Oftentimes people call me “Paul,” or they call Paul “Fred.” I often respond, “It’s pretty much the same thing.” But the reality is, it’s not the same thing. As we like to say, I’m programming, and Paul’s sales. And even though the lines intersect all the time here at Jacobs Media and jacapps, we are very different people that come at the industry’s challenges and opportunities from different angles and POVs. Today, Paul addresses the digital sales conundrum – one of the most talked about issues in radio and one that will be a big topic at Radio Ink’s “Forecast” conference later this month. So think of this as a digital “jump ball” an as always, we’d love to hear from you on the topic. – FJ
We have often quoted ex-Ford CEO Alan Mulally’s game-changing quote in this blog from his keynote speech at the 2009 Consumer Electronics Show: “We are a car company but we are learning how to think like an electronics company.” This was a seminal moment because historically, Detroit’s automakers were traditionally seen as slow, plodding, and behind the times. Mulally laid down the gauntlet that his company was undergoing significant changes.
But the following year, Mulally appeared at CES again and said something that wasn’t as highly quoted, but just as important: “We’re learning how to move at Silicon Valley speed.” In other words, Ford’s leader understood the challenges of transitioning a huge company from the inside out – to change the way that employees throughout the organization respond, solve problems, and most importantly, redefine their culture.
This isn’t an easy task, whether you’re one of the largest automakers in the world with hundreds of thousands of employees, or a radio station cluster in a small market. For both enterprises, it requires a complete re-imagining of the business that you are in from top to bottom. Ford no longer simply builds cars. They build entertainment transport systems that are totally interconnected with the cloud and mobile communications systems. By thinking about the business they are in differently, a world of new possibilities and challenges opens up.
Last week, BIA/Kelsey’s VP of Strategic Sales Consulting, Stacey Sedbrook, called radio out for not embracing the digital space with investment and enthusiasm:
“Despite some great examples of innovation, the radio industry is lagging other media in digital adoption. Radio has invested less in developing digital products and services, devoted less leadership attention to digital transformation and done less to retrain its sales force into digital sellers. As a result, it has less digital revenue than most other media. The good news for radio is it still has an opportunity to avoid the fate of newspapers, Yellow Pages, and other media that waited too long to transform and are now scrambling to return to growth.”
Legacy industries like automotive and radio broadcasting aren’t the only ones facing these historic dilemmas. If you attended DASH, you saw a video from Domino’s Pizza highlighting their new partnership with Ford, where consumers can order pizzas right from their cars. They don’t have to listen to an ad on the radio, or clip a coupon from the newspaper. It’s right on their dashboard. Domino’s realizes that its business is centered around people on the go and they can connect with them directly. They’ve removed the middleman.
They aren’t stopping there. In a recent story on NPR, “Domino’s Becomes A Tech Company That Happens To Make Pizza” (that sounds like a familiar refrain, doesn’t it?), the company has now gone all-in to reinvent the consumer experience and create a significant differentiator between themselves and their competitors. They’ve invested in the Domino’s Tracker, a way for consumers to track their order online that even includes elements of gamification, and they are about to launch a voice-activated personal assistant they call Dom.
How did Domino’s make the adjustment from slinging pizza pies to reinventing their entire business? It’s simple – the company’s biggest department isn’t their test kitchen, marketing, or layers of management. It’s IT, a department “staffed with digital futurists” that is charged with searching out new ideas and ways of reinventing their business and their relationships with their customers.
While their competitors continue to focus on cutting costs (Is that really cheese in your pizza?), Domino’s is investing in R&D with the goal of creating a unique, valuable consumer experience. In the process, they’re aiming to become the dominant pizza company.
They’re not alone – every major company is working feverishly to figure out how they can adapt to the tectonic shifts caused by technology that are occurring in the relationship between customers and brands.
A decade or so ago, companies had their hands on the wheel – they controlled their customer relationships through image management (the size of their ad budget they could use to push out messages). They also controlled the order and delivery process. It was all variations of “the way we’ve always done it.” And was often the case, many legacy brands provided a sub-standard consumer experience and they didn’t care.
That’s changed. And every company from airlines to car dealerships to radio stations has to rethink its consumer experience, and how digital technology is either disruptive or helpful. Heck, even the Secretary of State’s office here in Michigan has invested in technology that has partially eliminated those memorable experiences like hours-long waits in line at the DMV causing you to miss being in your workplace. If they can do it….
They didn’t have to strategize about how to be great back then. But they do now.
They didn’t have to invest in the customer experience back then. But they do now.
And that brings us back to Stacey Sedbrook’s view of the radio industry, where the digital maneuvering is still too focused on pushing out content – streaming, texting (“Listen at 2:15”), and even selling ads on Facebook pages rather than re-inventing what the business needs to become in order to better serve its advertisers, its listeners, and its communities. As Ford was a car builder, and Domino’s was a pizza maker, radio remains in the transmitter and tower business that does some digital on the side.
