Future of Radio
What is the future of radio? Does radio have a positive future with a wide-open list of possibilities, or are there stumbling blocks in front of radio’s future? What are the technologies and other competing sources? What will it take for radio stations to convert to digital technologies, and why have they not done that to date? These and other issues will be discussed in this paper.
Current State of Radio Broadcasting
According to a report called “The State of the News Media” by the Pew Research Center, traditional AM and FM radio “still dominate the audio landscape” but there are “growing signals that raise questions about its future” (Olmstead, et al., 2011, p. 1). Olmstead reports that “large majorities of Americans continue to listen to AM/FM radio each week,” in fact nine out of ten adults in the United States listen to AM/FM. That having been said, surveys show that “most Americans point to newer technologies” as having “more impact” on their lives, even though Americans spend less time with those new technologies (Olmstead, p. 1).
In the Pew Research Center survey, the results show that for the first time Americans say they are listening more to “online-only outlets like Pandora or Slacker Radio” than they do streaming content from existing AM/FM stations (Olmstead, p. 1). This could be of course because AM/FM stations that stream still play their commercials ad nausea, while Pandora and Slacker are commercial free.
Currently, HD Radio has “failed to take off,” Olmstead continues. Just a small percentage of listeners listen to HD Radio, “or are even aware it exists,” hence, fewer stations are investing in making that transition. While HD radio remained flat in the market, AM/FM revenues for 2010 rose 6% over 2009, Olmstead explains on page 1. The continuing growth of revenue for AM/FM radio could be threatened, Olmstead continues, if radio audiences continue to go to online alternatives like Pandora. That is because the revenue for AM/FM comes from advertising for the most part, and when ratings for stations fall flat, advertising money sinks as well.
National Public Radio (NPR) — which Republicans in the House of Representative voted to kill earlier in 2011 — “continues to be a growing source of news for many Americans,” Olmstead writes (p. 2). The expansion for PBS / NPR is due to the fact that commercial radio is doing away with news outside the largest markets in the U.S., Olmstead relates. The NPR audience grew by 3% in 2010, to a total of 27.2 million weekly listeners.
While the percentage of Americans that read newspapers has dropped by 16 percentage points since 2000, Pew data shows that the percentage of Americans using AM/FM radio dropped just 3 percentage points in the same time frame (Olmstead, p. 2). Those statistics regarding listeners to AM/FM could be changing though due to the fact that early in 2011, Pew research shows that “fully 84% of Americans over age 12 report using a cellphone; and because cell phones are “almost as ubiquitous” as radios, in the future more powerful smartphones will be used as audio devices and that portends “a potential forâ€¦ reducing AM/FM listening” (Olmstead, p. 3).
Another sign that AM/FM radio may take a dive in usage is the polling Pew did, which shows that 22% of those surveyed said AM/FM radio had a “big impact” on their lives, but 54% said cell phones had a big impact, 44% cited iPhones, 45% said BlackBerries and 49% said broadband Internet had a “big impact” on their lives (Olmstead, p. 4). Those that listen to online radio in their cars has “doubled” over the past two years, the survey reports. About 27% of Americans indicated that they were “very interested” in hearing Internet radio in their cars in 2010, and that was up from 10% who said the same thing in 2009; 6% of respondents said they were already using cell phones to hear Internet radio in their automobiles (Olmstead, p. 6).
The economics of AM/FM radio shows improvement today, the Pew survey reports. While the audience is shrinking some, total revenue for traditional radio rose 6% in 2010, to $17.3 billion, that is up from $16 billion in 2009. While some of that rise in revenue can be possibly attributed to the improving economy, the total advertising revenue for “all U.S. media was up 3% in 2010” and radio receipts were even better than 3%, Pew explains (Olmstead, p. 10). About a third of Americans told the Pew survey people that they receive “some news” through the radio, which is down from the 38% who said they got some news from the radio in 2008 and well down from the number (43%) who said the same thing in 2000 (Olmstead, p. 12).
