Tag Archives: Spotify

Is Radio Biting Off More Than It Can Chew?

caravelle radio broadcast stationThere are lots of items in the news these days about what the radio industry should be doing. Streaming, podcasting, smart speaker accessible etc. The one thing I hear little talk about is, improving the core product and focusing on what the listener is seeking.

The Radio Ecosystem

If you think about it, the radio ecosystem, AM/FM radios, have not seen any real changes in decades. Oh, there was the introduction of HD Radio – introduced around the same time as Apple introduced the iPod (R.I.P. 2001-2014), but listeners never really understood the need for it. HD Radio was embraced by commercial broadcasters when they learned they could feed analog FM translators from HD Radio signals and have more FM radio stations in a single marketplace. This was hardly listener focused and actually chained the radio ecosystem to old analog technology.

What IS Radio?

In the beginning, radio was a way to wirelessly communicate with other people using Morse Code on spark gap transmissions. Guglielmo Marconi built a radio empire on this technology.

David Sarnoff, a skilled Morse Code operator and a Marconi employee envisioned a “radio music box” and wrote a memo about developing a commercially marketed radio receiver for use in the home. It wasn’t until after World War I, when Sarnoff proposed the concept again, this time in his new position as general manager of the Radio Corporation of America (RCA), that it would see the light of day.

Sarnoff would demonstrate the power of radio by broadcasting a boxing match between Jack Dempsey and Georges Carpentier. In just three years, RCA sold over $80 million worth of AM radios, and not soon after created the National Broadcasting Company (NBC).

Federal Radio Commission

America’s first attempt at regulating radio transmission was the Radio Act of 1912, that was enacted after the sinking of the Titanic. This law didn’t mention or envision radio broadcasting.

As radio broadcasting began to grow in the 1920s, then Secretary of Commerce Herbert Hoover would begin the process of trying to regulate the limited spectrum that everyone now wanted a piece of.

The Radio Act of 1927 was America’s first real attempt at regulating radio broadcasting. The Federal Radio Commission (FRC) was then formed by this act.

It should be noted that the FRC operated under the philosophy that fewer radio stations, that were well funded and provided live original programs, were better for America than a plethora of radio stations providing mediocre programming. It was an idea that the major radio receiver companies championed.

Federal Communications Commission

In 1934, the Congress took another attempt at regulating broadcasting (radio & TV) as well as all the other forms of communication that now existed. The Communications Act of 1934 created a new regulatory body called the Federal Communications Commission (FCC). By 1934, radio broadcasting had evolved into a highly profitable business. Broadcast educator, Fritz Messere, writes: “Many of the most powerful broadcasting stations, designated as ‘clear channels’ were licensed to the large broadcasting or radio manufacturing companies, and the Federal Radio Commission’s adoption of a rigid allotment scheme, under General Order 40, solidified the interests of the large Broadcasters.”

The biggest and most well-funded broadcasters have been favored since the very beginning. What kept things in check until 1996 was the limit on the number of AM, FM and TV stations a single company could own.

Telcom Act of 1996

Those limits would evaporate with President Clinton’s signing of the Telcom Act of 1996. Radio, as America had known it, would be over.

Now, for the most part, a single owner could own as many radio stations as their pocketbook could afford. Lowry Mays and Red McCombs, founders of Clear Channel Communications, would grow their portfolio of radio stations to over 1200 from the 43 radio stations they owned before the act was signed.

In 2003, Mays testified before the United States Senate that the deregulation of the telecommunications industry had not hurt the public. However, in an interview that same year with Fortune Magazine, he remarked, “We’re not in the business of providing news and information. We’re not in the business of providing well-researched music. We’re simply in the business of selling our customers products.” (Mckibben, Bill (2007). Deep Economy. San Francisco: Ignatius Press. p. 132.)

