Radio's Three Blind Mice

One of these days the radio industry is going to get it right -- but today isn't one of them.

Frick and Frack -- the NAB and RAB -- two organizations that still don't get it -- have announced at the NAB Radio Convention -- that they are going to spend more of their members' money.

The latest brainstorm is the "Radio 2020" project.

The first problem is the name. Radio doesn't have until 2020.

National Association of Broadcasters and the Radio Advertising Bureau are apparently going to spend all this dough to re-brand radio. That's right -- re-brand a medium that in the same breath they claim the majority of listeners are happy with. Go figure.

And if you're not impressed with the NAB and RAB's apparent stance that they're mad as hell and aren't going to take it anymore, then perhaps you'll see through their announced mission to blame radio's "opponents" who have been allowed to position radio for too long.

Just one quick question -- just who allowed it (if it is true?).

Could it be the NAB or RAB?

Nah.

If that doesn't make your brown eyes red then how about the news that iBiquity, the HD radio company, is joining in on this boondoggle.

Three blind mice. See how they run a dying business.

An account in the trade paper Inside Radio reported the key goals of this trio is "to market radio's accessible technology and countering the public's notion that playlist variety and format diversity has declined".

They're kidding, aren't they?

Too many Swedish meatballs at one of the convention hospitality suites?

"Market radio's accessible technology?"

Let me guess, HD radio, right? The antiquated digital audio system. The one radio groups refuse to invest in. They're holding back quality programming for these HD channels and rightly so because listeners aren't buying HD radios. This begs the question: which comes first the programming or the listeners?

"Countering the public's notion that playlist variety and format diversity has declined?"

What?

The NAB claims to have compiled input from more than 5,000 consumers with the results showing nearly all participants rely heavily on radio.

So they want it both ways.

Radio is just fine. Just needs to be repositioned. The "opponents" are the bad guys. Let's all fight them there so we don't have to fight them at our next meaningless convention. So much for the new ideas claim this Charlotte NAB Radio Show made in their promotional materials.

It's more of the same old-same old from radio's three blind mice.

You don't re-brand a medium to the people who already are happy with it -- and the NAB is saying everyone is happy except for the "opponents".

You don't accuse the Democrats of being unpatriotic because they -- along with most of the country -- want our troops out of Iraq.

Sorry.

I mean, you don't accuse the opponents of being your problem when everyone knows the NAB was instrumental in getting the 1996 Telecommunications Act passed -- the one that enabled consolidation.

And you know what consolidation has done to radio. (Check your stock prices).

The RAB has been sitting around like Mister Rogers singing to new age competitors,"won't you be my neighbor". Online advertising is growing like crazy and this is the best they can come up with. The big NAB announcement. Get the "opponents".

There are some good and honorable people at the NAB and RAB make no mistake about it, but their direction is wrong. That's what I'm saying.

The radio industry is in trouble. But it is also in denial. And that's the problem that must be overcome before there is even a small chance to turn this ship around. The NAB/RAB/iBiuity initiative is even more denial. The radio industry is so over if it doesn't spend its time, effort and resources on real problems.

This is not the time to blame it all on "opponents" of radio.

Who are they talking about, anyway? Satellite radio? I hope not because satellite radio has not made it to competitor status yet (see, the only two sat coms are merging, but that's not important right now).

Internet radio? Someday but not today.

Apple? Steve Jobs? Who?

Apparently everyone but the execs who run radio companies and their trade associations.

Hey, if broadcasters want to fund this kind of stuff -- it's their money.

They could demand real leadership from their industry associations or they could redirect their membership money to projects that are actually going to tackle real issues that threaten radio's future.

Like ... the royalty tax that stations may soon have to have to pay to the record labels.

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Radio and Records -- Murder Suicide

The record industry is about to kill itself and murder its best friend.

Phil Spector, who knew?

The labels are in the process of trying to eliminate radio's royalty exemption which could exceed $1 billion -- 0r 5% of radio's revenues according to Deutsche Bank's Drew Marcus.

This would be tantamount to murder for radio stations.

The royalty tax would help cripple a declining radio industry at exactly the wrong moment in time.

By pushing for this money the record labels would also be committing suicide because radio has options to cripple them if it has the guts and because holding your best ally hostage makes no sense.

If radio tries to mitigate any new tax on music by seeking to lower the fees it pays BMI, ASCAP and SESAC, that hurts the artists.

But if radio operators swallowed hard and made the transition toward music that was not digitally protected and not aggregated by the big four labels, it would be the final bullet in the "brains" of the record industry.

Let the record show the wound would be self-inflicted.

Let's be clear.

The radio industry probably doesn't have the guts to stand up the the labels. So you can expect them to go crying to Congress. That will get them nowhere. Radio is not the power it once was. Playing nice will not work.

It's time for civil disobedience.

I can assure the radio industry that the next generation would not think any less of you if you didn't play the same 25 records over and over again -- as if it were possible for them to think less of the radio industry at this point.

The labels are in trouble and their response to all their problems has been to hunker down and fight.

The radio industry's strategy has been to run away from the fight -- pissing and moaning all the way.

This is the big showdown at the Not-Okay Corral.

While the record industry sues its customers and stages a stickup of its best friend (radio), young consumers continue to go elsewhere.

When I first arrived at USC a good number of years ago, I was shocked by all the pirating to which students openly admitted. Today, stealing music seems to have grown worse. Young people have many different ways to access music for free. From Russia with love -- at ten cents or less per tune. From bit torrent sites originating in countries like the U.K. and without digital rights management (DRM). Very appealing.

Then there's file swapping -- file sharing, burning CDs and, as a last resort, buying songs for 99 cents from Apple iTunes store.

Now Amazon is offering non-DRM protected music for 89 to 99 cents a download -- or as we say in the industry, Universal and EMI's way to get back at Steve Jobs for establishing 99 cents as the price point of legally downloaded music. They represent only two of the big four labels making songs available on Amazon. (As an aside you may remember that these labels fought Jobs to win variable pricing so some tunes could cost less and presumably newer hits more, but Jobs wouldn't have it. Now it's interesting that their Amazon experiment has no price higher than 99 cents a download. Lucky for them because young consumers think 99 cents is getting to be too much for a download).

The record labels' strategy is both masochistic and sadistic.

It's insane and it's going to backfire.

Call me names. Tell me I'm spending too much time with college kids or just plain go into denial.

But here's how it is all likely to unfold.

1. Music piracy will continue to increase. Sue all you like, they'll steal more.

2. If the labels can't make money on 99 cent downloads now, they're in for big trouble later because the 99 cent price point is headed down and, ironically, EMI and Universal are leading the way with their Amazon experiment.

3. Labels should be careful what they wish for because if they impose more royalty taxes on radio, it just might be enough for spineless radio executives to grow a -- well, a spine. (Unfortunately, you can steal a radio company's best people without too much outrage but when you start eying 5% of their revenues to pay a royalty tax, look out!).

No matter what transpires radio stations and record labels will continue to have less sales power going forward -- precisely why the current desperate strategy of the music industry is nothing more than murder-suicide.

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Clear Channel Interrupted

Clear Channel's ten-year quest to take over the world -- at least the world of radio -- has ended with shareholder approval to take the firm private at the end of the year.

It's a $19.5 billion buyout and the preliminary vote approved the merger with T.H. Lee Partners and Bain Capital Partners.

The timing was critical because investment money is hard to find these days -- a far cry from 1996 when consolidation was enabled by law. Now the shareholders are in a far more agreeable mood because it's as good a deal as they're going to get.

Back when Clear Channel stock was selling in the $90 range, executives predicted it would be a $100 stock. That never happened. In fact, the bottom eventually fell out.

Under the deal approved yesterday, Clear Channel shareholders were to get only $39.20 in cash per share and current shareholders could get as much as 30% of the new company.

The new owners will assume $8 billion in debt.

So what have we learned from this 11-year experience?

1. Venture capitalists don't buy assets to run them. They acquire things to build and then flip them for a profit. Bain and Lee have a unique problem. The assets they are acquiring will likely be worth less as the years go on because radio is on the decline.

2. Now is a good time to resell. I wouldn't be surprised if some assets are sold off in advance of the usual 5-7 year window. Clear Channel owns prime real estate even if it isn't what it used to be worth.

