Hear 2.0

When your Product is "Free" it has to be "Priceless"

(The following is lightly edited and reprinted from Doug Erickson's blog with permission)

Chris Anderson's Free is a good book.  It will force you to think harder about some important issues that the broadcast industry is facing right now, which is why Free should be on your bedside table ASAP. 

Consider this excerpt from the NY Times Sunday Book Review of Free, by Virginia Postrel: 

...the marginal cost of digital products, or the cost of delivering one extra copy, is approaching zero. The fixed cost of producing the first copy, however, may be as high as ever. All those servers and transmission lines, as cheap as they may be per gigabyte, require large initial investments. The articles still have to be written, the songs recorded, the movies made. The crucial business question, then, is how you cover those fixed costs. As many an airline bankruptcy demonstrates, it can be extremely hard to survive in a business with high fixed costs, low marginal costs, and relatively easy entry. As long as serving one new customer costs next to nothing, the competition to attract as many customers as possible will drive prices toward zero. And zero doesn't pay the bills...Obscured by the breezy tone of Free is a sobering message. 'Everybody can use a Free business model,' Anderson admits, 'but all too typically only the Number 1 company can get really rich with it.'

The largest consolidated radio companies find themselves in this terrible position not because radio has inherently high fixed costs. To the contrary, radio has very low operating costs compared to most other media. But Clear Channel, Citadel, Cumulus, Entercom and CBS are paying high fixed costs just to service their massive debt. If they hadn't leveraged themselves so absurdly, radio would be doing pretty well, even in this recession. 

It has long been my contention that I am much more likely to willingly pay $50 to see the art works in the Louvre than I am to spend my valuable time, but no money, to see the drawings in my neighbor's garage. Anderson raises an interesting point: As content itself becomes ubiquitous, time is what increases in value. No one has the time to see each new video posted on YouTube. No one has the time to check out every new and interesting web site. No one has the time to listen to every new artist and song posted on MySpace. And there is money to be made in (1) being the trusted filter, and (2) providing such remarkable content that it is worth paying a premium to get it. Hulu gets this. Seth Godin gets this. The Louvre gets this. 

As choices for information content proliferate to the point of infinity, and attention becomes more and more scarce -- and thus, valuable -- what is your station doing to deserve my attention and time? What can I hear on your frequency (or stream) that I can hear nowhere else? And, is that exclusive content remarkable enough to sustain itself through a premium subscription, or by building a large enough tribe of enthusiasts that you can monetize it and still make an acceptable profit margin after paying the talent that produced it? 

If not, welcome to the United Airlines business model. The line to speak with the bankruptcy attorneys is getting very long...

The Shape of Radio to Come - Four Predictions

Several things are likely before this year is out.

First, one or more major radio groups are likely to default on their debt obligations. This, sadly, will not be a surprise.  And it's hardly news.

Second, the Radio Advertising Bureau will likely vanish.  If that happens it may not make a big difference to your bottom line, but it sends a very bad signal to our agency friends on Madison Avenue. I'm hoping this prediction is wrong, for the record.

Third, the structural problems of all media tentacles - especially newspaper, TV, and radio - will likely alter the FCC's ownership rules so as to allow further consolidation, including cross-industry consolidation.  A shrinking industry can survive by owning more of the remaining real estate, and that's exactly what's likely to happen.

Fourth, plenty of smart broadcasters will be left standing - and lots of them will be staging for a new growth curve as they redefine their structure and their very fundamentals.  And how will those be redefined?

From MediaPost:

With rare exceptions, we won't be going back to double-digit station multiples," said Mark Fratrik, vice president of the BIA Financial Network and a former executive of the National Association of Broadcasters. The reason reaches beyond the recession to systemic changes occurring in all of media and advertising.

Advertising dollars are expected to be 10% to 12% lower than 2008, which was the second-largest-ever spending decline. Marketers are clearly paralyzed or bankrupt waiting out the recession, during which time digital technology is radically altering the media game board. When Madison Avenue revives in 2010, marketers will be spending less and seeking more of the target consumer connections and qualitative data they can only get on the Internet and connected devices. 

