Can Terrestrial Radio Thrive in the Digital Era?

| September 19, 2012

By Michael Harrison
TALKERS Magazine
Publisher

SPRINGFIELD, Mass. — Survival is not enough.

Survival is already happening and it isn’t as much fun as it’s cracked up to be as a spectator sport on the Discovery Channel.  In the reality show called terrestrial radio, sooner than later, survival will run out of gas.  For terrestrial radio, “survival” is simply a slower form of imminent death.

It should be the goal of terrestrial radio to thrive in the digital era.

Thrive?  Is that even possible?

Of course it is — but only if the medium’s players, from the very top on down, muster up the will to conquer the daunting obstacles standing before them.  It will take vision and courage fueled by bold ideas and action to slay the five-headed dragon threatening terrestrial radio with premature obsolescence:

1) Smothering debt.  Most large- and medium-sized radio station groups carry creativity-stifling debt that is almost impossible to service via the traditional radio business means of revenue generation. Cutbacks at a radio station can only go so far before they cannibalize the facility and whatever is left of its goodwill.  Consolidation inflated the bubble of radio station prices to the bursting point of finally rendering it unaffordable for a large segment of stick ownership to actually do “radio” effectively in today’s economy.

If the puffed up “geniuses” on both sides of the aisle who have run the United States of America into an ominous financial ditch can no longer cover up the odious results of smothering debt, why do you think the normal humans who drove the far more fragile institution of radio into its present hole can continue to pull magic money rabbits out of their arses?

When you occasionally hear broadcasters boast that their radio stations are profitably operating on cash flow (and thank goodness there still are some out there), more likely than not, those stations are either owned free and clear (usually by “families” that have owned them for years) or are paying off a minimal debt service.

The crying shame of today’s life-sucking situation is that radio station operation is still basically a very viable business – if given a chance to run in a realistic manner.

Therefore, we need not go any further in discussing the premise that terrestrial radio can thrive in the digital era, if a majority of its serious players remain buried in debt.  It cannot happen.

For terrestrial radio to make it and actually thrive – as opposed to maintain its existence based upon the next round of investment — someone is going to have to pay the financial piper so the cost of stations can come back into line with reality.  New ownership dedicated to the culture and vibrant dynamics of radio must be allowed to enter the industry, operating smaller, more manageable groups, and investing fresh capital with a reasonable chance of seeing a return on their investment.  I don’t mean a return that is dependent on the greater fool theory which views radio stations as speculative gambling chips.  That kind of 1992 thinking is deadly in 2012.  I mean a fair return in a sane, workable marketplace.

2) Exotic media rivals.  The digital 21st century is turning 20th century media on its head.  Obviously, this goes way beyond radio.  Little ol’ 20th century-born terrestrial radio is pitted against competition on many fronts from armies of strange invaders unlike anything it has ever faced… including out of town facsimiles of itself encroaching on local territories via the internet.   The internet is a miraculous medium but terrestrial radio stations must use it more wisely and not be in such a rush to sacrifice the uniqueness and indispensability they need to earn in each local marketplace – where the loyalty and revenue lies – for the fool’s gold of being just another of a thousand mediocre versions of its equally mediocre self co-existing on a single national dial in everyone’s dashboard.  Yikes!  Let’s see what that does to the value of the stick in five or 10 years – or maybe less.  If you want to put your station in such a situation and actually thrive – you had better be the best station in your format in the country as opposed to simply being the best in your market.

Since radio stations and shows are compelled these days to think of themselves as “brands,” it would be prudent to use the internet (as well as some of those severely under-developed HD channels) to create alternate versions of themselves (such as the HBO and ESPN channels) or the equivalent of professional sports farm teams.  Stations should nurture new talent and keep it within their “system.”  Let’s get young people interested in entering this field again.  Use the internet for experimentation and product development.  That’s the kind of brand extension that makes sense online.           

3) Blurry ratings.  Radio listening is literally “wireless.”  PPM notwithstanding, there is no “meter” to measure actual usage the way electricity, water and telephone consumption is tallied.   No tickets are sold. No circulations are audited. There are no “click-thrus.”  As advertisers expect increasingly precise metrics, radio lags behind.