Radio Zoning The FCC is now considering whether to further loosen up the ownership limits of radio and TV stations in America. FCC Attorney John Garziglia recently wrote:

“If radio stations could be erected like fast-food establishments and grocery stores, with no numerical limits imposed other than a businessperson’s risk tolerance, it would be difficult to argue for FCC-imposed ownership limits on radio. Indeed, a regulatory agency enacting numerical limitations on restaurants and grocery stores would likely not pass legal muster.

But there are widely-enacted municipal limitations on just about every type of local business. The limitations are called “zoning” – the permitting or prohibiting of certain uses in certain areas to protect the character of the community.

The FCC’s radio ownership rules can be thought of as a kind of radio zoning. In the same way as land-use zoning protects a community’s character, the FCC’s ownership rules permit or prohibit certain radio station combinations protecting the amorphous concept of the public interest.

With land-use zoning, communities maintain a distinct character, livability, aesthetic, and economic success by not bowing exclusively to the profit motive of land developers. Allowing several or fewer owners to own virtually all of the radio stations in the country would doom the specialness of our radio industry.”

 

I think John makes some excellent points and I would encourage you to read his complete article HERE.

Biting Off More…

Radio operators today can’t properly staff and program the stations they already own. What makes them think that will change if they own even more of them? Most radio stations are nothing more than a “radio music box” run off a computer hard drive, an OTA (over-the-air) Pandora or Spotify.

Former Clear Channel CEO, John Hogan, introduced the “Less Is More” concept when I worked for the company. While it actually introduced more on-air clutter, not less, the idea was neither new or wrong.

If owning more radio stations was the answer in 1996, then why in 2018 are we worse off than we were then?

Why was Jerry Lee able to own a single station in Philadelphia and dominate that radio market?

Why are many locally owned and operated radio stations some of the healthiest and most revered in America today?

Radio not only needs zoning on the number of radio stations a single owner can control in a market, but the total number of radio station on-the-air in a market. And it needs radio stations that are neglected to be condemned like property owners who let their land go to seed.

The FRC wasn’t perfect, but the concept of “less is more” served America well for many decades. Fewer radio stations that provided high quality, live programming, operating in the ‘public interest, convenience and necessity’ and by virtue of that diversity of ownership, provided diversity of voice and opinions, as well as healthy competition.

 

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The Winner Takes it ALL

108Everything old is new again. I’m sure you’ve heard the phrase. “Everything old is new again” was the title of a song in the movie musical “All That Jazz.” Part of the lyrics to this Peter Allen/Carole Bayer Sager song include:

 

Don’t throw the pa-ast away
You might need it some rainy day
Dreams can come true again
When everything old is new again

I might fa-all in love wi-ith you again

VADs

While I haven’t heard anyone call them this yet, I may be the first, I’m sure in time they will be referred to in this way, Voice Activated Devices.

You probably better know them as Amazon’s Echo, Google Home or Apple’s HomePod.

Amazon was first into this territory followed by Google and now Apple (their device will be available later in 2017). Microsoft recently announced they have partnered with Harmon Kardon to put the MS VAD “Cortana” into a smart speaker system. Harmon Kardon is a division of Samsung.

Fred Jacobs blogged about them in a recent article titled “Are Voice Commands the New Hi-Fi?” (Hi-Fi was introduced with the 33-1/3 discs introduced by Columbia 69 years ago this month – June 20, 1948.) In his article, he quoted Spotify’s Ian Geller who said voice commands allow people to “engage with music in ways they haven’t since the Hi-Fi stereo system became available.”

Fred feels that these new VAD’s are a “true moment for the radio industry – a chance to bring radio back to homes in a big way.”

The Old That’s New Again Part

As I study these new gadgets, I see a problem for radio of its own making, branding.

The radio I grew up with was very creative and prolific at branding itself with its listeners. It had to be because of the way radio ratings were conducted, either by aided or unaided recall. Billboards, bumper stickers, TV ads, t-shirts, putting your call letters and frequency on just about everything, everywhere it could be seen.

From virtually the beginning burning your call letters into the brains of your listeners was paramount.

