On the heels of yesterday’s post about public radio and iHeartRadio staging podcast upfronts, I heard from an old friend and former morning guy, J LaLonde. Many of you 
remember J as an accomplished radio air personality who made his way through a number of stations in the Pacific Northwest, the Big Easy, Florida, and Knoxville.
Today, he has his own content creation company, Aristocrat Studios, and is a comedian who tours worldwide. Like many radio “ex-pats,” J has taken a different pathway and is carving out a successful career in the entertainment space. And maybe getting outside of the day- to-day radio routine has provided him with some perspective that many broadcasters don’t have because of the incessant, all consuming 24 hour nature of the business.
I tell you all this because despite leaving the world of radio, J’s head is still very much in the game. He follows the comings and goings, he pays attention to news about radio, and when he saw this web page from the Interactive Advertising Bureau’s Digital Content Upfronts that started yesterday in New York City, he shot me the link on Twitter, accompanied by this existential question:
Where’s radio?
It’s a good question.
Below is the IAB’s entire nine day schedule for what they’re calling digital content “newfronts.” And as you can see, there are some media brands in this group – Bloomberg, the New York Times, and others. But not a single radio network or company brand in the pack:
Is it that radio doesn’t have the digital content necessary to be at an event like this? Is it that radio does even consider an event like this to pitch its wares? Or does it run deeper than that? Does radio talk the talk about digital assets, but when it comes to putting one foot in front of the other, well, maybe there’s the rub.
And all of this comes at a time when traditional radio revenue is, at best, flat to down, while digital dollars have doubled since 2009, making it radio’s fastest-growing sector.
This impressive digital trajectory is obvious to even a struggling math student, especially when contrasted against network and spot sales. Digital is now at 6% of total revenue and with the agencies getting downright frothy over all things digital, it seems pretty clear that these 2014′ digital levels are as low as they’re ever going to be.
To put a pin on the increasing value of radio’s digital growth cycle, consider the quarter by quarter, year by year trajectory of digital, and why it stands out in this challenging sales environment.
Given radio’s flattish scenario, this is a bright light that could shine even brighter if there were a concerted effort to embrace it and if the industry could work together to better communicate its digital assets to the people who are attending entire days of these new media upfronts.
Yet, radio’s incessant “92%” drum-beating continues to be more centered on facts that either are of little interest to decision-makers because they sound defensive, and for some, not even credible. Instead, messaging about digital is what they want to hear because it’s proactive, it’s today, and it’s evolutionary.
There is no question that radio is faced with disruptive, cataclysmic challenges. The competition has expanded exponentially, traditional revenue sources are eroding, and as importantly, our media consumption culture is undergoing radical change.
We will be talking about how viewing and listening patterns for both TV and radio are being altered by new media, gadgets, and the technology that is simply all around us. It’s complicated, and certainly a very difficult time in which to boil down an answer to the question, “What does success look like in 2015 for radio – and beyond?”
But when you look at the RAB’s challenge – continuing to report these numbers, knowing that every company is crafting their own unique strategy, and that rarely if ever does the industry speak in one voice – you gain a deeper understanding for the complexity of the problem and why Erica Farber could probably use a good night’s sleep.
As my friend, Tom Bender, reminded me the other day, those of us over 40 got into radio at a time when the business was clearly on the “up” escalator. Today, some of radio’s advertising pieces are clearly heading south. But digital offers radio a true way forward.
Or upward.
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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You are right on track with these posts the last two days, Fred.
Radio’s only hope for survival is creative, original content and very little is being done on the commercial side to explore this. All of the great radio innovations (like the creation of the Classic Rock format for example) came from daring, inspired programmers and talent who pushed forward guided by great vision. Alas, we are content to run appointment promos for the morning show for 6:50 am, while digital radio and podcasts offer real compelling content. Add to this Chevrolet making WiFi available on all Chevys and we better wake up, and soon.
