An Apple-Inspired Radio & Records Turnaround

Many if not most of my readers are progressive thinkers based on the contact I have had with them since I have been writing in this space.

People who love radio.

Passionate about the music industry and a shared fascination about new media and the role of differing generational traits that drive today’s music and media businesses.

That’s why I thought you would appreciate some thoughts on Apple’s latest accomplishment.

Apple has exceeded its guidance to Wall Street (although they usually play it coy when making such guesses) posting a 15% increase in profit for the first quarter -- even in this miserable recession.

An analyst for Sanford Bernstein & Company was quoted in Thursday's New York Times as saying “For a consumer company to be growing at 9 percent in this economic environment is a testament that the products are strong and the company is in touch with its customers”.

And there it is.

While we all know there are many differences between what Apple sells and what radio stations and record companies have to offer, there is also much we can learn.

Apple is selling iPods and iPhones at a rate greater than last year. Even their computer sales are only off 3% year to year – and Apple sells the most expensive computers with no discounting.

The radio industry – as much as we love it – really is not in touch with its consumers – their listeners. In fact, radio has not changed much in terms of innovation over the last 20 years and at the same time, because of consolidation and cost-cutting, its product is – let’s say, a bit stale.

The record industry is stuck on the CD, selling $19.95 monthly subscriptions, repealing radio’s performance tax exemption and continuing to cutback on new music discovery.

Apple is upgrading its iPhone – probably in the spring. Perhaps new phones. Almost certainly a new operating system for all its customers that will include the ability to make payments within applications and multimedia messaging.

Radio offers no exciting new radios (to match no exciting new programming).

It’s as if the industry outsourced the radio to automakers -- content with car radios and nothing else. Of course, the danger is that car radios are fast morphing into entertainment centers of which radio is only one component.

The last cool non-car radio was a Walkman. Not good in this era of iPod coolness.

A tabletop radio is still generally ugly. Look at HD radios. Even Internet WiFi radios are nothing to show off.

Which leads us to HD radio. If the industry ever had any doubts it was out of touch with consumers, just look to the fraud perpetrated on the public by the radio industry over HD radio.

No programming to justify the consumer's price for acquiring the radio.

No commitment from the major groups other than running HD radio ads.

Lousy reception.

Talk about being out of touch.

To turn the radio industry around, the CEOs who are currently running it need to go away. Some of them are nice people, but they've come up lame for a long time. Still, after 12 years of a monopoly and mostly a good economy no turnaround is possible in the radio industry with this same crew of CEOs.

The record labels are just as incompetent.

Their executives just do a better job hiding and stiffing their underlings with all the work of sticking their fingers in the dike. The label execs missed taking Napster out in the beginning – hubris, simply hubris. A humiliation - a settlement was their idea of winning the battle and losing the war. And they still can’t seem to understand that it is impossible to stop piracy.

The operators of popular file-sharing website in Sweden, the Pirate Bay, were convicted of breaking Sweden's copyright law by helping millions of users freely download music, movies and computer games on the Internet. They got one year in jail and almost $4 million in damages. Warner, Sony, EMI and Columbia Pictures think they won when in reality a political backlash now threatens the government.

In my first day as a professor at USC all those years ago I shall never forget one young man standing up and saying, “You can never stop piracy. We can hack anything”. I now believe him.

Apple is priced right.

Radio drops its drawers and has for years when selling ads. It didn’t need a recession for yet another excuse to undervalue radio.

Apple prices are right on the money. When Steve Jobs overpriced the original iPhone he recanted, made a small (and insufficient gesture of rebates) and moved on.

There is no recession in an Apple store.

No “dollar a holler” pricing. Just products that people want to own even when money is harder to come by. My wife finally gave up her clamshell phone – you know, the one she kept to stay with Verizon and avoid AT&T -- to buy a new 3G iPhone. (By the way, Verizon called my home in Scottsdale and left a message that they are ready to wheel and deal to get her back. Too late. She’s hooked).

And what’s up with AT&T?

No one wants to be on AT&T but to have an iPhone we all put up with it – and the excessive monthly fees just for iPhone customers.

The record industry doesn’t understand pricing.

It thinks variable pricing -- charging more than 99 cents for some popular music downloads on iTunes -- is a victory. Well, 99 cents is now too high. Apple is happy to let these fools running the labels dangle in the wind with their poor pricing strategies. Remember, you can load an iPhone with lots of free music – a fact the labels either do not care about or don’t believe.

To turn the radio and record industries around it would take some of the qualities that Apple possesses.

An innovator at the top.

Strong management.

Talented and happy employees who want to work for the company.

A keen eye on changes in generational media.

An understanding that Gen Yers are the changemakers – everyone else follows (iPods, music downloading, Facebook, YouTube, and on and on). Tough for some baby boomer CEOs to swallow.

A sense of fair but adequate pricing.

Rolling out innovative programming and products on a regular timetable.

Let me pause here to emphasize how important this is. Radio does everything by rating periods and billing cycles. You’ll note that Apple always seems to have new products that consumers demand when one product suffers (iPod and iPhone sales make up the three percent decline in computer sales). Next month it will be something else. There is a pipeline.

In radio, even a format change is done on short notice with very little planning or research.

What is in the record industry pipeline?


Same for radio – what is their schedule of innovation?

Their what?

I can appreciate that a lot of radio folks want to just simply will the industry out of its doldrums – shake it and wake it up. But that isn’t going to happen. In fact, I submit that you really don’t want to wake up this group of weak executives. They are capable of even dumber moves than we’ve seen to date.

No, what radio and records needs are new management, new focus and a new way to operate.

Terrestrial radio is dying – I hate to say it, but there is no getting around it.

Yet consolidators are cutting the innovation and firing the innovators they already employ.

The next mistake is happening now but you’d never know it by reading the Cinderella news accounts. Just as the industry took kids for granted assuming they would always listen to the radio, guess what these geniuses are doing to older available listeners who love radio?

That’s right, taking their local shows and personalities away – making their favorite stations less compelling and addictive. Less is less.

And now these same “available” listeners are spending more time online, away from their radios, getting into Facebook and Twitter – oops.

And finally…

There can be no radio business if we’re busy broadcasting over the airwaves that a huge new generation doesn’t receive and a group that can’t sit still long enough to listen if it could.

There is no future without being on the Internet – but not simply rebroadcasting traditional radio stations. That’s not change. It’s more of the same.

No hope without rethinking content.

Apple customers have downloaded one billion applications – paying money for a large number of them. That’s more than the record business can say about music downloads – an addictive growth business.

And when I say radio needs to understand the appeal, embrace the trend and provide an app-based business, what do they do?

Create apps that link to their terrestrial stations.

That’s not change. It’s more of the same.

Everything we do does not have to be 1960’s radio redirected to a new age device. We’d better get over that notion fast before it’s too late.

I know I may be preaching to the converted but you are the ones who will eventually start businesses and fix dying ones.

The media businesses biggest and most fatal mistake was not just making bad decisions as referred to herein, but not taking the time to really know the changemakers in our audience.

Apple does it and look at the consistent results it gets.

Sorry, it’s not cost-cutting. Not consolidation. Not even new technology that will save radio and records.

Look to Steve Jobs, the indispensable one for whom Apple shareholders pray every day:

Think different.

And, if I might add – understand how the changemakers think different.

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