Arbitron performs as competent a job as can be expected — given their limited resources — in tackling the enormous task of accurately measuring murky radio listenership on the increasingly pinpoint level that advertisers demand.  There is no easy answer to this problem because it would take a technological and financial effort equivalent to landing a man on the moon to truly rate radio accurately. Radio doesn’t have that kind of money to support such a project.

Again, Arbitron does a good job within the limits of reason and reality – but the PPM is not good at measuring the audience loyalty and quality-appreciation factors better served by the admittedly imperfect diary that also apply to getting positive results for advertisers.  Simply put, if radio allows itself to be judged in the advertising marketplace solely on numbers, it’ll soon be lights out for most of the stations currently on the air. The future of commercial media belongs to the super-servers of desirable niches.  Audience responsiveness, as well as size, counts for something and must not be discarded as a measuring stick.

4)  Generational cultural changes.  Targeting pop cultural preferences is a whole new game as the “wiring” of humanity’s nervous system undergoes observable evolution induced by the internet and its powerful new institutions.  It is gratifying to see the latest reports that indicate terrestrial radio is still reaching an overwhelming majority of the population.  I believe these reports… but only to the point that I believe any reports – especially those generated by sources within the very industry being graded.  We must not fool ourselves in an effort to sell ourselves.

The fact is radio has a tradition that goes back to its earliest days, and that is to reflect the “street” – the lingo, the feel, the hipness if you will, of popular culture.  Radio has always succeeded when it claimed ownership of popular culture – whatever that popular culture might be.

Political news/talk radio has succeeded these past 25 years because it has taken ownership of American politics.

Sports talk radio has succeeded because it has taken ownership of the sports craze sweeping the nation.

For terrestrial music radio to effectively stand up to the “Predator” of Spotify, the “Alien” of YouTube, the “Freddy” of Sirius XM, the “Jason” of MP3s, the “Godzilla” of Pandora and the “King Kong” of Apple – it must reclaim ownership of today’s popular music culture.  The best way to do that: Bring back the personality disc jockey and the street smart music director.  It might not hurt to start connecting with the music again.

If that happens, Apple and Pandora will simply be the 21st century replacement for Tower Records, not the radio tower.

It is vital that the NAB and everyone in this business put as much pressure as possible on the manufacturers of smartphones to “turn on the radio.”  This is an existential issue for radio.

5) The commercial. Those 30 and 60 second “spots” pile up into PPM pits of purgatory. Something must be done soon about the elephant in the room.  Commercial spots are ratings killers.  It is the cruelest of ironies that the very commercial itself can prove to be the downfall of commercial radio.  The industry must figure out a way to reinvent a way to express its commercial potency on the air.  Perhaps this can be done with an inventive way of generating and executing “sponsorships” instead of spots and using the internet creatively to provide value for advertisers that doesn’t drive off the listeners that the sponsors seek to engage.

So what to do?

The terrestrial radio industry, armed only with draconian budget cuts, increased centralization of management and programming, and letting it all hang out online, can only hope to survive as long as the FM/AM car radio remains dominant in America’s dashboards.  After that has changed, all bets are off.

I am excited about the internet and I think internet radio is here to stay.  My support in this article for terrestrial radio is not based on nostalgia or backwards thinking. I have a long history of predicting and supporting the rise of the “media station” as well as internet radio.  TALKERS magazine named its national radio convention – the “New Media Seminar” – some 15 years ago.  That was based on the premise that the key to terrestrial radio’s future survival and “thrival” is to effectively integrate its resources and cultural goodwill into a healthy relationship with and utilization of the digital world while preserving its unique and glorious culture as well as the economic security and viability of most of its professional practitioners in ownership, management and talent.

Not to do so presents the very real danger of what we grew up recognizing as “radio” becoming hopelessly adrift as just another utilitarian service without its own shipping lanes on the high seas of the internet.

Michael Harrison is publisher of TALKERS and can be contacted at michael@talkers.com.

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Category: Michael Harrison, Opinions