3. Lots of good management talent will be exiting the company if they can find better jobs. It probably is in their best interest to take the money and move on. This is to the detriment of the new Clear Channel because it isn't the Mays' who made Clear Channel radio's biggest group. It is their employees who are Clear Channel's biggest asset.

4. Consolidation has been a miserable failure. Imagine. Companies like Clear Channel got a virtual green light from the government to multiply and form a monopoly and even with that they couldn't run these companies. It's almost as if the radio gods were saying, "no owner can run more than 14 AM and 14 FM stations effectively at one time". The more they owned, the more they failed. Consolidators were banking on a second relaxation of ownership rules that never happened. Minus that, consolidators couldn't keep cranking out the numbers they were promising to investors.

5. Some radio CEOs who eventually took their companies public were not a very impressive lot. They couldn't compare with leaders in other segments and they didn't really do well with on the job training. When they were acquiring stations and heaping on more free cash flow, they looked competent. Once the acquisitions slowed down and they had to run their businesses, they looked -- well, the opposite of competent at times.

6. Debt catches up with you -- and it doesn't matter whether it's personal or corporate. When I published Inside Radio some financial people I respected a lot used to tell me these new consolidators would never be able to manage their debt. That the multiples were out of whack. The numbers didn't work. Back then, everyone looked away. They must have known.

7. The Internet, iPods, iTunes, mobile phones, the next generation and the social networks they now gravitate to are some major reasons why radio consolidators like Clear Channel lost the next generation, but not the only ones. Clear Channel has done a little better than their competitors in online ventures but from my vantage point none of them understand how to extend their brands and create new ones for future generations. Big consolidators gobble up companies because they can (and because their investment banks earn more fees).

8. Shareholders who bought the hype about radio stocks during consolidation, let me introduce you to "sell stop". You held it too long. You bought the hype about creating shareholder value. You should have bought Apple at $9 (now over $150).

9. The government is to blame. Few people hold the government responsible for ruining the radio industry. Deregulation was just another term for nothing else to lose (if I may butcher Janis Joplin's lyrics here). The airlines were deregulated -- you know how that turned out. The trucking industry was deregulated -- what a mess. Democrats and Republicans both are guilty of launching the great land grab. But in the end, deregulation or re-regulation or whatever you want to call it weakened the radio industry.

10. Don't let the NAB off the hook. The NAB was the group that engineered radio consolidation as an add-on to the Telecommunications Act of 1996 -- at the last minute. Your lobby group helped create this monster. Now the NAB -- under new leadership -- owes you one and they can start making up for their mistake by leading a vigorous (and hopefully successful attack) on record industry attempts to levy further taxes on radio stations for music rights.

11. The people who maintained their faith and their class during the tough times of consolidation are the real story. They loved the industry even though their consolidated employers threw many roadblocks in their way. Imagine running a local radio station competitively when 80% of the decisions are made at corporate.

When the biggest consolidator gets at $50 a share less than it was worth at the top of consolidation, it says more about the future of the radio industry than anything else.

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Nike Radio

Radio has faced a lot of competition in the past ten years, but are you aware of one of the more offbeat competitors -- running shoes?

Nike and Apple have teamed up to create Nike + Nano running shoes with an iPod that talks to you about your run --and entertains along the way.

Runners used to listen to radio or a Walkman or lately a small iPod such as a Nano. But that's so retro. Now you'll find more for the consumer and more competition for traditional media.

Here's how it works.

There's a pocket under the insole engineered for the Nike + iPod sensor. The iPod nano syncs workout data with both iTunes and nikeplus.com. According to the Apple website "The Sport Kit allows your Nike+ shoe to talk to your iPod nano. The sensor uses a sensitive accelerometer to measure your activity, then wirelessly transfers this data to the receiver on your iPod nano".

The shoes talk. You can see the minutes tick by on the nano and keep track of the the miles. Track the distance plus calories burned. Then, hear real-time feedback while listening to the music you programmed on your nano "including the one song that always gets you through the home stretch".

Choose workouts from the Nike + iPod menu. Pick the open-ended basic workout or customize a workout with time, distance and calorie goals. Then pick a playlist, shuffle songs or choose Nike-created Sport Music content.

You can get to your power song with one click while running and displays up to 1,000 individual workouts, so you can view your data anytime.

And there is a website where you can review your runs. Here's a sample.

When I first heard about this I thought "they must be kidding" -- not another distraction from traditional media.

But it's more than a distraction. It is a customization of music and information that fits perfectly for runners. Ideas like this further pull listeners from traditional radio and there will be more on the way.

Now I'm not saying that radio should shake in its boots because Nike and iPod have put together a niche product for runners. What I am saying is that in our new world where technology and Internet access meet, traditional media cannot compete.

Television is finding this out now and is making every mistake in the book. I'll talk more about TV's growing problems in the near future.

But Nike Radio is emblematic of the problems that traditional media companies now face.

After you factor in the self-inflicted problems resulting from consolidation, the Internet, a new generation not raised on radio, the decline of the record labels, the ascent of Apple and mobile phone technology you have an uncertain outlook for traditional media at best.

What I see going forward is more portable devices whether they are the next generation iPods, smart phones or mini-computers. WiFi and/or WiMax capability expanding the Internet to people on the go.

Radio can no longer be what an iPod can do better.

But where radio and satellite radio might have a future is in creating entertainment. New shows, well-produced and professionally done. This costs money and traditional media companies (being tethered to Wall Street investors) don't like to spend money on such things.

If radio sounds like an iPod, it still can't be customized by the listener.

If radio keeps trying to do dj shows in an age when only Gen X and baby boomers may like that approach, it won't resonate with the next generation.

Radio will have to offer real entertainment and distribute it in user friendly ways -- not just over the terrestrial signal or else it will lose listeners to things like running shoes that talk and whatever else is next.

If broadcast radio continues to stubbornly program with jocks, liners and limited playlists like there is no tomorrow -- there will be no tomorrow.

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Radio Sold Its Soul

In the age of consolidation radio stations can lose listeners, advertisers and the next generation -- and it still remains a healthy free cash flow business.

True, expenses have to be cut and programming has to be scaled back and made less ambitious -- but the consolidators can still post a profit.

One thing radio companies can't survive is the loss of Wall Street.

Main Street yes. Wall Street no.

The radio industry got into bed with the Wall Street greedy people and now there is mounting evidence that they are getting kicked out -- posing a threat to its future that is so major all the smart programming in the world can't fix it.

Radio was attracted to the action on Wall Street as soon as the 1996 Telecommunications Act was passed. That relationship appears to be winding down leaving the future of radio is gravely in doubt.

Look at the evidence:

1. Wall Street has soured on radio. How many investment banks still actually have a full-time analyst watching this segment? Look to the falling price of properties. To the few radio deals that get gone these days. To the pessimism on Wall Street that has put the damper on the future of radio.

2. Bain Capital -- if it gets the Clear Channel sale done -- has accomplished what? They wind up with properties that will likely be worth less money as the years go on. I call that a bad investment. I wonder what they are thinking. The spinoffs that are related to the privatization sale aren't even getting done for the original agreed upon prices. Lawsuits are flying. Radio stations are worth less. How does this constitute a future?

3. Stock prices are way down -- take a look. If you own shares in any of the public radio groups you have likely taken a haircut. And there is no upside as long as Wall Street is walking away from the sector. In fact, they'll be running away even if the Clear Channel deal gets done because radio stations are not going to be worth more. Don't believe it? Go back and look at the share prices -- down drastically with no upside.

4. The real geniuses (although we may not have known it then) were the owners who got out when the major consolidators spent Wall Street's money to acquire today's radio groups. Hope they invested it in a sure thing like tax-free munis or Apple stock. Many of the sellers don't have a position in radio and very few want to buy back in.

5. If station prices continue to tumble, how will consolidators get out? The simple answer is -- they can't. They're going down with this ship or calling for lifeboats. No one wants to buy radio stations at the prices consolidators need to get out.

6. Red flag -- if Lincoln Financial can't even get a buyer for its outstanding company then the poorly run groups are really in trouble. Lincoln is not a radio company. The stations they now own came along with their recent acquisition and they are damn good ones. Even Cox -- the rightful inheritor of the Lincoln stations didn't make a bid. More evidence that the value of radio is dying.

