Why 2007 Will Be Another Bad Year For Radio

I love the radio business. I truly do. Radio people are like an extended family. They are with you in good times and Clear Channel times. It pained me to have to write repeatedly in Inside Radio after consolidation that it would kill the medium. Many of my long time and new friends were redeployed as a result of all the station mergers and some of them took it personally. Others didn't. They just hoped and prayed I was wrong. Ten years later the record on radio consolidation speaks for itself.

Well, I'm about to do it again.

The radio industry just doesn't get it. You can't grow a business that doesn't have a strong, new generation listening. Generation Y has turned to the Internet, their iPods and mobile devices. YouTube, MySpace and social networks. It can't afford satellite radio and doesn't much like what it's hearing on terrestrial radio.

Ad agencies buy 25-54 year old demographics. That's why you see fewer standards stations and formats skewing older. Radio gets this part. So they overreact with too many of the same genres, too many of the same formats and a hot clock that should have been retired when digital time became popular. Tom Taylor in Inside Radio reports that the country format has turned around in 2006 with an increase from 2,019 to 2,033 stations. Classic hits is up to 442 stations from 237 three years ago.

There's nothing wrong with programming to what the market desires. That's smart business. But skipping the next generation -- Gen Y -- that's risky business. That's why radio has no future. When the current passionate radio listeners are gone, can this industry really, truly expect to grow when the next generation does like radio. And I side with Gen Y on this. In the past radio always appealed to teens. They were the next money demo in waiting. But consolidation has killed radio more than anything. More than the iPod. More than music downloading. More that the Internet. Few young people want a radio on their cell phones. They don't even want a radio in their cars. They'd much prefer an iPod hookup.

When I joined USC a few years ago I got my eyes opened rather quickly. Save the sweepers. Forget about pairing down large commercial loads. This generation wanted substantive change. Commercial radio does not speak to them. You can't win over a generation that has access to everything online by saying fewer commercials, more music and the most variety when in reality that claim remains unbelievable.

I am encouraged by the fact that this demo -- at least the many I have come in contact with -- wishes radio would change its ways. They don't understand why radio owners are so clueless. For the first time in the history of modern radio, there's nothing on the dial to appeal to the generation in waiting. Part of the reason is that broadcasters are panicking. That sounds harsh but it's true. They're blaming iPods and satellite radio when iPods are just a personal oldies station and satellite radio is not even on this generation's radar screens right now.

When the fire sale of Clear Channel stations is the biggest news in the industry, you know we've all taken our eye off the prize. The reasons we don't have 12-24 year old formats are many. We don't understand this generation. We feel the pressure from advertisers to deliver the older 25-54s. And even though Clear Channel is on the way down a couple of pegs, they still own a lot of radio -- and well, they're still Clear Channel. We don't innovate because we've fired a lot of our innovators.

Could legendary programmer Buzz Bennett be employed at a radio station today? The likes of Buzzy should be. He was never the model executive. He was quirky, out there and on another planet. Wasn't it great? Radio listeners thought so. I fantasize about Buzz Bennett working for Clear Channel down in San Antonio or CBS in New York. The new consolidators have taken the odd ball out of radio and you hear the results. Timid programming. No understanding of the next generation or their toys. The button down world of consolidation has sapped the life out of radio programming.

If I'm the radio industry, I find the likes of Bennett, John Rook, Bill Drake, Lee Abrams, send an emissary to Georgia to see Paul Drew, bring in Joe McCoy -- do I need to go on? Don't do this at a convention. That's tacky. Do it in a boardroom. Teach this once creative industry to find its inner creative soul. Okay, I'm sounding like Shirley MacLaine now, but you get the idea.

The iPod didn't kill radio, failure to understand that listeners want to hear their favorites not what consolidated programmers picked for them. The iPod enabled them to do that. Understand this.

Peer-to-peer file sharing didn't kill radio. Adding one or two new songs a week did. When the technology came along, who could blame the next generation for making good use of it. Their interests are broader than gutless radio stations afraid to add music for fear of attracting too much attention from Eliot Spitzer.

The Internet didn't kill radio. Internet Radio is awful right now. That's why terrestrial radio stations get so much online listening. Understand how radio couldn't be in a pickle because of the Internet when the Internet offers no real programming competition.

Video didn't kill the radio star. MTV has its own problems right now. YouTube wouldn't be anything without music. Music is a big part of social networks like MySpace. If you worried about MTV, you were not worrying about your own stations.

Mobile phones and devices aren't killing radio. They are utilities. We all have them -- every generation. They are no excuse for radio stations failing to program to the generation that text messages each other to death. Understand that we took our eyes off the ball on this, too.

So, 2007 approaches. Clear Channel may finally be paired down -- smaller, but still larger than it ought to be -- probably waiting for a few more years to pass before selling off more of its inventory. They are not likely to fill the role of leaders even though they will own more stations than anyone else. CBS is not likely to swallow a creative pill. They are dancing a dangerous dance -- flirting with new technology without really understanding its ramifications to the business they're in. And so goes your second biggest radio consolidator.

Some of the lesser consolidators are just trying to find ways to get bigger because if you don't grow on Wall Street you don't make more dough on Wall Street.

That leaves us with the smaller groups and whatever independent operators emerge over the next 12 months. We must count on them to break the famine of boring radio. We must count on them to innovate. Take risks. Spend time training people and learning about the next generation. My bottom line: radio's future is only in the hands of the operator who can run a station independently as "mom and pop" operators once did -- for the love of their craft more than the love of money.

At USC we're building programs such as The Music Media Solutions Lab which are available to such companies that want to navigate the future. And those of you who know me know that I will help in whatever way I can in the months ahead to assist you in applying what I have learned from the next generation -- a challenging, but critical market. Just contact me if I can be of help.

2007 will be a stinker for radio. But if even only some stations and or small group wakes up and comes alive, it will also be known as the year that we shook off Clear Channel and the consolidation that it represents and discovered our inner soul.

It's not a boom. But it's not a small thing. It's more than a small thing.

It would be a new beginning.

Let's Get Real About Payola

Yesterday, Entercom finally gave in and agreed to pay New York Attorney General Eliot Spitzer $4.25 million to make his payola investigation go away. Several other big radio consolidators including Clear Channel and a few major record labels have already settled.

Anyone who has been or is presently in radio knows that there was and is various kinds of payola. The record industry denies it. Independent promoters have a habit of disappearing -- I heard of one going to Sicily and returning when the heat was off. Radio stations can't bring themselves to admit their complicity. They're in denial. Hey, President Clinton told us he did not have sex with "that woman, Miss Lewinsky" and President Bush said steadfastly -- there are weapons of mass destruction in Iraq. There weren't. We're used to lies. But anyone lying about payola today only hurts themselves and their industry.

There were many types of payola. First, the "so nice, I'll play it twice" payola where the djs got paid directly for extra spins. But that was back when djs could pick their own music. In my era, the program director chose the playlist and they received drugs, sex, money and trips to Vegas under assumed names if they gave into the temptation. That's for starters. When consolidation came along, I call the third phase "legalized payola" where newly-consolidated companies insisted on being paid by record labels ostensibly in exchange for giving them a couple of hours advanced notice as to what songs they were adding. Had the labels waited, the trades would tell them for free. But it wasn't really about early notice. It was about access to their programs directors. Of course, access didn't mean influence, remember? Wink. Wink.

I guess you could say from the labels' point of view payola served them well. So inexpensive compared with having to buy a lot more regular advertising on stations promote their music. So clever because once a radio employee took payola, they swallowed their tongue for their own protection. How untraceable. This exemplifies the mentality that labels had namely that they discovered the artists, signed them to contracts, arranged their music and controlled their futures. Somebody forgot to tell the labels that it isn't that way anymore. They don't have the influence they once had. And their secret, silent but not shameful radio co-conspirators don't have their old influence either.

All this talk about Eliot Spitzer is so retro. What is payola anyway when the two conspirators don't have the influence to be guilty any more.

The killer apt for payola is peer-to-peer file sharing. While the consolidators were trying to find new ways to legally bilk the labels, the next generation was at work taking apart the infrastructure both of them have fought to preserve for decades. If we're going to get real about payola once and for all, let's admit it. It happened and I'm sure it still happens.

More important is that payola doesn't matter any more. The next generation can trade music legally and illegally and they do. They sample music from friends or social networking sites. Their iPods are basically their own personal, portable oldies station. But their computer, their MySpace and Facebook and tomorrow their mobile phones have neutered the old payola partners and solved the age of problem once and for all.

