Tag Archives: OTA

Radio’s Dilemma (or Opportunity?)

38Radio’s a business. Peter Drucker said “The purpose of a business is to create a customer.” A business also needs to make profit or it won’t be in business for very long. On that we can all agree.

Surprisingly, many business people who know this still go out of business, often because they focus on the profit part and not the customer part. Plus those businesses either never had or lost their competitive advantage.

Radio’s dilemma is it lost that competitive advantage. That being having an FCC license to broadcast. Not everyone could obtain a broadcast license – they were limited by the Federal Communications Commission (FCC) – or had the ability to profitably operate a broadcast property. Profitability is when you earn money in excess of your cost of capital.

The radio business made a lot of money. Many enjoyed cash flow margins north of 50%. Its success attracted more people into radio ownership because it “looked easy” and made a bundle of dough. As more radio stations came on the air, it drove up wages, increased competition and increased multiples for valuing radio properties when they were bought and sold.

If this type of growth and expansion was all that was taking place, the “circle of (business) life” would have seen the radio industry slow down as the overcapacity from all of the new radio stations fought over the not-as-fast-growing advertising pie. It’s similar to what happen to the casino industry as expansion took off in America after just Nevada and New Jersey were no longer the only two states to license casino gaming.

Enter the great disruptor; the Internet. Radio, as we all once knew it, would be changed forever. For the Internet would now provide the world with an infinite number of “radio” options, like Pandora, Spotify, iTunes, RadioTunes et al. All trying to be ad supported like OTA radio.

Clay Christensen wrote about what happens when an industry is disrupted in his book The Innovator’s Dilemma.  He tells the reader how incumbent companies often respond to their disruptors with disastrous consequences.

Radio looked at the Internet as a “free broadcast license” and put their OTA signals onto a stream and then tried to squeeze a little extra profit by running separate ads on the stream versus over the air. It created a little extra money for the radio business but created a less enjoyable listener experience.  Sean Ross recently wrote in his newsletter “Ross On Radio” how different and better a radio station he listens to online sounded when he actually traveled to the market and heard the same station over the air. The difference was in the breaks and it was HUGE.

It doesn’t have to be all doom and gloom.

Southwest Airlines has enjoyed four decades of profitability. Like Walmart, Southwest had a root purpose for existing. Sam Walton’s Walmart mastered logistics to keep prices to his customers low and Herb Kelleher’s Southwest focused on constant improvements to make travel by air more affordable to more Americans. Like all successful enterprises, they put the customer first and profits were the result of doing everything else right.

For radio to be successful on the Internet, it needs to create a better user experience that attracts and delights the listener or that creates a new and different user experience that will enrich the end users’ lives. Radio, over the air, FCC licensed radio has the best platform to promote its Internet products. The possibilities are infinite. But each product must have a purpose beyond just making a buck.

Businesses that grow have a purpose beyond profit. Businesses that focus their growth on profits won’t have either growth or profits.

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Podcasts & Homework

33On the surface these two things appear to have nothing in common. Right? But stay with me as I explain. I follow Duke Professor, celebrated author and student of human nature Dan Ariely. Dan writes a regular column for the Wall Street Journal in which he answers people’s questions. A recent question was “Any tips for encouraging kids to view their homework as play?”

Being that my second career is teaching at a university, subjects dealing with learning catch my eye, so I read what Dan had to say about this.

Can Homework Be Viewed As Play?

Two words: Not really.

However Dan goes on to explain why this is. While you can get kids to maybe enjoy homework more or to hate doing homework less, it is still work. Play is something else entirely.

So what does this have to do with Podcasts?

Hold on, I’m getting to that. Dan goes on to tell the story of how in a part of the world that has little water; deep wells need to be dug to find water. Pumping water out of these deep wells is a lot of work. A person noticing how children at a playground near the well loved to push a merry-go-round around for hours on end while at play had an idea. What if the children’s merry-go-round were connected to a pump that would draw water out of the well? Are you with me so far?  Well, that’s what they did.

A Not So Bright Idea

The result of this new “PlayPump” was underwhelming. And here’s the key point of the story. Dan says that “when you take a play activity and force children to do it, you change the activity from play to work, and the fun goes away.”

Podcasts = Work

In my honest opinion, Podcasts take work. You have to remember they are there. You have to download them onto your device. You have to schedule a time you’re going to listen to them. You have the ability to fast-forward or repeat them – which I’m sure you would say is their benefit – and that means you have control over them. You have a role to play. You have to work. So if Podcasts are to be a threat to over-the-air radio, listening to them is going to have to get a whole lot easier.

Don’t Discount Curation

Over-the-air radio is easy, just an on/off button, volume control, and your favorite stations ready to listen to at the push of a button. Someone else does all the work. They pick out the songs, they tell you the weather, they give you the time and traffic conditions, they entertain you, and they alert you to anything important happening in your world you should know about. All you have to do is play.

Who wants to do homework anyway?

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