Share This

Commercial Radio was already entering slash and burn mode before the recession hit.

Consolidation was driving out the researchers, marketers, programmers, and talent. Once the recession hit, things got considerably worse, and radio company leaders all but abandoned radio’s killer apps such as localism for a generic, sound-alike approach — positioning itself as a “reach” medium.

The results were predictable.

Commercial radio was up fractionally last year to $14.1 billion in revenue — well below pre-recession levels, according to the NAB. Even this week, radio companies are reporting first quarters that trailed last year’s numbers.

Contrast that with cable television, which poured millions into the development of creative programming directed at specialized audiences.

Again, the results were predictable.

New Neilsen data shows that cable, forever a backwater in the media world, has caught up to its broadcast counterparts. In 2011, cable collectively billed $21 billion, just shy of the broadcast networks’ $21.1 billion. (Note that TV’s total haul, which includes syndication, etc. is almost $72 billion, more than all other platforms conbined.)

For longtime watchers, it’s an amazing milestone for cable to catch the big 5 broadcasters.

But perhaps more amazing is the growth that came during the recession. In 2007, cable pulled in $14.8 billion — so we’re looking at nearly 50% revenue growth while facing the worst economic headwinds in the history of the medium.

Over the same period, broadcast television slimmed by just shy of $2 billion. So cable not only poached broadcast dollars, but more importantly, it grew the business.

Radio stagnates while cable experiences massive growth. Same recession for both.

Cable did it by investing in the product — something commercial radio simply has not done.

Share This

The Radio Advertising Bureau reported that radio, as a whole, was up $100 million in revenue over last year.

On the surface, this is fantastic news. Just keeping its collective head above water is worth celebrating.

But below the surface, the increase from $17.3 billion to $17.4 billion points to fundamental problems with the business model, and how it’s being executed.

In short, commercial radio was up 1% over last year, and when compared to network television (up 12-15%), cable television (all-time high upfront), and new media up more than 25% depending on the sub-category, a 1% year-over-year looks a little scarier.

What isn’t available in the initial numbers, as reported by Miller, Kaplan, Arase, and Co., are breakouts that might tease where sever problems lie. For example, has AM become a boat anchor that’s dragging down more respectable FM increases, etc.

However, here’s a chart worth looking at — Q4 breakouts that show where growth is really coming from. And it isn’t spot revenue, which actually declined 1% year-over-year.

As noted above, there are nice increases in the Network, Digital, and Off-Air categories. However, those pieces of the overall pie are relatively small, so the increases really need to be in double digits to re-invigorate the medium –especially in digital and off-air.

Terrifying are the spot numbers. Other trades have blamed the lack of political dollars infused into radio in 2011. While that may be the case, it really isn’t the problem. And neither is the soft economy.

What nobody wants to talk about is the fact that advertisers are turning away from radio. Check our January 29 story citing STRATA data.

Or the implications. Remember that station values are pegged to cash flow. Increases of 1% won’t even overcome inflation, so, arguably, everyone’s radio station is worth less than last year.

We’ve previously argued that commercial radio is simply getting it wrong — trimming, cutting, nationalizing, and otherwise failing to connect with the audience on a more local, intimate, or even social level.

The revenue and other research numbers are supporting our position. It’s bad business.

Radio cannot become a commodity– like flour, sugar, or gasoline — purchased simply on price or convenience.

While the rest of the world is methodically heading in a more socially connected world, commercial radio is running in the other direction. Disconnected and passionless. Advertisers have noticed and are re-thinking their options.

It’s time for commercial radio broadcasters to turn around and act more like their public radio brethren — building communities, and growing.

On August 30, 2009 I wrote that radio was blaming all of its problems on the recession, and once the economy bounced back, everything would be fine.

In short, I called bullshit.

Instead, I argued that commercial radio’s business model was on fire well before the recession, and everything big radio companies have done since has simply fed that fire.

I pointed out Bob Garfield’s excellent observations in his book The Chaos Scenario. Among other things, Bob noted that media’s expansion was seriously outpacing the ad dollars that supported it.

The result would be sinking CPMs and a greater proportion of the ad dollars going into digital.

Big Radio’s response to all this has been to circle the wagons, cut costs, and turn the content into a commodity. Arbitron’s Personal People Meter handed over more data, which was immediately misused by managers and consultants who didn’t understand how to use it.

In the almost two and a half years since I wrote that piece, commercial radio has gone literally nowhere. On the other hand, Broadcast TV, Cable, Digital, and Mobile are up big across the board — regardless of the economy. Only print has fared worse.