Jim, I like your comments more than Bob Bellin’s. 🙂
We have to be bold, innovative, and not afraid to fail. And see the world for what it has become. We need to get a seat at this table, and it starts with showing up. Thanks for weighing in.
Whenever you trumpet radio’s digital revenue, you can always count on me to rain on the parade. Some reasons:
1) Radio has no digital product that represents any real media value. The revenue figures mostly represent moving money from spot in a transparent attempt to showcase growth where there is none. The good news is that spot is probably growing – most of the digital money radio reports is probably really spot. If you need any proof, look at the stuff Larry Rosin has posted recently comparing radio’s aggregate streaming delivery to Pandora and Spotify. Media buyers aren’t being fooled as easily as wall street in this case.
2) If radio had a digital product, if there was music involved, it would be a financial drain – and the more successful it was, the bigger the drain. If you were to compare the EBITDA of Pandora and Spotify to radio’s, you’d see the oppostie story to digital delivery. They’ve lost money quarter after quarter, despite huge audience and delivery gains while radio continues to stay profitable.
Onerous royalties are the bogey man here and they get WORSE every year. What that means is that there IS NO DIGITAL OPPORTUNITY for radio, except one where they lose money and that will continue to be the case unless/until the royalty structure on streamed music changes.
And the better the auto industry does at making streaming easy with cool intuitive center stacks and built in wifi, the more money radio (and Pandora and Spotfy) stands to lose by giving people what they want. Yes, that’s ridiculous, but its true.
Radio should apply its lobbying and bully pulpit resources to fixing streaming royalties rather than FM chips and HD radio. When the future is linked to streaming and streaming is linked bankruptcy, well, do the math. Radio has the critical mass and revenue to lobby hard against the music industry (that will fight any change tooth and nail) – including its own FREE airwaves.
Summary: There is no digital opportunity for radio other than to lose money. It doesn’t have to be that way but it is. Fixing royalties isn’t sexy, it doesn’t make for eye catching color graphs and it will get really ugly getting to a solution, but without it digital solutions are digital money pits.
Umbrellas anyone?
Umbrellas? After that rant, we’d be better off with the Enterprise’s deflector shields. All your points are well taken, Bob. Dollars are being shifted (not all of them), radio’s digital content needs to be improved, and the royalties are crazy. All that said, this is the world in which we now live and in which we must compete. It’s the sandbox where the agencies live, and radio needs to learn how to play this game. Or become Kodak. Or my former travel agency. Or the Rocky Mountain News. It’s disruption, plain and simple, and it’s not going away. The good news is that there’s money to be made. Lots of it. And we need to figure this thing out.
I think we agree on the product issues and of course radio needs to figure out and master the digital landscape or be progressively and fatally diminished. The problem is that current royalties mean that the better radio does it, the more progressively it will be diminished – so without some change, radio will be diminished whether it addresses digital or not. A solution that can only lose money isn’t a solution. if figuring out digital is radio’s future and fixing royalties is the only way to do that profitably, fixing royalties is radio’s future.
I’m dating myself here and may have used this example before…there was an absent minded professor character (Professor Pepperwinkle) on the Superman TV show that invented a gold making machine. The only problem was that the ingredients cost twice as much as the gold the machine created. Right now, any digital solution that includes streaming music is Professor Pepperwinkle’s gold machine. You can’t lose $5 on every sale and make it up in volume (speaking of old references).
Unless someone can posit a realistic way to make money streaming music, I’m not being Debbie Downer, I’m laying out the only realistic path forward. Given the current landscape, would you invest your money in streaming music? Would you recommend that a friend do it?
Just sayin…
Others have noted that there’s more than one way to skin the digital cat – and it doesn’t have to necessarily be predicated on streaming. The podcasting buzz may be 50% hype, but the other half is all about the ability of radio to marshal its resources, personality, and native intelligence and create products that are truly worthy. Again, public radio has set a high bar, but so many successful air personalities in radio have some good podcasts in them. It’s just a start, but hey, that’s the point. What’s the strategy? What’s the plan? And again, what does success look like for radio in 2015? Let’s at least start there.