While the labels and radio stations were thinking of ways to make consolidation increase their influence over the record buying public, the kids of the next generation gave them a lesson in power to the people. So, Eliot Spitzer is the governor-elect of New York state. The consolidators who were caught red handed practicing payola only had to throw a couple of million dollars apiece at the attorney general's office to make it all go away.

The laugh is on them for the lawsuits may have gone away and Spitzer got his money, but the next generation made the underlying and illegal influence of payola disappear first.

Disney Shows The Labels How to Make Hits

The Disney Channel kids program "Hannah Montana" is a smash hit. And so is the music 14- year old Miley Cyrus sings as the fictional pop star Hannah Montana. She has sold over 1.6 million songs in about two months beating out the likes of Jay-Z, Sarah McLachlan, The Beatles Love album and a slew of others. It highlights the potential of the 8-14 year old market sometimes known as the "Tweens". These days the usual mojo from teens is not there in the record business. Teens and older Gen Y youths have found their way to music downloading. They're not such a hot record market anymore. But "Tweens", that's another story. Let's break it down.

Disney is looking to record clean, family music for its target age group. That leaves a lot of rappers out. Rap and Hip Hop may have been embraced by "older" young people, but the new record market could be kids -- really, kids -- looking for something the record labels could not know to offer them. That's because the major record labels have gotten into the habit of missing trends. They used to rely heavily on their gut. Now, gut has nothing to do with it. No doubt this "tween" market is not very hip -- and record labels try to be the epitome of hipness. But 1.6 million records -- an average of 100,000 a week since mid-autumn -- should serve as a wakeup call. Miley Cyrus who plays Miley Stewart on the "Hanna Montana" TV series is now getting ready to release an album under her own name. There's little doubt the kids know who she is. If they like her music, they will buy her songs.

I vividly remember putting on an Inside Radio Management Conference event on the campus of The University of Southern California before I sold the publication to Clear Channel and joined the USC faculty. My friend, Professor Ken Lopez, put together one of the hit panels with ordinary college students talking about what they liked and didn't like about terrestrial radio. Keep in mind that was five years ago and radio was actually sounding better to young people then than it does today. I will never forget the students talking about the things they liked in radio. No, these things didn't come from Clear Channel. Nor from CBS. Or any of the other big players. You see, the students waxed eloquent about Radio Disney. At first I actually thought they were putting us on. But their sincerity eventually won the day. These students liked the variety, the creativity, the production on Radio Disney even though they were clearly older than the Radio Disney target demographic. Most of the real world radio people attending heard this and promptly dismissed it. That would turn out to be a mistake. Just as it is a mistake for record labels to try to find the next teen idol when they are not willing to use their gut and gamble on something new. Britney Spears is so, well, 90's. Paris Hilton is so not going to be the one.

Former Disney CEO Michael Eisner has taken a lot of brickbats for his management style and his boardroom battles. But the very successful Eisner gave us all a hint even back then that he knew radio best. Eisner did not buy big radio stations when consolidation was approved by Congress. God knows Disney had the money to be a big player. I often wondered why and how they resisted buying even one major station once the floodgates opened. ABC Radio owned a lot of major market properties but not a lot of stations overall. When the consolidation buying spree ended ABC owned virtually the same number of stations. All of a sudden Clear Channel's 1,100 stations made ABC seem like a little fish and the little fish from San Antonio looked like the king fish. But Eisner methodically continued buying what some brokers called "shitty little properties" for a few million here and a few million there. He did it to have a place to air Radio Disney. You'll note ABC did a complicated deal (waiting completion) with Citadel to merge their stations. What you should also note is that current Disney CEO Bob Iger kept the "shitty" Radio Disney stations and did not sell them to Citadel or anyone else. Disney knew all along that as hip as we all are in radio and records that traditional radio's day was over, but kid's radio was a potential boom business. Along with theme parks and a cable channel, Disney is proving they were right.

This is all well and good but how does it bode for the future. I wouldn't be surprised to see more trouble ahead for the major labels as they chase their long tail in denial that the music changed. Or, has it? Maybe the labels changed. When radio stations full of hubris stopped programming to their local markets and went big time (as in big time media) perhaps the record labels did the same thing. They cut expenses, consolidated, overreacted to the online peer-to-peer downloading trend, started suing their customers and then declared themselves hip all over again in the digital age. Meanwhile they continue to under achieve.

The record buying public -- even the lost generation Y -- is tired of only rap and Hip Hop. Clean still sells especially with pre-teens. Pre-teens are putting on a record buying clinic for the labels as witnessed by Hannah Montana's success.

Is Disney the only company that listened to its gut? Was Eisner smarter than his unfavorable press led us to believe? Did he know something everyone else missed? I say yes -- and here it is -- when music media starts imitating itself it fails to innovate. Does that sound like an accurate description of both the radio industry and the record business right now?

Verizon -- Can You Hear Me Now?

Coming early in the year ahead, Verizon customers will be seeing -- that's right -- seeing their first banner ads on news, sports and weather sites among others that users visit and display on their mobile phones. This morning's New York Times is reporting that the decision has some major implications for users and advertisers along with many risks. Ad averse consumers could cancel if irritated enough by this new barrage of advertising and switch to other competitors. Some view the cell phone utilities the way they look at cable companies. There is lots of churn among mobile customers who endure poor service, inconsistent coverage patterns and unimaginative products among other things. Now this. What are these utilities thinking?

More profit -- that's what they're thinking. Just as radio stations did after consolidation when they threw out of the rule book on hourly commercial limits to impress their Wall Street backers. Just as the television networks did in adopting shorter more frequent ads. Just as newspapers did when they stuffed their Sunday papers for decades with ad circulars that made the paper seem like an excuse to carry all those ads. The thing these examples all have in common -- besides being traditional media companies -- is that they are all in transition, some on the ropes as the interactive revolution and a new generation takes hold.

Mobile companies probably can't be faulted for wanting to get into the act. When you see what Google has made from search ads and how the Internet has exploded from banner ads you almost can't blame them. However, new age Internet and mobile companies need to be cognizant of not just ways to advertise and monetize but how to help their sponsors be effective. Radio long ago got in the habit of giving lip service to this, but it is not alone. Too little concern is exhibited for delivering results for advertisers.

In my USC Music Media Solutions Lab, students working for corporate sponsors on independent projects, have kept an open mind to all sorts of advertising that delivers something to them that they actually want. There seems to be a desire for more creative and intelligent ways to reach the next generation. I am extrapolating here, but it appears to me that banner ads are not what they had in mind. The reason Gen Y likes -- or shall I say tolerates -- banner ads is because they are so easily skipable. And this is a multi-tasking generation that is under pressure on their Internet to buy something at every click. It's not working. Consider the industry standard 1 or 2 percent click rate success benchmark. They show signs of remaining in control of what they let influence them. I think it is a generation that actually likes advertising -- creative, effective advertising -- that consumers all so frequently see very little of.

And that's the issue to keep in mind. No one can stop the stampede to monetize the Internet and our mobile world. Advertising fools are born every minute. But ultimate success is going to go to the media companies that focus on being effective rather than mindlessly jumping on the next trend. In other words, making advertising that works using changing and exciting technology. And my sense is that utilities such as mobile phone and cable companies should remain delivery systems not content providers or marketers. Look no further than cable advertising to see how long it took for cable companies to monetize its growing subscriber base and while somewhat substantive, it's success pales in comparison to almost anything Google.

If mobile companies don't watch it -- and it appears they aren't thinking this way -- running banner ads has more potential to drive customers away or make them irritated or both. To borrow a phrase from Verizon's successful campaign to emphasize its superior coverage network, "Can you hear me now"? Mobile carriers are the deliverer. Content companies are the providers. And consumers are the deciders. You haven't heard the last of this long assault on our digital future by companies in search of ad revenue, but all ad revenue is not created equal and some strategies are going to backfire. This has the earmarks of one of them.

ROI + RCE = A Better Future

By Steve Meyer, Inside Music Media™ Contributor

"The proper response to digital technology is to embrace it as a new window on everything that's eternally human, and to use it with passion, wisdom, fearlessness, and joy." - Ralph Lombreglia

While the principal operating philosophy in all business models has always been spending with analysis on ROI (Return on Investment), we now see a shift in the digital age where companies focus operations and marketing on RCE. (Relevance, Creativity, Engagement). Those elements are what separates leading innovators like Apple from other hi-tech companies and those elements are critical in redefining goals as things change daily. It doesn't mean ROI goes out the window. It means that to get a satisfactory ROI, companies that want to remain competitive and ahead of the curve, should invest heavily in RCE.