With commercial radio having just announced another flat month (December year-over-year), Strata’s fourth quarter survey sums it up.

(Strata, by the way, is a software company in Chicago that supports around 1000 ad agencies.)

Check this unfortunate finding…

The top medium of choice for clients in Q4 2011:

* Spot TV (Broadcast and Cable) 51%
* Digital 31%
* Spot Radio 8%

As bad as the 8% is, it’s down from 16% last year.

As Bob Garfield correctly predicted, not enough dollars being spread too thin across too many new forms of advertising.

And if you’re wondering where the next trough of money is going to go, look at your phone. Ad Age reports that mobile advertising will be up 80% in 2012 to $2.6 billion.

If you’re curious as to why Clear Channel dropped radio from its name, the answer lies in this chart:

Mobile Advertising Projection: Ad Age

I’ve said it before and will say it again — it’s not the medium, it’s how the medium is being programmed. Pubradio is hanging in there and in many places, growing. Commercial radio is just plain getting it wrong with a game plan that may provide audience, but that audience is less and less desirable to advertisers.

And that’s all that matters.

Share This

If you’re programming a music station and you’re addicted to Arbitron’s Portable People Meter ratings data — or you have a boss or consultant who is, take note of the death of WYSP, as you may get a glimpse of your future…

On Monday, I posted Memo to Commercial Broadcasters: It’s Not Working.

In it, I argued that, plain and simple, commercial broadcasters and the old-school consultants who consult them, have shown you their game plan, and that plan is not working.

Television, with sagging shares and the same lousy economy, managed nearly a 15% year-over-year increase at the advertising sales upfront. Digital media has romanced the auto industry, among many others, and continues to eat more of the pie. Even Public Radio shows growth.

But not commercial radio. Defensive, fear-based programming tactics rack up passive cume, but continue to strip radio of any meaningful sales story and the advertisers are hip to it. The result of all this “work” is anemic, 1% year-over-year “growth”. And when growth numbers are lower than the rate of inflation, well…

With radio’s cash register failing to ring, advertisers are either not sharing commercial radio’s enthusiasm for big, passive cume, or those  advertisers can easily reach those same people through other mediums.

The demise of WYSP/Philadephia offers up an excellent illustration of why current tactics are not working.

CBS pulled the plug on WYPS after their venerable AM sports-talker, WIP was successfully attacked by an FM competitor, WPEN -The Phanatic.

So how do you protect an engaged audience and the resulting cash-cow franchise? You kill your FM station with that has a passive, disengaged audience you can’t monetize.

WYSP had a robust cume of 770,000, but managed to convert it into just a 2.2 share. That’s lots of people spending very little time with the station. Passive. Not engaged.

WIP has just 429,000 listeners, but managed a 2.1 share. Fewer people, listening much longer or more often. So the station with almost half the audience wins the day.

CBS’ move is easily explained: One attracts dollars and the other doesn’t. One worth protecting, one less so.

‘YSP, in the end, featured Danny Bonaduce in the morning, but then launched into a hyper-tight classic rock format devoid of really anything besides a mix of well-worn songs that could be found just about anywhere.

Worth remembering: Advertisers and agencies can actually hear your station, and they know the difference between the vibrant and exciting, and the defensive and passive.

A sign of the future? In just the past month, WRXP/New York, WKQX/Chicago, and now WYSP/Philadelphia — all now talk radio. The latter two were very poorly executed stations, and pretty much deserved their fate.

But if these major market changes are any indication, there will be many fewer jukebox cume machines this time next year.

What replaces them is anyone’s guess. More talk? Or will station owners and senior management finally realize that they’ve been sold a bad strategy full of tactics that don’t deliver, and need to change course?

- Paul Marszalek

15 million units of the original iPad, one million units of the iPad 2 sold in the first weekend of release. Rumor has it there will be an iPad 3 later this year.

So let’s get this straight: A high-end, overpriced product the beats the competition like a red-headed stepchild — during the greatest recession in history.

Imagine where Apple might be when people actually have money to spend.

Interestingly, it’s not all that rare. There are many examples of companies and products that emerged during recessions and sometimes even dominated once the economy recovered.

While most companies peel back on research and development, cut talented personnel, and otherwise hide in hopes of riding out the storm (sound like anyone you know?), others pounce.

Household names like GE, CNN, MTV, HP, and FedEx all grew out of recessions.