7. There's no money out there for acquisitions at old multiples. And only fools will get into this game now. When the prices go down -- and they're going down now -- how will these sales get done without capital? And investment firms are going to have to get a lot of upside to risk the downside. In radio terms that upside translates into debt service -- the kind you can't afford in an industry that isn't growing and has lost its future to the Internet, iPods and mobile phones.

There is a saying that money talks and b.s. walks. Today, in radio, it's the opposite -- money walks and b.s. talks.

And that's what the CEOs of radio are doing.

They blab too much.

Over promise.

Under-deliver.

And it's mission accomplished -- the destruction of an entire industry for the benefit of a few.

Owners. CEOs. Stock options. Obscene fees for investment banks and bogus introduction payouts to people who on the whole did absolutely nothing.

Radio companies that lost their future by making deals with the devil these past ten years are now fast becoming persona non grata with their Wall Street investors.

It's radio's worst case scenario -- and it happened because radio sold its soul to Wall Street.

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HD on QVC -- Lipstick on a (Roast) Pig

You've got to hand it to iBiquity, the firm that brought you HD radio over ten years too late and "shrewd" enough to copyright the term HD while at the same time saying it doesn't really mean "high definition".

As the saying goes, you can't put lipstick on a pig, but somehow, iBiquity has managed to get QVC to sell HD radios to its vast home shopping network audience.

Hope QVC has better luck than Radio Shack, Best Buy and Wal-Mart selling these empty radios. Hey, whatever happened to that hype? You can't easily find an HD radio in those stores let alone a young salesperson to close the sale.

Maybe QVC viewers can buy George Foreman's grill along with their HD radios so that they can cook this pig because there are going to be a lot of unhappy customers out there once they plug it in.

In case you haven't heard "HD Radio broadcasting is sweeping the country" according to iBiquity's web site. Did you know that HD is "available to over 80 percent of the population. More than 1,500 AM/FM stations are currently offering subscription free digital content, including more than 600 HD2 multicast stations offering unique formats and content".

Wow, such a deal. Let me guess. You need to buy a new expensive radio, right?

Here's what iBiquity says, "All a consumer needs is a new HD Radio receiver; the content is free. The radios are priced for everyone from under $100 from major mass-market retailers across the U.S. Virtually everyone can experience the crystal-clear digital sound on AM and FM as well as the broadcast-exclusive new FM channels".

Those under $100 models must really sound good. iBiquity seems to have left out the expensive $400 models. Just an oversight, I guess.

This roast pig is getting me sick to my stomach.

While some radio broadcasters are holding out hope that HD will energize the declining radio industry, others are apparently thinking about their options -- including unplugging their HD hardware and moving on to a solution that actually holds promise -- say, the Internet.

Let's imagine how QVC's customers are going to feel when they unpack their HD radios and plug them in for the first time:

1. Where's the beef? (Sorry, this is a pig -- where's the pork?). Where's all that exciting programming I was told would make the purchase price all worthwhile? Do they file a class action suit, return the radios for a refund or use their new less than $100 HD radios as antiques?

2. Where's the fidelity? K-Fed had more fidelity when he was married to Britney than HD radio has now. Yes, it's better, but no -- not that much better. A Bose it's not. Satellite radio it's not. It's just not.

3. When do these consumers figure out that you get what you pay for -- HD radio content is free. Radio companies are waiting for them to buy millions of new radios before they spend their precious money on new programming. Maybe this HD-QVC marketing marriage will backfire and help sell satellite radios. At least satellite sounds better, comes in cars and has hundreds of millions of dollars of programming built into it.

4. Oh, and where's the "unique formats and content". I'm telling you, maybe I've been hanging around the record industry too long but lawsuits would be flying for misrepresenting the product. Yes, I have been blinded by the Big Four labels. (It appears the RIAA is going to take a class action suit that could paralyze its efforts to sue the pants off music pirates -- if successful. I've got to stop thinking like a lawyer and start thinking like the lowly program director that I have been proud to be).

HD subchannels are really nothing that radio PDs can't program. They have lots of ideas. Unfortunately, few companies are listening to their ideas for the main terrestrial channels.

That's why radio programming sucks. It's that simple.

Selling HD radios to consumers at this point is like selling a potion from Brother Love's Traveling Salvation Show as a cure for disease.

HD is a disease.

At best, it's an engineering work around for analog radio.

At worst, HD gives false hope that listeners will actually float radio owners by buying the expensive equipment to receive a digital signal with precious little content attached.

This is nuts.

Steve Jobs wouldn't expect his customers to buy an iPod without offering a vast music library to make the device a worthy investment.

By the way, a competitor of Apple, Spiral Frog, just launched its run at iTunes that must be directly out of the pages of the HD playbook: Spiral Frog's music is free, but you can't share it. You have to wait 90 seconds for the first download. Have to sign-up and re-sign up monthly. It only works on Windows. Can't be heard on an iPod and, oh, did I mention that only one of the big four labels is contributing music to that pig -- I mean frog.

Another pig you can't put lipstick on is consolidation, but I don't want to squeal too much about that here.

HD on QVC.

Can you imagine how pissed buyers are going to be.

I'm going to turn QVC on and have a few laughs. (If I'm a lawyer, I'm recording it).

But it's really not a laughing matter.

It's painful to see a once proud industry acting like it's selling snake oil. That's my opinion. Others have different points of view.

If I'm running a terrestrial radio company right now, I'm hiring the best and brightest programmers (even if I have to get them out of retirement or steal them from unappreciative consolidators) and I'm telling them they have carte blanche to program to the available Gen X and baby boomer audience. Not Gen Y!

I'm then investing heavily in Internet streaming and technologies and hiring the youngest, smartest and most skateboard proficient young people to help me build programming for where the next generation lives.

Wait.

I've just described CBS.

I don't know where CBS Radio President Dan Mason stands on HD today -- he was a big booster before he took his present job. May still be. But he's sure performing like a Renaissance man now and HD has nothing to do with the current CBS turnaround.

This is my way of saying to my radio brethren -- it's time to move on -- beyond HD radio.

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Why "Jack" Hit The Road

My readers often give me ideas for things that I write about from the perspective of my experience in the media business and my work with the next generation.

After writing about the "Fresh FM" and WCBS-FM "Classic Hits" revival, one reader wondered about my take on the Jack" format.

Of course, "Jack" works in some markets -- and that needs to be recognized -- but it's also fair to say that when the history of formatic radio is compiled (and, say, Bill Drake narrates it), "Jack" will be a mere blip of the VU meter of programming.

Why?

Let's start with New York.

New York is an atypical example. Former CBS Radio President Joel Hollander was apparently hell bent on becoming a program director after those years of selling and he gave us "Jack" and took away one of the most beloved stations of all time -- oldies WCBS-FM.

Right there was trouble.

Who blows up a format that admittedly had been declining in ratings and revenue while it still billed $35 million? What the station needed was some smart programming help and a refresher course. It needed to carefully (and I emphasize carefully) integrate newer oldies, if you will. CBS has done that and now we're only days away from ratings proof of what all programmers already know -- the station is back, big and bad.

In the context of "Jack", the unfortunate format that had to follow CBS-FM, it was doomed from the start in New York. But even if "Jack" had been installed on another CBS FM station in the Big Town, it probably would not have been as successful as Hollander had hoped.

My analysis is that "Jack" was a station programmed by radio people for radio people -- and that doomed it.

Let me explain.

No one in their right mind promotes a format by saying "We Play What We Want". That's radio speak. Young listeners told me, "we play what we want and it's called an iPod". This edgy stuff that "Jack" was made of was probably unnecessary. Just playing the music might have worked better.

The liners and sweepers were not helpful to this format but programmers needed to do them more than listeners needed to hear them. (I'll write about what young people tell me they want from their radios and you won't believe it or won't want to believe it. Hell, with that promo, maybe I'd better not write about it at all).

The music on "Jack" was probably the best part. The station was aimed at Gen Xers and Gen Y listeners knew that, but where was the core audience?

Radio reinvented radio and it came out like the same old radio.

Arrogant.

Sweepers out the -- well, ears.

Sounding just like a typical radio station.

