Is Radio to Survive Again?
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October 2005

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Is Radio to Survive Again?

Ipods, satellite radio, internet radio and what ever is next are all making an assult on traditionally transmitted radio and with some success. There are those that believe traditional radio's days are numbered due to new technology. So the question is, is radio to survive again?

History is in favor of traditional radio. Television was supposed to end radio's dominance. It didn't. Cable was added to the TV mix, and radio continues to thrive. Each time, radio has reinvented itself maintained its place in the media and entertainment mix. Now comes the new technology threat of Ipods, satellite radio and internet radio. Will radio be able to again reinvent itself and survive.

To try and find an answer, Advertising & Marketing Review went to three experts on the subject. Speaking on behalf of radio is Steve Keeney, a career veteran in the business having managed successful stations in Denver and Portland and now President of The Denver Radio Company about to acquire two area stations. A&M Review Internet Columnist Glen Morris takes the side of new technology and feels radio's salvation may be new technology on AM radio called Digital Radio Mondiale. Speaking for the advertiser is Eileen Weinert, The Media Team President.

The importance of new media cutting into traditional radio is pointed up by the fact Arbitron Inc., and comScore Media Metrix released the first audience ratings from their new online radio rating service in December 2004. The service estimated that 4.1 million people a week, age 12 and older, listened to three major onlne radio networks. The three charter subscribers included American Online's AOL(r) Radio Network; Yahoo!(r)'s LAUNCHcast; and Microsoft's MSN Radio and The rating period was from October 2004. The service is going to provide online radio with traditional broadcast ratings including Cume and Average Quarter Hour estimates for standard dayparts and demographics.

The following are excerpts from a conversation with Steve Keeney on "Why Radio Will Survive."

Radio has always has been a survivor. Doesn't mean it will always be. Touching on history, with the advent of TV and later cable, the prognosis was that radio would die, and it didn't, it morphed, it reinvented itself, it actually became more local. The radio networks as we knew them, NBC, CBS, Mutual, largely went away. Radio reinvented and became more diverse, more local. There are a lot of music formats and out of that salvation came more and more niche formats such as talk and sports. I have been involved with all comedy radio which is a 24/7 comedy network just getting started. Radio has been a survivor but doesn't necessarily mean it will be a survivor with the new media. I don't know that it will but I strongly believe it will unless the basic values of radio listeners change. Regarding satellite radio, Ipods is another source of music, no matter how many sources you have you're only going to spend so much time with music. Ipods are replacing the cassettes that we used. Will this increase peoples' listening to music at the expense of radio, It's possible. Satellite is an additional source of entertainment. It more directly competes with radio and therefore is a greater threat. But, it is not local, it can't be local because it emanates from one source and I don't know how it is possible to insert local information.

The issue is, is radio going to remain competitive in terms of listening. The major clusters are wise in cutting back on commercial content as there is a tolerance level by listeners. If that tolerance level is exceeded they are listening to you less and hating commercial more, assuming they hated commercials in the first place. I applaud the major groups for pulling back the amount of commercials.

But that's not the issue. A manager from another market once told me, and I quote, "Great radio stations die from within." And I think that that statement is applicable to radio as a medium. If radio is going to die or is dying, first and foremost it is dying from within not because someone is challenging it. The core issue is radio, not just remaining local, but becoming more local in principle, the way it once was. There are syndicated formats, they are not local. The local stations do the best they can to make those syndicated formats local but they are not local radio. And I wouldn't pretend to a prospective client of all comedy radio that it is local. Inserting rapid-fire weather forecasts and traffic reports from a common source is not local, it is providing minimum local content. Local radio by my definition is the real interaction of radio personalities, announcers, the people on the air, with listeners both on and off the air. It's easy to talk about and discuss but what separates the men from the boys and the women from the girls in local radio is executing, is understanding the values the interests and things that are really important to your listeners every day, whether they happen to be national local, on going things, just street buzz types of things These are really the function of great program directors, talent working together everyday.

DJs used to do their shows from storefronts and other locations which were local. How do you address being a local station? They have changed over the years, the principle of being local has not. Stations have moved away from being local. If we forsake that then I ask, what reason do you have to listen to a radio station. If all they are doing is playing music and syndicated talk program, you can get that content on satellite, like listening to Howard Stern, if that's your preference, starting next year.

