Oh, The Insanity

The National Association of Broadcasters (NAB) submission to the Federal Communications Commission for the FCC’s 2018 Quadrennial Regulatory Review is eye-opening.  You can read it for yourself HERE. It left me shaking my head.

The NAB told the commission that “’local radio stations’ Over-The-Air (OTA) ad revenues fell 44.9% in nominal terms ($17.6 billion to $9.7 billion) from 2005-2020.” Local 2020 digital advertising revenues by stations only increased the radio industry’s total ad revenues by $0.9 billion bringing them to $10.6 billion.

The NAB’s solution to the problem is for the radio industry to become more consolidated.

The definition of insanity is doing the same thing over and over

and expecting different results.

-Albert Einstein

Say What?

Back in the mid 90s, the radio industry was telling anyone who would listen that the problem with the state of radio broadcasting in America was that the industry was made up of little “ma and pa” radio stations/groups which could not scale and if the ownership caps weren’t lifted the radio industry would perish.

Excuse me, but I’ve already seen this movie and how it ends. So, why would doing more of what didn’t work, result in a different outcome.

The Media World Has Changed

I don’t think anyone would contest that the media world we live in has changed dramatically since 2005. Facebook, the world’s largest social media company with over 1.84 billion daily active users, opened its doors on February of 2004. YouTube began in 2005 and Twitter in 2006.

Google, the dominate search engine on the internet, began in 1998 and internet retailing behemoth, Amazon, began in 1994.

The new internet kids on the block that dominate our day are WhatsApp (2009), Pinterest (2009), Instagram (2010), Messenger (2011), SnapChat (2011) and TikTok (2016).

The Top 10 internet companies at the end of 2020 raked in 78.1% of the digital ad revenue ($109.2 billion).

All Ad Dollars Are Green

While we like to break money spent on advertising into distinct categories like digital media, traditional media etc. the reality is the total number of advertising dollars is a finite number and in the end you can’t tell a dollar from digital from a dollar from analog advertising.

“You can’t handle the truth!”

Colonel Jessup

(played by Jack Nicholson in the 1992 film “A Few Good Men”)

Since 2005, many young entrepreneurs have created a better mousetrap to capture those advertising dollars. No one ever made a regulation or a law that prevented the radio industry from doing what any of those internet companies did. The passenger railroad industry never thought of themselves as being in the transportation business but only the railroad business. That’s why it found itself challenged by other means of people transportation, namely the airlines.

The radio advertising industry was born by entrepreneurs that learned how to create a product that attracted a large listening audience, which in turn enabled them to sell audio advertising to companies wishing to expose their product or service to these consumers.

Unfortunately, we found ourselves challenged by new media competition. Initially, it was television, but transistor portable radios, along with car radios, allowed our business to reinvent its programming and flourish once again.

With the advent of the internet, radio was caught flat-footed.

If that were its only problem.

Radio Stations (2005-2020)

In 2005, America had 18,420 radio signals on the air.

  • 13,660 AM/FM/FM Educational radio stations on the air
  • 3,995 FM translators & boosters
  • 675 Low Power FM stations.

By 2020, those numbers increased to 26,001 radio signals.

  • 15,445 AM/FM/FM Educational radio stations
  • 8,420 FM translators & boosters
  • 2,136 Lower Power FM stations

18,330 vs. 26,001

That’s a 41.8% increase in the number of radio stations.

While radio folks were busy trying to steal radio advertising from the station across the street or consolidating with their former competition, the internet folks were focused on selling more advertising. From 2005 to 2020, the sale of digital advertising grew from $12.5 billion to $139.8 billion. That’s an increase of 118.4%.

But during that same time, radio grew its digital advertising footprint by $0.9 billion.

Quantity vs. Quality

When radio regulation began in America under the Federal Radio Commission (FRC) the decision was made by that regulatory body to focus on the quality of radio programming versus the quantity of radio stations they allowed to broadcast. Only people or companies with the economic capital to operate a radio station in the “public interest, convenience and/or necessity” would be allowed to obtain a radio broadcast license.

I believe you could say that the radio industry’s downfall began when we ceased worrying about quality and went with the more signals we license, the better for radio listeners mantra.

Sydney, Australia

Sydney is a major city in the country of Australia with a population of 5.312 million people. There are 74 radio stations on the air in Sydney.