How can the radio business change this equation? By looking at the business differently, just like Ford, Domino’s, and the Michigan Secretary of State has.
The traditional radio business is based on advertising, and nobody has to point out again that revenue is essentially flat for the industry with few indications of a major uptrend any time soon. Radio revenue for most companies continues to be in a “flattish” range. And flat is not the new up.
That should be motivation for broadcasters big and small to find creative ways to invest in new ways of doing business. Radio can no longer afford to be a “push” medium. Rather, it needs to look at its business model as an opportunity to leverage its audience in multiple ways, and not just to advertisers, but to improve its own performance among an ever-changing populace.
The radio audience remains large, and it’s the secret weapon for broadcasters. iHeartMedia and now Townsquare have figured this out by investing heavily in the concert business. They are able to move their cume audiences into an ancillary business and generate millions of dollars from them.
But that’s the tip of the iceberg, and it’s going to require a significant investment in R&D and outside capital to determine a company’s – or station’s – digital strategy focused on creating new businesses and platforms to increase engagement, discover new revenue streams, and most importantly, reinvent the way that everyone in the industry defines what it is they are actually doing.
It’s going to require new ways of approaching these business opportunities – not morphing existing staff to new roles but investing and committing to the hiring of new people whose jobs – and incomes – are dependent on success. Asking traditional radio salespeople to successfully sell new, non-traditional products – especially digital – has generally been a failed experiment.
If radio is going to get serious about creating digital businesses, it’s going to require not only new thinking, but investment.
And while some might suggest that Wall Street might not tolerate a decline in earnings that comes from making investments in R&D, explain why Amazon stock is so appealing, even though they’ve never made a penny in profit CEO Jeff Bezos plows his revenues right back into his business, expanding its customer base and product offerings, while refining and customizing the overall customer experience. One day that investment will pay off, and based on the chart below, lots of money because people believe in his dream.
Over the next few weeks, ,any of you will order clothing, electronics, wine and cheese baskets, and iPhone6 cases from Amazon and similar businesses that have redefined the shopping experience. Yes, the mall will be packed, but if you talk to people in that business, they will tell you that “etailing” has forever changed the way we shop, forcing even brick and mortar stores to get serious about their online shopping components.
Amazon’s stock price history is anything but flat, because they continue to innovate. Radio can – and should – do the same thing.
Because the only flat thing that’s good is a pizza.
After a brief stint working for the William A. Robinson marketing services agency in Chicago, where he created campaigns for Philip Morris and Seagram's, Paul struck gold when he was hired as an Account Executive at WRIF-FM in Detroit. This experience launched his sales management career, and four years later, he became the General Sales Manager for KZEW-FM in Dallas, and ultimately, the General Manager for KHYI-FM, also in Dallas. He was lured home to run WDFX-FM in Detroit, before joining Jacobs Media as its General Manager in 1991.
Along with overseeing the day-to-day operations of Jacobs Media, Paul’s main contribution has been the addition of sales consulting services. As an expert in all Rock formats, Paul has made Jacobs Media clients’ untold amounts of money by aiding them in their understanding of how to sell, market, and position their formats via sales training seminars. He has conducted hundreds of client presentations on behalf of Jacobs Media clients, and has aided the Ford Motor Company and Procter & Gamble in improving their understanding of the youth market. Paul is a true "format champion" – someone who believes in the power of branding, and developing radio’s inherent assets.
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I wish that there could have been a follow up question to Stacey that outlined the economics of streaming digital music. Everything she (and you too Paul) said is true, but so is the reality that the current streaming royalty structure precludes ANYONE from making a dollar doing it. Maybe Pandora has an 8 share and maybe its an 11, but if it was a 30, they still wouldn’t be able to make any money.
Few have been as critical of radio’s top dogs and their lack of vision than me – but I see the conflict. If radio did everything that was suggested here, every customer that it converted to digital would also be converted from a profit center to a loss center. Yes, there is more to digital conversion than just streaming music, but its hard to imagine any digital strategy for radio that didn’t rely on it prominently.
The sad reality is that there is currently no model for streaming music. The record biz won’t budge, claiming they are way behind the good old CD days an artists are complaining that they are too. Dominos can put an app on your dash and still sell you a pizza and Ford can replicate your phone on that dash, sell you a car and maybe even make more on that car if that dash is awesome. Imagine if Dominos or Ford had to shell out 70% of their revenue on each pizza or car they sold with those features.
Has anyone even tried to craft a model that would allow every stakeholder to make a reasonable ROI? Unless and until that happens, its unreasonable to expect an flat industry to commit to down.
I sugggest some beta testing. Set up the products that you’d offer in a perfect royalty situation – including sales and support in one or two markets. Then work it backwards to a royalty system that could allow eventual reasonable profits if scaled. And start negotiating. Maybe a straight pay for play isn’t the only or best way to structure royalties – all possibliities should be considered once there are cost and revenue baselines. Yes, they would lose money – but in a controled, productive way that could be an investment in the future.
