There’s good news, and there’s bad news. First, the good. An article yesterday in Forbes said that consumers want AM and FM on their car radios.That is a strong indicator that radio continues to do a great job of compelling consumers to listen. Congratulations. But there’s some not-so-good news, too.
1. Local car dealers are doing less radio advertising than at any time in history. Why? Because they have developed digital marketing systems and entire digital departments, and they feel less reliant on local media.
2. Perception tends to be reality among advertisers. When everything they read says that old media has died and online media is working and is cheap and highly targetable, they assume (incorrectly) that radio is no longer viable. Especially when local TV has seen a bloodbath loss of viewership.
3. Radio’s ownership of in-car listening — which makes up about half of all radio listening — is being threatened by smartphones and, now, in-dash systems offering multiple entertainment options like iTunes and iTunes Radio, favorite podcasts, and, of course, Spotify, Pandora, and others.
4. Many believe that because everything else has gone digital, and because mobile devices dominate our lives, that all radio and audio listening will eventually go digital and the transmitter will no longer be relevant.
Radio has a looming crisis.
1. There is no guarantee that just because consumers love radio, they will continue to love radio when they have alternatives at their fingertips in their cars.
2. There is no guarantee that the “data cost” argument will prevent or lessen streaming. There is a generation that seems to accept that their phone bill is more important than a car payment.
3. That same generation is not buying cars. The auto industry is very concerned that millennials don’t seem to care about cars until they marry and have kids. No cars, no in-car radio listening. Oh, and Uber has become the personal car for many millennials: on demand, with driver, only as needed. And of course ZipCars are also in many cities, and they can be an attractive alternative as well.
You may have noticed a lot of advertisers moving away from traditional media and toward the bright lights of online and social media. Yes, a high percentage have actually abandoned legacy media — including radio.
Car dealers have become very sophisticated marketers. They even have their own Digital Dealer Conference. They are in love with digital media and the control it gives them, and many no longer feel that free hot dogs and remotes that bring people out for test drives are worth the effort.
Any car dealer will tell you that rarely does anyone visit a dealership anymore to browse and get sold. Most buyers have done their research online, know exactly the car they want and need, and have come to confirm their decision, drive the car, and cut the deal. They even know where they can get the lowest prices, and they use that against the dealer.
Additionally, Tesla has changed the game and is pushing legislation to allow direct online buying — with no need for dealers. Many car dealers fear, and rightfully so, that all car buying will end up direct online sales. Some even fear that the big car companies want that to happen, to eliminate the middleman and increase margins and profits.
Dealers are lobbying hard to prevent direct online buying, but Tesla is winning in many states. And their wins will pave the way for others. Today you can go online and buy a Tesla, pick your options, pick your lease or purchase plan, and arrange for delivery, all in less than 15 minutes.
As other automakers move in this direction, people will no longer have to meet car dealers, one of the two service providers they tend to hate the most. (They’ll still have to go to the dentist.)
Have you noticed more new cars on the road lately? In my town, I’m seeing a lot, and 2015 is projected to be the largest car-selling year in history. People have been sitting on older vehicles because of the economy, and those vehicles are wearing out. In fact, my wife and I are driving older cars and in the market for something new at this moment. It appears we’re very typical.
New cars equal new technology. New car sales ultimately led to FM’s dominance over AM, something industry experts had predicted could never happen. Does the digital dashboard mean the same thing could happen for AM/FM alternatives? Absolutely. And as demand for new cars increases and leases expire, vehicles with newer tech will start moving into the used car market. Connected cars may hit the 90 percent mark within about two lease turns, which is just six or seven years from now. By 2021, nearly every car on the road could be a connected car.
But let’s not forget: Most cars are connected now, by way of the smartphone in your pocket. I play my smartphone in the cup holder about half the time, listening to audio on my iTunes account. Apple disrupts everything, and Google is usually right behind. Sooner or later, it’s virtually certain that everyone will want Apple CarPlay or Google’s Android Auto in their vehicle.
This is all about DISRUPTION, and that disruption includes radio, especially loss of listening in the area we still dominate.