What are the major threats to radio broadcasting? Public Radio: Political Target
There are a number of threats that challenge radio broadcasting in the United States today. One of those threats is political, and it comes from the conservative majority in the United States House of Representatives — some representatives of the GOP are referred to as the “Tea Party” — whose members apparently believe that Public Broadcasting is a tool of liberals and should be shut down. Public radio and television are under the umbrella of the Corporation for Public Broadcasting (CPB), and there are 900 public radio stations that do receive funds from the CPB. However, according to the CPB, every public radio station is locally owned and operated, and those stations “provide programs and services responsive to the needs of their communities” (CPB).
Congress has authorized that local public radio stations have “autonomy” — that means the CPB cannot own any public radio stations, but can offer programming to stations, and those independent stations can choose which (if any) of the programs that the CPB offers to PBS, NPR, and Public Television programs like Sesame Street. The CPB points out that each station produces about 40% of its own programming. The local public radio stations have their own fundraising strategies to support their services, while the federal government provides about $28 million annually for CPB to providing programming to the 900 radio stations spread out around the country.
So why did the House of Representatives approve legislation for 2011 (on February 19) that “cut all financing for the Corporation for Public Broadcasting for the year 2013” which is the first time the House passed such legislation (Jensen, 2011). Author James Ledbetter explains that a TV and radio broadcasting system partially funded by “â€¦Congressionally controlled money provides the ultimate hot-button issue, a grandstander’s dream” (Ledbetter, 1999, p. 10). In 1995, when Republicans controlled the House, Congress “â€¦held more hearings on the budget for PBS and NPR shows than it did on budgets for Medicaid and Medicare,” entitlement programs with budgets more than 100 times the budgets for the CPB, Ledbetter explains.
Indeed, throughout the 42-year history of public broadcasting, the taxpayer subsidy has “â€¦repeatedly been used as a club with which to clobber that very commitment,” Ledbetter continues. “Like a dog that has learned to flinch at the mere pantomime of the master’s lashing,” public broadcasting leaders have learned to stay away from provocative subjects that could conceivably bring criticism (founded or unfounded) from conservative lawmakers. Colorado Congressman Doug Lamborn, a Republican, said the vote in the House on February 19 “reflects the will of the people” and that it is time to “â€¦get our fiscal house in order” (Sullivan, 2011). Lamborn called the vote an “historic step”; there are “so many media outlets available to people we don’t need a government-sponsored media anymore,” Lamborn continued, alluding to commercial broadcasting entities (Sullivan).
Meanwhile, as to the most recent attempt by conservatives to slash funding for CPB, the U.S. Senate rebuked the vote in the House and so public broadcasting continues, for now at least. But that didn’t stop Florida Governor Rick Scott from vetoing his state’s $4.8 million appropriation for public broadcasting; that means that each of 13 PBS stations in Florida lose about $87,287 each, according to Elizabeth Jensen, writing in the Media Decoder in The New York Times.
What are the major threats to radio broadcasting? Strategic Challenges
Robert G. Picard is Director of Research at the Reuters Institute in the Department of Politics and International Relations at the University of Oxford, UK, and he is also editor of the Journal of Media Business Studies. In his 2009 article in The Media Business (“Radio Stations Face Significant Strategic Challenges”) he asserts that the “wide availability of substitutable audio platforms” along with “lifestyle changes” are contributing to the decline of radio broadcasting audiences (Picard, 2009, p. 1). In particular, Picard views the digital revolution as posing the biggest threat to radio broadcasting.
Rather than listen to radio stations for the songs they like, and having to endure commercials that seem endless, people now can create their own “personalized playlists” on their computers, their MP3 players, and their mobile phones, Picard explains. He doesn’t mention Apple’s iPod, iPod Touch, and iPad, but those devices also pose a challenge for traditional radio broadcasting. People can “â€¦select music that suits their individual tastes and many have wider repositories of music in their own libraries” — thanks to the iTunes and similar services — than are offered on the playlists of radio broadcasters (Picard, p. 1).