"Jack" isn't the only format to be sent packing after a relatively short run except today all-knowing radio people send their junked formats to the Internet to be reborn as cheaply produced (and sounding) streams.

Again, that's radio misreading the younger audience.

Young listeners like the Internet. They like streaming stations. I have a student who claims to still listen to Y100 the Philly alternative station that went "underground" t0 the Internet years ago after it was kicked off the air.

Being kicked off the terrestrial dial is a badge of honor to the next generation.

(Try not to attack the messenger here -- some of you can't resist and I want to be blunt with you about perceptions that I have observed about the industry we love).

So, let's get this straight.

1. Our new formats sound like our old formats -- we just change the liners.

2. Listeners hate the liners but we love to do them so we continue to shoot ourselves in the feet.

3. Listeners love a knowledgeable air staff and short of that we'd be better to shut up and play the music.

4. Arrogance and radio go hand in hand in the minds of a lot of young listeners. Playing what you want is one thing -- but it's an empty promo. Radio always plays what it wants.

It's kind of like "My FM".

The next generation isn't going to buy this so make sure you're programming to the suckers who will actually believe "My FM" is their station.

If you think I'm saying radio people have changed very little and their younger listeners have changed their expectations a lot then you would be right. That's exactly what I am saying.

Many of you know that I have returned to USC for another year of teaching but in my "private practice" I am advising radically different approaches to terrestrial radio and even Internet streaming because broadcasters have to spend a lot more time to change the way their programming people think before they can produce formats that listeners will want.

Times have changed.

The day of hiring the voice over talent and writing the new liners has come and gone. It can work with older radio lovers, but it has no chance of working with the next generation.

What keeps me enthusiastic is that I am not at all discouraged by these harsh assessments of today's radio I hear from young people. I have identified several opportunities of which radio can take advantage.

But...

Nothing will change because the next move is for the radio industry to go back to school -- so to speak -- and learn first hand about the problems and opportunities of programming in a different world. We've got iPods, iPhones, e-mail, text messaging, pirated music, dying record labels, social networking.

Just ten years ago we had radio and records.

it's time to get turned on by the emerging options that can only be ours if we change.

We must change our entire approach to what radio is and can be.

Or else, as the Ray Charles song says, we'll all "hit the road, Jack".

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Fresh FM vs. Stale FM

By Jerry Del Colliano

(Pictured left with consultant Todd Wallace and media broker Gary Stevens back in the day)

The radio industry knows a good thing when it hears it and it's jumping on the "Fresh FM" trend afraid of missing out and/or afraid a competitor will make them eat it.

The radio industry knows a good thing when it loses it, too, as CBS' WCBS-FM is proving since Radio President Dan Mason manned up and returned the updated but beloved "Classic Hits" format to the New York airwaves.

Look at the ratings already in virtually no time as reported by Tom Taylor in Taylor on Radio-Info:

"Just looking at the highly unofficial X-Trends-produced extrapolations – classic hits/oldies WCBS-FM is sitting in the second spot both 12+ and 25-54. That’s astounding, for a station that was tied for 16th 12+ in July, the month before. And with 25-54s, CBS-FM jumped from #14 to #2, July to August. As for the Arbitron-supplied three-month rolling 12+ averages for June/July/August – CHR Z100 is #1 by itself, for once, with a 4.8".

And "Fresh FM" is working for CBS in New York on another station as well and has been adopted by Jerry Lee's WBEB-FM, Philadelphia as part of his marketing strategy to stay on top. Except for hiring me for my first radio job at age 17, Lee hasn't made too many mistakes. He's making the changes while he's on top -- his usual M.O.

Lee in partnership with researcher Bill Moyes has beaten back competition over the years by changing formats, call letters, mascots, testing music, testing commercials, producing great TV ads and buying lots of TV penetration with the skill of a surgeon.

So when Lee and Moyes make this preemptive move -- I, for one, take note.

But I'm intrigued by the irony of "Fresh" new music (at least in perception) and "stale" -- what we could (for the purpose of this discussion) call the oldies franchise that radio lemmings couldn't wait to dump a few years ago.

Until...

Until Dan Mason returned and said, "enough". That's when (among other things) he righted the wrongs of his predecessor, Joel Hollander, with the single push of a station I.D. button and that wonderful JAM legal ID came blaring from 101.1.

Mason, in my opinion, understands what he's working with -- which is Gen Xers and baby boomers. There are tons of baby boomers still around (thank God) and a whole money-spending population of Generation X.

Knowing which listeners are available is tough enough (although not brain surgery), but it's nothing compared to knowing who isn't available to be a radio listener these days.

That would be Generation Y -- the years more or less around 18-24's who are coming of age.

To them "Fresh FM" means nothing because FM means nothing. They like "Classic Hits" music but you're not going to get them off their iPods, computers and social networks no matter how hard you try.

The reality is -- there are three hot formats.

"Fresh FM".

"Stale FM" (I know, that's an awful name because the WCBS-FM is fresh in a lot of ways but for the purpose of comparison work with me here).

And, "no FM" -- what the next generation is moving towards.

The radio industry could have fought for this demo. They could have made it harder for young people to abandon radio when they flirted with the Internet, but consolidators were too busy worrying about losing Wall Street. You know that story. Nonetheless, what's done is done and no matter how hard you fantasize, you're not going to change the last few paragraphs.

I think "Fresh FM" is a wonderful concept for the available listeners of FM music stations. It will work and I'd snap it up if available. As a former PD I wouldn't want to compete with the concept of "Fresh FM" if I'm in that genre (and ex-PDs are like ex-Marines -- there's no such thing! Once a Marine...you know the rest).

Many of you already know I love bringing oldies back even if you have to call them "Classic Hits". Mason and company has done a skillful job integrating the 70's into CBS-FM -- no small task. With all those boomers in love with their radios -- go multiply. Give birth to "Classic Hits" stations everywhere. Program to the available audience.

"No FM" is really where I see the next generation and future ones heading. It is very unlikely they will redirect their attention from iPods, computers, social networks and, now, mobile devices back to a radio. And they certainly don't want a radio in these devices.

So, we have to fight them there because they aren't going to listen here.

The same creativity and shrewed marketing that is bringing great success to "Fresh FM" and "Classic Hits" needs to be applied to the generation we let get away.

Radio can do it, but not on a terrestrial signal.

Not on a terrestrial signal.

Even though recent reports show that streaming terrestrial radio formats are growing at a rapid pace online, they are also finding their older audiences online.

To get the next generation, we have to take it to them where they live and spend their time and right now that's not a description of a radio.

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What's Really Killing Radio

It's not lack of HD technology, not too many commercials, not competition from iPods, cyberspace or social networks.

Not the decline of the music industry and certainly not satellite radio.

Radio has lost its listeners' trust.

Radio used to be a trusted friend.

I remember when I programmed in Philadelphia. I inherited a fascinating (although long) jingle package called "Where Your Friends Are". The station and other stations that subscribed to that jingle imagery actually tried to make the listeners feel that top 40 radio was their friend.

Today, students laugh when they hear them -- not because the music is ancient -- but because the concept is.

Radio used to be a listener's friend.

And it still is -- but only where radio works.

And that tends to be in smaller markets. Small market radio never got the message that radio was dead probably because the bug-eyed consolidators who lusted after the big stations in the big markets fell in love with the small stuff second -- if at all.

It's true that small market consolidators came next -- and that some of them were no better than their bigger brethren -- but there are also some good operators who remember their roots.

Winning and holding the listeners' trust.

NPR has it today on a national level. Ask young people -- and I do -- if they listen to radio and they unenthusiastically say yes. Less, but yes. But when they refuse to put NPR in the same category as radio, you've got a clue as to to how deep the trust problem runs. NPR is not radio.

Radio is a commodity to them. Hell, radio is a commodity to most consolidators. It's mission accomplished.

When small market stations become part of the community instead of big market imitators these stations still find the most passionate listeners.

Radio has been ruined by most consolidators.

I say it again and again because all the other issues are secondary to this nuclear holocaust that happened in our industry. Consolidation has been bad for radio and good for a precious few.

Consolidators lost their way because they forgot what made radio the darling of Wall Street in the first place. And as soon as consolidators worked their "magic" things began to unravel.

