The Vanishing Car Radio

Broadcasters should be concerned about the changes ahead next year in what used to be called the car radio.

Today, it’s the entertainment system – the one in the center console that formerly was a monopoly for radio broadcasters that is now shared with increasingly popular hard drives for downloading personal music libraries, satellite radio, the usual CD or tape port and soon WiFi-enabled vehicles that will allow the occupants to access an almost infinite number of Internet stations.

This is either a false alarm or a wake-up call. I’m saying it’s too late to stop the changes that are already in motion or prevent additional competition in that center console.

For example, imagine what will happen if Pandora succeeds at finding an automaker who will hard fix its popular custom music service into the car. Pandora is negotiating with Toyota as we speak. Pandora is what a new generation calls great radio and if Tim Westergren manages to get Pandora into the vehicle, terrestrial radio stations are going to take a big hit. (An announcement is expected soon, for more click here).

Back to the programmable hard drives in cars.

You may remember I was fascinated when some of my students told me they wanted to buy a Ford. I’m not a snob but I just couldn’t understand why a Ford – until they admitted it was for the Ford Sync – a hard drive that allows them to dump their MP3s or CDs in the console, shuffle it, and play their own music.

No need to wait for WiFi capability.

No need for music radio.

Recently I bought an Italian car that barely came with a radio let alone a sophisticated entertainment system. What it didn’t have was satellite radio and I was supporting Mel one month at a time until I took delivery. I could add an after market satellite radio but it spoiled the aesthetics of the car and frankly, didn’t fit into the cockpit.

But it has a hard drive my students would have loved – 30 gig and ready for my iTunes library. It shuffles. Files the music in several categories. Oh, and it allows me to text message right there on the console (look out!). Of course, I don’t text and drive but lots of folks do – another distraction from radio and safety.

(When you get a chance read this amazing report that texting is worse than drinking and driving -- here).

Today an automobile is not just a radio with four wheels -- it is an entire entertainment system.

I sure like my own “station” better than what I’ve been hearing. I can even talk up the vocals myself – okay, too much information.

The point: terrestrial radio needs all this competition for its sacred listening grounds – the auto – like it needs a hole in the head. And keep in mind iPod docks are becoming more prevalent plus some folks just stick their ear buds in while they drive.

At the same time I’ve been warning that Apple is going to come out with a tablet device smaller than a notebook size computer and larger than an iPod Touch. It is expected in 2010 and it will have the capability to buy and read books, newspapers, periodicals. Listen to streaming. Watch videos and TV. Download and access over 100,000 apps. Store your iTunes library – perhaps even allow you to read PDFs for work.

An entertainment wonder that will be the next generation iPod.

If you take into account the sociology of the technology, you’ll note attention spans are very short. Listeners want what they want when they want it. The consumer has become the program director, in effect.

Radio was once an $18 billion industry in the early part of this decade – imagine that Lee and Bain paid about that to go into debt to own the largest radio group -- Clear Channel. Nevertheless, BIA is projecting radio as an $8 billion by 2016.

That alone frames the debate.

Before another decade goes by the radio industry is projected by financial analysts to generate half of the revenue it recently produced – when it had a monopoly in the car and listeners were available online or at home to access terrestrial programming.

Radio should be a content producer.

There is less need every year to broadcast anything 24/7 – not the least of which is voice tracked music or national syndicated shows. The world has changed.

The consumer has changed.

Advertisers are in the process of changing.

My advice is to do the best local radio terrestrial stations can do – not the worst as many are now doing to save money. This is not the time for this.

And hedge the bet against the digital future which is already showing that radio has an uphill battle competing as a broadcast medium with on-demand content that consumers are beginning to embrace.

Save station brands and expand them into new media. Be part of the Apple tablet when it comes out. Be ready to make the free cash flow transition from traditional to new media by 2016.

Right now radio companies spend nothing or next to nothing on the digital future even as more competitors chip away at their businesses.

At that rate the vanishing car radio will be driving listeners in a new direction and now is the time to understand the technology, sociology and urgency of taking action.

For those of you who would prefer to get Jerry's daily posts by email for FREE, please click here. Then look for a verifying email from FeedBurner to start service.
Thanks for forwarding my pieces to your friends and linking to your websites and boards.