Consolidation and PPM (Personal People Meter) would take the need to brand – or so the new Wall Street stakeholders thought – away. Consolidation did this through many signals in the hands of a few operators and the need to cut costs. Arbitron’s (now Nielsen Audio) PPM device did it by recording “listening” even when the listener was totally unaware of where the music or talk programming was coming from.

The new Voice Activated Devices now require a person to KNOW exactly what it is they want to hear when they say the activation words, like “Hey Alexa” or “Hey Google” or “Hey Siri” followed by a specific request.

Unaided recall is back.

Wi-Fi, Hi-Fi & Being Connected

While these new VADs maybe the new “Hi-Fi” for a 21st Century world, they require Wi-Fi to connect to the internet and their respective clouds.

While many of us today take access to a broadband connection for granted as our parents did a landline telephone line, many people in America were not so fortunate. Poor people or people in very rural areas depended on assistance from the Federal government to connect them up to a wired telephone line because private companies found doing so very unprofitable. The Universal Service Fund (USF) was established to provide the funding. Everyone who had a phone would pay a tax to help wire America.

As the need for internet broadband became as necessary in a 21st Century world as a phone line did in the 20th Century, the tax would continue to provide this telecommunications service in the United States.

To read about all of this more detail, click here

Various Ways to Listen

Public Radio in America is leading the way with directing people with the many ways they can be heard. A good example is WBAA AM & FM from Purdue University. Their “How To Listen” tab on their website informs the listener how to listen to their stations over-the-air, streaming online, via their App or via a Voice Activated Device.

This last VAD page also tells listeners how to listen to NPR One using voice commands, such as “Alexa, play NPR One.”

BRANDING Your Radio Station is IMPORTANT

Using a VAD is a return to the days of unaided recall for the radio industry. The need to brand your radio station is critical in a Voice Activated Device world.

How is your KISS, FROG, HOG, JACK etc. different than other such brands all over the world? How will your VAD know which one you want to hear?

Might the return of unique and one-of-a-kind FCC assigned call letters come back into fashion?

Coleman Insights just released a study on Public Radio that shocked programmers with the fact that fewer than one in four radio users can call to mind any Public Radio station.

It’s a Winner Take All World

When the elephants fight, it is the grass that suffers is an old African proverb. It means that the weak get hurt in conflicts between the powerful.

Today, the powerful are Microsoft, Google, Amazon, Apple and Samsung. Each one having their own voice assistant it hopes will dominate the field.

Our 21st Century technology is altering the structure of competition in America as never before. It encourages more monopolies, a “Winner Take All” world.

Natural monopolies are not new. Utilities are an example, but they were heavily regulated. The natural monopolies created by the internet crush competition and that could negatively impact the American economy. Internet innovation moves fast, the Federal government moves very slowly and regulation won’t stop them from occurring.

You can’t order from Amazon on Google Home. You can’t access your favorite iTunes podcasts on Amazon’s Echo. Each device requires a subscription to their music library, unless you request over-the-air radio streamed into your VAD.

War Chests

Apple as of May 2017 had cash reserves of $256 BILLION. In fact, Apple, Microsoft and Google own 23% of all U.S. corporate cash outside the finance sector according to Moody’s.

iHeartMedia is still wrestling with over $20 BILLION of debt. And Cumulus maybe even worse off.

Their challenges are not those of the entire radio industry and money is not always the determining factor in innovation. A perfect example is how the Wright brothers beat Samuel Pierpoint Langley in the race to create powered controllable flight. Langley had the financial support of the United States government and failed while the Wright brothers succeeded using their own resources from their bike shop.

Crisis

The Chinese language uses two symbols to represent the word crisis. One symbol means “danger” and the other means “opportunity.” 109Radio has been here many times in it’s almost 100-year history before.

Smart operators are already speeding down the path of opportunity.

Are you one of them?

