Radio & Records: An Inconvenient Truth

Al Gore wrote a book about global warming – later produced as a movie – that won him a Nobel Prize. Whether you agree or disagree with his point of view or his politics, sometimes it takes a slap in the face to wake up and consider reality.

I’ve often wondered why we don’t see the press exposing the radio and record industries for what they are – throwbacks to another era. I’m sure you’ll agree that when you read the consumer or trade press, you get the feeling someone did something bad to the radio and record businesses.

Maybe a young, headstrong generation.

Maybe technology.

Possibly even a corporation such as Apple.

Iconic futurists are portrayed as villains – like in Steve Jobs.

One thing is for sure – the problems in the radio and record businesses are never the results of the people who run the radio and record businesses. It’s never their trade groups – NAB, RAB, RIAA. It’s always someone or something else that is the matter with these two industries.

Those of you who know me know that I have been an outspoken critic during the "great" consolidation. And now, after a four year sabbatical teaching the next generation at the college level, I know I was only beginning to scratch the surface then.

It’s far worse than I thought.

So, if you’re interested, here’s how I see an inconvenient truth regarding these once powerful and now ailing entertainment industries:

Terrestrial Radio Will Never Be a Growth Industry Again

It’s with great sadness that I say that, but to the depth of my heart and mind I know that over-the-air radio, too, shall pass.

It will take a while.

After all, more people listen to radio than to any other medium. Free radio. And the industry is always fast to point this fact out. The reality is that the next generation is not listening to radio and the industry cannot sustain its previous growth without the next generation. Some of the demise of radio was due to the greediness of its CEOs who insisted on consolidation. Technology also played a part.

The real end came when radio decision makers were off cutting costs and trying to eek out an extra penny of profit for their Wall Street investors while they failed to understand the monumental change of generations that was concurrently taking place.

Gen Y – many the children of baby boomers, the best fans radio ever had – turned to their own devices. The Internet. Email. Online chats. Then text messaging. Bit torrent sites from which to download stolen music. Mobile phones, smart phones. Social networks and it continues even as we write this.

The radio industry has virtually no working knowledge of the whys and wherefores of this generational change. I confess I don’t think I would either had my non-compete with Clear Channel not by chance sent me to academia.

Now, however, I can attest that transmitters and towers will be as useless ten and twenty years from today as a horse and buggy is today.

The truth is that radio owners want things to stay the same – after all, they spent hundreds of millions (if not billions) to buy these station assets. But things can’t stay the same because of rapidly changing technology and the mistake of radio stations to assume the next generation would always be available to them.

Even Wall Street knows this.

That’s why there is little interest in acquiring radio stations – God knows there are tons of them on the market right now.

Shareholders know this.

Radio stocks are tantamount to penny stocks. Four major radio groups are teetering on delisting from their stock exchanges because their value is less than a dollar.

It will not get better.

The only option is to program and market to the available radio audience – older people. And without the next generation, there can be no growth.

The first response should be to commit 20% of next years budget to Internet, podcasting and mobile content. Do this or face extinction from the digital world. No more time to waste. No excuse is good enough. No rationalization will satisfy.

One of my colleagues at USC used to stick it to me by saying it won’t be long before the radio spectrum will be abandoned and will be offered to the masses again. (You know how they are in academia, always looking for a good-natured intellectual fight).

I can’t predict the disposition of the radio spectrum but I can say with great assurance that the radio company that doesn’t start investing 20% in non-terrestrial, local-based content is history.

Music Will Never Be a Revenue Source for Labels

Another inconvenient truth – the genie is out of the bottle and can’t be stuffed back or, for that matter, sued back in. Record labels can no longer control the delivery system (the Internet) for music and therefore cannot charge money for the one thing they sell – albums.

They can’t even keep unreleased music from being stolen as witnessed by the flap over Guns N' Roses new album 14 years in the making. Perhaps you heard about the poor sap who got caught putting unfinished GNR cuts on the Internet. How bad is that when labels can't even keep unreleased music out of the hands of "pirates"?

Of course, the labels, like their radio brethren, are fighting like hell to get back into the past when a consumer would get arrested if they stole music. Today, all that is history. Even good kids – young people who would never think of walking out of a retail store with that which they don’t own – steal music.

It isn’t ethical.

It’s not right.

But it’s not going to stop.

You can see why the four major labels have less than a zero percent chance of remaining in the music business. They can’t even get rich on 99 cent downloads sold legally on iTunes. And there’s no way they are going to sell enough CDs to be a multi-billion dollar industry going forward.

In Sunday’s New York Times there was an article about how popular vinyl is getting. I only wish I had a dollar for every interview I’ve done with a reporter on this topic. So what? Vinyl is certainly not the answer to the record industry’s problems.

Nor are the solutions offered by the labels. ISPs as toll takers for consumer access to millions of songs. On-demand music will not work. Pandora has already been invented. They've run out of viable ideas and they've certainly run out of time.

So the truth is that if the four labels want to remain as entertainment industry entities, they will have to stop selling music. (Don’t slit your wrists, please – there is some hope, read on).

Music must be given away free.

I’m not saying the labels and artists should like it. I liked the days when I spoke my mind in Inside Radio and got paid $450 a year for each and every subscription. Now I write here for free and reach far more people than I ever imagined but make no money. I feel for the labels. But you have to find other ways to make money.

Ancillary ways to create income is what labels will have to do. I personally don’t think most of them can stomach this. The Internet has made it impossible to protect music. It can’t be sold. Therefore, to remain in business – the labels will have to sell something else creating ancillary forms of income.

I’m not speaking of 360 deals the way they are being forced down the throats of the weak acts. I’m not a great fan. I’m talking about merchandising at levels where the labels are presently not qualified.

The record industry is dead – died about three years ago. Rigor mortis is setting in.

Music will be free from now on or until the Internet can be controlled – which is never.

Tomorrow’s record executives have not yet been born.

So there you have it – my inconvenient truths about the two biggest, baddest and best industries I know.

Begging for bold leadership in an era of great change.

It isn’t human nature to expect that tomorrow morning some radio or record executive will wake up and say, “ah ha – I’ve got it, terrestrial radio is dead” or “music will always be free”.

I don’t expect that, either.

It’s evolution.

Fight it if you must. Strike back and turn the RIAA loose on your fans if it makes you feel any better. Ignore the fact that young people hate radio no matter how it’s delivered. Keep cutting back talent and services. Make radio national for cost effectiveness and less local -- the way it works best.

I understand.

But over time you will agree. Maybe it takes 12 or 24 more months of revenue decline in the radio industry. Or, another down year in CD sales for the record business.

There’s money to be made – plenty of it – not in the traditional radio and record business but the businesses that cooperate with the inevitable.

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