What does this mean for the advertiser?
Radio has always been a great source for local advertisers and if radio goes away then one major and very viable medium has disappeared. An adjunct to that question, the satellite and other national media, unless there is some technological advance, cannot tap into the local advertising community the way local radio can. Assuming there is a way for satellite to provide local advertising it's still not local radio, no local personalities doing local spots. The loss of radio would be a huge loss for local advertisers. Radio today, yesterday and for years is very affordable, very targetable, is very intimate, and all of those things are important to most local advertisers.

Regarding the younger demographics:
What can radio do to get younger demos off their Ipod and listening to radio?
I don't think you can get them off their Ipods anymore than you can get people away from the TV set. I hope that radio someway can rebuild the competitive share of listening with the younger demo by becoming more involved with the younger local listeners. I think it's a greater challenge for a company that owns a younger station to retain or improve the amount of listening that the younger listener does to that station. Younger kids are always on the cutting edge of technology. It's a greater challenge than a station with an older format, but it is a challenge that can be met. Ipods, Satellite, Internet are not local. Local radio with younger formats must have a much greater presence of where those younger, more active people are located. As an example, Steve Kelly was 19 when I hired him for KIMN-AM and revitalized the station when FM was taking over. He brought the teens back to us. He was visible on behalf of KIMN and reattracted listeners. Paired with Pepsi, we did a series of music history tapes. Steve went to every high school in metro Denver and, more than just introducing the tapes, he connected with the teens. He also did many other stunts that attracted audience like the Mile High Seat stunt, sitting in every seat in the stadium. This underscores being and understanding what local radio is all about.
Radio stations today tend to shun research. Good research is just that, good. The starting point to determine what a radio station can do that it is not doing to become more locally involved starts with a good research piece. It has to be well constructed, one on one, not just picking up the phone.

Steve's conclusion:
Radio is very viable, it's a very personal medium, its core values are there, but I think generally speaking, we as an industry have moved away from those core values that are oriented around the local and that along with over commercialization, extracting local personality out of radio and by relying more on network services. We need to get back to the truly local presentation of radio.

From the media buyer/advertiser standpoint:
From an interview with Eileen Weinert, President, The Media Team.
Eileen Weinert

We feel radio is still a strong viable option for many demos such as adults 25-54, 35-54. We current have clients getting excellent response from radio. I would certainly say that radio is not dead.
Sure there are things that are infringing on radio, the internet the Ipod or other personal listening devise, but I see that as infringing on the younger demographic, the 18-24 male. But from our clients perspective radio continues to pull well and bring people into their retail locations and make the phone ring. Truly there has been a lot of change but we're still a big believer in radio.

On reaching the 18-24:
We have not tried satellite radio. Frankly the penetration is still pretty low, I think it's about 10% of the US now that have satellite radio. As for the Internet, absolutely, we're tying all kinds of things to reach out to that younger target audience that is difficult to reach. Things like online couponing, where they can go online to a website and download coupons.
We're still pretty much making the traditional radio buys for the 25 plus. I think radio is alive and well. You'll always have the format shifting as they find demos in their own way. Yes, I think radios going to have to do something to reach out to that younger demo but our clients all feel radio is doing a job for them and they will keep using the medium.

The Future of Broadcast Radio May Be AM
by Glen Emerson Morris

A recent survey indicated that people with broadband connections tended to watch about two hours a week less television than their non-connected neighbors. Interestingly, people with broadband connections listened to just as much radio as those without it. Recent sales figures for commercial radio bear this out. No decline in revenue was noticed over the last year.

Whether broadcast radio will continue to fare better than commercial television is another matter. The US now ranks about 16th in per capita broadband, and Internet radio's market share will likely go up as more bandwidth becomes available to the average home. However, there are technological advances coming that will have a profound impact on broadcast radio, in particular AM radio.

Long since abandoned by most listeners, not to mention advertisers, AM radio is about to be reinvented as a broadcast technology far superior to FM radio. No kidding. And it just might take off.