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The Question Radio Itself Has Yet to Answer

86That was the subject of an email I received from a reader of my blog recently. The writer went on to eloquently state why he felt the way he did, even citing articles on the topic. He had my interest and I asked him if we could speak on the phone.

The BIG Question

This reader’s (who asked to be kept anonymous) big question was “What can radio do that other media can’t?”

And it’s a very good question.

In 2017 when many are using the internet for things that only radio could provide in the past, is radio’s future being the poor man’s smartphone, tablet or iPod when it could be more?

“NPR and SiriusXM, in addition to the new exploding podcast marketplace, have had no trouble creating personalities and programs,” but my reader writes “why does FM commercial radio continue to stick with playing the hits, past and present, at the expense of personalities, thinking it will make them money when the biggest radio companies have trouble paying off debts on the stations they seem to have paid too much for?”

Well it was a well-known fact all of my radio life that you make money in radio at the time you buy a radio station. Buying it right makes all the difference. And those big radio companies went on a buying spree using other people’s money (Wall Street) and it’s much like student loan debt, no one worries how much debt they’ve accumulated until they are asked to replay it.

Is Local Radio Local Anymore?

My reader quotes Westwood One’s Chief Insights Officer Pierre Bouvard from an AdExchanger interview as saying “A local radio station gives you traffic, sports, weather, great music, funny DJs and talks about your town,” he said. “Spotify has these robotic music playlists, which are awesome, but there’s no one telling you what happened at the Giants game last night.”

My reader says Pierre (who was my first Arbitron representative back in the 80s) makes a good point, but wonders if Pierre ever took the time to hear what passes for much of local radio these days. My reader feels that much of today’s FM radio stations do a combination of great music and robotic, Spotify-ish playlists, and relatively little in the way of “traffic, sports, weather…funny DJs and talk about your town” stuff.

Sadly, I’ve heard similar things said at radio meetings where the person starts off by saying “now don’t quote me on this, but…”

TELCOM Act of 1996

It was President Bill Clinton who signed the Telcom Act of 1996. That act was supposed to bring competition to the phone and cable television industries thereby lowering costs of each to the consumer. While that didn’t happen quickly (some might wonder if it ever did) it did cause the quick consolidation of the radio and TV industries. We went from a country where the largest radio operator could own 12AM-12FM-12TV stations to virtually whatever their pocketbook could afford. And with Wall Street Bankers waiting in the wings, what a company could afford was a lot.

Low Power FM & Translators

For the non-radio folks who read this blog, Low Power FM signals and Translator signals are virtually the same thing, with the exception being that Low Power FM stations originate programming and translators don’t. Both are received over the air on the FM radio dial. Both have increased the number of FM signals on-the-air in America today.

The latest FCC (Federal Communications Commission) report as of the end of December 2016 shows that there were 4,669 AM radio stations on the air in America. Over on the FM dial, 16,783 signals now beat the airwaves (FM, FM educational, translators and low power FM).

To put things in perspective, at a time in America’s radio history when the number of FM signals equaled the number of AM signals on the air, 75% of all radio listening was to FM. So you can only imagine what it’s like today.

93% of Americans 12+ are reached weekly by AM/FM radio says Nielsen.

So while the Telcom Act of 96 caused radio to consolidate under fewer owners who own more stations, adding to the signal overload was the advent of low power FM and translator signals. So much to program and no one home to do the work.

Enter computers, voice tracking, and syndication. This is same computer technology that is employed by Pandora, Spotify, Radio Tunes, SoundCloud and many others.

When TV Challenged Radio

In 1952 TV was born again. It was birthed just before World War II but the war years put broadcast radio/TV development on hold. After the war ended, things began to ramp up quickly for TV.

In 1953, Elmo Ellis was hired to fix 750AM – WSB in Atlanta. Ellis would write about “Removing the Rust from Radio Programming” for Broadcasting/Telecasting (now called Broadcasting and Cable magazine).

One of the points Mr. Ellis made was that a stack of records and a turntable do not a radio station make, though many broadcasters persisted in that very belief.

