Radio’s Hardware Problem: How does Radio compete if consumers don’t have radios?

Last week at the RAIN Summit Orlando I stood in front of a crowd and presented this video:

The purpose of this awesomely-bad B-movie trailer is to get everyone thinking about a world without radio. As ridiculous as the premise seems, if some catastrophic event took out radio transmitters, what would people do? Well, they would use the digital options they already have. It turns out that no catastrophic event is even necessary to create a shift in listening behavior – because it is already happening. Broadcast radio has a big problem: A hardware problem.

This is a topic that is pretty much never talked about at American radio conferences. Which is crazy to me because – when I think about radio’s hardware problem I picture that B-movie asteroid shooting to earth.

At American radio conferences, we see a million panels about creating great content, so that people, when choosing to listen to radio content, will choose your content.

But no one ever discusses an utterly essential question – what are they going to listen to that content ON?  One of the basic assumptions of the radio industry is that if we put our content out there – if we put our signals out there – people will naturally have a device on which to listen to it. Well – let’s look into that.

Earlier this year Edison published its annual Infinite Dial study. In this study, we asked, “How many radios do you have in your home?”  And by radio we mean – an actual device that picks up AM/FM signal. Conveniently, we had asked this same question one decade earlier – in 2008. At that time, four percent of Americans ages 12 and over said they did not have a single radio in their home, and six percent of 18-34 year olds were in the ‘no radio at home’ category.

Here are the results from this year.

Ten years later, 29 percent of Americans said they do not have a single radio in their homes, and among 18-34-year-olds, half are in that category.  Radio has a hardware problem.  For half of today’s 18-34 year olds, for nearly one-in-three of all Americans, there is no ‘radio’ in their home.  We released this incredible finding earlier this year and almost no one paid attention. Most radio trade publications did not make an issue of it, and I’m not aware any industry associations discussing it. Radio is facing a hardware problem, and yet no one seems to even care.

So I stood up on the RAIN stage on this week and forcefully said, “You need to care about this.”  Among all the issues facing the radio industry – all the opportunities and challenges – nothing might be more important than this hardware problem. Let me make that point as clearly as I can make it. If you take away nothing else from this post, please take this point: No one is loyal to FM.  Nor to AM.

 No one is loyal to FM.

Without a doubt, millions upon millions of people across America are loyal to the content radio produces.  They are loyal to their favorite morning shows, to the music and companionship and news and information and sense of place that radio content provides to them.  But no one cares at all about the method by which that content is transferred to them.  They listen, or listened, to radio via AM or FM all these years not because they cared about AM or FM, but because that just happened to be how it got to them.  It was and is a marvelously efficient manner in which to send content over to these devices that can receive them.

But – these devices.  These receivers.  These ‘radios’.  This hardware. Thirty percent of Americans don’t have a single one in their homes any longer.  And it’s not at all easy to acquire a new radio if you want one. 

A few weeks ago I walked into a Best Buy. I asked the person who greeted me at the door where I could find a radio. He sent me to the ‘speakers and headphones section’ and I found entire aisles of Bluetooth speakers. You could get them in any size and shape imaginable. The prices ranged from very affordable to stupidly expensive. There was also an aisle of smart speakers – new products from brands I had not heard of with Alexa and Google assistant baked in.  None of these speakers had AM/FM. I did eventually find a radio…it was a feature on a CD player that cost $59. $59 dollars! Can you really expect consumers to buy a radio at this point if these are their choices?

In a world without radios, consumers select from what we at Edison have called for years the “Infinite Dial.”  Not a dial that stretches only from 88.1 to 107.9 megahertz.  But one that allows them to listen to pretty much anything they can imagine.  They can listen to ‘radio’ – or at least the streams of pretty much any radio station that is also available in their local markets, but they can also listen to the streams of radio stations from other markets or other countries, or they can listen to what we now think of as ‘pureplays’ like Pandora and Spotify and Apple Music, or hybrid concepts like iHeart Radio, or podcasts, or – essentially anything they might want to

At Edison, we also perform a subscriber-only research series called Share of Ear®.  Among the many amazing things that Share of Ear tells us, it shows what device people listen to radio on. So let’s look at the devices that people consume audio on today.

