A Splash Of Cold Water

On the inevitability of the decline of broadcast radio…

We’re starting to see glimpses that the immediate future of Radio may not be as bleak as many pundits have been predicting.

Spotify remains a work in progress. It claims 5.5 million users, but as of last month only about 100,000 of them were paying the company a monthly fee, according to people familiar with the service. It is currently trying to break into the US market, but has been mired in discussion with the big music labels…for months.

That quote comes from a Media Memo piece on Spotify that you can read here.

There is ample research showing that Americans aren’t all that excited about behavorial tracking, which was supposed to save the online listening advertising model. If listeners are hearing ads about products they had already investigated, the theory says, they will be more receptive to these interruptions. Uhhh, apparently not…

An RTNDA survey shows that the radio format which should be most easily transferred to web usage — News/Talk: We all want, and use the web for, information, right? — is a problem for more than half of the stations trying to establish their online product. Blame it on the recession, or the collapse in advertising rates, but funding the qualified manpower to staff these online efforts is sadly lacking.

Yes, revenue for Radio in most US markets was down in 2008 and 2009, though 2009 ended much more strongly than had been predicted. This decline in revenue has more to do with a broken advertising model than mass defections of listeners to satellite or internet radio.

The simple truth is, almost everyone listens to several local broadcast radio stations every day of the week, a behavior that is not changing.

Broadcast radio still throws off amazing free cash flow, and if it wasn’t for debt service, would still be one of the most attractive investments available.

Does anyone really believe that Pandora or Spotify can come close to generating the revenue of a KIIS or WLTW or KGO or WCBS in the next few years?


Can this change once streamed stations in a car are the norm? Yes, of course that’s possible. It’s possible I’ll be named President of Clear Channel radio too.

Once WiFi is ubiquitous, will it change listening behavior in cars, and in offices, and cause hundreds of millions of listeners to choose Pandora or Spotify over their favorite and familiar local stations?

I’m not so sure yet.

I’m not saying broadcast radio doesn’t have problems, and big ones at that. One of the biggest, which everyone at the NAB seemed to ignore last week, is that it will become increasingly difficult to hold rate on spots that fall later in clusters.

But even if we could, we already know our listeners do not want to hear as many spots as we run. We’ve exceeded their tolerance, which is a big reason Pandora and Spotify have any attraction at all.

But, to be fair, they’re going to have the same problems with advertising that broadcast radio does: No one wants to hear a spot about a product in which they have no interest.

And, so far, subscription radio, other than NPR, which is heavily subsidized by government, hasn’t proven to be the kind of cash machine that broadcast radio has typically been. Why should I pay for something I can hear free?

My crystal ball is more cloudy than clear.

What do you think?