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Radio's Future: Diversity or Obscurity

by Glen Emerson Morris
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The Radio industry is at an interesting point in its history. Radio rates are at an all time high just as the Internet seems threatening to replace it completely. Will radio survive? Well, that depends on what you call radio.

There will always be a demand for something to listen to, by millions of people, and on a daily basis, but exactly how this audio content will be provided is another issue. Broadcast radio, as we've known it, will probably die shortly after wireless Internet access becomes commonplace. However, it will quickly be replaced by Internet-based radio that will provide advertisers with unprecedented precision in market targeting, assuming, and this is a big if, the broadcast industry makes a smooth transition to the Internet.

It's not like the broadcast industry has much of a choice about trying. Within a few years, whether they're at work, at home, or driving in between, the average consumer will have the choice of listening to dozens of talk and music stations on AM and FM broadcast, or thousands of highly diverse shows the Internet. The odds are most consumers will be listening to shows on the Internet, and broadcast radio is going to be facing a very difficult situation.

Difficult, yes, but not un-winnable. Broadcast radio stations still have a lot of resources to draw on, even if their broadcast licenses aren't part of them anymore. The question facing the broadcast industry isn't whether, but "how," to adapt to the Internet. The answer seems to be the same response radio made to adapt to television; diversify, just on a greater scale.

This is how it would work in practice. Take a hypothetical radio chain, owning five broadcast stations in 50 markets. Because of the Internet, it is suddenly facing competition from literally every other radio station in the country, not to mention thousands of other Internet Websites that also offer streaming audio.

At this point, the chain's broadcast licenses aren't worth the paper they were faxed on, and it finds it's own stations are now competing against themselves. For instance, if it owned a classical station in each of 50 markets, and it simply put all of them on the Internet, all 50 stations would be in direct competition with each other, and none of them would have enough local listeners to appeal to advertisers. On the other hand, if each station were given a slightly different format, dividing classical music into 50 different sub-formats, for instance, opera, minuets, ballet, trumpet voluntaries, Bach, etc., the station's formats would complement each other, instead of compete. However, this approach would only work if the chain made all of its 250 stations available in each of its 50 markets, and offered local spots on all 250 stations in each market.

Fortunately, this kind of localization would be relatively easy to do. The appeal to advertisers would be a considerably refined market segmenting of the audience, for any market segment the radio chain targeted. For instance, a company wanting to promote an opera would find it more cost effective to advertise on an opera channel than a general classical music channel, assuming the ratings were somewhat comparable.

With Internet-based radio it would even be possible to offer advertisers spots that only ran in certain parts of the city, something impossible with broadcast radio. This would open up new opportunities for smaller advertisers, and help maximize the efficiency of their ad budgets. It would also help maximize the profits of Internet radio stations without adversely affecting advertisers.

In addition, radio stations could make revenue on national versions of each of the 250 different stations, simply by substituting national news and spots for the local ones. National advertisers could target consumers with 30 second spots much the same way they're targeted with banner ads by DoubleClick. That is, assuming consumers haven't disabled cookies in their browsers by then, which is a distinct possibility.

Consumers may be throwing other wrenches in the works, too. Internet radio stations can be launched without a license from the FCC. The hardware isn't particularly expensive to buy, and most of it is available at Radio Shack. In a few years every garage band, church choir, and would-be-Sinatra in the country will be planning on having their own Internet radio station, and many will succeed. The competition will drain listeners from advertiser sponsored entertainment, and the large numbers of them may never come back.

The sooner the conventional broadcast industry embraces the Internet, the less the losses will be for all concerned. The broadcast industry needs to be on the Internet, offering consumers the same diversity that other sources on the Internet offer consumers today. If the broadcast industry can do this, it will be able to offer advertisers precision targeting undreamed of just a few years ago. It won't be radio anymore, but it just might be something better.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

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