Perhaps adding a shift in paradigms from ROI to include RCE would benefit the music industry greatly. Without putting the best minds together and defining the 'relevance' and value of music in today's marketplace to consumers (critical); employing 'creativity' in all areas of the business to generate new dynamics and revenues; and 'engaging' consumers for the long-term, the same problems will continue to plague the industry this year and beyond. You know the tune, more of "meet the new boss ... same as the old boss."

One thing is certain: the old walls are "tumblin' down, tumblin' and tumblin', tumblin' down."

With all the new technology headed our way and already at hand, the industry should put their best people together to work on exploring every possible new revenue stream that can be created with new models once designed. Steve Meyer is one of the music industry's top professionals and publisher of the new media newsletter DISC & DAT.

Clear Channel Liquidation Company

If you had a doubt as to what Clear Channel was up to when its actions proved it wasn't up to running a large radio group, you can now rest easy. The latest news is that Clear Channel plans on selling an additional 75 grandfathered stations for an approximate $1.1 billion dollar minimum take. That's on top of what they will earn from their already announced strategy of selling 448 stations below the top 100 markets. Clear Channel is doing better getting out of the business than it did by being in it. The same can't be said for their brethren -- the owners who lived in their shadow and sold ads against their mighty combos. But that's not important right now. It's all about about Clear Channel. I am not one who thinks the "new" Clear Channel will be a radio operator five or ten years down the line. They own a lot of real estate and they're now selling some of it off. If they hold what remains of the company and sell off pieces of or all of it in going forward, another obscenely huge payday is coming. Do you think their money investors don't know this? Since when do Wall Street bankers spend this kind of money to operate? There's always the chance that Clear Channel will do some swapping of the grandfathered stations instead of selling (for tax benefits, of course), but don't confuse the "new" Clear Channel for an operator. They are a liquidator -- and a damn fine one at that.

The Problem With SNL's Cingular Deal

NBC Universal has signed a deal with Cingular to allow their upgraded video customers to access clips, new content and archived material from Saturday Night Live. NBC recently launched a section for SNL on its web site. It seems like a good deal for Cingular, one of the largest mobile phone utilities and NBC Universal. But wait. Is it? In their race to be content conduits, utilities such as cell phone companies are beginning to scare me. They think exclusive deals for content will be a win-win and enhance their ability to get customers to upgrade phone service. The problem is that in the long run if SNL content is only available on Cingular, it may be good for them and may help NBC (which also runs its own site), but it is contrary to what many of us believe the mobile future will eventually look like. Consumers will demand access to all content available on the Internet. The next generation wants choice. That's big with them. When a consumer signs with Verizon and only gets Verizon content that plan would have worked before universal access to the Internet. Otherwise, it is an irritation. Think of the satellite radio business. If you buy a certain car because you like it, you're generally stuck with the (company installed option) satellite service even if it isn't the one you want. When will the content providers and delivery systems of the future understand that choice not chance is what consumers will demand and eventually get?

Other Voices On Google Radio Ads

Consultant Jack Taddeo, a long time radio friend of mine and very thoughtful observer of the radio scene is interviewed on ZD Net's technology web site regarding the Google AdWords initiative in the radio industry. A sample: Taddeo is asked whether AdWords was a win-win for radio and advertisers:

"Not for stations. That is unless you are trying to reduce your ad inventory to pennies on the dollar. I call it the "station going out of business rate". The argument goes: if you have an open slot then why not get some money instead of no money? Plus you will be "sold out" which can help increase unit rate based on supply/demand pricing. The problem is that you are doing two things you would never allow your own staff to do. 1) lower the rate by about 95%. 2) fill up the station with cheap commercials, decreasing the listening environment for what amounts to a few dollars. Sometimes, some revenue is not better than no revenue. For advertisers, if they don't care about targeting, maybe the "catch bin" of commercial inventory is usable".

Read the entire interview here.

Inside The Beta Test of Google Radio Ads

AdWords customers involved in beta testing are experiencing a new kind of radio advertising sales. The AdWords system is similar to the online ad selling approach Google has made its name and profit from. Prospective radio advertisers -- and this could be companies or individuals who have never advertised on radio or thought of radio as an advertising medium -- can bid on the spots and target their ads by time of day, demographics, format and location. The advertisers see instant reports. Google is also working on a program that will refer new advertisers to people who can help them write copy and produce ads -- something like the radio has done for years when the salesperson brings the order back to the station with some copy ideas. It takes about 12 hours to get results on the bidding. Some people report that a minimum of $100 a spot was established and the bids are often higher (radio, learn your lesson. Set high minimum prices and the market will go from there). In other words, no cheap ads. Google has thought of everything including setting up a system for ad agencies and fielding a force of sales people (often ex-radio salespeople) to beat the bricks looking for business.

You can see why radio owners love this concept. It's for lazy people. It's cheap. No expenses. No employee benefits. No rent. No autos. No selling! No kidding! I've said it before and I'll say it again, a declining radio industry pressured with having to cut expenses to impress Wall Street has to love the potential of Google AdWords. So I'll be on the record early and often adding: be careful what you wish for, you may get it. Once radio sales becomes a commodity, the only people who could love it are media companies looking for easy money that are willing to give up control of their marketing to a bigger, smarter company -- Google. For radio, the short term results will be as expected. The long term results will not be pretty.

A Better Radio Sales Idea

Why not let the Radio Advertising Bureau supervise radio sales on a market by market basis? The groups and stations willing to opt in can finance the effort from savings derived from fielding a full sales staff. Yet the concept allows stations to opt in as much or as little as they feel comfortable doing on their own time, at their own speed (i.e., start by submitting unsold inventory and later, add other avails). I mention the RAB or some other sales organization so as to keep the effort fair. Standards should be set. Bids can be raised or lowered similar to how airfares are routinely priced. Two more advantages: RAB fields a sales team to actually sell local radio not just let advertisers bid on it. If radio is serious about being local in more than just name, ideas like this make a lot of sense. Second, stations don't cede control or profits to Google. Their only obligation is to fund the non-profit combined local radio sales operation. Legal counsel should be consulted to avoid monopolistic roadblocks. In this day and age, can you imagine the government being an impediment to monopoly when their policies created it? One local sales staff -- run by a non-profit group -- first to sell unsold local station inventory and eventually (if it proves successful) to add more inventory. Variable pricing (top rated stations can set higher bid prices) can be set and adjusted hourly if necessary by any participating stations. It's radio being local. Taking control from Google. Actually emphasizing selling! There you have it. Start your brainstorming sessions and get rolling.

The New CBS Records

It's not the old Columbia Records, but CBS is getting into the new age record business. This time it is doing it on the cheap. No start-up expenses, no worries about artist development, no expensive infrastructure. CBS wants to be paid for music that appears on its television shows. One of the benefits of the transitioning music business is that all it has to do is release songs on iTunes and voila! -- their in the record business. They can also take advantage of their broadband channel to deliver the music to the market. Imagine what they might do with radio or TV to promote it. Now old line media companies are beginning to think new age. Television shows are virtual soundtracks these days compared to the golden age of television. ABC's Grey's Anatomy led the way with appealing music on the popular hit show. ABC went far enough to tell viewers how they could buy the soundtrack music. I'm not sure whether ABC made any major money or, for that matter, any money at all on the music. The CBS move is an interesting one to watch. It acknowledges the awesome power of music (would there be an iPod with only podcasting?) and validates the notion that "old dogs" like Viacom can learn new age tricks.

41 Days of Radio Listening A Year

The Census Bureau projects 41 days of radio listening by adult Americans in 2007. Some 65 days for television. One week each for the Internet and newspapers -- this according to an account in Inside Radio. Don't celebrate too soon. This is definitely good news for radio stations aiming at adult listeners, but we didn't need the Census Bureau to tell us older listeners are still hooked on radio. The harsh reality is that radio listening and resulting radio advertising revenue has peaked and is heading down. The straight scoop is that young people -- the next generation, the people media must have to grow for generations to come -- are not listening to radio 41 days. Nowhere near it. They are on their iPods, cellphones, online, emailing, and happily involved with the Internet. That's point one. Point two is that as soon as WiFi proliferates, these people will become more involved with their interactive media. Traditional radio, TV, movies and newspapers will not likely be the beneficiaries of a generation neglected and denied by old line media companies.

