INK TANK: The Day The Transmitter Died

Radio's Best And Worst Day

Imagine for a moment you’re the CEO of a major publishing company, and you see that Jeff Bezos has announced the Kindle by Amazon. What’s your first reaction? It probably sounds like this: “People love books. They love the touch and feel and smell of paper, they like to show them on their bookshelves — plus, they won’t pay for digital words. This Kindle thing is silly, and it will be short-lived. Anyway, Sony tried an e-reader and it bombed.”

In June of this year, e-books outsold paper books for the first time.

Imagine you’re the CEO of Kodak. “Digital isn’t as good,” you say. “People like pictures, and film is better technology. It’s tested, it’s been around for 100 years. Digital photos are a passing fad.” Kodak actually invested $25 billion in digital photography but still failed to control it because they were unwilling to believe film would be superseded.

Maybe you’re a radio executive saying this: “The transmitter is a more efficient means of delivery. We can send a signal to millions of people at no additional cost. Streaming is stupidly expensive and has a cost per user. The model can never work. Plus, who wants to sit at their desk to listen? There are billions of radios, with an average of six per household. We’re in virtually every house in America and in 100 percent of the cars. The transmitter will never go away.”

What if the transmitter were no longer relevant? You say that will never happen? Here’s how it could.

The New York Times says the auto fleet in the U.S. averages 11 years old, and that by 2015 we will see approximately 70 percent of the market buying new cars. Already a high percentage of new cars, including lower-end brands, are Internet-enabled and can receive Pandora, TuneIn, and iHeartRadio. What if, by 2015, all new cars have Internet radio? It’s very possible. It’s also possible that auto manufacturers will decide to stop putting AM/FM radios in cars.

Seem silly? Car manufacturers are some of the biggest advertisers in radio, but they want exact listening data, not estimates. This is a world where Google and others can tell them exactly who saw and heard their ads. Automakers are not required by law to put radios in cars. They could make the Internet the only way to listen. That way they could track exact listening stats. No more estimates. No more panels of 150 people representing listening for an entire city.

Ask the CMO of any giant marketing company and they’ll tell you “big data” is the next big wave. Big data allows data from all places to be combined, creating a depth of information never before available. With radio listening exclusively online, an advertiser could use GPS data to air a spot for their business when you’re a few minutes away. Imagine driving down the road and hearing, “Whole Foods is just a couple of minutes down the road. It’s dinner time, why not give yourself a break tonight and pick up a pre-made meal?” or “You’re just a few minutes away from our new location, why not try it for lunch today?” Big data allows this, and it’s already happening.

Though losing our over-the-air monopoly in the automobile seems like a bad thing, a world of nothing but streamed signals could make for the biggest boom in radio history. If radio could assemble big data and tie it to the car, the biggest advertisers would use radio more than ever.

No, it’s not good for Arbitron, unless the company can insert itself into the middle of the exact-data play, and it’s not good for the transmitter companies (though you’ll probably always need a transmitter to serve the remaining analog units in the world).

Will this scenario play out? I think it almost has to. Though it seems counterintuitive, forcing all radio listening through IP would give us the best advertising environment in radio history. Losing the transmitter would be the best — and worst — day for radio. Best because it allows us to have the real-time, exact audience stats, worst because it forces us to abandon the in-car monopoly. I also think there will come a time when AM and FM spectrum will become so valuable to the government for other purposes that the FCC could force radio off the air and online.

Imagine how that would change everything. Suddenly the FCC is no longer controlling radio. Suddenly that license is no longer a concern. But it would also democratize radio even more, since any Joe can create an online station.

Shooting the messenger here is a natural reaction, and so is denying it could ever happen and defending the status quo, which many will do. I don’t blame you. And I may be wrong. But history says people who denied that such dramatic changes would or could occur were usually wrong. If you catch yourself saying, “That will never happen,” that’s a signal that it probably will.

This is in no way an indication that I don’t believe in radio. I remain our biggest champion, but I also know that change is inevitable, and at the moment, Ford, Toyota, and the other automakers hold all the cards. They know they can change the face of radio and make it exact, measurable media just by removing the AM/FM receiver from the car.

Radio’s survival, your survival, is predicated on great content, great brands, and making sure those brands are everywhere. How we deliver is less relevant than what we deliver, as long as we’re where the consumers want us to be. Call me crazy, but I think that radio becoming 100 percent Internet-based is the one move that can make this industry boom financially again.

Comments

Eric....a few years ago I would've thought you were crazy. Then again, I first heard about Twitter through one of your articles. Nicely written, and I have no intention of shooting the messenger. As we learned with Hurricane Ike on the Gulf Coast, when data fails,(as it did and will) we always have good ole' broadcast to keep us informed....we hope.

Posted by: Mark Moss | November 15, 2012 at 12:13 PM

I am afraid I have to repectively disagree (or maybe agree), Sirus and Pandora and MP3 files downloaded to any number of playback mediums represent the final nails in the traditional transmitter radio business model's coffin that flourished for decades. Clear Channel and The Mays Family squeezed the last big money out and walked away fat and happy as a final coup de gras of sorts ... hanging the company with an impossible debt load (thanks to Bain Capitals Private Equity arrangement with a consortium of banks - that took a court order to force the sale thru at $18-$20 Billion) - I gave radio 20 years of my life and glad I left while I was still young enough and sane enough to pursue a 2nd career. The 20 years I spent in radio were some of the best, and trying years of my life ... but after deregulation and then with the advent of the cluster concept - it became a game for big money speculators and financiers with short time horizons, always looking to sell to the "bigger fool" - many did and walked away quite wealthy leaving piles of impossible debt for the new owners to grapple with. Today's new technologies offer a multitude of how people choose to listen. These new outlets for listening (not AM or FM) and unwieldly debt, I believe are the 2 biggest challenges facing the traditional radio model today. I am still amazed at some of the good people who have survived - you Eric Rhodes are one of those people ...

Those who were really smart pursued the "vertical real estate" angle and continue to win big with cell phone carriers and others who require tower space.

Posted by: Paul Rogers | October 10, 2012 at 07:32 PM

Yep, that's pretty much what is happening, Eric. But radio doesn't need to worry about all that data management. You can go down that path if you want or you can just turn all that data management over to SpotMedia Services, Inc. (a wholly owned subsidiary of SpotMagic, Inc.)for significantly less than it takes to maintain all your terrestrial properties now. Plus, radio will get new ways to make more money with creative tools. Now you can get back to doing what you do best connecting with your audience and creative content. Because those are the traits that separates real radio from the hacks.

Posted by: Robin Solis | September 29, 2012 at 05:30 PM