1. Virtual voice tracking -- how silly, how stupid, how anti-radio.

2. Economies of scale -- one PD running more than one station. Managers responsible for more than they could handle. Idiots (not everyone, but you know what I mean) overseeing regions when they couldn't even run one station.

3. Cutbacks -- please Wall Street at the expense of main street.

4. Shortsightedness -- that's what kept the IT guy in the back room when the IT guy was the only one who knew about the revolution that was coming.

5. Paranoia run wild -- it's satellite right that's the enemy. No, it's the iPod and Steve Jobs and the cell phone and those kids with short attention span. They'll be back. Well, they won't. They've got elsewhere and the relationship the next generation now has with radio is defined by convenience not choice in too many cases.

6. Bickering with the record labels -- radio kicked the labels when they were down by trying to pull off legalized payola. The labels get access to consolidator's program directors and in return they get weekly "adds" a few hours ahead of the music trade press. Big deal. Big scam. For this the labels were forced to pay the consolidators -- in some cases millions a year. No wonder the labels are taking radio stations down with them as they discover that they have no answers going forward. Eliot Spitzer put the fear of God in them and now it's gone.

7. Arrogance -- forcing advertisers to buy what they didn't want to buy. Packaging stations that were stiffs with ones that were winners. And the resentment that bred. High prices. Commercial clusters no one listened to because they were too long (duh, the sixth spot in a six spot cluster -- great marketing). Arrogance for not helping advertisers become better communicators -- especially on the local level. The salesperson writes the copy, gives it to the swing guy who throws some music together and makes it sound like everything else and bill the client. Radio needs more Jerry Lee's (WBEB, Philadelphia) who understands radio and advertisers together.

8. Measuring audience instead of effectiveness -- meaning if I all of a sudden said I'm going to carry advertisements and I have three million readers (okay, down boy) you'd expect results, wouldn't you or else you wouldn't care how many readers I had, right? In radio, we got so caught up with how many listeners we had and not at all concerned with whether we could make them buy what our sponsors were selling. After all, it is commercial terrestrial radio. And the infighting over the People Meter is more of the "stick your head in the sand" mentality that has little to do with whether a radio station can effectively communicate with its listeners. (By the way, those of you who get mad when I mention what my students like, skip this line -- they like "live read" commercials by people they respect. Sorry).

There is no shortage of the things that really killed radio. I'll bet my readers can add many enlightening comments as further proof.

But in the end, the bond of trust that radio used to have with its listeners of all ages has been broken and the thing that initiated this self-destruction was the illusion that consolidation was good for the radio industry.

It was good for the consolidators.

Consolidation was bad for radio listeners and the future of radio. That's why the Internet is the hope for the future because Internet radio (and not terrestrial streams) has a second chance to build the bond of trust that made radio a great source of communication and a great free cash flow business.

A business that is imperiled by a shortage of young listeners with whom they have no meaningful relationship.

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The Clown Prince

The artist formerly known as a singer is acting more like a record label exec.

Prince is suing people like it's 1999.

He is after the social network YouTube for unauthorized use of his music. He says he wants to "reclaim his art on the Internet".

Is this the same Prince who sat out and sulked when he got into a pissing match with his label all those years ago?

Isn't that when the silly concept of being the artist formerly known as Prince surfaced?

But now, the Internet and the next generation is getting to Prince.

He wonders how YouTube can filter porn and pedophile material but it has a hard time keeping fans from putting up his work -- unauthorized. So he's doing what every purple-blooded American record industry exec would do.

Sue.

What is it with the record industry? The unlikeliest singer to act like a suit and take up the fight for record labels against piracy is Prince.

Why is it that younger musicians are embracing the viral spreading of music online while Prince is protesting?

For one thing, he's old.

His chronological age might be just 49 years old (on the Keith Richards Rock and Roll Scale) but his record industry age seems more like it is 76. And old, in this case, means out of touch with reality not just years.

Prince has the right to spit in the face of his fans. That's why we embrace freedom. But he shouldn't be surprised that the next generation will be unsympathetic to his desire to drain every last penny into his rather large bank account. He's throwing red meat on to the next generation's argument that young people sometimes offer when they rationalize stealing music.

The artists are rich.

The record labels are mean and meaningless.

And anyway, we (the youth) buy all those expensive concert tickets, useless CDs and t-shirts.

I'd be laughing right now if this situation wasn't so pathetic.

Since when is Prince Clive?

In fact, if Prince really wants to help the music industry he should cross back over from the dark side (label) and make more hit records.

In fact, Clive should find us a few more artists like Alicia Keys while I'm at it.

And the vast conspiracy of record label lawyers should be given a serious time out while record execs figure out what they're doing wrong.

They're going the wrong way!

The market is online stealing music and, to be fair, sampling it before buying and/or attending concerts.

The labels want them to turn their radios back on again, damn it, and listen to what they (the labels want them to hear). Then go to a record store and buy a CD (they don't want to buy).

See what I mean?

The market is saying make music cheaper, deliver it online or on the go through their mobile devices and remove digital rights management (DRM so they can share it like they would a CD).

The labels are saying, don't tell us how to price our music and you really need to buy albums again. Oh, and stop cherry picking the good tracks. You need the stiffs, too. Your parents bought albums full of bad tracks. Why can't you?

Their answer: We have the Internet and social networks like Facebook, MySpace and YouTube.

See?

Clive is telling his artists to shut up and sing.

Prince is telling his fans to shut up and buy.

There is no hope for a record industry that is so lost that it thinks fighting YouTube is a worthy use of its time. When a major artist like Prince wages war against "The Great Viral Way" you just know in your heart of hearts that the record labels just don't get it. They don't understand their customers.

When men get old (and the record industry is run by men) drug companies like Avodart like to advertise prostate medicines to them by saying, "do you have a going problem or a growing problem".

Well, the record industry sure doesn't have a growing problem.

And those that are so old that they still embrace stuffing a CD mentality into cyberspace are going to have a going problem.

They're going to be the ones going -- into a new line of work.

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SoundExchange Torture

It's been several months and finally SoundExchange, the royalty negotiators for the record labels, has gotten back to Internet streamers with an answer on a more equitable rate structure.

No.

SoundExchange Executive Director John Simson told the NAB in a letter that their offer of June 6th to settle the dispute over Internet streaming rates is unacceptable.

The NAB's website had been featuring a countdown clock for the number of days it took to get an answer to their proposal -- 96. Here's NAB's response.

This is foolish.

The Internet streaming business can't really be a business unless it has more equitable rates for the use of music programming and it sorely needs stability in rates -- that is, a long term agreement.

Both equitable rates and stability. Not one or the other.

Perceived attempts by SoundExchange to divide the smaller Internet streamers from their bigger brothers and sisters has apparently not gotten any traction.

What SoundExchange is doing is tantamount to torture -- not to streamers but to the very record labels they represent.

The poor labels haven't done too much right since the turn of the century. They've lost the CD. Been on the wrong side of the downloading issue. Enabled and then allowed Apple CEO Steve Jobs to fill the leadership vacuum they have left -- thus, the iPod and iTunes stores have thrived.

Their attempt to sue naughty consumers to stop pirating music not only failed but illegal downloading has increased. And if you want to pay the lowest price for music, you can still download from Russia for pennies on the dollar. The record labels haven't been able to stop that -- either.

So, it must be torture for the poor labels.

Here they think that they've got these helpless Internet streamers by the you know whats. True, streaming music on the Internet can never be a business as long as the future is so uncertain.

But...

If I had a choice of being an Internet streamer when I grew up or a record label, I'd choose -- an Internet streamer.

Streamers have a future.

Space exploration or the Titanic?

With or without the help of SoundExchange, Internet radio broadcasters will adapt to the DRM-free music that is available to them if they have to because paying the present CRB rates is not a viable option. And I've always believed that getting away from the mainstream music industry would actually help the music business -- more variety, more opportunity, more volume.

Torture without habeas corpus -- is this Guantanamo?

Habeas corpus in late Middle English : Latin, literally means ‘you shall have the body (in court).’

That's what SoundExchange is going to have if they don't negotiate in good faith for more equitable rates and stability for Internet streamers except that the body they shall have in court -- to use the Latin -- will be theirs.

And it will be dead on arrival.

