OK, it started with this screaming headline in Radio Ink. (You have to hand it to Eric Rhoads – he loves a good controversy and enjoys using his publication as a forum.)
JERRY LEE: “STREAMING YOUR STATION IS A BAD BUSINESS MODEL”
And from there, a digital can of worms opened, eliciting comments – often emotional – from many different sides of the question.
We have the utmost respect for Jerry. He is one of the most enigmatic broadcasters of all time, having accomplished so much in Philadelphia that he has indelibly impacted the entire industry. Jerry is not just a thought-leader – he’s a bona fide icon and philanthropist who puts his resources and efforts behind causes and business ventures he believes in. That’s one of the reasons we selected him to participate in our memorable “President of Radio” session at our Summit back in 2008 in Austin.
Some of the comments that appeared in Radio Ink in response to Jerry’s statement even suggest that supporters of streaming are somehow anti-broadcast radio. Or that focusing on streaming takes our eye off revenue generation for the main product.
Perhaps we can lend some clarity to the conversation.
First, CX – or the Consumer Experience – something that we have written about extensively in this blog. Simply put, broadcasters (or book sellers or travel agencies or phone companies) have got to acknowledge what the customer wants or else face the truth that she will simply go elsewhere.
Today, the options are many and they are easily accessible. If a fan of B101 or any other radio station wants to listen on their iPhone or office computer or laptop while sitting in a Starbucks, the station’s audio better be available on a quality stream. Otherwise, she’s gone.
And as we well know, buying a standard AM/FM radio is simply not as easy or attractive as it was back in the ‘70s. Many consumers don’t even have a working radio at home, aren’t allowed to have one in the workplace, or simply find it convenient to stream on the aforementioned devices. To deny the changing ways and new channels in which the audience entertains themselves is folly. To not provide great radio content on these devices is to simply walk away from listening – and revenue opportunities – and hand over your audience to another source.
Radio’s “problem” with digital isn’t an argument about technology. It’s a debate about whether the consumer matters. Too often, broadcasters see the world through their narrow “What’s in it for us?” lens. If we cannot monetize it, cannot market it, or cannot somehow fit it into the budget, it simply isn’t viable. Listeners don’t see it that way. Their propensity to multi-task, their shortening attention spans, and their expanding options all work against an industry that is in denial or simply turns its back on them.
Second, investment in infrastructure and platforms is the key – and in that regard, radio has an advantage over Pandora, Slacker, and the other pure-play Internet broadcasters. Our brands, our personalities, our local market reputation and know-how can come together to leverage viable digital strategies and multi-platform successes. Instead of looking at new technology as an albatross, broadcasters need to start viewing it an opportunity.
If you think back to what radio’s pioneers must have been thinking back in the 1930’s and 1940’s, consider that the U.S. economy was in far worse shape than it is today. And yet, those entrepreneurs bought land, erected expensive towers, built buildings, and hired staffs – all on a bet that radio would one day be ubiquitous in homes, cars, and workplaces. And that the revenue would follow. At that time, Americans entertained and informed themselves mostly through print media – magazines and newspapers – and at movie theaters. Radio was not a sure thing, and you can bet that naysayers were in abundance.
Tim Westergen is all about building infrastructure and amassing fans. His bet is that if Pandora is available in enough locations, channels, devices, and avenues, ubiquitous access to his product will eventually turn into dollars. We can debate this logic as many have, especially since the IPO launched. But to sit around and spend time haggling over Pandora’s financial viability misses the point of Westergren’s goal and his brand’s impact on traditional radio stations – to offer his content to consumers wherever and whenever they want it. And Pandora fans aren’t concerned with profitability. They simply want entertaining content wherever and whenever they can get it.
That’s CX – and whether or not it’s a money maker for Pandora and its investors – what is the logic of this argument when it comes to radio? Why wouldn’t broadcasters want to study consumer behavior, gadget acquisition, and media usage, and then be sure their content is available to their audiences in modern, cool locations? Don’t digital and its new channels present an incredible, exciting opportunity to modernize radio, providing currency through accessibility via new gadgets and technologies?