The answer then is not to get too happy about the Census Bureau figures. Instead, it's time to go to school on Gen Y. Traditional media companies are content providers if anything. Their delivery systems are fast becoming antiquated and not part of future generations' world. These companies -- including record labels -- need to understand how very different and unpredictable this generation is. They need to become experts. They are not presently anywhere near expert on the next generation. And they must come to understand that they are best when they are inventing content. Media companies want it both ways. They want to be the major provider of content and then want to choose the delivery system -- as they always have. When radio was invented, stations programmed them. When television was invented, stations programmed them.

The critical difference now is that these powerful media companies no longer get to choose the way the audience consumes their content. Start with that lesson and there remains hope. Ignore this and you'll see them hanging onto their failing models. You need go no further than record labels to see it clearly. Labels want to find the acts, control their contracts, supervise their recordings and sell CDs. As painful as it is to accept, this model is outmoded and ten or twenty years from now the only remaining media companies from this day will have learned this lesson. Census Bureau figures are what they always have been -- interesting and outdated.

CBS Is The New Clear Channel

Things are so quiet on the Clear Channel front that you just have to know that the Mays' want to get out the back door with as much money as they can and with a private radio group in tow. They won't even contest the sale of their valuable grandfathered radio stations by seeking waivers. Anything to get this deal done fast. Many expect the new Clear Channel radio group that emerges to be like the old "Cheap Channel" before its consolidation days -- a nice, "little" family business. That paves the way for number two to become number one -- CBS will have more influence than the new private version of slimmed down Clear Channel even if it has many more stations. But CBS shares in the disgrace of consolidation. Under Mel Karmazin it was a ferocious cost-cutter. Under present management it looks inept. Couldn't replace all that Howard Stern revenue even with a full year's notice -- still can't. Dismantled formats. Installed a nice little "Jack" format even in markets where it wouldn't work -- it couldn't work. CBS has a convoluted view of where it fits into the Internet seemingly grasping to become a new age Internet company with the baggage of an old line media company that missed the boat.

With "leaders" like Clear Channel and CBS these past ten years, no wonder the radio industry is on the ropes. They think it's all because of the Internet and iPods, but they are the reason. Under the guise of creating shareholder value, these misguided consolidators cut and hacked their way into the next quarterly earnings report. They took their eye off the ball when it was convenient to do so. Both companies didn't respect and value their best asset -- no, not the towers and transmitters -- but its creative, management and sales people. If their ineptitude didn't hurt so many of my longtime radio friends still toiling at their jobs, I'd almost be enjoying what they have created -- no vision, no plan for the Internet age, no withdrawal plan from consolidation and -- this is the best of all -- lots less shareholder value than a few years ago. I thought that was their mantra -- shareholder value.

Bottom line: they've failed their listeners, failed their employees and failed their shareholders who today hold stock that is greatly devalued from what it once was. Now that the Clear Channel that we all know and love is on its way to being neutered, is anyone excited by the prospect of the soon-to-be all powerful CBS as the new Clear Channel? Don't look to Wall Street.

For another view of the damage from consolidation, read John Rook's excellent piece "Radio's Past is Its Future" by clicking here.

It's Already Too Late For YouTube Competitors

Viacom, News Corp, NBC Universal and maybe CBS are this close to announcing that they will compete with YouTube. They want to get into the distribution business that YouTube -- now Google -- is in. There are many problems with this grand plan not the least of which is can these traditional media rivals get along? There are big egos and longtime rivalries here. What has YouTube wrought? Apparently, it has scared these old media competitors into working together. I'm not betting that this coalition will last long if it ever launches.

There are lots of concerns:

• True, they own a lot of content that can be re-purposed on their version of "YouTube", but with the intention of encouraging viewers to contribute their own videos, what about this idea is different from YouTube? They're the second one in with an idea that sounds too much like the first one in.
  
• The site would be advertiser supported. It has yet to be established that YouTube will work as an advertiser supported venture. Google hopes so after spending $1.6 billion for YouTube, but we'll see.
• This consortium includes parties with diverse interests. News Corp owns MySpace and Fox Television. Viacom owns MTV. CBS is already negotiating with Google and has a separate deal in the works to sell unsold radio inventory to Google. In other words, there are conflicts.
  
• YouTube has an early jump on this potential venture with content deals involving Warner Records, SonyBMG and Universal and a licensing deal with CBS. Not terminal, but being first counts for something.
  

It's easy to understand why old line media companies want to compete with Google even if Google's YouTube is untested as a moneymaker. Just the thought of such a huge revenue stream has these companies thinking the impossible -- working together. Yet, this development is fascinating to watch as it unfolds. It shows how desperately traditional media companies want to get into Internet distribution. And they know very little about the generation that made YouTube possible in less than two years from inception and without an ounce of promotion other than viral word of mouth. They know little about social networking and while they are trying to understand, they have little fear of the best reason for not competing with YouTube. The YouTube audience is fickle. What's hot today, won't be tomorrow. And that applies to YouTube, MySpace, Facebook -- even iPods and smart phones.

Perhaps traditional media companies should concentrate less on trying to get into the Internet business and more on creating the content that won them success in the first place.

The Real "Person of the Year"

I don't know about you, but this time I think Time Magazine is reaching for it's "Person of the Year". God knows, I wouldn't be the one to take anything away from the Internet or the mobile world we are increasingly living in. The "revolution" Time credits is, well -- old news. If they didn't want to name the now wealthy, wet-behind-the-ears YouTube founders, that's fine. But naming "You" as the "Person of the Year" is a cop out. If -- and I say if because Time editors are more qualified to narrow down their candidates for this honor -- they had to have an Internet-based "Person of the Year", they're missing the point. My candidate for "Person of the Year" would be Generation Y specifically. Gen Y is the group that didn't just discover or inherit the Internet. They made it work and now they are helping it make money. When a young man can turn down $1 billion for Facebook you've got the real story. What's more, Gen Y enabled the Internet and helped set up what is coming next -- the mobile future. Anyone can use the Internet. But this generation used it to totally tear down the "Berlin Wall" of traditional media and has opened the way for free music downloads, new business relationships, new social networking and stands to redefine just about every institution -- media or otherwise -- by Internet, mobile standards. I vote for Gen Y as the "Persons of the Year".

A Great Idea From Bill Gates

The Microsoft Chairman said that consumers should just buy CDs and rip them onto their mobile music devices. Sound idea. It gets around digital rights management (DRM) which will never fly with the music buying public and will only serve to depress online profits until labels give it up. Perhaps Gates was prompted to make his comment in light of a Forrester research study that alleged Apple iTunes sales were down. Forrester has since modified their dire projections and blamed it on too small a sample size. One thing they are correct about. DRM is hurting digital music sales. And the average amount of new music per iPod owner is only 22 songs (up from 20). Approximately two albums for comparison sake. But let me add some caveats to Gates' advice even if he only meant it to be a jab at Apple. If I'm a record label, I'm lowering the price of all new albums to $9.99 to compete with the iTunes price. Of course the CD comes with no DRM restrictions. In other words, labels would then have a way to sell more CDs. Apple has only 6% of the music market, but it dominates MP3 sales. Everyone knows Apple CEO Steve Jobs just wants to sell iPods. Apple is not getting rich on 99 cent tunes. Once DRM is removed from legal downloads, Apple and other sites will be ready for boom times. In the meanwhile, lowering the price of a standard CD to 99 cents could be a boomlet of sorts for record labels.

Radio's 12-24 Dilemma -- Taking Less To Get More

By Dave Van Dyke, Inside Music Media™ Contributor

"Greed blinded an industry that couldn't see it had a future"

It's always interesting to follow the trades in our business, especially when the stories are old news. I'm referring to the headlines last week about the Arbitron "fly-in" during which was discussed the fact that the radio industry has ignored the 12-24 year old audience to the point that the very future of the business is at stake because traditional radio has offered this generation nothing for over ten years.

This isn't new news! Jerry's been talking about this for years; research projects as far back as 2003 at Bridge Ratings have shown this age group, in general, hasn't felt there's any compelling reason to listen to terrestrial radio. Other researchers have flown this flag, yet the radio industry has just ignores these warnings. Why?

It should be no secret that the answer lies in top lines, bottom lines and senior management's lack of courage and their short-sightedness in placing the almighty dollar ahead of the industry's future. However, the real blame sits with advertising agencies and radio clients who have been brainwashed to believe that 12-24 year olds don't have disposable income and are not worth marketing to. Maybe they do understand that this age group has tons of money ready to spend on everything from movies and music to clothing and electronics; these buyers of radio time have simply following the "lemming law" and inadvertently led the radio industry down a path of self-destruction.