AM radio's revival began in 1998 when the International Telecommunication Union began the development of the Digital Radio Mondiale (DRM) standard. By digitizing and compressing audio, DRM combines the range of AM radio with the audio fidelity of FM, and tosses in a digital data stream as well. In addition, DRM technology also allows AM stations to transmit further and with less interference than ever possible. It may sound like a long shot, but some heavy hitters are backing the DRM standard.

In June 2005, Texas Instruments introduced a DRM receiver on a single chip. Home radios based on this DRM chip will be on the market by the end of the year. Initially the price is estimated to be about $200, but prices are expected to drop significantly over the next few years.

Like many new technologies, DRM is facing a chicken and egg dilemma. Consumers won't buy DRM radios until there are plenty of DRM stations to listen to, and plenty of DRM stations won't be launched until a lot of consumers have DRM radios to listen to them.

Assuming that enough people are willing to spend the $200 required for a DRM equipped radio is a big assumption. Satellite radio, based on $100 receivers, has proven a difficult sell. Granted satellite radio also costs about $10 a month for a subscription, it offers commercial free music, which DRM stations are unlikely to ever provide.

However, DRM will offer things that satellite and FM radio can't. The data stream DRM provides has a bandwidth of 40 kilobits per second, about two-thirds the speed of a dial-up modem. This is considerably faster than the digital stream offered by FM radio stations using the radio digital system (RDS), which transmits just enough to provide the station ID and some song information.

BBC engineers have demonstrated a way of using the DRM digital stream to transmit a news program simultaneously with music. The news show is transmitted too slowly to listen to, but it can be stored and listened to later as "news on demand."

DRM in fact offers a lot of good reasons for radio stations to adopt it, and on the most part, the numbers are good.

It has been estimated that it will cost in the neighborhood of $60,000 for an AM radio station to convert to DRM. The playback will come in several forms. DRM will allow AM stations to reach up to 100 times the market they currently reach. The UK firm Radioscape recently detected a test DRM broadcast coming from Thailand. DRM stations will also have the option of using around a fifth of the power they currently use to cover the same area they do now. In an era of high-energy prices this could be a major benefit.

DRM will also offer radio stations new revenue streams. TI and Radioscape are working on a system that will allow software to be broadcast over AM radio. Many home appliances, and even cars, are now run by microprocessors that could be updated automatically using DRM. Radio stations, for instance, could make money from Ford or GM to broadcast updates of their car's software. It would be easy for the car manufacturers to link a car's radio to the car's microprocessors to allow software updating by radio. It would be a lot cheaper than having the car owner have to go to the dealer for the update.

Properly marketed, DRM could transform AM radio into the most profitable of the broadcast industries. However, it will still face tough competition from Internet. By almost any criteria, Internet radio provides a much better product. In some cases, an overwhelmingly better product.

For all its wonders, DRM fails to address several issues that make Internet based audio content so appealing including no commercials, and a vast assortment of content. For five dollars a month offers over 17,000 commercial free channels including nearly every conceivable format. In the case of New Age, for instance, there are dozens of flavors of New Age including vocal, space, ambient and meditative. Classical, jazz, folk, and spoken word also have a wide array of sub-formats.

Another compelling feature of Internet radio is its content on demand capability, which can take many forms, from time shifting to podcasting. I regularly listen to the PBS show Weekend Edition Sunday hosted by the charmingly intelligent Liane Hansen, but frequently I don't get up early enough to listen to it on the local PBS station. No problem. If I miss the local PBS broadcast, I listen to Weekend Edition Sunday on the Internet feed from KQED San Francisco, which is two time zones later. If I get up too late for that, I listen to it on KIPO Hawaii, or one of several stations in Alaska. I'm also a fan of many of the BBC Radio 4 science and history shows, which are almost all archived and available for free listening at any time.

Still for many consumers and AM radio stations, DRM may prove irresistible. It's also possible to see how DRM just might save the broadcast industry from Internet radio. Yes, it's still a long shot, but less likely things have happened.

Conclusion by Ken Custer
New technology will continue to produce competition for all forms of entertainment, especially for the ear of traditional radio listeners. But technology plays no favorites. As new ways are found to take a share of the listening audience, traditional radio also must finds new technology to compete and keep a share of the market. And still, the biggest positive for traditional radio is local content and local contact with its listeners. As long as local radio maintains its local presence, something that internet, satellite and other syndicated forms cannot provide, there will always be a need for its services.

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