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The Columbia Records Plan To Save The Industry

A few weeks ago The New York Times Magazine had a cover story on Rick Rubin, the co-operator of Columbia Records these days.

Rubin was pictured in a white robe in the yoga position with his beard and long hair flowing and his eyes closed. Unfortunately, or perhaps appropriately, the photo was taken in Malibu -- a yoga paradise.

The article, written by Lynn Hirschberg, was titled "Can Rick Rubin Save The Music Business" with the subtitle "Or, Can a Recording Guru Be a Mogul Too?").

If you're pressed for time, let me answer the question.

No.

Rubin is a talented creative guy who has been responsible for a lot of good records. He has the ear and the skill to handle talent, but judging from what I read in the article, he's clueless about the deep crap the record industry is digging itself into.

Rubin, a man who brags about not showing up to the office, is looking at building new Columbia Records offices -- perhaps in Santa Monica or Beverly Hills. I guess that's so he can say he doesn't even go to a nice office.

And tell the recording artists that he's building infrastructure on their backs because one of the hair brained ideas that is attributed to him in the article is that Columbia Records may ask artists to give them up to 50% of their touring, merchandising and online revenue.

Natalie Maines, lead singer of the Dixie Chicks, is saying tell us it ain't so, Rick. She's quoted as saying, "Artists should never give up that money. The companies are all scrambling because of the Internet and they will screw the artist to meet their bottom line".

Ya think?

Okay, let's see what else a guru has up his long sleeves to turn this baby around.

How about Rubin's idea to make the iPod obsolete.

You heard me right -- make the iPod obsolete.

A record label that can't even make the iPod work for them is now going to annihilate it.

How?

By offering young consumers who don't go for spit when it comes to subscriptions -- a $19.95 a month subscription to a music service (hasn't this been done already?).

In his fantasy, Rubin thinks consumers will pony up to pay $19.95 (did I mention that price?) and they'll be able to hear millions of songs anywhere. Cellphone, car, computer, TV.

Did anyone tell Rubin about the lack of WiFi or WiMax coverage? Never mind.

He then drinks Sony's Kool Aid by envisioning a Walkman-like device that would plug into speakers at home (didn't Steve Jobs think of this without the yoga and no hair?).

I'm getting light-headed here.

The service can also have demos, bootlegs, concerts, whatever context the artist wants to put out -- as the article said and once all of that is in place Rubin says the industry will grow 10 times the size it is now.

NO. NO. NO.

What world are these record cats in?

Young people want to own their music not rent it.

Compare iPods/iTunes to Rhapsody.

They want to steal music not buy it.

They're not going to start buying when they've been stealing since they were teens (and their not confessing it to their priests, either just like their parents aren't going to get excommunicated for using birth control).

There's lots more to get excited or depressed about in the article and I leave it to you and whatever supply of Zoloft you can get your hands on because you'll need it.

The inconvenient truth (has anyone used that term yet?) is that to stop piracy and sell tons more downloads, the labels will have to sell their tunes for a lot less than 99 cents!

Now I can see label execs getting out of the Lotus position and jumping into the Pacific Ocean.

The music industry can survive if it listens to Steve Jobs.

As much as the labels hate Jobs, he is absolutely right -- make the music one price and make it cheaper. And I add, cheaper than 99 cents a song. (Scroll down and see my piece yesterday on this topic).

It's not all that bad.

The record business can be saved tomorrow if it does the opposite of what label executives say today.

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Music for the Price of a Text Message

Everyone seems to know the record business is dying except the people running it.

It's a business highly dependent on the sale of Compact Discs -- and CD's are not selling the way they used to before digital downloading arrived.

The stores they sell in -- record stores -- are in short pants.

New technology has come along and the labels are still overreacting to music piracy by leading a national jihad of lawsuits ordered by the ayatollahs of sound.

Yet in this new era music still consumes the minds and ears of young people buying iPods and opting less for free music on terrestrial radio.

Music is even driving the sale of Apple's iPhone. Without music, it would be, well -- just another Motorola.

Through all of this the decision makers at the labels still can't figure out what to do.

Maybe it's their age?

Maybe not.

Apple CEO Steve Jobs is about the same age as record execs and he knows exactly what to do to sell and promote music. In fact, Apple is a de facto indie record company -- with the emphasis on indie like in independent.

If Jobs had his way, he'd be selling legal downloads on his iTunes site for less than the industry standard he established at 99 cents a song. To do a recent deal with a major label Jobs had to concede to selling digital rights management (DRM) - free music for an additional 30 cents. He must have held his nose to get that deal done.

If the great Steve Jobs has called the shots right for his business, perhaps other music media companies ought to listen to him. True, his business is selling consumer devices, but his business is also selling music online by default. An important distinction, however, is that Apple makes its money from the former -- not the latter. Yet, selling music online gives Jobs power.

No one else could make it happen.

The labels had their heads up their Walkmen.

Radio stations were too arrogant to think hit music could be made without them.

Both were wrong.

So, back to Jobs.

He obviously sees a lower price point for online music and just mentioning this sends record executives into cardiac arrest. Hell, a 99 cent download is a giveaway to them. (Humor me here -- didn't labels used to sell "singles" for under a dollar and they had to actually manufacture them?).

At USC, one of my Music Media Labs hired a research company for an underwriting client's project to find the price point for selling tons more legal downloads. Let's just say the answer is well, well below 99 cents per tune.

So that got me thinking that as the music business kills itself, it may be missing the big fix. And it's not going to like my solution. I know the answer already.

Sue someone.

Just kidding.

Nonetheless, I believe music will be free or cost next to nothing in our mobile-enabled, WiFi covered, Internet-based world within the next ten years.

That's right. The days of selling music for traditional prices is as gone as -- well, radio influencing the youth market to buy music. (I have to shake my head when the labels look for ways to tax radio airplay -- it's murder-suicide). It doesn't matter. The next generation's head is elsewhere while the heads of record execs is -- well, you guess it.

There is one hope.

Here is the Del Colliano Solution -- love it or hate it. But dismiss it at your own peril.

Notice how much texting young people -- the ones who drive the music market -- do?

Each message costs only pennies -- some have service plans to handle the huge influx of text messaging on their cellphones each month. If they use too many texting minutes, they buy more or up their text messaging plan. A last resort as every parent knows is cutting back on texting.

In other words, if text messaging cost 99 cents -- or, say, even 15 cents a message -- young texters would text a lot less.

Texting is a big business for mobile phone companies and it is a big business for a lot of reasons including -- the price is right.

The record industry -- before it gets the lights on the way out the door -- might want to consider making the purchase of music virtually non-consequential financially.

Envision the youth market on their computers and cell phones buying -- I said buying -- music at will, on impulse, 24/7 -- like they use text messaging. In bulk.

So much for theft.

So much for needing DRM.

Sell volume and welcome to the new world of music.

This sticks in the craw of record labels and I understand that. They'd rather sell CDs at their 199o prices to a market that has moved on. They'd rather come up with unworkable ideas like getting Internet Service Providers (ISPs) to charge customers for carte blanche use of all music on their personal devices.

But young consumers don't want to pay for what they can get for free online.

Make it a few cents and there will be no argument.

Let me repeat that.

Few want to pay for what they can get for free and the labels can't stop online piracy. It gets more pervasive every year.

Several cents is next to nothing -- just as it is for text messaging -- but it adds up to big business.

Between that and what they'd save on lawyers, it would be the 60's all over again.

Music for the price of a text message.

Laugh.

Protest.

Dismiss.

Then reread this post and keep in mind that the conditions that would lead to such a strategy are inevitable.

Cooperate with the inevitable -- now that's a business plan.

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"Empty V" Video Music Awards

Did you see or hear about the Video Music Awards sponsored by MTV Sunday night?

It was business as usual.

Controversy as to whether Britney Spears looked as good as she did before giving birth to her two babies. She did an uninspired, bikini-clad rendition of her new single Gimme More.

The gratuitous barbs from comic Sarah Silverman about Britney's "two mistakes" (her children).

It got me thinking.

Why is MTV still doing these music video awards?

They hardly ever play videos.

Justin Timberlake on several occasions during the telecast shouted out that MTV should play more videos and less Simpsons (the Ashlee and Jessica reality show kind).

Production on the VMA show was enough to make a person who didn't have attention deficit get it.