Moreover, Satellite and Internet radio are offering “hundreds of choices of highly focused music formats,” Picard continues, making radio “â€¦a less relevant platform” for music and entertainment than it was previously (p. 1). Besides using Satellite radio — and being willing to pay for a service that specializes in exactly the music genre listeners prefer — users are downloading podcasts on a number of topics that interest them, Picard explains. The problems for radio resulting from these alternative audio choices are “compounded” in the United States due to the deregulation in the 1990s that ultimately led to the reduction of musical genres and other content on radio broadcasts, Picard continues.
On top of that, programming is much less local and “less relevant” because programming and content decisions are being made elsewhere, in many cases, by corporate ownership (Picard, p. 2). Among the biggest, most powerful corporate radio broadcast interests is Clear Channel, a corporation that owns an estimated 1,200 stations (including 140 stations in New Zealand and Australia) according to the Clear Channel Corporate Fact Sheet. The Clear Channel corporation brings in an estimated $6 billion annually and its broadcasts reach an estimated 238 million listeners a month, the company claims.
Picard asserts that radio advertising expenditures are down to about 10% — from 13% in 2002 — in the United States, and the price for radio stations on the market has seen “considerable weakening” in recent years (p. 2). Picard recommends that owners of radio stations need to “â€¦start spending a good deal of time thinking about what is happening to their industry,” and what they need to do to stay relevant and profitable; they will need to “reposition their functions” for both advertisers and audiences, Picard concludes (p. 2).
Prospects of Satellite Radio and Radio Online Streaming /
Transformation of Radio Broadcasting to the Digital Age
An article in Forbes (January, 2011) points out that while CBS Radio has 130 stations in the U.S., and those stations have been “profit drivers” for CBS, the company has lost market share in the last few years because it has sold off some of its stations in order to “focus its efforts on larger markets.” CBS has lost market share (down from 11% in 2005 to 8% in 2009), but that’s not its only problem, according to the Forbes’ article. Pandora, an Internet radio service that is “pushing into the drive-time radio market,” Forbes explains; hence it is challenging CBS and other traditional radio broadcasting interests. Pandora streams online and because millions of consumers now have smart phones (that pick up Internet signals), they can use Pandora instead of commercial radio stations. Moreover, Pandora allows the user to zero in on specific musical tastes and specific artists. For example, a jazz aficionado may establish a “Miles Davis Radio” channel on his or her Pandora link, and all the listener hears is Davis and other jazz artists in the same genre — with no advertisements or drive-time hype to interfere with the music.
The Forbes article explains that Ford Motor Company will be launching new cars with “embedded software that will operate Pandora through voice controls” so that the driver doesn’t have to look for a button to push or a knob to turn. Mercedes-Benz is currently promoting Pandora’s radio service in its automobiles, as well. Obviously, digital formats are presenting a huge threat — and a viable alternative — to traditional broadcast radio in the U.S.
Blogger Rocco Pendola asserts that Pandora isn’t the only challenge to traditional radio broadcasters. Pendola explains that “Clear Channel now plans its attack” based on the corporation’s ability to promote digital radio to its already use audience (Pendola, 2011, p. 1). Only three percent of listeners, Pendola explains, have use of digital radio, but Clear Channel has seen the writing on the wall in radio, and hence it has innovated with its iHeart platform. The iHeart platform will allow listeners to “create playlists on your own musical tastes,” as Pandora has done so successfully (Pendola, p. 1). The iHeart component of Clear Channel of course provides access to all of Clear Channel’s offerings — including far right wing conservative Rush Limbaugh’s daily rantings along with Ryan Seacrest, Dr. Laura, and others — not just music.
“Clear channel is finally doing what radio companies should have started doing years ago,” Pendola continues (p. 2); “â€¦they are innovating or at least following the innovators with aggression, as opposed to sitting back licking their wounds.”