While running radio stations for CBS not so long ago, I recall the frustration we had walking out of buyers' offices when they had explained that this younger generation wasn't their core target for the radio clients they represented, yet they had no problem spending money on youth cable networks such as MTV to promote movies and other youth-targeted products. The buyers just couldn't see the same relationship radio had with this active consumer group and so they wouldn't buy radio. Whose fault was that? Did radio sales people fail in some way?

So, over the years, management at traditional radio followed the money and did not develop programming and personalities that would compel this generation of 12-24 year olds to stay glued to their radios like previous generations have. Their rationale was, "we'll go where the money is: the 25-54 family reunion demo." Obviously, radio is a business and businesses need to make profit. But radio's always been in the business of making money and due to lack of courage the industry has ignored the concept that it needs to develop future audiences.

Consolidation led to ownership concentration which led to the concept of cost savings and the dream of leveraging audiences on multiple stations for increased revenue. Greed blinded an industry that couldn't see it had a future. Wall Street forced traditional radio to focus so much on this quarter, this month - even this week's sales, that radio forgot to 'save for a rainy day'. In the words of humorist Kin Hubbard, "the hardest thing is to take less when you can get more," and traditional radio hasn't worked hard enough to take less. (Dave Van Dyke is President of Bridge Ratings)

Best Buy Adapts to The Next Generation

No schedules. No meetings. A company traditionally known for its strict work rules has gone head first into becoming a worker friendly company. It has its risks. Best Buy is looking to judge its employees not on hours but on results. It's amazing enough that a draconian approach to employee relations is being dropped by Best Buy. I found this plan to be fascinating and worth reading for my students as well as my friends in traditional media companies. From Business Week Online: "Hence workers pulling into the company's amenity-packed headquarters at 2 p.m. aren't considered late. Nor are those pulling out at 2 p.m. seen as leaving early. There are no schedules. No mandatory meetings. No impression-management hustles. Work is no longer a place where you go, but something you do. It's O.K. to take conference calls while you hunt, collaborate from your lakeside cabin, or log on after dinner so you can spend the afternoon with your kid." Read the story.

Next for Cell Phones: Bling Tone

A Washington Post article says "Women who have historically wielded serious power of the purse as consumers are now buying all kinds of technology for their families and themselves, outspending their male counterparts 3 to 2, according to the Consumer Electronics Association." A CEA study earlier this year showed that women prefer their cell phones while men prefer high definition TV. Sterotypical or not -- there is money to be made here expanding beyond the bland mobile phone. Here's the article.

iPod "The Oldies Station"

Who would have thought that the home of the "Greatest Hits of All Time" would be an iPod instead of a radio station. With radio gradually getting out of the oldies business I'm thinking that consumers really consider their iPods and MP3 players their music collections. Odd, but research tells us these same consumers on the average have fewer than 200 songs on their iPods and they play them over and over again. Geez, that's more repetition than a Steve Rivers playlist! Why don't they complain about such repetition? Because it's their music. They are the program director. They play what they want -- take that, Jack! CBS overreacted to the iPod and developed the U.S. version of "Jack". I'll still never forgive Joel Hollander for blowing up oldies icon WCBS-FM in New York as a knee-jerk reaction to the iPod generation. And, by the way, if "Jack" is the answer radio has problems. The next generation wants to (and really has to carry their oldies around on an iPod because radio has failed them in this department). But they want new music -- lots of it, differing by genres, regions -- not the same old playlists city-by-city. So, let's take this from the top -- it's fine if Gen Y wants to have their "Greatest Hits of All Time" on their iPods and I understand why that repetition doesn't irritate them. But for crying out loud, if you're going to blow up a station to attract 12-24's, do what they want not what your program directors want.

Honey, They Stole My 12-24's

At the Arbitron Fly-In yesterday some much needed straight talk from researchers and consultants about how radio has lost a generation of teens. I had my epiphany a number of years ago when I first began teaching at USC. I couldn't believe that the next generation had such high disregard for radio. I couldn't believe that these young people knew Clear Channel -- almost the way I knew Clear Channel and that they didn't much like what Clear Channel was up to. Even though its late, the public outpouring of what radio did -- or more precisely, didn't do -- to lose an entire generation of 12-24's is healthy for radio. After all, you have to admit that you have a problem before you can solve it. And radio's 12 step program to attract 12-24's should begin with "Hi, my name is radio and I have arrogantly ignored the next generation while I greedily tried to get in on consolidation". Another step might be, "Take one daypart at a time -- create programming that elevates the experience rather than dumb it down". How about, "Admit that you are powerless over iPod, Internet and mobile phones, but never forget that you are the greatest producer of content on this earth -- bar none". And, "Come to believe that a power greater than ourselves can restore us to our sanity". No, not Clear Channel. Local radio. Down and dirty servicing the needs of differing communities. And, "make a list of the young people we ignored and make amends". This means getting to know them first before programming to them. And never forget it's not technology that turned off a generation to radio it was hubris -- ours.

Inside iTunes' Decline

Forrester Research delivered some shocking news recently. Apple iTunes' sales are off 65% since January and the average size of transactions is down 17%. This sounds like the decline and fall of iTunes, but it really isn't. It's the continued decline of the record business because the entire downloading sector is down and the old CD business continues to erode. Just visit any Apple store during the Christmas holidays and you'll know how many iPods are flying out of the store. The concept of iPods is not going away. The concept of selling music to the next generation is. Digital Rights Management that prevents easy use and transfer of downloaded songs is hurting. The high price of downloads is also hurting -- and yes, I said the high price of downloads. Perhaps 99 cents a song sounds fair, but they'll be no boom in legal music downloading until the price gets as low as 30-50 cents. Labels would then be in cardiac arrest. I guess they'd rather die a slow death at 99 cents or higher. Maybe ther stuck on pricing issues but the labels have not exactly been promoting online sales. In my opinion they are reluctantly embracing it while they covet ideas of someday replacing Apple's 99 cent price model with variable pricing. The labels should be careful what they wish for. If they don't start accepting downloading as the new music delivery system, they will be blamed for both presiding over the demise of the CD (their fault -- too expensive) and the decline of legal music downloading (their fault -- too pricey). iTunes isn't the problem. The record industry is.

Social Insanity

The latest rumor is that Yahoo has offered $1.6 billion to Mark Zuckerberg's social network Facebook and Zuckerberg has declined it. I don't know what's more insane -- Zuckerberg turning down $1.6 billion or Yahoo willing to pay $1.6 billion. The acquisition would get the ailing Yahoo it's own social network to counter Google's YouTube which also sold for $1.6 billion. Facebook is projected to earn $1 billion in revenue by 2015. But projections are meaningless in the fickle world of the next generation. And it's odd to see new age companies such as Yahoo acting in desperation like an old line media company such as Viacom. The only sure bet is to take the crazy money. Whether the next generation will remain in love with social networking in years to come is a fool's bet. It's very possible -- perhaps even likely -- that the dew will be off the lily by the time 2015 comes along. Right now Google is putting on a clinic to all media on how to develop out-of-the-box ideas. Copying them should not be one of them. There is a real question as to whether the commercialization of social sites like YouTube and News Corp's MySpace will drive quirky Gen Y'ers away. After all Gen Y is the anti-establishment. It would be better to follow Google's lead not in spending a fortune to acquire YouTube but spending a fortune to develop so many new and different Internet-based ideas.

The End of The World As Labels Know It

This generation of music fans is no fan of digital rights management. Everyone knows it but the major labels continue to tread water before they drown in their own miscalulation. Now, we're beginning to see signs of a change -- a very small change -- in the attitude of at least one label. EMI is offering Norah Jones' Thinking About You and Relient K's Must Have Done Something Right for 99 cents each as MP3 downloads from Yahoo. It's hard to say how much of this little toe in the water is to test the efficacy of selling music without DRM or how much is designed to get under Apple's skin. The labels have a hate-hate relationship with iTunes and by making songs available without DRM elsewhere (including the artists web sites) the songs will be playable on an iPod -- without having to pay Apple for the songs. Many indie labels, have been selling music MP3 downloads for some time. Dimensional Associates's eMusic has sold nearly 100 million MP3 downloads to date according to a recent article in USA Today. The end of the world as record labels know it is about to happen. DRM will not endure. No lawyers, no technology -- nothing can stop the record buying public from getting what they want -- music they can use interchangably on their MP3 players. But if major labels gave in to their wishes they would be called, well -- leaders.

