August 2006

Technology now and what we expected in 2000.

Technology now and what we expected in 2000.

In various comments since we started this site we have ruminated about the future of radio in terms of threats to the current medium as a whole from technological developments including Internet audio in various forms and satellite radio: This month we consider a narrower area, that of satellite radio - currently the only broadcast subscription audio service in the US - and the threat to it from the development of Internet and mobile technology.

In our September 2000 comment we considered Internet audio "Much PR, less performance so far!" and indeed at the time we were correct in noting that for a mass audience that it was then a "lot more costly, complicated, restrictive and often of poorer quality than off-air listening".
Those views were shared by most of the big commercial players in radio who at the most dipped their toes into live streaming.

Even then though we considered that technology could change this, writing, "Or it may be that developments of mobile phones will enable them to be used as a phone combined with an Internet-access device and maybe also combined with Walkman-style CD or tape devices. If these developments move far enough and don't cost too much then there could be a real revolution. So it is possible that technological development in this area could make listening to Internet stations as easy and convenient as tuning in to a traditional radio."

We were wrong about tape as the development of flash drives and small hard drives proved over the next few years - iTunes were launched at the start of 2001 followed by the development of the iPod, which was launched in October 2001 with a 5 GB hard drive. We were ahead of our time, however, in predicting the development of mobile phone technology to encompass Internet access and audio storage and playback but this is now proceeding apace.

The next month in our October 2000 Comment we considered satellite radio, coming out pro but concluding, "satellite radio, like Internet audio, will be yet another different and complementary service to that provided by current terrestrial broadcasters" and suggesting that even though it might bite into terrestrial radio profitability there was room for all.

The following month in our November 2000 Comment we considered the strength of an "aural medium" and suggested that people try every so often to "listen hard" rather than having audio just as a background for other activities and concluded " Like being engaged in a book so as to be oblivious of what is happening around you, you can be overtaken by the aural. And when you are the experience is worth it -- well worth it. It's an investment in time and appreciation, not a waste of time."

So how do these comments stand up after six years?

Fairly well we'd say in terms of both where the industry is now and where it looks likely to be heading as technological change moves apace. In terms of the latter, we are seeing considerable development of mobile devices to combine functions so that the phone may now also be a camera- still or movie- audio and video storage and playback device, simple text device, and Internet linked.

At the same time other technology has moved on with more and more developments in wireless broadband so that portable computers - not forgetting that mobile phones are actually fairly powerful computers in some cases - can be used with Internet wireless in many more locations and may yet be Internet capable throughout larger cities.

That capability puts pressure on all players as voice over Internet capability means the computer can be a cheap or free way of making phone calls - local or International - putting pressure on the mobile telecommunications companies, the phone can be used to receive audio or the Internet, putting pressures on broadcasters and music companies, and digital broadcast capability in some countries can already provide TV and audio to mobile devices.

Add to that the relative cheapness of digital storage nowadays and it has become practicable to make years of print and broadcast media available on demand … if a means can be found to make this pay for itself.

Looking ahead.

Looking ahead we think the market will change dramatically with a mix of paid-for and free on-demand services - think of the various podcasts now on offer with vodcasts growing and with a similar mix of broadcast services funded by subscription, licence fees and commercials.

The equipment that can receive these will also develop - it really can't be that difficult to make a device that can handle satellite radio, various forms of digital radio and TV, services from the Internet and receive these via traditional broadcasts, satellite broadcast, and wireless - or networked - Internet sources.

Some major players are already developing their offerings on a variety of platforms and we see this trend growing but our crystal ball is still rather fuzzy on how the smaller, local players can cope. It may well be that if they really serve their communities well they can survive principally on the basis of current broadcasts but we think they would be foolish to bet on that.
In our view even the smaller players will have to think in terms of multiple-platform offerings - and advertising if that is the way they are funded - but we also expect companies to grow up to offer these services simply and competitively for stations that don't have the size to justify becoming technologically savvy: After all that's what happens with hosting sites for all but the big companies and in many other areas of business where various elements of operation are outsourced to specialist companies.

Our concern is that the virtues of some of the smaller operators could get lost in the formats mass produced by such larger service suppliers since it is obviously more economic for them to offer a similar service for all but even then technological development should make it easier to provide a modular mix-and-match service.

Overall we rather think the chances are there for more variety for the audience and that the fears of existing players are misplaced if they are smart enough to use the new technology.

Certainly some of them are at more risk than others - where might Sirius be for example if Howard Stern moved to selling podcasts and a streamed service (OK, Sirius is going to do this anyway but the opportunities are now there for individuals to strike out on their own in a way that was not possible in the past)?

In the end though, as we've noted before, the existing players have the knowledge, people and infrastructure already in place. It's up to them to use the advantage to attract the audience: There may be temptations to try the recording industry approach of trying to stem the tide but in the long run it makes much more sense to ride the wave.


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