Back in July, we addressed the slow death of Radio in Radio’s Wounded Business Model.
This morning, Barron’s cover story hits on many of the same themes: Internet broadcast and streaming, Satellite Radio, iPods, and P2P and how they are (heh heh) killing the industry.
As we observed last time, its their own damned fault. The industry — Clearchannel in particular — went for short profits at the expense of the long term relationship with their audience. They completely overlooked that their product IS THE AUDIENCE — who they then sell to their clients, the advertisers.
Ooops! We alienated our living breathing product, who have since told us to bugger off. Its no surprise their shareholders are punishing them by voting with their feet.
Sure, any burger joint could raise short term profit by using Hamburger Helper — but that does long term damage to their business: Their reputation suffers, they lose customers, mostof whom go away permanently. Its the EXACT same thing here: Radio — defined as the broad swath of FM stations broadcasting across the USA — has become the Hamburger Helper of music.
Where does the blame lay? Start with the Telecommunications Act of 1996 — the enabling legislation that got the ball rolling: It allowed — nay, encouraged — massive consolidation in the industry. I haven’t thought through whether Radio’s Wounded Business Model is solely an unintended consequence of that legislation — or the result of awful management. Its prolly a combination of both.
All we can say is “Buh-bye.”
Here’s a lengthy (yet surprisingly familiar to readers of this blog) excerpt from Barron’s:
Younger adults — the key targets of radio advertising — have clearly been losing their ardor for the medium. By one key measure, the number of listeners ages 18 to 34 has declined by about 8% in the past five years, as portable digital-music players, Internet radio programming and other innovations have started to take hold. And while the dollars spent on radio advertising have been essentially flat for the past few years, competing media like cable TV, the ‘Net and outdoor advertising have been gaining steadily.
“It’s over,” Larry Haverty, a media specialist at State Street Research and Management in Boston, says of radio stocks’ big run. “Something good happened in the ‘Nineties; something less good has happened in the ’00s. Every retailer is blowing its budget on advertising and radio is not getting any of it. If they don’t get it now, they’re not going to.”
Investors, along with radio executives, may not be facing up to the full extent of the industry’s challenges. While radio has always weathered past threats — video did not kill radio’s star, as a group called the Buggles prophesied in 1981 — things could really be different this time.
Across the country, listeners are changing how they choose to receive music and news and talk radio. They are turning to portable music players like Apple Computer’s iPod, streaming audio over the Internet and the emerging field of satellite radio to hear what they want, when they want to hear it.
Anne Kershaw, a 46-year-old lawyer who travels weekly between her home in Tarrytown, N.Y., and an office in Richmond, Va., bought an iPod in May, partly because “there is no decent radio station in Richmond. I was tired of being preached to.” She still uses the radio — but not in the old way. By attaching a transmitter to her iPod and setting it on a certain FM frequency, she can play the 983 tunes she has downloaded to the iPod through the radio, whether at home or in the car.
Music downloading is one of the “fastest-growing digital phenomena ever,” says Forrester Research Group. It predicts download services will generate more than $200 million in revenue this year, $40 million higher than forecast and up from just $36 million in 2003. In all, some 35 million U.S. adults have downloaded music, according to the Pew Internet & American Life Project, a nonprofit initiative.
Trends like that are causing companies to reassess advertising choices, to ensure they’re getting the most bang for their buck. Accountability and return on investment are the priorities in advertising right now, and it’s hard to say radio is providing much of either as listeners start tuning out. Among all people older than 12, only 14.6% are listening to radio during an average 15-minute period, down from 16% in 1998, according to Arbitron.
Glad to see this meme has infiltrated the mainstream. Merely took a month and a half! (MMmuuhaa hhhaaahhhaaa! My evil plan is coming together, just as I envisioned!) Pretty cool.
My next target: Insipid boy bands!
UPDATE: August 28, 2004, 10:13 am
David Farber’s interesting-people listserve has the complete article
Losing the Signal
Radio may be in a long-term decline. Time to tune out the stocks?
By Sandra Ward
Barron’s, Monday, August 30, 2004
Radio’s Wounded Business Model
Losing the Signal