Consolidation Hurts

The Future of Music Coalition is releasing a damning report at 12 noon Eastern time today that will document in a meaningful way what many have thought and few can now escape -- consolidation hurts the public. This is particularly important because some radio groups are using Internet advances, new technology and satellite radio as their excuses to get the FCC to relax ownership rules further. Here's a look at the key findings:

• The top four radio station owners have almost half of the listeners and the top ten owners have almost two-thirds of listeners.
• The "localness" of radio ownership – ownership by individuals living in the community -- has declined between 1975 and 2005 by almost one-third.
• Just fifteen formats make up three-quarters of all commercial programming. Moreover, radio formats with different names can overlap up to 80% in terms of the songs played on them.
• Niche musical formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk, where they exist, are provided almost exclusively by smaller station groups.
• Across 155 markets, radio listenership has declined over the past fourteen years, a 22% drop since its peak in 1989. The consolidation allowed by the Telecom Act has failed to reverse this trend.

The fact that further consolidation is even being considered is a testimony to how out of touch the FCC really is. Consolidation has failed radio. Radio has failed it's listeners -- especially the next generation. Wall Street no longer considers radio a growth business -- unless or until it can consolidator further (hint...hint) at which point investment banks will be happy to go around again. While greedy radio companies and the FCC conduct this dance, other mediums are compromising radio's future. Even by Wall Street's greedy standards if you can't build shareholder value when you have a virtual monopoly, do you deserve another bit at the apple? If you love radio, say no. The Future of Music Coalition report will be posted at www.futureofmusic.org at 12 noon on December 13, 2006.

AdWhores

I feel dirty saying anything against Google, but I am worried about my friends in the radio industry. Radio is ice cold and Google is red hot. I've written previously about how the radio industry should beware of geeks bearing gifts (i.e., online bidding for radio time). I'm happy the early experiments seem to please the terrestrial broadcasters participating in the Google initiative, but they are frankly hard put for good news these days. I believe if this thing catches on, it will do more damage than good. Let me make my case. The Google radio ad system reaches out to anyone who wants to advertise on radio. They bid for ads (and so far, I'm told, the ads are fairly compensated as a result of free market bidding). The advertiser doesn't know which station their ads will eventually wind up on. It's clean, cheap and cold -- just like the Internet. I see some radio groups getting excited about the Google ad bidding system -- AdWords. I agree with AdWords rival Bill Figenshu who thinks auctions are bad for radio rates. But what's unfortunate is no major radio broadcaster is as excited or actively involved in new initiatives for relationship selling. Only Google's way gets them revved up right now. To the extent that Google AdWords succeeds and radio takes the quick cash for unsold inventory, it is mortaging radio's future by delving deeper into an inherent Internet strategy and away from an inherent radio strategy -- personal selling. Watch this one. Within five years (maybe even sooner) there may be no going back. A number of years ago Clear Channel CEO Lowry Mays raised a stink when he said that radio was basically a vehicle for running commercials. Today no one seems to be raising a ruckus over Google's blatant attempt to turn radio into a commodity. I'm no fan of Mays, but if AdWords works, he will have turned out to be so right in ways even he couldn't have known back then.

TKO-Mobile

I was Christmas shopping at the Scottsdale Fashion Square a few days ago and wandered into the T-Mobile store to play with the new Blackberry Pearl. Within minutes a sixteen year old girl and her mother broke into a fist fight at the check-out counter -- that's right, holding nothing back -- with another teen and her mother. Four different customers had to restrain these holiday bundles of joy. The language was right out of HBO. Merry Christmas! Happy Holidays! Holy Moses -- what is happening to us? Mobile connectivity is growing exponentially. We text each other. We talk on the phone while we walk. While we shop. While we eat. Drive. Even while we converse with others yet I wonder if we are really communicating better. Admittedly, this example is not representative of our new mobile culture (I hope). But I haven't been able to get this incident out of my mind. Somehow I get the feeling that advertisers, utilities and media companies are piling on our next generation. Soon the messages they may want to deliver will not be heard even if they can deliver them to an entire generation's left ear. The commercialization of Gen Y's world is now in progress. Coke will be doing a deal with MySpace to allow members to choose free online holiday "cards". The door is open, the onslaught of messages is coming in the name of monetization. So hopefully I am just shell shocked about the phone store incident, but maybe I've got a point to mull -- is corporate America treading where it wiser to tread lightly -- on the next generation's electronic, digital, Internet toys? I'm thinking, we may soon be dealing with over-commercialization that will make the next generation even more fighting mad.

Playing Hurt -- A Half-time Pep talk

By Dave Van Dyke, Inside Music Media™ Contributor

"Radio has more experience at this game and we know the other team's weak spots; we're bigger in all our positions, too. So as we prepare for the second half, let's get re-inspired about how great our team is and focus on the game at hand - don't get distracted by their cheerleaders. Let's go out and win one for the bookkeeper"..

I love football analogies. Traditional radio's got some players who are playing hurt. One of our biggest and most long-term dependable players, half-back "Average Quarter Hour", has really taken a beating lately. He's not as quick and he's just not contributing to the power of the team as he once was. He's brought us some great games; we need to pump him up a bit. One of our strongest guards, "Cume" - the one who's been protecting our quarterback all these years, is beginning to lose his edge, though he's still doing the job. Perhaps our weakest link - one that almost got taken out of the game this year, is quarterback "Self-esteem". Man, did he take some shots over the last two or three seasons. He's been hurt so much that there are rumors among the press that he doesn't have "it" anymore. We know that's not true; he needs an attitude adjustment - and fast! Thank goodness our two best players, offensive ends "brand awareness" and his counterpart "brand equity" have been eating right and working out. Nothing seems to phase these guys - no matter how many times they get hit. They're the best we have, yet sometimes we forget the their importance to the team.

The other team's got some superstars we have to take out. Their little guy "satellite radio" got a great rap in the trades at first, but after some pounding by our middle guards, it looks like he'll be limping into the playoffs! However, let's not get cocky! Their best player, "iPod" also known as "MP3", just won't quit. He's their top scorer and so far we haven't figured out a way to stop him although our scouts report that he tires quickly. He and the young guy, "Video Game Controller", are probably going to keep getting to our quarterback and half-back until we find a way to stop them. And don't neglect to cover their amazing rushing defensive end, "Internet radio". This guy just keeps getting bigger each season and he's comin' on fast!! Sure, we've got some people playing hurt, but so do "they". (Dave Van Dyke is President of Bridge Ratings)

Solutions For The Labels

CD sales are down again. Legal downloads are up but not as much as in the past. Labels are getting hooked on ring tone sales to help make up for the short fall in CD sales. Music is as stale as the latest innovative idea from a big four label. Desperation is setting in as labels try to get more merchandising rights in artist contracts. Even hit albums are not dominating the charts. Big artists start with big sales and then decline rapidly. Christmas sales figures are not in, of course, but barring the unforeseen, it will be another down year for record labels and trouble aplenty ahead. Here are some good ideas I've heard to turn things around: Lower the retail price of CDs to $9.99 now and compete with iTunes. Faced with owning the CD or paying $9.99 for an album download with lots more digital rights management restrictions, CDs should benefit. Lower the price of digital downloads. I know, you think I'm nuts. I've seen research that shows consumers would greatly increase their legal music purchases. But offer the lower download prices only on label websites. Leave iTunes at 99 cents. Be careful of YouTube and MySpace. Think of them as "radio" not profit centers. And, one more thing, although there's still a lot of good pop music around there still isn't as much as there should be to drive demand. Spend some money to find the next big trend. Listen to your gut not your lawyer. I'm just saying.

The $1.6 Billion Garage Sale

Google, a new age company -- the rage, the do-no-wrong new media conglomerate had to go outside Google's significant brain trust to buy YouTube from a couple of kids they then made into billionaires. Couldn't Google have invented YouTube on its own for a lot less? YouTube could only have been conceived of in a garage by a few fools who thought pirating other people's copyrights could be a big business. Imagine if Viacom had a skunk works and its brainstormers came up with YouTube first. How fast do you think corporate lawyers would have shot down that idea? In the music-related media we tend to blame new technology when sales go down or businesses dry up. But the real reason many media companies are on the ropes is because they have run out of new ideas -- with or without the benefit of new technology. They've been reduced to hanging on to old models or pimping their products out to get in on hot crazes they didn't invent. Viacom is still reportedly stalking Google -- a scary thought. News Corp is heavily into monetizing MySpace and one false move by the "suits" and this new age wonder loses the upside that made Rupert Murdoch spend over $600 million to possess. The readers of Inside Music Media come from traditional and interactive media. If radio wonders why it's own can't innovate, rent a few garages and send in a dozen pizzas. If TV thinks it's any match for YouTube or mobile video clips, it can only adapt not invent. Rent more garages and turn unconventional minds loose. If failing newspapers think cutting down the size of their broadsheets will attract more young readers (as they seem to believe), they'll be greatly disappointed when they stick with the Internet to get their news. Garages or more accurately off-premises, unsupervised, uninhibited, unstoppable innovating is what's winning the day. Businesses from Apple computers to YouTube got their start in garages. The $1.6 billion question is not whether Google gets its return on investment for YouTube, but whether the media business learns what Google already knows -- you can't innovate from corporate headquarters.

