April 2006

Live or later: Implications of on-demand audio.

Live or later: The impact of on-demand audio.

For most of its life radio has essentially been a "live" medium, often along all of the transmission chain with just a live microphone or microphones going to air: Everything from dramas to news was delivered live most of the time until the Second World War.

Even after recording equipment became widely available it was reel-to reel until the cassette was introduced to the market in 1963 and it wasn't until 1979 that the introduction of the Walkman by Sony made it practicable to carry recorded audio on the move.

The changes made to listening habits by all these technical advances was minor, very minor compared to the impact of TV, yet for a quarter of a century now it has been possible to record radio programmes and then take the recording with them to play wherever and whenever suited them.

So is the advent of "on demand" audio or downloads, automatically as in Podcasts and manually, different qualitatively or quantitatively to what went before? And if so, in what ways and to what extent will it affect radio in terms of business and programming?

Qualitative impact.

Although millions of people were soon time-shifting programmes through VCR's after their introduction, comparatively few did the same when it came to radio. Much of this may have been to do with the comparative ease to set up recordings of one medium - programmable recording was built into the recorders for TV but not for radio - and some of it because radio programmes in general weren't felt by most people to be worth recording for later listening but whatever the reason there was no great impact on radio listening.

This began to change when digital technology and the growth of the Internet, and in particular broadband, made it possible to easily offer audio to and save audio on digital media.

Most of the initial change came because people were able to record music easily and, more to the point for most it would seem, almost for free via various file sharing technologies. Downloads at this stage were a form of mass theft, showing how large a portion of the population (younger ones in the main as it happened because they had moved to the technology more) were essentially dishonest or at least very limited in their concepts of what boiled to theft.

Attention moved more towards radio with the advent of the podcast, which in practical terms only dates back around two years. Since then more and more radio companies, particularly public broadcasters, had offered podcast cum MP3 downloads of their shows allied with on-demand streaming audio.

The combination of being able to choose when to listen to a show - the BBC, for example streams most of its output on demand for up to seven days after a show - or to speedily download it, either automatically or via a manual MP3 download, for listening on any MP3 device - has certainly changed listening habits for many.

We would see this trend continuing as more sophisticated devices become available with a store and replay facility and the growth of technologies such as wireless broadband and DMB (Digital Multimedia Broadcasting) and audio availability on cell phones makes it even easier to get other options than a traditional broadcast signal.

Quantitative impact.

Despite the above so far the new listening technologies have not made great inroads into the audience for terrestrial broadcasts, provoking much more concern from the entertainment industry about piracy of music.

This could, of course, change as technology moves further and in particular if wide-area wireless broadband takes off since it would then be possible to listen to audio of choice from stations all round the world while on the move, particularly in an automobile.

So far only a few "Internet radios" that allow people to "tune-in" to Internet stations without a computer are on the market but this is likely to change if, as already noted, wireless broadband in DMB and audio availability on cell phones, becomes widely available - these and other developments could lead to major growth make other options to traditional over-the-air stations.

For the moment we don't see them as likely to have any more impact than satellite radio - currently with around 10 million subscribers in the US, a twenty-fifth of the numbers who listen to terrestrial broadcasters there- but the latter have audiences that are static or in slow decline whereas other options, including satellite, are growing quickly.

The future.

Forecasting is famously fraught with uncertainties but despite the introduction of US HD channels, which so far seem to be mainly cheaply produced jockless music packages with a song purchase scheme added on in some cases - there are exceptions as always and particularly for public radio the option to offer continuing music stream as well as news - we don't see terrestrial radio growing much and we do see other technologies biting into listening.

Looking at the next five years and taking the US as a prime example (and assuming the much-worried-about economic collapse doesn't happen - not a very safe assumption in our view as oil prices will almost certainly remain high and the current administration seems to live in economic cloud-cuckoo land) we would at the most expect terrestrial radio to retain its audience numbers and the other options to at least treble theirs.
In addition the development of local online advertising could well in our view bite into radio advertising income significantly as it is likely to do for newspapers.

That leaves us expecting terrestrial radio income to follow the listening and either fall or remain essentially static (if the economy slumps all bets are off as that will hit all media), satellite to potentially go into operating profit and other listening income to grow fairly strongly if some of the current paid podcasting trials perform well.

Terrestrial radio therefore has the choice of either accepting lower profits to keep its programming up to scratch - we certainly can't see it getting away with adding much more advertising in terms of spots albeit Clear Channel's "Less if more" strategy could boost the per-spot income - or cutting costs.

This latter we could easily see as turning into a very debilitating spiral of less attractive programming competing with increasing attractive options from elsewhere, particularly for music formats.

For news, sports and talk, however, live is going to remain largely irreplaceable by on demand, especially for in car listening although for home listeners here push-news to cell phones and other electronic media may well take some of the audience here at times except when there are major events in which case we would expect traditional media to get their normal audience boost, if not a financial one.

The other modes of listening will, we expect, continue to develop technologically as well as growing audience but they are likely to face increasing pressure from the entertainment industry and its lobbyists to grab as much cash as they can for any music use so they could easily change emphasis in some cases to being a front-end for musicians to promote and sell their music directly, yet another area that was traditionally a strength for radio albeit ground that many stations abandoned to various degrees in favour of poll-led playlists.

What we regard as asset-stripping by radio conglomerates in the way they have operated has therefore in our view come near to the end of the road unless the accountants go for a final burst of short-term profit taking: If they do, advertising-funded terrestrial radio will survive but be weakened and other listening options be correspondingly strengthened.

Expect many more attacks on funding for public radio from commercial vandals over the next few years!

What you think? Please E-mail your comments.

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