It was the very same philosophy I employed when I launched a “Music of YOUR Life” radio station. I felt that to be successful, you needed more than just Al Ham’s music list, you needed the personalities that complimented the music.

Both my reader and I are in complete agreement in that a radio station is more than just a song list.

Less Is More

The problem today is that with the “land rush” by broadcasters to own as many signals as they can, we have seen our country’s biggest broadcasters put themselves into a debt situation they cannot get out of and smaller broadcasters have signals and streams to manage but not the revenues to properly execute them.

If we go back to the beginning of broadcasting in America, we see that the FRC (Federal Radio Commission) that predated the current FCC felt that quality over quantity of radio stations should be the rule of measure. By limiting the number of stations, the FRC was attempting to insure the content of those stations on the air would be of the highest quality and also by limiting the number of stations; the advertising revenue that is the life blood of free over-the-air radio could be sustained.

What Can Radio Do That Other Media Can’t?

This brings me back to the question my reader originally posed and asked me to answer.

But before I do, I’m going throw that question out to my other readers – to date over 80,000 from all over the world – to weigh in with their thoughts.

What do you feel radio can do that other media can’t?

Is any radio station you know of doing it right now?

Is this a sustainable future for over-the-air radio?

I’m looking forward to reading your thoughts.

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Don’t Let Radio End Up Like Yahoo!

49I just finished listening to Jason Jennings’ podcast about how Yahoo went from being a company worth $120 Billion to its sale to Verizon for $4.8 Billion. I think the wisdom that Jason shared is very applicable to the radio industry’s journey through consolidation since the Telcom Act of 1996.

Jason says the selling of Yahoo is like a train wreck; you don’t want to look, but you just can’t help yourself. I know many who’ve said similar things as Wall Street invaded radio with its goal of “increasing shareholder value.”

So how can radio learn from Yahoo’s mistakes? What are the lessons Jason shared that apply to radio? Let me share with you the Top 5 Lessons of Yahoo:

#1) Know What You’re All About

Yahoo never really defined itself and the revolving door of CEOs contributed to this with each one bringing a different vision – or no vision – to Yahoo. Or as Jason puts it, the company didn’t have a purpose; they never knew what they were all about.

As radio was deregulated and its original mission of serving the public interest, convenience and necessity was abandoned, nothing replaced radio’s reason for existing except for “increasing shareholder value.” Not surprising as radio people were replaced by Wall Street investors.

#2) Have a Set of Guiding Principles

Radio’s guiding principles were first established by the FRC (Federal Radio Commission) and then by the FCC (Federal Communications Commission). Under President Ronald Reagan – and his government is best that governs least approach – radio’s deregulation began. President Bill Clinton would open the flood gates of consolidation with his signing of the Telcom Act of 1996.

With no guiding principles, investors were free to move in all directions; and they did, buying up not just radio stations but many of its manufacturers and service providers for radio.

It’s like the old saying, if you don’t know where you want to go, any road will take you there.

#3) Using a Business like a Personal Piggy Bank

Radio investors and many top radio executives began using radio as a personal piggy bank, only taking care of themselves and focusing on the immediate quarter with no long term vision, strategy or investment. Too many just lined their pockets and left.

#4) Trying to Be All Things to All People

Jason says “great companies stick to their knitting. You can’t be all things to all people.”

Radio was originally about serving their community of license via over-the-air broadcasting. It delivered local news, local sports, local community events, local bands and more by local radio personalities who lived in the communities they served. It was focused like a laser beam on local, local, local.

#5) Don’t Copy the Competition

Radio today is trying to copy Pandora, Spotify, Apple Music and others. Radio today is trying to also copy YouTube, Facebook, Pinterest, Twitter and SnapChat. Radio is trying to copy just about every other business advertising model and without any guiding principles has been economically treading water.

Yahoo’s SVP Brad Garlinghouse wrote his infamous “Peanut Butter Memo” in October of 2006 that pleaded with the company to narrow its focus and clarify its vision.