My wife went to test drive a new car last week and said, “That car is so cool. Apple worked with them on the design, and it’s amazing what it will do.” This is someone who does not tend to care about cars or car radios. If she is excited, others will be as well.
So what do we do, Eric? I’m not trying to sell fear. But every smart business executive should have a healthy streak of paranoia, because historically every industry has been disrupted at some point and to think radio is immune is a fool’s game.
Historically, radio has fought new technology, tried to stop it via legislation, even put together advertising and PR campaigns to battle new tech. Rarely has the industry embraced change, admitted that it could be a problem, and addressed it head on with practical solutions.
I believe there are solutions to this problem, but if you’re one of those who says, “Radio is strong today and will be strong forever,” then nothing can help you. If, on the other hand, you are the one saying, “Radio is strong, but we face challenges, and we need to fight like hell to stay strong. We need to embrace change and be a part of it, making sure we’re playing a major role in it,” then there is hope.
Solutions to Radio’s Challenges
Sometimes I’m accused of declaring there are problems and not offering solutions, but there could be nothing further from the truth. When I first raised the flag to bring attention to this connected car issue and radio’s challenges, I immediately launched a conference (partnering with Jacobs Media) to reveal and address those issues. It was well embraced, and we not only helped a couple of hundred radio stations adapt their approach, we brought the major auto manufacturers together with radio CEOs for the first time in history. We got auto and radio at the same table to work on their issues.
Radio, I believe, is now secure; it will always have a place on the dashboard. We opened the eyes of the car companies and these executives who had no idea what our listening levels were. They had been buying into the hype of online media and did not, until then, know the truth that radio has remained strong. By changing that one perception, we secured radio’s place in the car for several major brands.
So should we do the DASH conference again? We debated it, and decided that the points I mentioned above still threaten radio, and that we as managers had better relearn how to deal with, sell, and understand what is happening in the car business.
Not only do we need to address continuing concerns about how to remain relevant and dominant in the car, we need to work to keep radio as a major spend in automotive. As you look at your daily reports, you’re probably seeing dealers missing who were there as recently as a year ago. This problem is growing, and it must be addressed.
Radio Ink and Jacobs Media are driven to have a legacy as the two companies that saved radio in the car. Yes, I’m confident that our place in the car is now secure, but we are not confident that radio knows how to keep its listeners in the face of new in-car mediums. And we know the declines in automotive advertising in radio are increasing.
Therefore, we’ve reinvented the DASH conference, and it will be all about survival: saving radio’s listeners in the face of new competition, and saving radio’s advertisers. It’s not just theory we are presenting. You’ll hear actionable ideas from the car dealers and auto companies themselves. Things like:
A few important little things you can do that will keep listeners loyal to radio
What you can do in conjunction with car dealers that will turn you into an important partner to help them deal with a major consumer issue they face
Changes in the way you identify your station so you don’t lose listeners in the car.
A problem every dealer faces that radio can solve.
Specific ways to increase the level of partnership with local deals and make your station a critical partner to their success
Why hot dogs and remotes are not the “killer app” anymore, and what is.
What dealers need, more than anything else, that radio can provide.
Specific roles radio can play to bring dealers back with increased spend
The new way to sell car dealers than you and no one in your company is likely to know
Strategies to make automotive your No. 1 spending category again
What is your reality? Could you look me squarely in the eye and tell me that you’re not at all concerned that as much as 40 percent of all radio advertising will go away to digital? What will you do if radio loses its dominance in the car? Can you survive on in-home listening?
Where will you make up lost automotive dollars if all automotive spend goes away? How would your balance sheet change if you could regain the confidence of automotive advertisers and hold on to those who are about to bail out, and if you could once again make automotive a bigger spending category? We’ll give you more specifics about DASH in the future, since we just announced it today. The dates are November 4-5 in Detroit.
Of bigger concern is that we, as an industry, must be willing to take challenges head on, learn everything we can about them, develop an action plan and implement it. We have to avoid the “It’s never happened, it can’t happen to us” arrogance and should instead find a healthy response by creating an understanding first, and then an action plan. Thanks for listening.