Dear Fred,
A great article, congratulations! Specially let me highlight your answer to Bob Bellin, which I find simply brilliant. It all can be said the same laughter or maybe more expanded, but it can not be better said than what you do.
Still some radio broadcasters are more like fighting against the facts, than concentrating on building a disruptive product, able to establish a real dialogue with their listeners. I personally love radio, and I hope that there will be radio for longer, but sometimes I have doubts that some broadcasters will be reacting in time that my 18 daughters starts to hear radio, and not only the pure internet players, like it happens now.
Thanks Fred
Elisa, thanks for the kind words and for reading our blog. I truly take pride in the fact that a high-level discussion has broken out here among people who truly are smart and care about radio. You’re in the mix and I appreciate you taking the time to add to this conversation.
Bravos, Fred. Developing digital is a critically important issue which deserves serious consideration. It’s legacy media’s Gordian knot. The check engine warning light is on; the velocity of change outside of traditional measured media clearly exceeds the rate of change within. Lots of moving parts at work here.We have an urgent need to get this right.
Bob’s suggestion to focus on royalties is spot-on. His assertion – “There is no digital opportunity for radio other than to lose money” – is patently false as it pertains only to the present rather than the possible and, as I read him, only to streaming music. To quote H.L. Mencken “Explanations exist; they have existed for all time; there is always a well-known solution to every human problem – neat, plausible, and wrong.” Bob is correct to characterize today’s generally accepted free streaming model as a money losing proposition. My take is each “free user” represents a non-negotiable collect phone call. Yes, we need to change the format.
Trivia sidebar: the most recent estimate of the cost to make a penny is 1.7 cents and 8 cents to produce a nickel.This really is losing money to make money.
The present position of Apple may be instructive. They are making an argument to rights holders for subscription (i.e., paid) streaming and against free streaming. Rhapsody has proven it possible to make money streaming; now Apple wants to scale the model within a proprietary ecosystem. It’s shaping up to be Apple v Pandora, Spotify, et al. Will the now popular Freemium pricing in music survive? Stay tuned. Parties with an interest are many including rights holders, regulators, the courts, pure-plays, broadcasters, telcos, labels, artists and players yet to be named.
Please let me offer this thought. Radio can grow digital revenues without streaming. To think otherwise represents a massive failure of imagination. Digital advertising and marketing dollars are being invested to reach the right audience with the right message at the right time on the right device. Buyers seek solutions not products. Radio, the first wireless, mobile, real-time medium can play and win in this competition but not with a 20th century business model.
As Fred and Paul have said many times in this space, Radio needs to suit up and show up prepared to play. The next big opportunity to evangelize Radio will happen in 150 days in New York at Advertising Week. Let’s have something valuable to preach.
Dave, I always appreciate your comments as a very smart, accomplished radio guy who has moved on and has succeeded in other media spaces. Several of the comments today are similarly themed. The conditions are difficult but staying the course is not an option. When you see Apple, Facebook, Pandora, and Spotify all going through similar gyrations in efforts to stay dominant, relevant, and profitable, it is small comfort to radio broadcasters trying to reinvent their business. As Tim Westergren opined on WWRS last week, radio has some great assets and qualities – if broadcasters can get there from here. He may have been kind, given the audience, but radio people who simply demonize him should have been taking copious notes.
There’s a way out of here, using native assets the business has cultivated for decades. But the perpetual money machine that almost effortlessly cranked out boxcars of dollars is broken and beyond repair. It’s going to be easy, but everyone in the media business knows that. Thanks for contributing.
I think its a matter of mass, scale and cost. Yes, there is potential in podcasting and yes, in the abstract, digital revenues can be increased. But not enough to make radio healthy. To think otherwise is a massive failure in Arithmetic. What’s been advocated amounts to standing on the couch and reaching for the stars.