MTV once put fear into the hearts of radio operators. Remember the chutzpah of "Video Killed The Radio Star". MTV was the next big thing back in the 80's.

Well, all these years later video didn't kill radio.

Radio consolidators did.

With an assist from Steve Jobs and Al Gore (assuming you believe the right wingers who say Gore invented the Internet).

I felt sorry for MTV Sunday night.

I felt sorry for me watching such an uninspired program that didn't do the music justice.

I felt sorry for anyone who didn't own a TiVo.

Okay, I've had enough fun.

The fact is that MTV doesn't matter the way it used to.

Radio doesn't either.

And record labels sure don't matter. We live in a world where musical anarchy exists if you don't approve of the democracy that has spread through the Internet and the mobile space.

Apple is breaking new music and making the hits through its iTunes store.

Young people 18-24 are spreading music virally through their MySpace, Facebook and other social networking sites.

If every social networking site shut down tomorrow and all piracy was thwarted, the music industry would indeed die because the next generation would never trust the automatons on radio to be credible sources of what's good.

Lee Abrams, the XM satellite programmer and former radio guy, told one of my USC classes yesterday that back in the 60's radio used to make the hits. The students were wide-eyed in amazement. When the jocks said, "Herman's Hermits have a great new record", Abrams said, "the audience would go out and buy it" as incredible as it may seem today.

Even though young people are exposed to radio (although they rarely choose it over music sources) the last thing they'd do is trust a radio disc jockey when it comes to what's hot.

Therein lies the problem.

If Apple is cool because it knows what's hot, what is radio?

Dead in the water.

And, MTV is right next to it.

The iPod is popular not because it has video capability, but because it is an audio device. While some consumers like video, everyone likes to hear music.

So what's radio's excuse for dropping the ball?

And drop ball is what they're doing -- all these competitive disadvantages are self-inflicted.

Radio ignored rich and deep playlists because PDs know better than the public. Listeners want the same 30 songs over and over again. It's the magic formula. It's always worked.

Not now.

Radio knows better than the public that dumb djs are better than knowledgeable ones who have a passion for music. (Quick, name five knowledgeable djs. Bet you can name five dumb ones faster or at least what station they're on).

That listeners are so stupid they will sit through six or more commercials without tuning out (How do radio exec's know? They commissioned a study that said so).

Watching MTV's VMAs made me think of radio.

Empty.

Empty on music power.

Empty on music knowledge and passion.

Empty on variety and choice.

That's why I call MTV "Empty V".

At least MTV has reality shows to fall back on. At least it can be a regular cable network with regular programs and sales reps who wear regular suits.

But all radio has is the music and while that should be enough to drive the medium, it's not enough now in the age of the Internet, iPods, downloading and social networking.

To borrow a phrase from Britney Gimme Me More.

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HD Hypocrisy

The new Polk Audio I-Sonic and JBL receivers are much ado about nothing when it comes to advancing the relic known as HD radio (or for those who believe the term -- high definition!).

Last week when Apple CEO Steve Jobs announced his new line of products and left radio and Internet radio out in the cold, it was business as usual for radio advocates -- attacking the Apple and the iPod.

Then a day or so later when it became known that several of these devices including the Polk unit would have tagging capabilities for HD radio, the iPod was the greatest thing since top 40 radio.

Consider this -- and see if any young people (or old ones for that matter) are going to tag songs heard on HD radio.

1. The units have a tag button on them to hear songs on the FM dial.

2. The info is stored in the receiver and synced to your individual iPod.

3. You connect the iPod to your computer and iTunes software allows you to buy the songs and download them to the device you really value -- your iPod.

I don't know of any young people (the predominant iPod market) who would do this.

I don't know of any young people who want HD radio.

More and more of them don't even want terrestrial radio.

They want Internet radio on the fly.

Here's a few more reasons why only iBiquity and a few clueless radio group heads could make a big thing out of HD radio tagging:

1. The radio's cost a lot of money (Polk's unit is $499 in the Apple store -- betcha they'd rather have an iPhone and pocket the savings).

2. Skinflint radio operators will have to add a little new box to the HD medicine show they already run to allow these tagging buttons to be encoded. Lots of luck. No HD listeners and iBiquity is asking cost-conscious operators to throw good money after bad.

3. Clear Channel and some other big consolidators love it. Based on their track records, I'd check my pocket to see if I still have my wallet and consider myself warned. Want to feel that warm and fuzzy feeling? Listen to Clear Channel radio head John Hogan slobber all over HD tagging: "The iPod is not a competitor to radio -- it's a collaborator in connecting with consumers on a continual basis" (This is Jerry again -- WHAT! -- is Hogan nuts? The iPod is radio to the next generation). Okay, let's try Mark Mays for that good time feeling. Here's what Mays said (according to Inside Radio) after a face-to-face with Apple CEO Steve Jobs: "HD Digital Innovations such as this will continue to open up additional and new services for consumers and revenue opportunities for broadcasters". (Me again, I know Mark is smarter than this so I hope some PR flak wrote that!).

So, let me see if I get this right.

The iPod is now our friend.

Clear Channel is now a leader in tagging technology.

iBiquity finally has a reason to sell HD radio as the future (attached to an iPod).

And...

And...

The very damn radio stations that broadcast in HD offer no programming worth listening to. HD Radio is a virtual sewer of formats owners don't want on their terrestrial frequencies and other assorted garbage that no one sane would listen to -- let alone spend money for new radios -- tagging or not.

In other words, the broadcasters getting all hot and bothered about Steve Jobs' offering them a little button that's not even on an iPod shows you how pathetic this industry has become.

An industry that hasn't supported HD radio from day one.

Now wants consumers to pay for new radios before stations offer anything worth listening to.

Stop the insanity!

iBiquity -- the people who own the term HD Radio (they can have it along with "Edsel") -- according to Inside Radio expects more groups to sign on for tag technology by the NAB Convention next month.

I hope not.

Stop with the technology smoke-screen.

To hitch-hike on a phrase made famous by Clinton strategist James Carville: It's the programming, stupid!

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Apple Taking Care of Business

Steve Jobs, Apple's dynamic baby boomer CEO, made headlines Wednesday when he announced a new generation of iPods and said Apple was going to reduce the price of its top of the line eight gig iPhone by $200.

Of course, if you were an early adopter -- someone Apple needs to drive its innovative businesses -- you could have felt screwed.

But, one day later Jobs made it right by offering all those who paid $200 too much a credit of $100.

"We want to do the right thing for our valued iPhone customers," Jobs said. "We apologize for disappointing some of you, and we are doing our best to live up to your high expectations of Apple."

Not only is this the right thing to do for the customer, it's the right thing to do for Apple.

You'd be lucky to get out of an Apple store or off apple.com spending only the $100 credit.

What Jobs has done is brilliant because he smooths ruffled feathers and gives his customers a little play money to put toward other Apple gear.

What gear?

One of those new iPods he demonstrated. Some software. A new battery. The new Mac operating system update when it becomes available in October.

Who knows?

And who cares?

Hell, the holidays are coming and many of us have kids. You know what kids want.

There are many things for us to learn from this quirky, odd and talented new age CEO.

One, he's old and it doesn't matter that he is old.

So for all those radio people out there trying to hang on for a few more years before the ship sinks, you're making a mistake. The ship doesn't sink if you take one lesson from Jobs: know the youth market better than they know themselves.

Thanks to Clear Channel, I have had the chance these past four years in my own way to go where I would never have gone -- the college campus, face-to-face with a generation I frankly thought I knew.

I didn't.

Even though I have a daughter in college, I looked at things differently when I looked at my own flesh and blood.

But I know more now and fully realize that the things I thought matter, don't.

They just don't.

1. All Clear Channel's money couldn't help them operate the 1,100 stations and assets they bought as an elite public company. They undervalued their people -- the most important resource.

2. Sony's dominance of the Walkman market couldn't give them a leg up in the digital MP3 market. In fact, it hurt them. They paved the way for this guy Jobs who knew what his customers wanted instead of what sister company Sony Records was worried about -- piracy.

3. Yahoo is a new age company that looks embattled like a traditional media company. You mean young companies with lots of young people can take their eyes off the prize, too? That's how Google surpassed them.