Third, these arguments are all about monetization, and it is frankly still too early on the digital revenue curve to know precisely where it’s all going to end up. While Eric Rhoads was writing his headline about Jerry Lee, these other stories were all over the trades last week:
Clear Channel angers a media buyer because they reduce the available inventory in their streams
iBiquity puts up money to encourage radio salespeople to generate revenue from HD Radio
Pandora’s IPO puts their value at close to $3 billion, but the CEO can’t answer questions on CNBC about if or when they will be profitable
What does this tell us about the challenges and opportunities that are in front of us today in radio – and the ones that the industry will be facing in the not-so-distant future? Yes, it’s the money. And no, we don’t know right now today exactly how this is all going to shake out.
This argument isn’t about “To stream or not to stream.” It’s about the difficulty of facing change and about the eventual challenges to aggregate audience, and to generate profits from these efforts. In the early days, few new businesses are profitable in their embryonic stages – Amazon, Google, Facebook, and now Pandora are all modern examples. All of these brands have done what radio’s pioneers did eight decades ago – focused on consumers, recognized opportunity, took a risk, built infrastructure and access, created content and functionality, and then developed a business model that made the venture successful.
Finally, there’s the matter of focus. Radio, its employees, and its trades publications enjoy a good conversation, a good debate, and lots of back-and-forth. And that’s what makes our business interesting.
But too often these days, we find ourselves arguing over questions that do exactly what Jerry Lee warned against in the Radio Ink piece – losing our ability to stay zeroed in on what’s important because we’re debating tertiary and often irrelevant issues that miss the point of where consumer tastes are heading.
When we spend time debating whether Pandora is radio or whether streaming is a good business model, our competitors take the opportunity to keep furthering their missions to dominate the world of new media.
On their big IPO day, Pandora executives spent the better part of a day reiterating their goal to redefine radio. That’s what they’re focused on.
Radio broadcasters would do well to beat Pandora and other challengers to the punch, and modernize their medium proactively. In the early years, Kodak could have developed digital cameras. Barnes & Noble could have launched an eCommerce site to sell its books while Border’s might have created an eReader of their own to match or improve upon Amazon’s Kindle. But that would have required a recognition and acceptance of the Consumer Experience. It would have also meant not being in denial about societal and technological change.
Radio could lead the way toward a multi-platform “anywhere anytime” model leveraged on its great personalities, familiar brands, and local roots – if it stops debating meaningless issues and focuses its strengths and assets on providing its great content to its audience, whenever and wherever they like it. CBS Radio’s announcement yesterday about Radio.com, Last.fm, and MP3.com suggest that this thinking is most definitely in-play in corporate radio headquarters. It is in keeping with the spirit of radio’s early swashbucklers.
If we build it, the audience – and the revenue – will surely come.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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The Jerry Lee flap feels like link bait. If we’re really playing to the puck, this is a non-issue. The consumers have already voted on the choice/ availability/ technology issue. When I think of Pandora, I don’t focus so much on this particular company but what it’s doing to change consumer expectation and speed adoption of mobile streaming. Much in the way Napster didn’t have to endure to have its full impact felt, Pandora may not be a long-term company — but it won’t matter if their ultimate impact is the market shift.
It is a non-issue, Mikel. And we know where the puck is going. And you are dead-on about consumer expectations, mobile streaming, etc. The toothpaste is out of the tube. We better be where our listeners are.
Thanks for taking the time to read our blog & comment.
Everything Fred says is true…including the fact that there is no way to stream without losing money. In real terms, the more effective a radio station’s streaming efforts, the more money they lose at it. It’s a real life version of the retailer than loses $5 on every sale but makes it up in volume.
The 800 lb. gorilla in the room is the royalty rates, which pretty much force radio, if they want to acknowledge/act on Fred’s salient points, to make less money than if they don’t. This is a terrible choice – and I think the NAB’s focus on terrestrial royalties, as opposed to streaming, reflects how out of touch radio’s leaders are with their audience and how they live.
Radio’s future is, I believe inexorably linked to whether they can find a way to get the music industry to agree to reasonable streaming royalties. Mike Agovino’s proposal was the best I’ve seen in a long time, but sadly, way to rational and balanced to expect either side to take seriously, much less adopt.
