Why Radio Will Only Be An $8 Billion Business by 2016

It’s easy for the traditional media business to take its eyes off the prize.

Since 1996, radio has been all about consolidation, cutting expenses, what turned out to be the myth of shareholder value, Wall Street, debt and refinancing, downsizing, mass firings and the dilution of local radio.

These are emotional issues for sure and because of the clusterf@#ks running the three largest consolidated radio groups it is easy to think of radio as a figment of their imaginations.

But there are more serious issues coming to light.

One of them is that according to BIA, the radio industry will be just a $14.6 billion industry by 2013 – three short years from now.

And only an $8 billion business by 2016.

These are not my figures. They are BIA/Kelsey's 2009 estimate which is considered the gold standard for the radio industry. That means an industry that was hovering around $18 billion in 2003 (way before the recession), would lose more than half its value if BIA’s projections turn out to be correct.

Other things get lost when we think of how foolish it looks when the bean counter mentality takes over.

For example, the fact that radio showed no growth as an industry the year before the recession – presumably when things were good. And that in 2009 barely one billion in online revenue contributed to the total production of radio revenue.

That's not going to work in the mobile Internet world that is developing thus the battle of radio vs. online when it really should be radio driving the online revolution.

To put things in perspective, one private company, Apple, is larger in total assets than the entire radio industry combined.

While Farid Suleman, John Hogan and Lew Dickey are playing monopoly as the three largest radio consolidators, they are missing a major point.

Radio sat out the Internet expansion.

And ignored the cultural revolution that transformed 80 million members of Gen Y to mobile and Internet.

They missed the iPhone, iPod, downloading mavens who only used radio when there was not something better available.

They missed that changing formats and mixing up the playlists was no longer enough to appeal to an entire lost generation.

And how sociology evolved at that time so that consumers would rather look to each other through Internet-based social networks for tastemakers rather than traditional djs or radio djs who were being replaced by voice tracking and generic national substitutes.

As a former radio industry and now mobile executive puts it:

“100-million smart phones and universal 4G data service will change OTA broadcasting forever. Don’t think digital can do that? It only took 10-years for digital to totally replace camera film. Kodak went from a Dow Jones member to a KKR borrower. Smartphones inform, entertain, and personalize the user experience. One-way, untargeted broadcasting offers reach but lacks targeting.

Hoping for 2nd half 2010 turnaround is dreaming. Get online or get out quickly … for your family’s sake”.

It is too late to put the genie back in the bottle. I’m sorry, but that’s just the way it is.

Radio is not going to attract 80 million young people who grew up without the passion their parents once had for radio. Instead, here is a prescription for curing the ills caused by radio consolidation and clueless bankers.

Radio talent must be redeployed to the mobile space and mobile Internet which is the new frontier.

As long as attention spans are declining, 24/7 broadcasting will not be necessary.

Content, brands and personalities who once worked in radio are valuable in the mobile Internet space but not in the traditional long-forms radio owners are stubbornly clinging to.

The all-news station of the future is the cellphone with options to connect consumers with video, audio and text on demand.

When the earth quakes in California or the weather service issues a blizzard warning for the northeast, one tap of the smart phone puts a consumer in the know.

Therefore, radio companies that want to avoid becoming antiquated will have to reinvent themselves using their talent, marketing and sales abilities.

But wait.

The radio industry is squandering this talent. The best managers in communications are radio managers.

Local media salespeople are critical to the future -- didn't Google prove that you can't make a commodity out of radio advertising whatever radio is or will become?

All the on-air personalities who have been dismissed or bought out were just assets-in-waiting for radio companies if they could have seen the future.

Terrestrial radio will not go away anytime soon but the industry's reliable metric is projecting that radio will be producing half of what it now bills even with their version of online services.

That's just not going to be good enough.

BIA is saying that each year radio will decline and by 2016, radio will be half of what it is today. In other words, if radio CEOs don’t want to believe me, believe BIA.

Let me whet your appetite as to what growth could be ahead in digital content:

1. Radio shows could be as short as 15-25 minutes (remember declining attention spans) and delivered on mobile devices over the Internet or cellphone network as podcasts or content modules. Because owners are not limited to "shows" that go on-the-air through traditional means, they can offer hundreds and monetize them all.

2. There may eventually be no need for 24/7 programming so if I want the latest in electronica, I may subscribe for a micropayment to a two-hour timespan of content that would repeat and reside on a web stream. Discounting this model is spitting in the face of what Apple is already working on -- streaming music for a monthly fee.

3. All news radio would be – tap and see, tap and hear, tap and read (especially dramatic when people understand the full potential of devices like iPads.

4. Mobile Internet will be available everywhere with cloud computing and WiFi, phone or WiMax links thus rendering radio’s safe zone – the car – no longer safe.

While this is disturbing to people who insist on doing radio the way it has been done for decades, it is very exciting to those of us who can see new challenges and opportunities ahead.

Do radio companies get this warning?

If you think spending zero – or less than 3% of their annual operating budgets on Internet and mobile initiatives is a rallying response then I’ve got a glass of Kool-Aid for you.

By their actions, radio groups are headed into the history books unless they open their financial books and wake up to the mobile future.

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