It’s hard to deny that the overwhelming majority of action/interest in digital audio from consumers has been in some sort of streamed music. There are lots of different forms – all have their pros and cons and all have one thing in common – they lose money…all the time. Scale your audience up and you just scale your losses up.
That isn’t a model (freemium vs. subscription) issue, its a royalty issue…period. Royalties are way out of line with revenue potential. I’ve been singing this tune for years and only one thing has happened during my multi-year aria – the situation has gotten progressively worse as ridiculously high royalties have simply gone up. Leave it to the music industry and they won’t stop at 70 cents on the dollar, they’ll want 120 – and who knows, if present trends continue, they might even get there.
I respect the dissenters but continue to believe that distractions from the main issue only prolong and extend an untenable situation and the path to the only real solution to radio’s digital future. It would be better to face this now than wait until Pandora/Spotify and whoever else have sold their last share of stock to fund operations and have to shut down.
It’s gnarly and challenging at the same time, Bob. And I think the comment chain throughout today is instructive and helps frame the magnitude of the dilemma. Thanks again for continuing to throw logs on the fire.
The line attributed to Daniel Patrick Moynihan seems apt, to wit: You’re entitled to your own opinions. You’re not entitled to your own facts.
“…digital revenues can be increased. But not enough to make radio healthy.” Pure, unadulterated nonsense. We may agree to disagree on how we define “healthy” but, according to the “Arithmetic” it’s raining digital cash. It seems a reasonable argument that the only real obstacle to Radio capturing bigger digital shares is Radio. There is nothing to suggest it is not possible for Radio to grow and reach a healthy share excepting the belief that the industry will fail to reinvent itself.
On streaming. Your Arithmetic actually supports Apple, Pandora, Spotify, Amazon and all of the other streaming initiatives which is why they continue to invest. Reach a point in scale and your 30 or 20 or 10% of retained revenues pushes the enterprise into break-even and to profit. Granted, it’s a moon shot and it’s not likely to be a double digit operating profit (perhaps more like the razor-thin margins of the grocery business). A potentially profitable business nonetheless.
The model issue is relevant and real, in fact, it’s live ammo in this discussion. Ask Taylor Swift. In my opinion, Apple seeks to marginalize free ad-supported streaming. The Apple killer app is pure-pay and one of creative collaboration involving customers, artists and licensing stakeholders. Paying a monthly fee for access to all (or the majority) of recorded music may be a fantasy but the early odds suggest it’s a code worth cracking.
Let’s keep in mind no one has the answers here and we are all making this stuff up as we go along.
Thanks to Fred and crew for use of the hall.
Similar to the piece I posted yesterday on LInkedIn, Radio needs to become more relevant and quickly too. At GeoTraffic, we stand on the sidelines practically screaming to be put onto to the field, with a traffic solution that offers relevant, hyper local content as well as a new revenue stream. As Radio has made billions advertising around traffic over the years, I wonder out loud why they are not integrating our no cost offering into their existing mobile Apps as they revenue slides away. Here are some of the reasons we have heard from industry Sales and Digital Media Content Directors:
1) We prefer not to be the first;
2) We like to sell our own inventory but we are not sure we could sell all of the inventory (when told we can sell the unsold inventory “but we want to sell our own inventory”);
3) We are not sure we can generate that much adoption to the offering;
4) This would require on air promotion and we are not prepared to spend that type of money to promote the offering.
Mind boggling from our perspective…
Our Road reports are hyper local content created every 3- 4 minutes, relevant and personal to listeners as well as a terrific geo location based ad opportunity. By incorporating our platform into a stations digital platform (royalty free- partner ;)) we become the first component of a hyper local digital offering. Stations need to ask themselves a simple question “Is a broadcast traffic report on a programmers schedule valuable content to the listener in today’s world?” We are all aware that the broadcast report is currently generating ad revenue…for now… thereby offering immediate monetary value. But that seems to me like tearing down the exterior walls to burn for firewood to stay warm in the winter! The real question is what is Radio doing to replace this revenue as it is going away and sooner then later if you look at it from a monetary perspective. But what about content? Why not give the listener the content they came for and when they want traffic, a digital solution on YOUR PLATFORM to get it. The ironic part is that stations do not have to stop generating the on air revenue to begin to open the digital pipe; they can be used in tandem. As other traditional media platforms and the new digital platforms are cleaning out Radio’s kitchen while it sleeps, someone needs to go up with a bucket of cold water and wake the giant before it is too late.