"Every local media company must broaden its thinking about what they are and how they go about their business," Fratrik says. That means partnering with Google and adopting its online ad auction model, partnering with local newspapers and other stations, aggressively getting into e-commerce and multicasting, and charging for their unique local content and services on mobile handheld devices, he said.

Now, more than ever, it's time to ask what business you're really in.

And that means what are your unique leverage points and how can you solve the problems of your constituencies better than anybody else?

To quote one of my favorite TV characters from the 90's, "the truth is out there."

When "Feel-Good" News Hurts Radio

One of the biggest mistakes the radio industry makes is to embrace and encourage "feel-good" statistics from Nielsen, Arbitron, and others that look for and find the good news.

There's nothing wrong with good news, of course.  But the world knows when you're not telling the whole story and it damages the credibility of the story-teller and our industry, both.

Take this piece from MediaPost, which reports on Nielsen's pronouncement that radio is still "tops with teens worldwide."

Not only does the article poke holes in the argument but it points to the weakness of the argument itself:

Indeed, the Nielsen study ended up damning radio with faint praise. For example, Nielsen's observation that "teens may find themselves in older cars not yet equipped to play from their MP3 player" hardly inspires confidence, suggesting a residual audience held in place by technical limitations that will eventually be lifted. Likewise, Nielsen's assertion that "radio still serves as an information source for local social happenings of extra relevance to teens" describes a function that is marginal to radio's overall business, and also an easy target for disintermediation by online media.

Too often, our industry is so hungry for positive spin that we leap into obvious traps - and I'm talking about companies (Nielsen and Arbitron) who should know much better.  With friends like these, who needs enemies?

Here's the headline I want to see covered in MediaPost:

"Radio broadcaster launches bold initiative to reinvent industry."

Don't look for that headline to come from Arbitron or Nielsen.

Please, Arbitron and Nielsen, save your "good news."  You're not doing yourselves - or the rest of us - any favors.

Rather than assure me I'm not ugly, how about announcing my makeover?

Our industry desperately needs a public relations effort with teeth - one which is about the truth of our progress and plans, not about false images of momentum full of more holes than swiss cheese.  This is really pathetic, gang.

Radio goes "interactive" in the dash

Harve Alan tips me off to this video from VW and Intel.  

It features an all-new "infotainment" in-dash system that features all kinds of interactive content along with a handy, dandy AM/FM radio (and not the HD kind).

The thing you need to understand about this (inevitable) technology is this: Anything that occupies space with a radio and consumes the same attention and time as a radio competes with a radio and substitutes for a radio. 

That means those are your competitors - and it also means you're in that "business" too.

That means you must either dive into the fray or offer an alternative so compelling it beats the competitive offerings.

  

Reinventing Radio

Take a page from a magazine. 

Literally. 

As this article from the WSJ illustrates dramatically, many magazines are surviving by redefining what a magazine is.

Whether it's a mag that comes with a free t-shirt or one that changes colors in the sun or one that comes fitted into a Frisbee, a magazine is no longer exclusively about the content but about it's context, too. It's about the experience of which the paper is only one part.

Says the WSJ:

These are publications that revel in their 3D-ness, special objects that demand deeper interaction from their readers than the average print magazine. Taking advantage of recent advances in printing technology, these publications are determinedly nonconformist in everything they do. But they are, in essence, magazines -- curated, regular compilations of content with clear selection criteria, consistent design and an individual voice.

Radio, too, must expand its borders and consider what experiences it can deliver that are not bound to the over-the-air signal or even bound to the call letters.

What your station has isn't a "brand" in the sense that it's all about your call letters. Nope.  What your station has is a mass volume of relationships and trust between you, your audience, and your advertisers.

Those relationships are waiting to be leveraged.

Any way you can.

Will "Curation" Save Radio? Nope.

One of the ways radio's competitive advantage over competitors is often described is by invoking the term "curator" to define radio's role in guiding listeners to what's good in new music (for example). 

iPods may be able to play your perfect mix, the thinking goes, but it can't introduce you to interesting stuff you don't know yet. 

Well, there are several flaws in this thinking. 

