"
and other initiatives, terrestrial radio just can't keep on
packing in the same amount of adverts and filling in time
with pap and expect to keep the audience yet to do otherwise
is likely to mean less income and higher costs.
That is a likely indicator that radio stocks are overpriced
but seems to us to be a positive development for listeners
who will benefit from the competition; indeed are already
beginning to do so as fear overcomes greed in some boardrooms.
And in the longer term, we'd contend that if new services
get people to appreciate the benefits of listening that a
plus overall: Better to fight over a bigger pie than a smaller
So what should
terrestrial stations do?
To face of any threat successfully, we'd suggest,
means evaluating it and then reacting according to the real
world situation not the one you'd like to see. It also means
thinking in a longer term frame that quarterly reports that
may boost stock options for the CEO - and see the company
down the tubes in a few years when the aforesaid is enjoying
a well-padded retirement having been dumped but collected
from the options and often paid off when in reality he or
she was in the longer term a cost not a benefit.
So what is the longer-term future for an aural medium? We
think it splits roughly into three segments.
Internet and mobile technology.
The newest in technological terms, is the ever-developing world
of being able to download digitally from the internet, a world
that encompasses broadband, mobile phone technology, and Wi-Fi
and its developments as routes to the download.
About the only thing that could hit this development hard would
be a US Supreme Court decision to bow to the Neanderthal approach
of the motion picture and recording industries - they who wanted
video recordings banned and now want to hold file-sharing software
firms Grokster and StreamCast Networks, the Morpheus distributor,
liable for what computer users do with the technology.
That case goes before the US Supreme Court this month and we can
only hope that it will uphold lower courts and throw out the entertainment
industry's arguments: Our view is that the argument to hit the
software firms is based on logic that would also make it reasonable
to hold Hollywood companies responsible (for damages) and individuals
responsible (as accessories before the fact) in part for various
atrocities where lawyers have claimed - without success - the
crime was imitative of or influenced by the movie or video game.
Assuming that technology - and society as a whole - win, there
will be no escaping the fact that it will become more and more
simple to obtain a massive amount of audio on-demand or to store
for future play in a portable audio device. Listening to this
audio will inevitably eat into the time spent listening to radio
but it won't deal it a deathblow.
The next segment is that of satellite radio and we expect
and welcome a healthy future for this sector. It can provide
a wide range of programming available on a national or trans-national
basis and indeed in many areas will provide extra choice not
only because it aggregates audience for a service to listeners
with specialist interests from a wider geographical area but
also because all of its services remain available as you move
within the area it covers.
We could certainly see interest in a science and technology
channel or a drama channel, for example, as being sustainable
with an audience from all over North America but not if the
audience is to be drawn from one city never mind a rural area.
What we can never see satellite replacing is a strong local
And finally terrestrial radio: The financing model for this
will have to remain some form of public broadcasting or advertising
and it's fairly obvious that the strength of terrestrial lies
in being local since that is an area the other segments cannot
tap in the same way. Terrestrial radio can, of course, use
the internet to develop its local strength and if sufficiently
imaginative could in our view benefit considerably.
There is, for example, in our view, be a sizeable demand for
news and information about a city or region of the US from
people who've left it and development of podcasting technology
could well enable radio to fulfil this need profitably. How
demanding, we ask, would it be for a local station to produce
a weekly or more frequent podcast of local highlights that
it could promote locally on its terrestrial service and provide
on a sponsored basis?
It could only do so, of course, if its service does include
local programming since in the longer term we expect there
to be a gradual drift to satellite of syndicated hosts - not
just the Sterns and Opie and Anthonys but also other hosts
if satellite continues to grow.
This does not mean giving up on syndicated programming but
a realistic assessment that it is fighting the wrong battle
to try and hang on to exclusivity for it: Far better to assume
those on the move will listen via satellite but the local
audience can be retained by supplementing the syndicated with
the local - and insisting on doing so whether or not the syndicated
host likes the idea of opt-outs for such local content.
Equally for music, there's nothing the station can offer in
terms of tracks that listener's can't get elsewhere but if
the mix they get is diverse enough and within a programme
that offers other elements that i-Pods and satellite cannot
provide - and again we stress the local, in terms of hosts
references, news and information - we would expect many people
to stick with the local station.
If on the other hand what they get locally is a host from
far away voice tracking and music from a very narrow playlist
they may well find satellite preferable most of the time and
not bother coming back much.
And finally there's that one benefit radio still has over
the other information offerings: When the mains power is out
and there's a hurricane, people need information - sometimes
very local information - that only local radio can realistically
supply. It certainly won't be on the i-Pod and satellite radio
may well be able to provide useful regional and limited local
information but for vital detail, the local station is irreplaceable.
Irreplaceable that is, assuming it has invested in back-up
generators and staff who can keep it going. If it goes off
the air or doesn't have the backbone of people it's irrelevant
when it really matters and may well be considered replaceable
when the emergency has passed.
So the best answer is to build local strength, nurture local
connections, and build on them. Satellite can probably do
network radio better but no competitors can beat a good local
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