Brad felt that Yahoo was spreading its resources too thinly. Business Insider recently wrote “This internal memo from 10-years ago shows Yahoo still hasn’t solved its biggest problem.”

If Yahoo had a culture problem, radio by way of mass consolidation had an even bigger one. First, as Wall Street money flowed in and radio stations were bought up, each of those stations represented its own culture that would need to merge into a larger culture. Then these new larger radio groups would try to change the culture from a local scope to a national scope. National radio personalities like Ryan Seacrest, Rush Limbaugh and many others would replace local personalities. National radio contests would replace local ones. Live and local for the most part would soon only appear in the history books on radio.

Culture is created at the top. Over the last twenty-years, radio’s consolidation has seen a revolving door of top leadership. The culture of radio has been a moving target for both industry professionals and listeners alike. Culture is built over time. There is no “quick fix” for building culture.

Absent a company culture, what fills the vacuum is one of everyone for themselves.

Now twenty-years later, there are signs of new growth as people who believe in live and local, and operating in the public interest, convenience and necessity are entering the business.

In many small markets, this way of operating never got sucked into the vortex of consolidation.

Even some of our country’s biggest radio companies are focused on getting back to the core principles radio was built upon.

Radio, the first broadcast transmission system to reach a mass audience, almost 100-years later is still the leading way to reach a mass audience.

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SiriusXM Radio is Now Free

43

What would you do if you woke up one morning and saw this as the headline in all the radio trades? Have you ever considered the possibility of this happening? Well lots of people woke recently to this headline “Angie’s List is now free: What this means for your business.”

Call it a subscription, a membership fee or a paywall, what happens when they are eliminated? In Angie’s List’s case, less than one percent of Americans were members at the $40/month fee that had been in place. Paying that fee let people see the reviews of other members that had experienced certain businesses or services they had used. Now everyone can see those reviews. Angie’s List had developed a reputation for its members writing rather substantial reviews as well as being a website that is strong, trusted and contains valuable content.

Why Did Angie’s List Tear Down Their Paywall?

Angie’s list is a publicly traded company. Their stock is down seventy-five percent from three years ago. Management is under pressure. Tearing down their paywall means increased page views. When page views go up, revenue goes up. See the strategy?

Could SiriusXM Follow Suit?

Satellite radio currently captures about ten percent of radio listening and mostly in vehicles. The new digital dashboard entertainment centers will be a gateway to Pandora, Spotify, Apple, YouTube and more. Having an XM button on my Honda Accord, I know that my access can be selectively turned on or off by SiriusXM. When they do one of their free listen promotions, they don’t turn on all the channels, just the ones they think will hook me to listen. So, I would imagine, they could create a group of channels that could be on all the time and carry a limited commercial inventory attractive to national advertisers. Like the most popular musical venues, such as adult contemporary. Even if they only turned on the top five music formats, it would mean drivers could listen to them wherever they drove across America, plus SiriusXM would have the ability to pop in promos for their other channels that remained behind a paywall. It’s almost too scary to consider the possibility.

Teens Love Streaming

Teens love streaming audio and their smartphones. According to the Music Business Association and their data partner LOOP, teens spent 51% of their listening time on a typical day streaming their music versus only 12% of their time with AM/FM radio. This is a media usage habit being formed in the next generation. It not only affects traditional AM/FM broadcasters but satellite radio as well. This is a problem that needs to be addressed.

NextRadio App

Thanks to Jeff Smulyan and Emmis, the NextRadio App is the way FM broadcasters can get their audio into those smartphones, without running up a user’s data plan. However, Sprint has already removed many audio streaming services from running up their data plans by letting their customers listen as much as they want at no extra charge. Since teens avoid paying any fees whenever possible, free is always an attraction.

Less Than 1% of World Pays For Streaming Audio

AM/FM radio has been built on free. That’s an advantage that too often gets taken for granted. According to Nielsen 61% of people find out about new music via their AM/FM/satellite radio.