First, while iPods do not provide a curatorial guide-like role, services like Slacker and Pandora certainly do, even though they are effectively automated (the "curator," in other words, is a robot, but an effective one). While this is a fairly shallow definition of curation, it's not far off the mark. 

Second, the vast majority of radio listeners do not seek out curation from their favorite stations. While they may listen for what's new, they don't necessarily expect to be "guided" by "experts." Nor would most say they need this level of guidance, which is more characteristic of a AAA format (commercial or especially non-commercial) than of every other format combined. 

Third, curation over the air requires people - human beings - who can curate. To guide people to cool new music, you need a recognized music expert who is as interesting and entertaining as she is knowledgeable. Just being the station for what's "new" does not make you a curator. It only makes you a place where curation might be welcome. 

Consider the bookstore example. 

The employees who recommend the books are the curators. And they lend their names to their recommendations along with a blurb justifying their picks. This is curation. On-site experts exhibiting their expertise for your benefit. 

Curation will not be radio's savior as long as that expert element is lacking or downsized or de-cluttered or trimmed. 

Curation doesn't simply happen. It is earned. 

In case listeners want it at all.

Cell Phone-Only Households surpass Landline-Only Households

See this video from NBC Nightly News.

If you don't see the video, click the post title.

The End of "Reach"

From Business Week: 

For decades network TV has been about reach. Programmers traditionally chose shows with broad appeal, the better to get millions of viewers and, in turn, persuade national advertisers to buy those eyeballs. That era is essentially over and the networks are scrambling to adapt to a fragmented landscape where even popular shows are lucky to pull in 10 million viewers. "They have to rethink what they put on the air, how many hours they'll do it, everything in their playbook," says a former top executive who now produces TV shows.

I keep saying this but few folks in radio seem to be listening:  The era of reach is ending. The era of accountability and engagement has arrived.

Sure, it's still important to reach lots of people.  But reach as the primary - or exclusive - selling point is fading fast.  How radio navigates this tipping point is one of the most critical decisions you or your company will make over the next couple years.

This much is for sure, it ain't business as usual anymore.

Or, as NBC CEO Jeff Zucker said, "We can put our heads down and we can cross our fingers and wish this was 1987. But it is not."

9 Secrets to Radio's Digital Transformation

Either "Radio is screwed" or "Radio's opportunity is HUGE!"

Which side of the attitudinal coin are you on?  Because one side will survive and thrive after the shakeout, and the other will not.

I don't know about you, but I want to be on the side that sees huge opportunity, because it's quite real.

Early this week I was honored to be a featured speaker at the Gospel Music Association convention in Nashville.

This is the underground video of the event (excuse the soft lighting and internal camera mic), but it's the full 45 minute presentation, and it includes nine simple but strong themes about what radio needs to do to realize its future.

Packed inside are audio excerpts from several of the interviews featured in my new book along with a few piping fresh interviews too new for the book - two of which have yet to be posted even here.

So watch this video, I urge you.

Radio's future is the one we make - or the one we settle for.

The choice is yours.

It's worth noting that making this transition happen is exactly what my new company is designed to do.

Thinking the Unthinkable about Radio

"Society doesn’t need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable. That’s been a fine accident to have, but when that accident stops, as it is stopping before our eyes, we’re going to need lots of other ways to strengthen journalism instead." 

So says Clay Shirky in one of the finest and most widely read pieces of 2009. 

Which leads to this question: Does society need radio? 

The answer, quite clearly, is "no." 

Society doesn't need radio, society needs what radio provides. 

Society needs the comfort of our favorite songs. We need the real-time connection to our community (however we define "community"). We need to know what to wear today and whether or not school is cancelled.  We need to stay up to date or to revel in our past.  We need to be outraged and informed and soothed and amused.  We need to be told what to do in a crisis.  We need to know what's on sale and where.  And we need these things wherever we are - at home, at work, in the car, and on our hip.

These are all radio specialties, but did you notice that nowhere in that paragraph did I use the term "radio"?

As an industry, radio needs to recognize that its social currency is in what it provides, not in the manner it provides it.

Radio needs to escape radio - and get into its future.