By comparison, Los Angeles (America’s second largest city) has a population of 3.984 million people and 158 radio stations serving its metro.

In July 2021, radio revenues in Sydney were up 11.3% year-on-year according to Milton Data.

The Benefits of Pruning

Gardeners know that pruning is the act of trimming leaves, branches and other dead matter from plants. It’s by pruning a plant that you improve its overall health.

A beautiful garden is one where the plants have been trained to grow properly, to improve in their health/quality, and even in some cases to restrict their growth. Pruning is a great preventative gardening and lawn care process that protects the environment and increases curb-appeal.

The irony of gardening is, the more fruit and flowers a plant produces, the smaller the yield becomes. Pruning encourages the production of larger fruits and blooms.

Why do I share this with you?

I believe that everything in the world is interconnected. You can’t for a moment think that what makes for a bountiful garden would not also make for a robust radio industry.

Today’s radio industry is so overgrown with signals and other air pollution, that it has impacted its health.

Doing more of the same, and expecting a different result is insane.

It’s time to get out the pruning shears.

Less Is More

I believe that the way to improve the radio industry in America, to have more advertising revenues to support quality local services including news, sports and emergency journalism, along with entertainment by talented live performers, is by reducing the number of radio signals.

AM radio is the logical first place to start.

Elsewhere in the world we are seeing that not only the AM band being sunset but the analog FM band as well. The world has gone digital.

American radio has one final chance to get it right by correcting for past decisions, hurtful to radio broadcasting, in creating a new and robust digital broadcasting service.

17 Comments

Filed under Education, Mentor, Radio, Sales

17 responses to “Oh, The Insanity

  1. Mike Buxser

    Dick, you are 100% right. I’ve never seen it explained any better. You nailed it. Radios worst enemy is itself.

    Liked by 1 person

  2. Well certainly, Dick…the country will not be “better off” with more radio stations. I’ve been saying this for a couple of years now. If, for example, an AM station can’t find a way through its management to get more than a 1 share, is it really serving a purpose? But, I would remind folks that it’s not just the radio industry that is going for “scale”…or even broadcasting in general. It’s almost everything in America these days. The more stations there are, the more ways the pie is getting sliced. Eventually, you’re left with no more pie.

    Liked by 2 people

    • Kevin, I think we’re seeing that pie evaporating for radio. I see Gordon Borrell is teasing that audio advertising will be going up double digits in 2022, but not traditional radio advertising, which on Tuesday, Oct 12th it appears his latest research will reveal another year of negative growth for the business.
      -DT

      Liked by 1 person

      • And that’s we’re all in the digital game right now.

        Like

      • But without the understanding that the digital game is different and you need to play by different rules.
        -DT

        Like

      • Ted Allison

        I was in public radio for over 25 years at a smaller station where we tried to be a little more creative then shall I say the big guys.

        The problem with both commercial and non-commercial radio is everyone is stuck in a rut, why does everyone have to do the same thing over and over again and again. How many Top 40 stations can there be? Sport stations?

        Now that we are able offer stream service to listeners around the world it just amazes me.

        I see / hear people wanting to start up new audio streams all the time but what to they want program the same stuff hundreds of others are programming or the local station is airing.

        Be creative with your program and try to keep it local.

        Liked by 1 person

      • Ted, thank you for sharing your thoughts.

        While the material goods supply chain is choked up, the global media stream is abundant. We’ve never had such access to virtually anything you want, whenever you want it via the internet.

        ON DEMAND was the game changer and allowed each of us to customize our choices based on our mood.
        -DT

        Like

  3. Arun kumar

    Beyond doubt Quality and content both important but revenue will be made if we advertise ours content will promote and share on every platform

    Like

    • Arun, when I worked at Clear Channel, I remember the webinars that said we needed to focus. And then went on to list a hundred things we needed to focus on.

      Each medium requires a different way content needs to be served up. You simply can’t do it once and then think putting it everywhere will be a panacea.

      Gary Vaynerchuk’s book “Jab, Jab, Jab, Right Hook” clears lays out why this is so.
      -DT

      Liked by 1 person

  4. Dave Mason

    Dick, it seems that much of the content in the world is driven by FOMO. Radio has lost a lot of that, and going digital will make it worse unless its a gradual shift or better content. Pruning the number of choices? Tell that to the EMFs of the world. Not to fault the religious broadcaster one bit, but the rules have allowed them (and others) to have multiple signals in many markets and reduce the “choices” available. In San Diego, Radiolocator.com says we have 478 stations available to us. 82 are Christian Contemporary, 57 are religious, 149 are Spanish or Mexican, 23 Public stations and the rest. Signals in the region probably reach about 10 million (or more). Take that Sydney.