Then again, I am a newcomer to the industry………
Change is hard, especially for brands that have been doing it the same way for a LOOOOOONG time. This is but one example of a need for a new model. At last year’s DASH, Larry Rosin clearly showed that traditional traffic reports on the radio would go the way of traditional school closing reports. Frank, your presentation was well-received. Hang in there. It takes time to launch new platforms and models.
Fred,
Patience isn’t an issue from our perspective as we continue to gain traction. What is disconcerting is that adoption is coming from other traditional media platforms (TV and Newspapers) and the new digital media platforms – not Radio which has owned this space for so long. Other platforms are understanding that the race for the dashboard is on and establishing an “in cabin presence” is important with a “brought in” solution. As the radio is getting harder to find in some of the new cars, even the convenience factor is slowly fading away.
Understanding the fact that there were concerns with launching such an offering, we have simplified the process to a point where a network television affiliate integrated and launched our offering on their App in less then 1 hour, replacing a flat 2D u- engaging traffic map with a user friendly, revenue producing solution that is unlike anything on the market.
DASH was an eye opening experience for us and surely for those in attendance. The message was clear-get moving and do it now. Unfortunately all you can do is pound the drum Fred. As time passes, Radio will eventually listen but at what cost? That remains to be seen. All you can do is keep banging the drums and hope it is sooner then later!
Appreciate it, Frank. You’re gaining a valuable perspective on radio. Glad DASH worked for you, and hope to see you again in November.
“…but so many successful air personalities in radio have some good podcasts in them..”
KQRS morning host Tom Barnard launched his M-F podcast in the summer of 2012. Just prior to the launch, his parent company Cumulus had declined Tom’s offer for a partnership on this side project. The guys from Atlanta were confident that he’d “lose interest in a few months”. The company asked that Tom not mention the KQ morning show on his podcast (though he was allowed to plug his podcast on his FM morning show). Now, after nearly two years, 400+ podcasts, over a million downloads, and over $1,000,000 in digital revenue to Tom’s company, Cumulus has noticed. It’s my understanding that a partnership & syndication arrangement of some kind is in place as part of Tom’s new talent contract. I don’t necessarily mean to pick on Cumulus, but this example typifies the short-sightedness from much of corporate radio with inflexible group-wide mandates (Sweet Jack anyone?) snuffing out innovation coming from the local stations.
It’s a strange thing, Dave, how podcasting has snuck up on many broadcasters (sort of like social media and the “connected car”). I think that the “conventional wisdom” in the business was that podcasts had been around for a long time, only appeal to a specialty audience, and can’t be monetized. Again, public radio has proved that the first part of that supposition is wrong. And now with upfronts and the attention of the ad community, I’m expecting that many groups, clusters, stations, and individual shows/DJs are getting the message.
The crazy part is that like Tom, there are many personalities out there who have the ability to do this – and can provide content that is additive and even exclusive from their normal shows. I keep hearing from certain corners that commercial radio can’t succeed in the space because the content’s not there. But Tom (and others) debunk that theory. Thanks for taking us “backstage.”
At the risk of alienating my many friends still in the radio business, I hesitate to jump into the fray on this issue but really, I can’t resist:
– It’s criminal that radio is absent (and not missed) at the #NewFronts. It’s 2015. If the RAB board doesn’t care enough to invest in compelling products that powerfully engage young audiences, get ready for the trickle of revenues out of radio to turn into a torrent. Dave is (as usual) absolutely right about the need for radio to take control of the conversation at NY Advertising Week.
