I call it Armageddon Radio.
For years now I have been warning that the radio industry would forever decline if it did not embrace the digital beyond.
Many of you agree.
Radio CEOs do not.
But now even they cannot dodge the mounting evidence that just running on-air stations will not be good enough to sustain a growth industry.
Don’t take my word.
At the recent BIA/Kelsey conference in Jersey City (hooray for that conference site from this Jersey boy), they made breaking news.
According to accounts in Inside Radio, there is “slow growth for radio’s on-air assets, stronger growth for online” and it quotes BIA/Kelsey as saying “the media world has been irreversibly changed for consumers, businesses and media companies”.
Thus, a reallocation of ad dollars.
From terrestrial to online.
Radio and traditional media is still a potent force but online is growing rapidly. The shift that I’ve said is driven by generational considerations is a full blown revolution.
Even Clear Channel, Cumulus and Citadel – the Three Blind Mice – will have to fess up and gear up.
According to Inside Radio, “Total local ad spending for all media will grow from $128.9 billion in 2010 to $144.9 billion by 2014, president Neal Polachek says. Traditional media’s piece will decline during that period while the slice allocated to digital will more than double, from $17.5 billion this year to $36.7 billion in 2014. “
Here’s the scary part, according to Polachek, “If you pull digital out of traditional media, you can see that traditional media is declining over the next five years…”
Digital accounting for 25% of all local advertising by 2014.
Newspapers 13.3% (down from 21.5% in 2009)
Online 13.1% (from 5.4% in 2009).
TV 12.3%.
Radio 10.7% of ad dollars.
Analysts – the few still left standing in radio – are loathe to predict an industry robust enough to even equal where it was before the recession.
As we say in Philly, “who don’t know that”.
The world has changed but radio has basically remained the same.
Radio companies spend next to nothing on interactive enterprises while consumers spend like crazy even during a bad economy to own the latest Apple devices and smart phones.
Radio geniuses play down the importance of Pandora, the heir apparent to music radio, by making the same lame comparisons they used to make when they compared radio to satellite radio – that is, mine (audience) is bigger than yours.
Everybody wants to be Pandora and young and old alike adore it -- about 48 million strong and growing (source: Media Maverick).
So, I’ve warned all this was coming and who would have thought a radio publication as good as Inside Radio would one day have its four top stories about digital issues? That says volumes as well.
The Dark Ages of Consolidation are ending and the Renaissance of Mobile Internet is happening.
Perhaps you saw the Coke “Happiness Machine”Commercial that has had over 2 million views that is indicative of how advertisers will precede radio into new media. Take a look:
One of my readers wrote to remind me the other day that the radio of the future that I often describe is not really radio. And he is correct. It will be different but the skill sets that radio companies have give them the added competitive advantage.
The radio industry wants to operate on the premise that today’s on-demand audiences need 24/7 broadcasting. They cling to that premise and get snarky when challenged.
Yet, look around, young people and even a growing number of older listeners want to be in the driver’s seat backed up by a recent Forbe’s article on “The New Normal: Your Customer Is In The Driver's Seat”.
This is no time to take it personally.
The radio industry will have to adapt.
Perhaps they didn’t like hearing it from me or the handful of others who warned that sociology was on a collision course with technology.
Now, even at their media conferences – the news is the same.
Digital tracking up.
Traditional heading down.
So what is the answer?
I know I am preaching to the converted here, but let’s just preview what radio can and should do to avoid going down with the ship:
1. Bolster local, terrestrial radio. Not voice-tracking or cheap syndicated schemes. Hire personalities. Do local commercials. Please fans. We know how to do this so let’s do it now. Terrestrial radio can be a large chunk of free cash flow that will fund the necessary transition to digital platforms so this is no time to fire talent, do repeater radio and drive willing listeners prematurely away from the mothership.
2. Reread number one.
3. Budget 10% of your operating budget to interactive media as soon as possible. Add a minimum of 5% to that every year if radio is serious about becoming part of the digital revolution. And it had better be because when BIA/Kelsey predicts turbulence ahead, the industry is running out of happy talk upon which to stay the course.
4. Build local interactive hubs around the cities where you have existing stations. Then, get ready to go into markets where you do not have clusters. All of these interactive hubs should be autonomous and local.
5. Read the words “autonomous and local” without anything in your mouth this time so you don’t choke on it.
6. I can name at least ten growth industries for these local hubs – digital publishing is one, local record business is two, new social media connections is three. The other seven will cost you (wink/wink).
7. Pressure the NAB to negotiate special rates for streaming and podcasting in return for a fair and easy to swallow performance tax on terrestrial radio. I don’t think radio should have to pay this tax, as you know, but radio is going to lose the battle in Congress in the years ahead. Use what they want to get what radio needs – a preferential arrangement to make music podcasting and non-terrestrial radio streaming affordable.
8. Talk radio is aging – there is a way for radio to lead the next “talk” revolution that isn’t built around politics, three or four hour shows or even listener call in. The next generation gets its talk radio on by interacting in social media. Hell, you do it when you go to a Radio-Info message board. Radio companies should build it and they will come.
9. Brainstorm for the iPad – that is the entertainment device of at least the next ten years. Everything you do should be optimized for iPad and by that I do not mean offering apps to access existing content. In the future, if you can find 10,000 people who will pay $25 a year to hear a jazz expert do a one-hour jazz show each day, then you have generated $250,000 a year in subscriptions alone. As you know I am working on the pay model with a bright developer and I believe pay is the way.
10. Then do 10 more of number 9 and bring in $2.5 million in niche programming revenue to add to your improved terrestrial radio free cash flow. Now are you liking the mobile Internet?
11. Get into TV. Not ABC or Fox type TV. Or even YouTube. If you’re with me on the importance of building content for the iPad, imagine the video shows you could professionally do each week with sponsors that could put you in the television business without having to have the expenses of our friends across the street.
I’m just warming up but I wanted you to see what I mean when I say – improve terrestrial radio so it can keep cranking out free cash flow to fund the fundamental change in consumer preferences for new media.
Coke may have found its “Happiness Machine”.
But yours is likely to be an iPad, Ford Sync or similar device the nature of which consumers cannot get enough.
My message to the radio industry: Don’t whine or pout.
Attack!
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