    My head hurts after the discussions of what’s wrong with radio and how the people controlling it come up with more brilliant ideas to “fix it” which are totally the opposite of common sense. Your assessment is right on, so who’s got the joystick in this game? Competition kept the radio business thriving until it was determined that 80% to the bottom line was better for “shareholders” and Wall St. Can’t say that’s worked out well either. It coincided with thousands of other content (i.e. digital/online) choices So there’s no doubt we know the problem. When all is said and done, when every digital choice is available to every user everywhere, we’ll see the winner being (ta daaaa) CONTENT. FOMO may not be the ultimate answer, but it’s certainly a better answer than the NAB can come up with.

    Liked by 1 person

    • Dave, we are very much on the same page. Interesting analysis of the San Diego radio market. Lots of signals, not a lot of choice, and all of them fighting for crumbs.

      I wrote about how shareholder value has negatively impacted radio. ICYMI, you can read it here: https://dicktaylorblog.com/2016/02/28/the-day-the-dumbest-idea-invaded-the-radio-industry/

      Content rules. (Ask Netflix)

      FOMO or Fear of Missing Out is being replaced for many of us by JOMO or Joy of Missing Out. We don’t care where the crowd goes, we instead prefer to satisfy what gives us peace.

      I love this poem that captures JOMO.

      “Oh the joy of missing out.

      When the world begins to shout

      And rush towards that shining thing;

      The latest bit of mental bling–

      Trying to have it, see it, do it,

      You simply know you won’t go through it;

      The anxious clamoring and need

      This restless hungry thing to feed.

      Instead, you feel the loveliness;

      The pleasure of your emptiness.

      You spurn the treasure on the shelf

      In favor of your peaceful self;

      Without regret, without a doubt.

      Oh the joy of missing out”

      —Michael Leunig

      Thank You Dave for reading my thoughts and expanding upon them.
      -DT

      Like

  5. Meanwhile, radio operators are having the skeleton air staff that they still employ put up Podcasts, with no revenue in sight. If that effort would be put into traditional, live air shifts, they would have more listeners and advertisers would have better ROI. Therefore, increased billing. If you think there are to many radio stations, why are operators having their staff compete in the 725,000 podcast space? If it is worth a Podcast, it should be on the air.

    Liked by 1 person

    • Dave Mason

      Good thoughts, Scott. In the “old” days, AM staffers would be assigned duties on the FM station as well, until FM started paying for itself. Many broadcast podcasts now are just a rehash of the on-air product, which is good for the branding but not good enough to make money. The latest “fad” will “prune” itself (using Dick Taylor’s words) much like HD on AM, HD on FM, AM Stereo, Quad FM and other wonderful ideas that failed to make money for the broadcaster.

      Liked by 1 person

    • It really does seem like mis-spent time & energy, doesn’t it Scott.

      Unfortunately, most of those radio podcasts are re-purposed on-air content. Podcasting, streaming, etc are different mediums and need to be treated as such. One size doesn’t fit all.

      Thanks for sharing your thoughts.
      -DT

      Like

  6. Chuck Wilkinson

    Los Angeles Radio Metro is 11,469,700 6+ persons. don’t miss a big fact like that to prove your point.
    Radio is a mature medium that missed the opportunity. It will continue to shrink because of underinvestment in people and product. We live in a non-linear on demand world, and linear mediums don’t fit the paradigm. When I got my first DVR TV changed forever. Now on demand podcasts mean listeners don’t have to listen in morning drive to 16+ units per hour.

    Like

    • I was trying to compare the city of Sydney in Australia to the city of Los Angeles in California populations. The greater metro population of Los Angeles is now up to 18.8 million people. Likewise, when you expand the geography of LA, you also will increase the number of radio signals, so in the end, it’s all relative. But I get your point.

      We agree that “radio is a mature medium that missed the opportunity.”

      On Demand was the game changer that put linear media on the ropes. All of my media is now on MY time, not some scheduler’s. For me that change occurred with TiVo.

      Thank You Chuck for keeping my feet to the fire and contributing to the conversation.
      -DT

      Like

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