One of my favorite weekly reads is Tim Moore’s “The Midweek Motivator.” You can sign-up for Tim’s weekly wisdom here.
This past week, Tim wrote about how people inside radio stations are asking him, “is radio failing?”
Now Tim’s a student of history, and he responded with “If you care about history (because the past is prologue) here’s the simple truth: some large groups are faced with debt loads that will either force bankruptcy or massive reorganization.”
Tim’s analysis about how America’s two largest broadcasters dug huge debt holes that can’t be re-filled by current operating revenues is spot-on. With radio, like a lot of businesses, it’s a matter of buying it right from the get-go. Start out upside down and most likely you won’t have a good day.
A system that is over-reliant on prediction through leverage, hence fragile to unforeseen “black swan” events, will eventually break into pieces.
Crystal balls are hard to come by but my tea leaves are leading me to believe that mass mediated communication is confronting more than just debt loads. What we are also dealing with is “paradigm paralysis.”
Radio’s leaders are holding onto a set of beliefs and views that radio is invincible.
Thomas Kuhn coined the term “paradigm shift” in his influential book “The Structure of Scientific Revolutions” in 1962. The business world adopted this terminology of “paradigm shift” to describe a profound change in a fundamental model.
Paradigm paralysis, on the other hand, is the inability or refusal to see beyond the current models of thinking.
Let Me Share a Story
John C. Harrison told this story at the First World Congress on Fluency Disorders held in Munich, Germany in 1994. See if you see a parallel to radio and the advent of satellites, streaming, podcasts, and smart speakers.
In the late 1940s a man walked into a laboratory of a major photographic
manufacturer in America to demonstrate a new photographic process. But
he didn’t bring along a camera or film. He brought along a red box with a
shiny steel plate, a charging device, a light bulb and a container of black
powder. The picture he created was faint but discernible.
“But where’s the film?” they asked. “Where’s the developer? Where’s the
darkroom? Why, that’s not really photography!” And so, the company
passed up an opportunity to acquire the process for electrostatic
photography, or xerography…a process that has grown into a multi-billion
Why did they pass up such a great opportunity? Because the people who
saw the process were suffering from PARADIGM PARALYSIS.
Call Me an Outsider
Joel Barker wrote a book called “Paradigms: The Business of Discovering the Future.” Joel says that anyone who develops a new paradigm is often labeled an “outsider.”
Truthfully, when you’re running a cluster of radio stations, you don’t have time to think let alone take a step back and look at things with a fresh eye. I know. I’ve been there.
What teaching and now blogging have given me the opportunity to do is listen to everyone talk about the prevailing paradigm of radio broadcasting, in all of its subtleties and contrast it, to what I’m witnessing taking place before my eyes and ears by the end users of mass media.
And what I sense may be happening, is the radio industry being on the verge of a “black swan event.”
Black Swan Events
Credit card companies, who amass tons of data on their customers, still managed to miss the huge financial crises in housing back in 2007-2009.
When a tidal wave struck Japan’s Fukushima nuclear plant, the predictive model used to calculate how high the protective wall should be built, provided for a 20-foot wave. Yet, the wave that struck the plant was 24-feet high.
AIG, an insurance company in the business of predicting risk, missed seeing the financial collapse that bankrupted them.
Now Facebook is dealing with a black swan event over their data breach by Cambridge Analytica. Only this black swan could have major implications for how digital advertising is bought and sold in the future. The UK and Europe will put in place in May 2018 the “General Data Protection Regulation,” that will protect their citizens’ personal data or offending companies will suffer stiff penalties and fines.
So, what the Facebook story is doing, is making its two plus billion users aware of such massive collection and abuse of our data, but the fallout from this breach of trust will impact the ad supported business model of everyone in the digital advertising world.
30% of American Homes Don’t Have a Radio
Edison Research and Triton Digital’s annual “Infinite Dial” research just produced this astounding statistic. Close to a third of America’s homes no longer have a radio set in them.
Many people see smart speakers as the way back into the home for radio. But are they really?
Cable TV & Over-The-Air (OTA) TV
In the beginning, cable television was called “Community Antenna Television.” The concept was simple, TV stations were primarily located in big cities and the suburbs couldn’t receive those TV signals. So, antennas were placed high on mountains and cables would carry the signals received to homes in the valley.