Price is the number one reason more people don’t pay for streaming audio. Out of a worldwide population of over seven billion people, about forty-one million buy some form of audio streaming; 0.58% of the world’s population. That percentage turns out to be lower than the total number of people who have a Netflix subscription around the planet.

23,870 AM/FM Radio Signals On-The-Air

The FCC just published their latest numbers for broadcast stations as of June 30, 2016. We are approaching 24,000 signals for radio in America. 19,194 of those signals are FM and 4,676 are AM. Plus we have two satellite radio signals, Sirius & XM, which are now under a single owner.

Pay & Free

It doesn’t take a whole lot of imagination to see satellite radio one day deciding to have the best of both worlds. Offer premium pay channels to those willing to pay for them and at the same time create a free tier of channels that could be ad supported by national advertisers.

What history shows us are things that happen in other industries and services eventually make their way around to virtually all of them. It’s only a matter of time.

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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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Bring Back the Radio Hackers

We never called them that back in the early days of radio’s reinvention period after the birth of television in the 1950s, but that’s what they were.

Radio from the beginning basically was a medium that killed Vaudeville. Radio enticed the performers of Vaudeville to bring their acts to this new mass medium. The sales pitch went something like this: you won’t have to travel every day of the year, sleep on trains and eat your meals on the run. When you move your act to radio, you will be able to go home every night to your family and have a “normal” life. And you’ll make more money!

Not all performers would make this transition. The downside to moving their act to radio was that no longer could they have one act that they could perform night after night. On the radio, they needed a new act every performance. That’s a BIG CHANGE.

When television came along, the successful radio acts moved to TV and radio needed a new idea.

Enter the Hackers

 Alan Freed would hack the term Rock ‘N’ Roll and become the first famous disc jockey introducing a new venue for radio.

Todd Storz and Gordon McLendon aka “the Maverick of Radio” would hack the idea of Top 40 radio introducing a tighter playlist and higher repetition of the biggest hits. After observing teenagers playing the same songs over and over in a juke box.

Better Practices

 Today’s world is infested with the concept of “Best Practices.” It can be a stifling thing when it comes to creativity.

Today’s radio was born out of hackers that were constantly thinking up “Better Practices.” Ron Jacobs and Bill Drake certainly did at Boss Radio in Los Angeles with 93 KHJ. John Rook did it in Chicago with both WLS and WCFL. Rick Sklar did it in New York at Music Radio 77 WABC. Plus there were so many others in all size markets. Radio was different everywhere you listened because it was being hacked in so many wonderful ways. It was exciting to turn on your radio and hear what was going to come out next.

Insanity

 The definition of insanity is doing the same thing and expecting a different result. We have a lot of that kind of stinking thinking today and I’m sure you’ve heard all the reasons for why this is the path some of our biggest broadcasters are taking. As the radio business grew from a mom and pop business to the behemoths of today a ritual of “Best Practices” replaced hacking.

Today’s Economy is a Hacker Economy

 We live in a world where it seems everything has been turned upside down by the World Wide Web, the Internet and mobile Apps. The power is shifting from the big to the nimble; the hackers. Learn to hack or be attacked by those that hack.

Radio is not exempt from this shift. And it doesn’t have to lose.

Radio has what everyone else would love to own, a mass audience. Radio today is delivering the largest mass audience of all the mediums.

It’s why every entity trying to play in the audio medium calls itself “radio.” Pandora Radio, Spotify Radio, TuneIn Radio, RadioTunes, Beats 1 Radio etc. What radio folks have that these folks don’t have is a broadcast signal that is ubiquitous and a listening habit that has been cultivated over many years.

However, what those pure plays have that radio is missing are hackers.

Radio needs to stimulate agility, creativity and take risks.

Stop thinking about where you want to be in 5 years and start thinking about what problems you want to solve most right now. The winners will be those most able to adapt.

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