The Future of 90 Second Commercials In Exchange For Downloading "Free" Music

The latest attempt by the record industry to swim upstream against Apple's iTunes appears destined to fail even before it ever gets started -- at least that's what the majority of my USC students think. Free music is a good thing. Being forced to watch a 90-second commercial every time you download that free music is a bad thing. Not being able to own the music is one thing. Having it all disappear within six months is quite another thing. This leads some Gen Y'ers to ask "What are these folks thinking?" Yesterday's announcement that Universal will take several million dollars in upfront money from Spiral Frog for a December launch of this new video service that takes its victims' eyeballs hostage for long commercials is way, way off. Apple's Steven Jobs must be beyond rolling on the ground and laughing. After all, he's the guy who made his second place computer company a major force and standard setter in the music industry. Jobs proved that earlier this year when he stared down a potential rebellion by some record labels pushing variable pricing for iTunes music. Jobs stuck with his 99 cent per download "magic number" and prevailed. So what's up? Record labels are smarter than this, right? They really know their young market, don't they? Well, not so fast. They seem to spend so much time on non-productive ventures when what they really should consider is cooperating with the inevitable. Oh, yes -- I know my music industry students are not anywhere near 100% representative of their peers, but I wouldn't bet that these very early "non-adopters" of free music (that's really not free and not really theirs) will work. Here's another approach: let the marketplace design the future of online music. P.S. They'll likely design iTunes with a few minor changes. Maybe the labels should finally accept iTunes as the industry standard as well. Invent a new "wheel" only when a new "wheel" needs inventing. For now -- this chilling thought: CD sales are still declining and most labels have no real workable strategy to monetize downloading of music. The prognosis for Spiral Frog is not good.

Sirius Terrestrial Radio

I keep getting this gnawing feeling that some satellite radio channels are sounding more and more like the terrestrial radio from which it was supposed to save angry listeners fed up with hype and commercials. Today I heard Sirius Six -- the Sixties channel -- with a live jock promo (over an intro no less) for a Sirius promotion (buy an another subscription, get a Sirius radio for home included in the price). This, along with jocks who are trying to sound like terrestrial djs, seemingly endless promotion of other Sirius channels and modern Top 40 formatics tells me you've got to hate terrestrial radio commercials an awful lot to put up with this insult to a paying monthly subscriber. Terrestrial radio operators are under the false assumption that satellite radio is their undoing. It's not. They are their own worst enemy. Average quarter hour listening shares have been declining in radio (according to Arbitron figures) since the early 90's -- way before satellite, way before the Internet revolution, hell- way before the iPod, MySpace -- you name it. Radio templates are the last ones satellite should be imitating. The next generation has moved on -- and with each year they grow older, take their place in the work force, marry, have children -- spend money become desirable consumers for advertisers. The terrestrial model works for Gen X and older, but it doesn't work for Gen Y and younger -- your future. It's ironic that some satellite operators can't do more than do a "wanna be" radio station. But the real news is that both are wrong. The future is interactive, Internet-based, fickle and mobile. The sooner traditional media starts dealing with these realities the sooner it can get in on the future.

iPod Fatigue

My students at USC have begun to utter the "F" word in public. It's unthinkable, but it is happening. "Fatigue" like in i-Pod "Fatigue" is the buzz. There is no chance -- zero -- that these members of the next generation are angry with their iPods and ready to throw them away with traditional media. But what is significant, I think -- and would be worth monitoring -- is that they are looking for Apple's iPod to do more. The question of how much more is also up for debate. In our informal classroom polls, the students seem evenly divided on whether they want their iPods to be telephones or their telephones to be iPods. There is no doubt that these Gen Y'ers value their cell phones above all other cool technology, but the iPod is right there. iPod -- an "oldies" channel for young people. So it is that they are beginning to utter "what's next". Gen Y'ers are a generation looking for something new on a regular basis and it may very well be time for Apple CEO Steve Jobs to wow this generation to their roots. What could it be. The rumors are out there. Is it WiFi capability. Downloading music on the fly. Would Apple dare to introduce an iPod phone -- many of this generation are suspect. Whatever the outcome the next move is up to Apple and you can bet they know this generation well enough to know that the next iPod may make or break the device as a cool item for the next few years. For those in traditional media looking on -- there is little good news. In an interactive world, the ipod has already inflcited its damage on the record business and the radio industry. Traditional media can't hurt Apple. Sony can probably not hurt Apple. Only Apple can do that going forward.

HD Will Not Save Radio

The radio industry is betting that high definition digital radio will make it more competitive against its perceived threat from satellite radio. Only one problem. The real threat to terrestrial radio is not from satellite radio, but from the next generation of listeners who spend their time listening to music interactively. This next generation -- Generation Y -- has been raised on the Internet and is not enamored of what terrestrial radio has to offer. It's more than whether radio stations cut their commercial loads or add more variety, it's about interactivity. Almost to a person the top executives who run the consolidated radio companies are convinced that HD radios will save the day.

For example: the I-Sonic satellite and terrestrial radio from Polk is being snapped up from the manufacturer by radio companies looking to use them as monitoring devices and to offer them for giveaways. And it's a good thing, too, because these radios cost $599 retail. Did I mention that they are DVD and CD capable as well?

Let's figure this one out. The next generation is going to spend $599 -- and certainly some day a lot less -- to own an HD radio that gives them more of what they don't want (radio) and none of what they already have (interactivity). There are some companies like Emmis Broadcasting which recognize that HD is not the sole answer.

If you're thinking about the future -- and terrestrial conglomerates should have been doing that ten years ago -- the operative word is interactive. The model is the Internet. The future is mobile and interactive.

Radio companies should be thinking of how to get into the content business by cooperating with the inevitable and encouraging their many bright programmers to find new uses for mono dimensional over-the-air radio.