TV operators loved this back then. It was like getting a power increase for no money.
Ah, but remember, there’s no such thing as a “free lunch.”
As the cable industry grew, channels such as ESPN and CNN and The Weather Channel were born and would compete with OTA TV.
Then along came streaming video.
At the end of March 2017, one year ago, Netflix surpassed cable TV with its number of subscribers. And if you were to add up all the other streaming video services available to today’s television consumer, the lead over cable wouldn’t be a couple million viewers, but tens of millions.
What happens when a household begins subscribing to these advertising free channels? They find it almost impossible to return to ad supported ones.
Now we circle back to the smart speakers, Amazon’s, Google’s, Apple’s and Microsoft’s for starters. Instead of a handful of audio choices, the smart speaker delivers an almost infinite choice, and many, advertising-free.
When you put a prime rib steak next to hamburger and they are both the same price, which do you think most folks will choose?
The smart speaker lets you customize your favorites, much like the pre-sets on your car radio does. I’m willing to bet that the average consumer will end up with about 3 to 5 favorite audio streams they spend the bulk of their listening time with.
In fact, Nielsen’s Total Audience Report released in the second quarter of 2017 said that 87% of OTA radio listeners spent their listening time tuned to one of their three favorite radio stations. And 58% of that time was spent listening to just one station, what Nielsen calls their 1st Preference or P1 station.
Why would we expect this number to grow with the advent of smart speakers?
I think Steve Goldstein summed it up best in his recent blog when he wrote, “Commercial radio should put down the hammer and stop searching for nails. As they think beyond the stream, they will see how people are using audio media these days and create on-demand solutions in-sync with the vast opportunity of the exploding Smart Speaker universe. On Smart Speakers, the listeners are asking for it.”
5 responses to “The Past is Not Prologue”
Amen. The Good: Radio has a history of producing outstanding content. The Bad: No so much, these days. The Ugly: CYA / CPA lack of creativity. Think: Little Anthony, I’m on the Outside…Listening in.” Ready when you are, Mr. Spock. Radio rides, again!
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You seem to suggest that the ‘advertiser supported’ model is dead. I just think it needs to change. Many say the public is tiring of massive numbers of ads bombarding them constantly. I agree. But, it doesn’t have to be that way. At its basis, advertising is one person telling another person about something in which they might have an interest. Radio does that better than any other medium. Years ago, I worked for a crazy station owner who did the morning show himself. And, his live spots for local businesses were the highest-priced spots on the rate card. Why? Because they worked. Just one guy telling another person (listening on the radio) that there’s a bargain down the street at so-and-so’s hardware store. Personal, effective communication. No spot recorded in a studio had that kind of effect. Radio can talk to one person better than any other medium. When the ads are an integral part of the format, not separate from it, advertising works and isn’t a tune-out.
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Art, the ad-supported model has been over-done. Two years ago I wrote about this in this article titled “Are We Killing the Gold Goose?” https://dicktaylorblog.com/2016/02/21/are-we-killing-the-golden-goose/
I find the “ads” on NPR quite effective in telling me about things I might be interested in, since often they have a connection to the program I’m listening to. And NPR talks to me, doesn’t yell at me.
Podcasts really understand the value of linking the host to the ad(s).
Paul Harvey sold me a lot of stuff I still have today by telling me about the products, and how he and the Harvey family enjoyed them.
What is dead are long-spot clusters. Screaming spots that bear no relevance to me and make no association with anything in my life. What are dead are spots about the advertiser and not ones about me.
The TV networks are all vowing to greatly reduced the amount of advertising in their programming. FOX has said it set a goal to reduce their number of ads to two per hour by 2020.
I’ve heard no such plan by the radio industry. Have you?
Thanks for adding to the discussion.
I LOVE the fact that you mentioned the Thomas Kuhn book. One of my favorites. It should be read by everyone who is in charge of anything!!! My takeaway from the book was that human beings have minds like steel traps. Once they close on an idea, they won’t give it up until they’re absolutely forced to. BTW, Entercom has been reducing spot loads somewhat. It’s a start.
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Thank You Gary for giving us that insight. -DT