Reinvest In Artist Development

By Steve Meyer, Inside Music Media™ Contributor

"Now, more than ever, labels should reinvest in artist development, something that's been overlooked for too long, and was once an integral part of every label's day-to-day operations".

Artist development went out the window once their budgets went toward making videos for MTV. Now artist development has long been forgotten in the rush to flood the market with trend music, flavor-of-the-month artists, and anything that sells and keep revenues flowing. Even in the late 60's and 70's, all labels wanted to grow and make profits. But they were also focused on signing artists that could provide them (and the public) with long-term success. Is this really an imperative at labels in today's business model? If so, then how many artists out there today have platinum and multi-platinum success? Then ask yourself how many will still be making music that will be valid in the marketplace, or on radio in 5 years. The list will be short. If one goes back and looks at the sales success stories and monster acts that sold product in the last decade, you'll find most of them are either gone today, or no longer finding success at radio and retail. Labels have to have diverse rosters and they've always had novelty acts, one-hit wonders, and short-term success stories. But the one constant that always provided health was in that diverse roster, a strong foundation of singer/songwriters/bands that could always deliver great albums when ready. The music people, not the lawyers, not the business affairs people, not the music video directors are the ones who will help the industry weather its current storms. And when the storms calm down, it will be the music people who engage the consumers. Steve Meyer is one of the music industry's top professionals and publisher of the new media newsletter DISC & DAT

Help the Needy -- Radio Consolidators

It's Christmas and time to help the neediest. And CBS, Citadel, Entercom and Clear Channel would have you believe that they are the neediest. These groups along with TV and newspaper execs are trying to get the FCC to repeal the "severe ownership restrictions" in a time when technological and marketplace developments have made competing more difficult. Are these people serious? The radio industry got everything they wanted in 1996 with passage of the Telecommunications Act. And all they've proven ten years later is that they couldn't run more than two stations in a market even with a virtual monopoly. Now they want another bite of the apple? This is not only insane but any elected official cooperating with this ploy should be held accountable at election time. The reason radio is on the ropes is not just the Internet. It's radio's arrogance and failure to program to the next generation. Need evidence? Check Arbitron's average quarter hour listening stats from the early 90's to now -- continually down. And the early 90's is before the Internet hit big, before email, before iPods and iTunes, before peer-to-peer downloading of music, before smart phones, YouTube....and on and on. Radio was blowing it before they had increased competition. Radio consolidators are acting like cry babies. If they eventually bamboozle Congress and win permission to relax ownership rules further, they will still fail. But more importantly, radio's big execs are wasting time while the next generation lives without them. What a case study for incompetence for Harvard Business School students.

Radio's Declared Victory Over Satellite

This is what's wrong with terrestrial radio. Their leaders have lost focus on what's important. Cumulus CEO Lew Dickey mocked the satellite industry at a UBS conference saying it would have been cheaper to put toasters in cars. Many radio broadcasters let their egos get in the way when it comes to satellite radio. Satellite is not their real competition -- the loss of the next generation to the mobile Internet is. And some satellite operators are trash talking radio as well. Sirius CEO Mel Karmazin's disingenuous comment that he'd love to see terrestrial radio's revenue up by double digits is the same thing from the other side. Even in the media business you can't declare "mission accomplished" (remember what happened the last time someone did that publicly?). NAB's President David Rehr is trying to reposition terrestrial radio as local radio and that would be all well and good if the stations actually got more local. More slogans. No substantive changes. Can't radio executives see that they're fighting the wrong fight? Even sending in more troops (if you'll pardon the analogy) won't be able to stop the rebel uprising of YouTube, MySpace, iPods, smart phones, peer-to-peer downloading and the entire Internet. So let's appoint a terrestrial radio study group. Let's see if they can come up with an exit strategy that will save face for media consolidators who thought "shock and awe" would be enough to win the day in this digital age. As on the national and international stage, media consolidators just can't admit they were wrong.

My Clear Channel Spin-off Fantasy

What do you call radio groups that want to buy some or all of Clear Channel's 448 spin-offs? Opportunists? Smart investors? Fools? With Lehman Brothers projecting 2007 to be radio's worst year since 2001, what must potential buyers of radio stations be thinking? Well, they are certainly not thinking what radio's pioneers thought back in the 50's and 60's -- that is, let's buy some radio stations. We can take the losses. All that Clear Channel will prove is that there is still money to be made trafficking radio properties. Radio stations still generate lots of free cash flow even if they aren't what they used to be. Selling 448 non-top 100 markets under present financial, technological and generational conditions is like buying the Titanic on the way down. That's a bit dramatic, but worse yet, Clear Channel will likely earn $2.5 billion for its 448 radio spin-offs and 42 TV stations and that's just the tip of the iceberg (did I say Titanic and iceberg?). Clear Channel should sell the 448 radio stations back to as many small operators as possible even if it has to leave money on the table. What am saying? That's pure fantasy. Yet these 448 stations should be the first to return to their rightful owners -- the people and the "permitees" who should be held accountable for operating them in the public interest. Remember where all this radio value came from in the first place -- independent operators with relatively small groups -- satisfying their audiences and monetizing their businesses through relationship selling. I now interrupt my fantasy to return you to Phase Two of Consolidation known as trafficking already in progress: The Return of the Screw.

Ads On Your Cell Phone

There is fairly recent research that shows about one-fourth of all cell phone users would be willing to look at advertising on their mobile phones in return for free service. A Harris Interactive research poll in August also says that 7% of current mobile phone subscribers would be interested in receiving relevant promotional text messages with some caveats. The ads-for-free-service trade-off is consistent with what I have observed among samplings of the next generation. They have ways of ignoring advertising to keep things free. But it's the 7% of consumers willing to tolerate promotional text messages that is major because there are almost as many cell phones in the U.S. as people (well, 200 million is more accurate but very substantial). This represents a big market and doesn't bode well for consumers already bogged down with 9 out of 10 junk emails. Spam filters and anti-spam software aside the early signs of the undoing of the mobile revolution may reside in this unbridled commercialization of the Internet and mobile spaces. It's sacrilegious to talk against making money off the current technology boom, but unless a balance is found between monetization and irritation the goose that laid the golden egg is headed for a dinner plate near you.

More Sirius Trouble

It didn't take Sirius CEO Mel Karmazin to announce yesterday that the satellite company was going to miss its subscriber projections -- by 200,000 by the end of the year -- to know it was in deep trouble. At least not for me. Working with the next generation at USC, I have become all too familiar with the reason why Gen Y doesn't subscribe in great numbers to a satellite service. It's money -- or the lack of it and a disinclination toward subscription services. Howard Stern boosted Sirius' subscriber count in his first year, but Stern appeals to older adults. And even the 500,000 paid subscribers he attracted was nowhere near what Stern's numbers were on terrestrial radio. Satellite radio finds itself in trouble because what was intended to be exciting new technology over ten years ago when it was first approved is -- well, not so exciting to the mobile, iPod Internet generation. Meanwhile the people who can afford a satellite subscription (not young adults) are getting only one oldies channel, one channel for each decade, one standards channel and the young are getting the exciting, cutting edge music channels. That's a problem. We've discussed in the past that not having a plan to get cash-strapped 18-24's is also a problem. It's great t0 have NASCAR on satellite for those who want it but it costs a fortune as does a lot of other packaged sports content. The serious trouble that Sirius is in is that it is radio and not the mobile Internet. Have you checked radio's outlook for next year? No growth again. The cure for both satellite and terrestrial radio is to embrace the future as a content provider not programmers of the technology they are married to. And the sooner the better.

Texting Getting Out of Hand

Pardon the pun. It's a vile habit of young people driven to distraction by the mobile media they are addicted to. It is equally also a very rude habit of older people who whip out their Palms and Blackberries while you are talking to them, eating or trying to communicate with them face-to-face. The texting craze can be harnessed by the media to get instant input, participation or even -- with some imagination -- instant sales. But the one or two finger tap is the potential enemy in my view. Old and new technology can compete in this new age by emphasizing content, but how are they to compete with repeated distractions that have very little to do with entertainment? Even texters who readily admit to their superior multitasking abilities show some encouraging early signs of tiring. If big bad mobile phone companies wanted to invent the killer app to hurt music media they'd invent texting. But wait, they already did. Texting may be a generational glitch not holy grail. Music media's best hope is that future generations will tire of it. And least it had better hope so because there is little they can do about it. If future generations continue the texting craze it will be hard to get their undivided attention for entertainment and this could be a big consideration going forward.