The iHeart application is designed to be used with smartphones, and Clear Channel is making sure that ample publicity will be used to promote its innovation. In September, 2011, Clear Channel sponsored a series of high-profile concerts at the MGM Grand in Las Vegas (with names like Lady Gaga, Alicia Keys, Coldplay, Kenny Chesney, Jennifer Lopez, Usher, Sting, Jay-Z among many others) in order to launch iHeart to the world, according to the Los Angeles Times Music Blog, Pop & Hiss.
Author Michael C. Keith writes that when digital technologies became available to the consumer, broadcasters viewed it (DAB, or HD) “as a threat” (Keith, 2009, p. 23). The executive vice president of the National Association of Broadcasters (NAB), John Abel, is quoted by Keith saying that “â€¦ DAB is a threat to anyone who plans to stay in business for awhile” in 1990. Of course that was an exaggeration of the issue, but the fact is that digital terrestrial radio means that those with analog receivers are out of date and out of luck. Still, digital converters are now offered at fairly low prices, and because digital radio can do several other things — like transmitting data into smart phones — it means profitability for station owners, Keith explains on page 23.
It’s very simple, Keith explains: Americans demand the best quality sound available, and they are not going to get that sound on analog receivers, because analog receivers pick up interference and digital is generally considered to be “interference-free” (24). The advantages that come with digital broadcasting — according to Jeff Tellis, former president of Integrated Broadcast Service (IBS) — include the following: a) “significantly improved coverage” with less power needed; b) much-improved broadcast signal; c) “more precise coverage control” through the use of “multiple transmitters”; d) no channel interference with adjacent channels; e) booster capabilities to avoid using separate frequencies to beef up same signal; f) easy transmission of auxiliary services; and g) the sharing of transmitting facilities with a “common transmitter and antenna” (Keith, p. 24).
As for satellite radio, an article in PR Newswire references an Arbitron study of listeners, which reports that as of October and November, 2009, exactly two years ago, there were “â€¦more than 35 million total adult listeners” tuning in to SIRIUS XM per week (PR Newswire, 2010). Not surprisingly, the study showed that listeners prefer satellite radio over “other audio options available to them,” and that of the broadcast options available, listeners typically listen to SIRIUS XM 62% of the time, they listen to AM/FM radio 16% of the time, about 4% of the time they listen to streaming music on the Internet and 10% of the time they use smartphones and other mobile devices (PR Newswire, p. 1).
The Arbitron survey found that on a typical day SIRIUS XM listeners spend two hours and forty-five minutes in their automobiles; those listeners tune in to SIRIUS XM 71% of the time in their cars, and tune into AM/FM 17% of the time, and 5% of their time in the car they use smartphones or other mobile devices. The survey by Arbitron showed that 56% of SIRIUS XM listeners “graduated from college or have advanced degrees” while just 24% of AM/FM radio listeners and 25% of the “general population” have degrees from colleges or universities (PR Newswire).
Satellite radio subscribers are — no surprise here — more affluent than AM/FM radio listeners, according to PR Newswire. Twenty-four percent of SIRIUS XM subscribers have household incomes of $150,000 or more; just 9% of AM/FM listeners have incomes in that category and only 9% of the general public enjoys substantial incomes such as $150,000. An interesting side note to the Arbitron survey shows that when it comes to listeners changing channels during commercials, “SIRIUS XM listeners are 61% more likely to stay with a commercial on satellite radio than with those that air on AM/FM radio stations” (PR Newswire).
The PR Newswire story mentions a few of the high-visibility personalities and artists, whose presence and star-power clearly helps get consumers interested in signing on; they include Oprah Winfrey, Barbara Walters, Bob Dylan, Tom Petty, Howard Stern, Martha Stewart, Jimmy Buffett and Willie Nelson, to name a few. Also the subscriber to satellite radio can hear games played in the NFL, Major League Baseball, the NBA (when it is not in a locked-out mode), the NHL, PGA golf and major college sports (PR Newswire).