Its easy to crticize radio for looking like the buggy whip industry that it pretty much is. But how much of what is recommended here would be done by any of the players in this piece if it was THEIR money and financial future at risk given the current economics?
Just sayin…
Bob, your criticism about the financial efficacy of streaming is on point. Jeff Smulyan reminds us of that every time he introduces NextRadio. So maybe I’m being overly optimistic when I have faith that Nielsen will at least provide a ratings solution. But digital assets aren’t just about streams – they involve apps, podcasts, video, and other assets that are part of great media brands. That goes to the heart of the issue and the opportunity. How can the medium marshal its strengths in a digital environment that can satisfy fans AND advertisers. As Paul points out, investment and experimentation is a key – and that’s what you also suggest with beta testing. Thanks for lighting up the conversation.
Bob, radio only looks like a “buggy whip” industry if it acts like one. It doesn’t have to be that way. There’s a ton of innovation in the audio space, but it’s happening at non-radio companies. Imagine if a radio company created Slacker or Stitcher, ad platforms like Clip or XAPP, or a traffic app like Waze. It requires resources, creativity, and investment. But it can – and should – be done.
I agree, but if it looks, walks and talks like a duck…well? Radio has squandered both ther opportunity to invent things it could leverage to its audience like the ones you suggested with tunnel vision and also much of what Fred outlined – by dumbing down its non music aspects with tracking and syundication. The podcast/video potential is way less than it could be as a result.
You talk to these guys all the time and because you’re the best at what you do, I asssume you have access to the top leaders at the best companies. Why have NONE of them really undertaken any of this on a corporate level? There are companies on great financial fgooting that could easily afford to do it. What gives?
I’m going to go on a limb and say something no one else has. One of the challenges in radio embracing digital products is the age of management. The last place I worked at couldn’t give a hoot – they didn’t understand it and didn’t want to. Age range was 50-64. They are old school radio guys. I’m not saying everyone is like that. I’m in the age group, but I understand it but not being in management, I couldn’t implement it. I also know radio has changed. These guys are of the this is how we’ve always done it mind set. People like this need to be filtered out or educated. If you have a corporate HQ that believes in the importance of digital they’ll find a way to do it.
Susie, there have been a number of studies that have been done that show that many CEOs are not personally involved with social media – which makes it difficult to be sensitive to a brand’s need to be on these platforms. As you indicate, it may have less to do with chronology and more to do with mentality. But when the CEO is not immersed in digital, it makes it that more challenging to implement new procedures, much less to change the culture when necessary. And of course, the other issue is that much of the digital revolution is disruptive – at least on the surface – making it that much more challenging to embrace something that can be harmful. Thanks for adding to the conversation.
Yes, many are not on any social media. I think you will find the younger ones are on more than the older. To me, it’s a mixture of chronology and mentality. I know there are a lot of industry’s that have implemented changes and improved their businesses with technology. Radio isn’t in that group. Why? I know the mentality has changed a bit, but I think it has to do with the culture of our industry. Remember the book “In Search of Excellence”? They named radio as one of the most cut-throat businesses. It’s “nicer” in some ways, but I would equate cut-throat with money. And to improve a business, you need to spend money. That was one of the reasons the last radio company I worked for wouldn’t advance in this area. They had to spend money. This has been an interesting conversation. Thanks! I read your blog a lot.
You don’t have to be a certain age to be a smart business person. If radio revenue is flat and digital is up, it’s pretty easy to conclude that you want to shift your investment to accommodate and accelerate that growth.
This is also where company Boards need to come in – it’s their job to make sure that management is steering the company in the right direction and challenge conventional thinking.
So while you are right – too many leaders are north of 50, that’s no excuse. The evidence is pretty clear, and the opportunity is pretty obvious, at least to me.
So it would seem. So why haven’t any of them embraced, or even experimented in it?
Two points:
1) There is money to be made under the current royalty system, just not by selling impressions. Using quantitative reports in post-campaign analysis are areas that have been developed by advanced digital companies. Ancillary needs of landing page construction, coding, data parsing, testing, etc., are all places where revenue is waiting. Yet radio is stuck in its cost-per-point pricing, using impressions as its metric. There is no “point” in audio today because, online, there is no known universal audience aggregate.
2) As was once explained to me: C-suite folks view digital as an expense which will not be personally recouped within their remaining tenure; why start something you’ll not benefit from? Ride what’s current to retirement. Digital is the next generation-of-management’s problem.
You are right, it’s no excuse. But it is a fact. You don’t have to be a certain age to be a smart business person, but there comes a time when you don’t want to take the risk. The opportunities are obvious to me, but to over 50 management trying to meet budget, it takes too much money to get the ball rolling. Ken is right, digital is the next generation of management’s problem – I would change that to responsibility. Hopefully, the landscape on this will improve as time moves on. Thanks for the great article!
Appreciate you reading our blog, Susie, and for taking the time to comment. It’s a thorny issue that is changing rapidly.