More recent examples might include the Kindle, Pandora, and Hyundai. Green Mountain Coffee, with their little single-brew cups, accelerated while Starbucks was on its heels in this recession. Interestingly, the two partnered just days ago as Starbucks rebounds.

For radio, it’s not too late. While things are improving somewhat, many radio companies and individual stations are still in hiding.

Stations that make moves now — investing in research, new formats, talent, and (gasp!) marketing may well reap significant rewards in the very near future as they position themselves ahead of competitors in a strengthened economy.

We’ve always preached that it’s not a question of which “media” is superior — new media or traditional media — it’s how they work in tandem.

Brands with traditional media assets have and will continue to have an advantage over new-media-only products fro some time to come.

Sure, there are some pretty astounding monsters in new media, but the fact is, they’re few and far between. What’s really been hurting traditional media is its nearly complete mishandling of new media.

Examples abound, from the fits and starts at The New York Times to the complete debacle at magazine publisher Condé Nast. Corporate radio has also been largely horrible.

Some are beginning to figure it all out, and win big. Others will wither.

But it’s not about new media versus traditional media — it’s really about content, and how the mediums complement each other in delivering that content.

Examples:

* Did you know that broadcast television actually grew against cable television last year? After years of taking their lumps, the networks actually took viewers away from cable.

* Do you know which broadcast network was #1 18-49 in the beginning of September, and has run a steady #2 since? Univision.

* Did you know that the number of people listening to radio actually rose last year? Yes, by about four million.

The question is why, and the answer, at least in the first two, is content.

Broadcast networks invested in content, namely the Olympics, to bring eyeballs back to the networks. Univision targeted a massive under-served audience with well-developed content to win the demo.

Radio grew because the content was good enough — but mostly because the audience measurement methodology changed. The PPM is logging more radio usage than the diary did.

While radio remains a bit scary with its defensive strategy and declining investment in content, traditional media will do just fine, so long as the content is compelling and offers a takeaway to the audience.

Statistical evidence that traditional media has a future comes in the form of a recent Pew Research Center study that shows, among other things, that when it comes to a daily source of information, it’s not about new media vs. traditional media, it’s about how people use them in tandem.

Researcher Ted Bolton dug deep into the Pew study, and published this article.

Take a look, then get back to working on spectacular content.

Share This

While moderating a record label/radio panel at FMQB’s recent Triple A Radio Conference, I posed the question of whether or not a music station’s success was reliant on a healthy music industry.

To illustrate the point, I asked radio panelists to describe their relationship with record labels. Using the language of personal ads, the options were:

* Just Friends
* Going Steady
* In a Long-term Relationship
* Friends With Benefits
* Looking for Mr. Goodbar

I was expecting a lot of “just friends” or “friends with benefits” responses. Instead, there was universal movement toward “in a long-term relationship.”

If that is the case, then it does suggest that music radio indeed needs a healthy partner in the relationship.

And it’s true — it does. Radio needs hits. Music radio needs well-produced albums. Radio needs stars.

Needs.

So what has radio done lately to help ensure the survival of record labels? I think it’s fair to say, less than it used to do.

And this is why I’ve come full circle on the idea of a performance royalty. I once completely opposed, I now believe a modest investment is in music radio’s best interest.

Airplay, much less a decreasing amount of airplay, is no longer enough– music radio isn’t holding up it’s end of the relationship.

Worse, music radio has shown its cards and all but gotten out of the content development business. It’s gotten so bad, in fact, that outsourcing the content development might be an idea that radio consolidators could get their arms around.

And that’s arguably what the performance royalty could facilitate. More money invested in the development of artists. More money invested into better production values. More money invested in the star-making machinery.

If it works, and the money actually is spent this way, not only would radio have a better product to monetize, but there would be more opportunity to get some of the investment back directly — with artists and labels more likely to play ball on events and other non-traditional revenue ideas.

Radio folks have told me that they have ZERO confidence that labels would do anything but pocket the cash.

I believe labels that do that won’t be long for this world.

If radio really believes in a long-term relationship with the labels, it will have to realize that it takes two to tango.

-Paul Marszalek

Citing a return of some longtime advertisers to the fold, the addition of some newbies, and increased revenue from digital and multiplatform, some analysts are predicting a 2010 that ranges from flat to up 2%.

Meager, but hey, it beats the alternative.

The question is whether or not a forecast that basically predicts treading water will be enough to turn the ship around.

With ferocious debt still killing off personnel and creativity, the revenue gains may not be enough to do what’s required — which is invest in content. And if that doesn’t happen, the audience erosion will continue.

Read the Ad Age article here.