The Future of Radio in the Next 15 Years
In the same way that Pandora is cutting cooperative / collaborative deals with Mercedes-Benz and Ford Motor Company — buy a new car and Pandora is already installed, and can be activated with a voice command — SIRIUS XM is doing some auto-related marketing of its own. The future of satellite radio has the potential to be rosy, since according to Spencer Osborne blogging in www.sirusbuzz.com, “â€¦about 60% of all new cars manufactured” have satellite radios installed. The deal is, the new car buyer gets a promotional subscription that keeps his or her satellite radio free for three months to a year, depending on the manufacturer of the auto.
Osborne asserts that nearly half of those new car buyers convert to a subscription, which is a seemingly smart business model for SIRIUS XM, notwithstanding the “high costs associated with” the promotional package. Those high costs, Osborne explains, result from SIRIUS XM subsidize the cost of the radio hardware, the installation into the new automobiles; and in some cases SIRIUS XM also pays the car companies “â€¦up to 35% of the revenue that they derive” from the deal.
However, many professionals in the broadcast and digital world believe that a much bigger potential for satellite radio lies in the smartphone industry. Consumers are “gravitating” to smartphones like Android, iPhone and BlackBerry in droves, Osborne explains. Hence, SIRIUS XM should be able to see that their “real growth story” should be linked to the smartphone market; however, SIRIUS XM “â€¦has not yet made the game changing move that could cement them as the consumers’ choice for audio entertainment,” Osborne asserts. In fact with smartphones, SIRIUS XM has no hardware to subsidize and install (like they have to install in autos), no installation to pay for, and “no revenue to share” (Osborne, p. 1).
Indeed, there are Internet royalties to pay but those expenses are “substantially less than all of the subsidies and revenue sharing” that the satellite company shells out to auto companies that are in partnerships with SIRIUS XM (Osborne, p. 1). In fact all SIRIUS XM has to do to get on board the smartphone bandwagon is to develop and keep updates an “app” — it’s really all about “the software” when it comes to smartphones, Osborne relates. With cars, it’s all about the hardware, the writer emphasizes on page 1.
As to the future of local radio in the next fifteen years or so, the National Association of Broadcasters (NAB) explains that there is legislation in the U.S. Congress that could have a “devastating” effect on local radio stations. The legislation is called “The Performance Rights Act” and if it passes, it would slap a new fee on local stations “â€¦simply for airing music on the radio — airing the music that provides free promotion to the labels and artists” (NAB). A tax of this kind must be rejected, the NAB insists, because it could “financially cripple local radio stations” in the future and put jobs at risk as well as stifling new artists that wish to break into the music recording business (NAB).
What is the point of the Performance Rights Act? The NAB explains that for over 80 years record labels and musicians have “thrived from radio airplay — which is essentially free advertising — from local radio broadcasters.” Broadcast radio, after all, reaches and influences 241 million listeners per week, a number that “dwarfs the reach of Internet and satellite radio,” NAB continues. Some 85% of listeners of “all audio services” say radio is the place they first heard new music, the NAB reports. But because many record labels have “failed to adapt their business model to the digital age,” they now wish to recoup the money they are not earning and do it on the “backs of local radio stations, that are, ironically, their greatest promotional tool” (NAB).
That said, the NAB asserts that Congress should oppose any tax of free, local radio broadcasters that could put local jobs at risk, prevent new musicians from getting a shot in the record business, and “harm the 241 million Americans who rely on local radio” (NAB).
Meanwhile, Jim Kerr of VentureBeat.com believes that the future of the radio industry will be more “evolutionary” than “revolutionary” and he offers five trends for the future to solidify his position. One, listener data must be “priority one” as radio transitions into digital through mobile and social media; two, local advertisers must demand “digital accountability” and not be willing to pay unless stations have digital assets; three, the value of streaming online must be “redefined”; four, digital agencies must embrace radio (“finally”); and five, radio must begin to “significantly embrace location-based mobile services” because there is a “huge opportunity” for radio to go to an advertiser and utilize a “digital platform to send their huge reach into storesâ€¦” (Kerr, 2011).
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