With constant news about advances in digital audio options, terrestrial radio is unfortunately shoved aside in the rush to cover the “next big thing.” Richard Harker argues that broadcasters are far better prepared to face the digital future than you may have been led to believe. In this week’s Programming To Win column, Harker says to not believe the hype and suggests that radio continue to adapt to changing technology around it.
Richard Harker
By: Richard Harker
The industry is being bombarded from all sides on radio’s apparent failure to make the digital transition. Critics complain of broadcast’s slow reaction to threats like Pandora suggesting that without a quick response, broadcast radio will become obsolete.
The facts on the ground, however, tell a different story. As we’ll show, the looming threat we hear about is based more on new-media hope and hype than reality.
The Accusation
In the midst of the war of words over the NAB’s cell phone FM chip proposal, Consumer Electronics Association President/CEO Gary Shapiro declared radio, “a buggy-whip business that refuses to innovate.”
Of course it was supposed to be an insult, and many radio people took it that way. But the truth is, there is no shame in making buggy whips as long as people want them.
Broadcast radio is far better prepared for its digital future than pundits and broadcasters believe.
The Past is Prologue
Those caught up in each technological revolution think that the revolution will change everything, and do it very quickly. Think about the Internet boom of the late 1990s. Venture capitalists rushed to fund hundreds of Internet companies to the tune of billions of dollars in the belief that being first was the key to success.
As start-up expenses continued to rise and hopes of a profitable return on their investment faded, the dot-com boom of the 1990s became the dot-com bust of the 2000s. Venture capitalists ultimately realized that the key to success on the Internet was not speed but rather deep pockets, patience, and a better idea.
To succeed on the Internet, you don’t have to be first. You just have to be better. Just ask early winners that later faltered like Netscape, AOL, MySpace, or Yahoo.
Misreading the speed with which a technical advance will transform society is not new, nor is it unique to the Internet. It happens at the early stages of every revolution. Rewind to the beginning of the 20th century.
When automobiles began replacing horses, dozens of companies jumped on the bandwagon to exploit this new technological marvel. One company that began building cars was Studebaker. At the time it was a very successful horse buggy company.
While it began building cars in 1897, it continued to build buggies well into the 20th century. Studebaker built quality buggies and carriages (The White House used them), people wanted them, selling them was profitable, and building cars was not.
Hundreds of companies rushed to build motor vehicles in the first decade of the new century. Most failed. Studebaker, however, became highly successful. Studebaker’s success in building quality carriages gave it the expertise, time, and resources necessary to become a successful auto manufacturer.
Imagine if today’s radio critics were alive when Studebaker was still making buggies. They would be telling the company that it was hopelessly out of touch with the new era, overly cautious, and doomed–just what radio critics are telling broadcasters today.
The Continued Strength of Broadcast Radio
A day does not pass without some pundit or self-appointed savior of radio declaring radio dead. We’re told that broadcast is being left behind, with listeners abandoning broadcast to listen to new digital alternatives. Radio must quickly adapt to the new digital landscape or risk obsolescence, they say.
Yet the facts on the ground don’t support the rhetoric.
Over 270 million people listen to broadcast radio each week, 240 million to commercial stations. Contrast the strength of broadcast to its new competitors.
Sirius XM has only 20 million subscribers. Pandora claims 65 million registered users, but only 25 million are active users.
Slacker, Pandora’s competitor, has just 200,000 subscribers, and something like 40,000 weekly users. Napster and Rhapsody each have about three-quarters of a million users. Spotify has about the same number in Europe.
The combined users of all the streaming services including Pandora total less than half of broadcast’s audience.
Should broadcast be concerned about the growth of these competitors? Absolutely. Is the clock running out for broadcast? Is the end near? Not by a long shot.
Registered user counts don’t tell the whole story. They don’t give us a true sense of the strength of broadcast. A more useful measure is the amount of time spent listening to these various services.
We at Harker Research did an analysis of radio listening comparing broadcast listening to online listening using hours of consumption, the total time people spend listening. Using Arbitron and published national streaming figures, here’s how commercial broadcast radio compares to its digital competitors:
| Commercial Broadcast | 3,721 Million hours |
| NY+LA+Chi Broadcast | 284 |
| Pandora | 262 |
| Top 5 broadcast streamers | 85 |
| Slacker | 11 |
The combined broadcast listening in just the top three U.S. markets nearly equals Pandora’s consumption. Note that the national streams of just the top five broadcast groups (excluding CBS) is eight times the listenership for Slacker.
Of course, radio critics point to the modest streaming audiences of broadcast groups and claim it is evidence of radio’s failure to adapt. The fact, however, is that local radio appeals primarily to local listeners, the very people who can pick up the stations. The streams of local stations will never amount to much as long as most people listen to radio on radios.
Critics also point to Pandora’s meteoric growth and claim that it is just a matter of time before broadcast listenership plummets. Perhaps, but despite the growth of online and mobile video viewing, consumption of traditional television is not declining. The same appears to be true for radio.
Arbitron did a recent analysis of listenership in PPM markets and found that radio listening has been stable the last few years. There is no credible evidence that people are abandoning broadcast radio, even young listeners.
So the evidence is overwhelming. Radio critics have it wrong. Despite their wishful thinking, the vast majority of radio listening continues to be done to commercial broadcast radio. It is in this context, using reality and the facts, not the hopes and dreams of new-media pundits and stakeholders that broadcast should develop a digital strategy.
Radio’s New Priorities
Broadcast’s tremendous lead over newer competitors should be the key consideration in developing a digital strategy. Why do so many people spend so much time listening to broadcast radio when there are so many alternatives?
Localism is the key.
The biggest difference between broadcast radio and our digital competitors is radio’s localism. As long as broadcast conveys a sense of place, it will continue to attract the vast majority of listening.
A radio station conveys a sense of place by saying “we are from here” in the things it does.
The importance of place is the reason radio stations from adjacent markets rarely do well. Take a look at any Arbitron ranker. How do outside stations do? Poorly.
On the rare occasions when an outside station does well, local stations quickly move to cover the format, and the outside station falters.
Digital competitors are like stations outside the market. They are new options for listeners, and they will attract interest. However, as local radio stations (and local groups) move to counter the new services, listeners will gravitate back to local stations.
So broadcast has been preparing for its digital future since the very first competitive battle. Radio is used to fighting over listeners, and rising to the occasion when a new competitor signs on.
Don’t get distracted by all the hype about Pandora and the other new competitors. To successfully compete:
· Learn from them
· Steal from them
· Adapt to them.
But don’t try to emulate them. Broadcast’s most important weapon to defend against national services is its localism. Whatever you do, don’t give that up.
Richard Harker is President of Harker Research, a company providing a wide range of research services to radio stations in North America and Europe. Twenty-years of research experience combined with Richard’s 15 years as a programmer and general manager helps Harker Research provide practical actionable solutions to ratings problems. Visit www.harkerresearch or contact Richard at (919) 954-8300.
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