– The “royalties are too high to enable profitable streaming” argument has crippled radio’s digital product innovation machine. It’s called investment for a reason. No risk, no reward.
– And if you think royalties are too high now, wait until terrestrial radio rates are normalized with the rest of the planet. It’s no longer credible for the American radio business to argue that it provides a unique promotional benefit to music rightsholders that is somehow exceptional from the rest of the civilized world — where broadcasters pay for recorded music. There. I said it. So did members of the House Judiciary who blasted Bruce Reese — a terrific leader defending an untenable position — of being “disingenuous” for “paying zero” in the IRFA hearings As did Register of Copyright Maria Pallante at the House Judiciary on Wednesday: https://1.usa.gov/1GMWHDO.
As Fred has pointed out consistently and far more tactfully than me, disruption is painful when you’re not the disruptor. I still care about radio, and hope today’s radio leaders will embrace innovation and leverage the brilliance of the smartest people left in the room. But the clock is ticking.
Larry, these are on-point, heartfelt comments that I hope everyone who reads this blog take seriously. We have experienced similar reactions when clients learn that in order to get their apps into car dashboards or smartwatches or on both Apple and Android, it’s going to cost – period. And sometimes the costs – especially when you’re dealing with multiple car brands, for example – are high and the process is lengthy. Pandora, iHeartRadio, and NPR (as mentioned) have paid the price in both dollars and time. This is the cost of admission in the digital age, just as buying land, towers, transmitters, and engineers were 75 years ago. No one wants to hear this, especially at a time when advertising is being diluted by the many choices.
Larry, much appreciated.
“It’s the CONTENT, stupid.” In reality, the spoken word lasts as long as folks have ears. Broadcasters connect with and supply ALL channels. Radio: The Once and Future King. http://www.broadcastideas.com
Thanks, Clark.
Amazing…this is a topic I’ve been talking about for quite some time. I worked in broadcast television when the challenge of cable first arrived, witnessed the plunge of newspaper tangibility, worked in radio for 8 years and participated in the uprising of social networking. I believe television gets it! The proof ? Nielsen is now using the data collecting on Twitter and Facebook through #hashtag conversation to provide hard data for audience reach and engagement. They are fully embracing this fact that everyone viewing has a tablet or laptop poised and a smartphone at the ready while watching. I can text, comment, retweet, like or share while I’m engaged with TV. You cannot while your driving! To make the evolution more critical, every new car has a computer w/ internet built into the dash.
Do people listen to radio outside of their cars? Yes, but we in the industry know that prime time is morning and afternoon drive. A listener is not able to interact socially during those times and now has the freedom of “appointment listening” as they do with television. Pandora, Spotify, playlists and podcasts are at my finger tips now…why only listen to local radio?
I have a well known “DJ” who left his morning show job to create his own radio station online.Basically taking his hours behind the mic, music with conversation in between and putting it on his site to stream. I think the idea has merit but he is going about it wrong. If I am a fan I want to listen to HIM, not music! Passionate radio people need to start changing and save the media…if possible.
Radio, especially local radio is just waking from their slumber and it may be too late. My beloved medium has not only been slow to react, inadequate to initiate…they aren’t even showing up for the fight. I now own an agency and this is a great post showing proof. I’m visited by radio representative that now are trying to sell digital platforms for SEO and Social marketing that have no tie or connection to their own product. If they start to think differently and creatively with diligence there may be a way. I believe podcasting is a start. It’s been around for a long time and radio understands the element. Now, they have to use it. Thanks for this!
Catherine, thanks for the thoughtful comment and POV. Subsequent posts have tackled some off these issues. I believe that while radio has squandered many opportunities, the chance to expand the tool kit to podcasts, mobile apps, and alternative streams is still there for companies nimble and smart enough to make good on it. We shall see. Appreciate the time and you reading our blog.