The royalty fees are onerous. For many stations, streaming is a loss leader, but a necessary avenue for its content as consumers become increasingly comfortable with digital audio from computers and mobile devices. Radio’s advantage is its other revenue source, something that pure-plays lack. Bob, as always, strong comments. Thanks for contributing.
Extremely well said!!
This is a really well articulated article, great job. I’ve personally been involved, and seen this already play out with CD, DVD, and other media forms. Everyone can see the change but it is difficult for the entrenched to accept and change. Once an executive at a major studio told me that he “just wants things to go back to how they used to be.” I bet there are a lot of people in radio who feel the same way. Unfortunately, as you point out, that can’t be.
One of the reasons I got involved with Abacast is because I feel that radio is in a unique position that other forms of traditional media don’t enjoy. The signals are live so there are virtually no piracy issues, and the content is timely and local so it is specific to a particular market. These are assets that radio could parley into real advantages, if it can commit to investing.
Thanks again, Fred, for outlining the issues at hand and why radio should view digital as an opportunity and not a threat.
I’m a former GSM and trainer of radio reps. I’ve transitioned the radio industry and now sit on the other side of the desk. In addition to my real job (I’m a headhunter) I’m also responsible for allocating advertising dollars for a variety of my company’s programs and projects.
I’ve got to tell you all–it’s not an easy job. I lose sleep over my decisions, because my crystal ball is besmirched with the fog of doubt. Should I spend more on PPC? TV? Radio? Outdoor? Who’s numbers should I actually believe–or should I simply buy from the rep I like best?
I believe our target demo spends more time streaming than listening to terrestrial radio. Note that I said “believe”. They may catch a drive-time slot and I have five or six strong stations to choose from in this market. I do know that many of them stream at work. What they stream–I have no idea; I suspect Pandora is a big draw but I’ll give the local classic rock station a fair shake.
I’m just one small pot of money in a sea of many, but for what it’s worth, the availability of online streaming is definitely a key component to my decision-making process.
I hope I’m not unfairly cherry picking to point out the flaws in your reasoning, but your business logic (revenue side anyway), is not compelling:
“To not provide great radio content on these devices is to simply walk away from listening – and revenue opportunities.”
“It is frankly still too early on the digital revenue curve to know precisely where it’s all going to end up.”
“If we build it, the audience – and the revenue – will surely come.”
I’ll even grant you that the audience will come. That doesn’t guarantee that advertisers will come or that they will be willing to pay rates sufficient to cover costs and realize a profit. Advertisers have many, many options these days. More than they really need, actually.
My station (a 1 kW Daytimer in Philly) has between 1000 and 1400 streaming listeners during drive times and mid days. We know this because our streaming provider tracks listeners. Most are local-and within our listening area. This tells us that some are probably listening at work on their computers and/or phones. Right now our stream is not PPM encoded-something that we will soon change. What if even one or two of those Internet listeners have a PPM? That could easily DOUBLE our ratings.
No question that streaming allows stations like yours the chance to level the playing field. Thanks for writing & contributing.
Tom, thanks for the comments & on our blog, your opinion is valid provided that you express it respectfully – as you did.
I’m saying that in the digital space, stations need to relax the revenue demands in order to understand that consumer habits are changing. Streaming may never be wildly profitable, but if that’s how a portion of consumers access us, don’t we want to optimize our content and be where they are?
Thanks for the comment.
Will, I feel your pain. And I agree that in the end, streaming will be a major part of the entertainment and information mix.
A reason why we do design and conduct our annual Techsurveys is to help broadcasters better prioritize their digital expenditures and the way they deploy their dollars.
If you have a database, you have a research pool. There are ways to determine audience tastes, desires, and usage patterns.
Thanks for taking the time to read our blog and to comment in this space.
Rob, thanks for the thoughtful comments. I also am enjoying this time as Jacobs Media is in a wonderful position to help our clients make that transition and achieve success in this rapidly changing world.
More audience engagement, additional platforms for our content, and more options make it possible for radio to better serve its various constituencies – the audience, the advertisers, and our communities. It is truly a great time to be alive and in media.
Thanks again.
Deep in our hearts, we all know why some want to kill/abandon streaming – HD Radio. Those with their hands in Struble’s pockets want to kill streaming. Simple. The exception might be CCU’s very successful iheartradio.com. Go figure?