So, what is the business of radio, in this digital age? I find myself asking this question ever so often – and I’m sure I’m not the only one. Many existing and several new radio consortiums and groups of individuals, who put in an application for one or more of the three new commercial regional radio station licenses and who are still awaiting ICASA’s decision, are no doubt preoccupied with the same question.
The radio industry finds itself in a familiar yet precarious position entering the second quarter of 2011 — traditional revenues are sustainable enough to continue with decent returns, but there’s not enough money to invest in the digital transition without re-evaluating some fundamentals of the business.
The result is that the emerging trends will not be revolutionary so much as evolutionary, and the key will be finding those points where traditional methodologies and digital extensions converge most effectively.
While radio has historically been about broadcast, at the centre of current digital development, from mobile to social media to streaming to advertising, is the unique user. That disconnect will start to be addressed by broadcasters in this year, 2011. Gathering, identifying, and communicating with radio listeners on a one-to-one level will be the centrepiece of radio’s — indeed, all of media’s — future.
So, what is the business of radio?
Digital agencies have completely ignored streaming through 2010 and traditional agencies offered marginal CPMs (cost per thousand impressions). The addition of user-level ad targeting will take CPMs to compelling levels thanks in part to digital agencies, who will finally be seeing a similar ad environment to what they see in display — ads targeted to specific users based not only on demographics, but their actual interests and behaviour.
As radio embraces more digital strategies to remain relevant to their existing advertisers, a positive side effect will be that digital agencies will turn their attention to radio. This will be a huge boon for the industry as ad revenue continues to erode from traditional agencies and move to digital.
Key drivers will be the continued growth of streaming, local digital initiatives like daily deals, improved user-level targeting, and direct digital marketing via things like email and texting.
The ability for radio to go to an advertiser and utilise a digital platform to send their huge reach into stores is a huge opportunity.
Some might say we exist to maximise profit for owners, including shareholders or public value, in the case of public service broadcasting.
In fact, the largest consolidated radio companies say they’re forced to operate under this mandate. Unable to produce enough revenue to impress day traders at the JSE and/or meet their huge debt obligations, they must cut expenses — and they see most employees as an expense, not an asset.
The real business of radio, I think, is still attracting and engaging listeners.
Attract and engage enough listeners and your station becomes an efficient and effective way for advertisers to spread their messages. Simple enough.
Except for that “engagement” part, which is in conflict with the differing ways consolidated radio and I see employees.
I think we’re all in agreement that listener engagement is a good thing; it’s one of the reasons personal endorsement spots work, and stations sell more of them now than ever before, at least in morning shows and some afternoon drive shows.
And that brings us to the topic no one wants to address, the words that cannot be spoken aloud inside any radio station: spot loads.
Radio is going to have to find a way to increase revenue while playing fewer spots.
We can either choose to, or have the choice forced upon us. And if we wait much longer, we risk our very survival. Our long-term viability is being sacrificed to short term greed.
The best way I know of to increase the value of your station is to increase listener engagement.
Part of that is undoubtedly music, if yours is a music station. The problem is, very few music stations have found a way to be truly unique, to be necessary to listeners.
Again, radio treats music mostly defensively, rather than as an offensive opportunity. Listeners don’t notice what they don’t hear, right? We’ve all been taught that, so many formats use research to screen out songs listeners might not like or know, rather than to find songs listeners might love.
And – justifiably – most radio stations aren’t eager to turn over control of their playlists to every listener, the way some internet radio stations operate or like Pandora in the USA can. (Pandora Radio is an automated music recommendation service and custodian of the Music Genome Project. Users enter a song or artist that they enjoy, and the service responds by playing selections that are musically similar. Users provide feedback on approval or disapproval of individual songs, which Pandora takes into account for future selections.)
So, the part of your station that cannot be duplicated by your local competition, or by satellite, Internet and/or Pandora is talent.
Great talent is key. Great production and writing talent for each station in your group, so your local spots are part of the excellence of your product, rather than an automatic button punch.
Great content managers and platform managers, who know their target markets and audiences, and have the time to make their station sparkle in every day part, every day. There is every reason to believe listeners still prefer their local and regional stations.
So, if we’re in the business of aggregating listeners and engaging with them, as we used to, let’s look a bit further out than this quarter. Let’s play to our strengths, rather than accentuating our weaknesses, because the bottom line is, this is a business worth nurturing and protecting.
And indeed, as the number of ways advertisers can spend their money explodes, reach and impressions remain one way to measure success, but there is a new way (or maybe a very old way) – and that new way will be more important tomorrow than it was yesterday.