The Emerging Mobile Middleman

Google is complaining that mobile phone operators are asking them to stop allowing people to access Google Mobile Maps by phone. Google's service gives interactive maps, search results, satellite images and very detailed directions to local businesses. The mobile operators are thus becoming the middleman between Internet companies and the public. The reason is obvious. Mobile companies offer their own detailed direction programs -- for a monthly fee. And what happens when VoIP becomes widely available on mobile phones -- in other words, cheaper service on phones with existing phone service through Internet access. The move to watch is that of the mobile middleman. A showdown could be coming between the gate keeper of mobile information and everyone's bad boy -- the Internet. The same Internet that is dragging record labels into the future, diverting youthful radio listeners to online, killing off newspapers and making satellite radio technology somehow seem antiquated little more than ten years after operators won approval to launch. But this battle -- the one between mobile operators and Internet giants and gadflies alike is the real heavyweight fight. If anyone can stop progress, it would be a utility. But the reverse could be true. The Googles of this new age could force mobile companies to cut their rates to compete with VoIP. And content deals can always be done. The mobile future is now unless, of course, mobile middlemen get in the way.

The New Radio

UK radio stations will begin being able to sell digital music downloads to their audiences in real time early next year. It's significant because the developers are calling it "digital radio's killer application". All the major radio groups and labels are on board for the roll out that requires a pre-paid plan for anyone interested in buying music from a digital radio station. Here's the part that's revealing. They claim more 15-24 year olds are listening to radio than ever but that as UBC's CEO Simon Cole says, "radio revenue is not rising to sustain the development". Come again? More listeners than ever in this demo but not a commensurate increase in revenue? You can't blame radio operators for wanting a bite out of the digital apple. They no doubt should explore every opportunity. My sense is that the next generation is not likely to vote thumbs up on digital radio downloads. Radio is late to the party. The real killer app for this demographic is WiFi. When universal WiFi makes carrying the Internet around in cars, in portable devices -- everywhere -- it will become the new radio. Of course terrestrial radio broadcasters can be part of all this if they don't continue to limit their horizons to transmitters and towers. The next generation lives where radio doesn't reside -- and can't reside technologically speaking. But traditional radio can become a provider of content in a new digital world. The choice is theirs.

Record Labels Need Strategic Alliances

By Steve Meyer, Inside Music Media™ Contributor

"If you do not seek out allies and helpers, then you will be isolated and weak." - Sun Tzu, "The Art of War"

If ever there was a time for the music industry to seek symbiotic relationships, it's now. The formation of these partnerships is becoming a key component in all corporate thinking and has been talked about recently in leading business publications. This from BUSINESS WEEK: "...companies should expand beyond their existing resources through licensing arrangements, strategic alliances, and supplier relationships." From FORTUNE: "Alliances have become an integral part of contemporary strategic thinking." Music companies have relied on mega-selling multi-platinum albums during their fiscal year to continually drive revenues and profits. With a healthy, diverse, and deep roster, that formula worked well for labels for quite sometime. Enter the Internet, technology to burn CDs, and the era of instant gratification and with it, disposable music, movies, and fashion. The public consumed "junk culture" like junk food and moved on to the "next thing" at an ever-increasing speed. The Osbornes today and Nick & Jessica yesterday, Hannah Montana and the High School Musical today, who knows who tomorrow. Strategic partnerships are fueling the growth of the world's most successful companies as the demand to deliver new products at lower prices increases. There's no reason why labels can't start mapping out a brighter future now to bring music to an even bigger audience than ever before. (Steve Meyer is one of the music industry's top professionals and publisher of the new media newsletter DISC & DAT)

Navigating the Digital Future

Can anything stop YouTube or MySpace or TiVo or peer-to-peer downloading or the iPod or iTunes or mobile entertainment? Yes. Yes. Yes. Yes. Certainly not traditional media. Radio, television, print, movies, the record business -- they're stymied. Lost in old ideas and the technology they hang onto and misdirected when they embrace a new interactive one. What can put a hurt on the current runaway digital future is the interactive media itself -- all of it. My long time friend and media futurist John Parikhal recently wrote: "The biggest "missed" story was the continuing damage to productivity that is caused by e-mail. If you get and respond to more than 85 e-mails a day, you're losing about 2-3 hours a day in productivity (which is why you're working harder and getting less done). This explains a lot of the collapse in creativity and forward thinking that used to happen in radio (and many other businesses). There's no time or incentive to think". The next generation is on digital overload. The Internet and mobile is virtually endless like outer space. The black hole that our naked eye cannot see right now is that after endless technological advances the consumer may not be able to handle it all -- to process it all -- and then choices will have to be made. This is coming so keep it in mind as you navigate the digital future.

Consolidation - The Bad & The Ugly

Ten years ago during the euphoria surrounding the passage of the Telecommunications Act I spoke out against media consolidation as publisher of Inside Radio. Not only that, I exposed as often I could, the heartbreak of an industry. I saw able managers overloaded with the responsibility of running too many stations. People fired because they got in the way (we wrote of a cancer patient who one of the consolidators fired even knowing he was being treated for the disease). The disconnect between Wall Street euphoria and Main Street neglect. Questionable practices like packaging more than the stations some groups owned with LMAs to offer advertisers an even bigger platform than I believed the law allowed. Some days the front page read like consolidation was all the news radio had. I took a lot of bullets for my early stance against media consolidation like my advertisers being warned that continued support of Inside Radio would mean not being able to do business with the growing groups. I was the target of personal attacks, needless litigation and my deceased father was even referred to as a mafioso. As I have said before, it all worked out for me in the end with a few unscheduled detours along the way. I was against consolidation then and remain steadfastly against it now. Media consolidation benefits only the few in control and their investment bankers not even their shareholders as witnessed by the across the board decline in shareholder value for those suckers who invested and held radio stock. I say this as I wait to hear what the first defector -- Clear Channel -- is going to do next. Sell all or the majority of their 400 plus spin-offs to one group (a tidier deal) or return the stations to their rightful "permitees" to run them in the interest of the people.

The Reluctant Broadcaster

By Dave Van Dyke, Inside Music Media Contributor

For many of us who have been in this great radio business for more than three years, the idea that the paradigm is/has shifted out from under us is a bit like feeling your first earthquake. It's crazy! Unlike most natural disasters, earthquakes give you the feeling that you are no longer in control - that there is, indeed, a greater force at work and you can't do a damn thing about it. Welcome to the world of traditional Radio 2.0 - the new reality. Does traditional radio's senior management have trouble seeing that their legacy businesses can not only peacefully but constructively co-exist side-by-side with digital media. The combination can be quite potent.

• Broadcast towers + any digital network = greater reach.
• Professional DJ's/hosts + user-generated content = more compelling programming.
• Being "local" + being virtually local, national, even global = vast audiences.
• Scheduled programming + time-shifted content = convenience for listeners.
• Over the air or streamed transmission + recorded, shared or networked = greater distribution
• Single programs with many listeners + many large niches of listeners = listener super-serving
• A radio receiver for AM or FM + many digital devices = traditional radio can be everywhere
• Only ad revenue + content revenue + fees + upsells = multiple revenue streams and recovery of lost traditional dollars
• A "receive only" or one-way system + an Interactive system = greater listener satisfaction

The transition from old to new requires a juggling act of sorts. Traditional radio must maintain its current 'legacy business' while quickly adapting to this new reality. Develop the new with the resources of the hold. It can be done - they are not mutually exclusive. Yet when I sit in front of broadcast executives and try to help them navigate the future and we discuss how they have the power to adjust, they acknowledge that they need to do some/all of it, but they insist they can't! They just don't have the resources. Sure, radio matured into a business sometime in the 80's, and there's nothing wrong with being a business with positive cash flow and expenses. But, folks, business has sucked the life out of this business. In the 80's and 90's, before consolidation, broadcast companies figured out how to make money and how to spend money. Something bad happened in '96. The last ten years have not been good to our business and now we're attempting to fight our way out. The industry has its visionaries who have carefully explained what to do. There's just not enough courage at the highest levels to do what needs to be done. Yet. (Dave Van Dyke is President of Bridge Ratings)