4. Sumner Redstone is not as crazy as some people think. Viacom and CBS are hanging in there. Maybe Sumner isn't getting down with the youth, but someone there is.

5. You don't have to be young to think young, but you do have to open your mind to their new ways of thinking. For them, stealing music is not stealing. There are legitimate ethical issues here, I know. But as a business issue, you must see beyond what sticks in your craw. Their dislike of radio isn't personal. They've just traveled elsewhere. You have to travel with them.

6. Record labels are history because they forgot how to value their customers -- the young folks who buy their product and support their artists. The labels stopped taking risks and hunkered down to make boring music. They sued their customers. Now what if Apple sued their customers? What if they stonewalled them like Sony did when they tried to encode CDs a few years back? I don't recall Sony making good on those CDs. It's one thing to take your customers for granted and it's quite another to wage war against them.

So Steve Jobs, who amazes me in so many ways, is reminding all of us that good business is doing right by the customer.

Just as endless numbers of radio stations have done over the years when they've given make-goods to advertisers they've disappointed.

Jobs didn't make a mistake.

He made a brilliant marketing move.

And I know my readers in the music-related media know exactly what I'm talking about.

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The iPod Killer

Apple CEO Steve Jobs made another one of his grand pronouncements yesterday and he seems to have left everyone very unhappy.

Except his customers.

Internet streamers thought this was going to be the moment that Jobs would build digital Internet capabilities into the iPod.

Radio broadcasters may not have said it aloud, but some were hoping that if that happened maybe somehow, some way HD radio might make the cut.

Jobs, the caretaker of cool, has once again taken a pass on all types of "radio".

This doesn't mean that future iPods might not have Internet streaming capabilities, but it's not a lock right now.

Not a lock because, to be frank, Internet streaming isn't in Apple's best business interest.

Jobs' core business is being a record tycoon.

Kidding -- kind of.

We all know his business -- selling devices and computers, but Jobs has fashioned himself into becoming a record poo bah. He's already a Pixar genius and a computer pioneer.

Radio is not cool.

And Internet streaming is not a great benefit to Apple's iTunes online mega store. You must remember that iTunes does have Internet radio capabilities but it's almost a throw away.

And the rest of us in the music media business?

We're looking in the wrong places.

Until WiFi or WiMax is everywhere, Internet streaming on a portable device is a nonstarter for iPod type devices. So there's no rush for Jobs.

Sony, the Walkman people, are hopelessly out of the picture.

Microsoft's Zune is a joke -- a bulky imitation of an iPod.

Don't get me started on subscription music services. We already have Rhapsody for what its worth and Columbia co-president Rick Rubin was quoted in the Sunday New York Times Magazine (cover story) on how a model that charges $19.95 a month for everything you can eat -- I mean, listen to -- would kill the iPod.

Not so fast. This next generation doesn't like to pay for what they can steal for free.

The iPod killer doesn't mean trying to design a better mouse trap -- so to speak. It's inventing a device that is not the iPod.

Not.

I believe radio, and even 24-hour streaming stations will have a hard time keeping up with an attention-deprived youth audience that toggles between songs on their iPods before they are over.

Even 60 Minutes founder Don Hewitt wants to do a show more like 60 Seconds with concessions to this generation's attention deficit.

So, what to do if you can't spend all your time and money trying to beat Apple?

Build a portable TiVo.

Build a device that could be both Live (where available) and time-delayed.

Live to bring you Internet streams when you are near WiFi. But this alone is not going to sell devices.

Time-delayed because I feel that the young people will crave downloadable content. Podcasts, if you will, with music programming once royalty issues can be resolved. They may want "shows" that are 10 or 15 minutes long. Maybe personalities they follow for a few minutes every day. Niche content and the like.

Terrestrial radio doesn't get on this new device unless and until it forms a skunk works with young people and lets them develop new content for distribution.

The point is that we don't need another iPod when the ones we have are making us happy.

No.

We need to build a new device to handle the content that radio people are going to create aimed at a new generation. We'll deliver it daily. We'll make it addictive. We'll add music as soon as we can work out the royalties.

This device is going to be popular because it cooperates with the inevitable which is -- consumers will choose their entertainment from a vast world of possibilities and consume it at will -- in short stretches.

The first models will dock to load and work at WiFi locations.

Of course, Apple could build all these things into iPod and iTunes now.

Agree or not, let's agree on this.

Content.

Short and sweet.

Addictive.

Spread virally.

That's the future and radio can have that future in a different model that takes it away from the terrestrial chains that prevent it from getting started.

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Radio: Bluff It or Buffett

It's hard to know for sure how the Oracle of Omaha, Warren Buffett, would run a radio conglomerate.

You might point out that Buffett has resisted the temptation of buying a radio group.

Certainly, stations were overpriced when consolidation came along (post-1996) and Buffett likes a bargain. Owning radio stations still is very expensive even without a future beyond Gen X and Baby Boomers. If and when Bain Capital (which got $1.5 billion in concessions from Home Depot recently) shaves some money off its Clear Channel purchase price, Clear Channel principals will still be seeing a lot of profit.

Assuming the banks still want to fund the deal in the current funds crunch.

And that's the point.

Regular shareholders must ride their favorite stocks up and down and know when to sell.

Warren Buffett's Berkshire Hathaway shareholders only know to hold the stock while the company makes them more money and builds true shareholder value. One share is worth around $119,000. They were only trading in the $30,000 range in 1996 -- the year that brought radio consolidation.

I know this is not a fair comparison, but not for the reasons you might think.

Berkshire Hathaway owns many different companies. Its unique and talented leader has been at it a long time. He has an uncommon skill. Who else would buy soft drink companies, ice cream companies and other personal favorites?

But look at Clear Channel stock in 1996 when it was trading in the $30 range -- approximately where it closes today -- as it awaits its fate from shareholders on okaying the privatization bid.

Even in 2000 when Clear Channel stock price topped out over $90, investors had to know when to get out because after that it has been downhill all the way. I'm not picking on Clear Channel, but they are the market leader. The other consolidators also have similar sorry histories of building wealth for their shareholders.

Why?

Radio bluffs it and Buffet holds it.

That's why our radio genius' are running at the mouth on all the little issues of the day -- promising analysts and shareholders alike a brighter day tomorrow.

Never mind that major markets are tanking.

Never mind that audiences are shrinking and radio is now paying the price for the switchover to electronic ratings.

Forget that there is no plan for the digital future of these analog companies even in a digital age. No plan to get the next generation happily involved with their products and/or services.

The only prerequisite for being the CEO of a public radio group these days is ability to look at life through rose colored glasses.

Well, Wall Street is apparently not buying it and I know in my heart of hearts that a lot of these very bright gentlemen aren't convincing themselves either.

Meanwhile, back to Omaha.

Buffett buys companies at the right price and I don't think he'd be concerned about radio's analog only platform -- if he saw radio as a necessity for consumers.

The way Buffett runs his various companies is by not running them himself.

No micromanaging. Can you imagine radio execs giving up that "skill".

Buffett meets with the head of each company once a year for a few hours. That's it.

Do you think radio managers could be trusted to do the same thing for their presidents and CEOs? Think they'd run their franchises in the ground or make them profitable?

Dwight Case who ran the RKO Radio group like this in its hey day operated his group with such autonomy. I'm not saying Case is Buffett but he's not Mel, either.

So you wonder why the once mighty radio industry is on its heals.

Why so many talented people can't come up with a suitable first response to the digital generation.

And you don't have to look very far.

Their leaders bluff it.

To Wall Street.

To their staffs.

To their listeners.

They operate in the vacuum created by Wall Street greedy people who have hijacked another entire industry to play short-term "Price Is Right". But not without the help of the radio owners and executives at the top.

Radio has many problems but one of them isn't a lack of talent.

Do as Buffett does.

Let your individual managers manage their entities.

Hold them responsible for the results.

Don't micromanage.

If they are good, they will adapt to the changing marketplace.

If they are allowed, they will find the digital answer to the next generation one market at a time.

I'm preaching to the converted. I know.

But I can't help wondering if the radio industry, left to die by Wall Street, might not find ways to rejuvenate its traditional business and invent some new digital ones that appeal to the generation -- a generation they need to grow.

I have one word for it.

Buffett.

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