 

The good news for the radio industry is that the device that gets the most listening today is what I have been talking about today: “A radio”.  42% of all the time spent listening to all the kinds of audio that consumers in America have available today is listened to on an actual radio. And as of today, 24 percent of all audio listening time is spent on a phone.  Fourteen percent of all audio time is from a computer.  And 2 percent of all listening is now on a smart speaker on 2 percent is through an internet-connected TV.

The listening on those four devices combined is equal to the time spent listening on ‘radios’.  Forty-two percent of the time spent listening to audio ALSO goes to these four devices.

So, obviously, ‘radio’ has 100% “Share of Ear” on radios.  But, here is my question: what is AM/FM Radio’s Share of Ear on digital devices? What is radio’s share on phones, computers, smart speakers and internet-connected TVs when combined?

The answer is eight percent. Radio has only an eight percent share on digital devices.  To date, when people are choosing what they want to listen to along the Infinite Dial, they are simply not spending a ton of time with the streams of AM/FM radio.

Now let’s look at radio’s share on individual digital devices:

On internet-connected TV’s, five percent of time spent with audio goes to radio. Out of all our digital devices, this is where radio does the worst. According to the infinite dial, 48% of Americans have an internet-connected TV in their homes. If this is a device that almost half the population owns, and we already know that radio has a hardware problem. This is an area where radio can definitely do better.

On the smartphone, six percent of time spent with audio goes to radio. The smartphone is a great thing for audio in general. I have heard some say it is the golden age of audio, partly because of the unlimited choices and easy access to audio with the assistance of a smartphone. Only, at least on the smartphone, radio is not sharing in this golden age.

Radio’s story is a little – very little – improved on computers. Ten percent of time spent listening to audio goes to radio on computers. But there’s one place that feels like a ray of hope for radio: the smart speaker.

On smart speakers, 21% of audio’s Share of Ear goes to radio. Surely a decent portion of that listening is going to public radio stations, which have jumped onto this technology faster and harder than commercial radio have.

Now to be fair, under the apocalyptic scenario I presented earlier, if every radio in America were wiped out, radio’s Share of Ear on digital devices would assuredly start to rise.  Some significant chunk of the people who are listening to radio now would immediately seek out the streams of the radio stations they are no longer able to listen to on a radio.

But there’s tons of evidence that once people have access to the Infinite Dial, they start to explore many more options.  So what can radio do?  What steps should the American Radio industry take to improve the situation?

Well first, let me cut off any consideration of one idea – That somehow we can get people to start buying radios again. If you gave them away for free, do you think people would choose them over their other beloved devices? No, the answer has to be for radio to put itself in a better position to compete on the ‘Infinite Dial.’

So in order to figure out what to do next, we decided to talk to various people we knew who look at U.S. Radio from the outside.  We contacted various friends from radio throughout the world and we asked them what they would do, and what they are doing, in order to be prepared to compete in this theoretical world where radios don’t exist.  When radio companies have to compete on what is essentially an even playing field with every other option possible.

REIMAGINING RADIO

The first point made by our advisors, rather naturally, is that radio companies have to reimagine themselves beyond ‘radio’:


This is a classic Business School story come to life. The train companies in the middle of the twentieth century, enjoying a near monopoly on the long-haul movement of goods, didn’t see the threat of long-haul trucking. The lesson is that they didn’t define their business correctly. They didn’t understand that they were in the transportation business and not the train business.  So they just watched their share of transport drop and drop.

In some ways, Radio has hardly noticed or even acknowledged its dropping share of audio, or Share of Ear as we call it at Edison Research.  Part of this relates to the business model.  Radio brands in local markets sell their ads against the Nielsen ratings, which only measure ‘radio’ and don’t have everything on a single scale.  On top of that, radio companies in America have actively resisted the measurement of IP-delivered radio or satellite radio or really anything beyond AM and FM and some limited measurement of the streams of AM/FM from Nielsen.  So instead of being able to market a story of a vibrant audio market, it is a story of a declining ‘radio’ market.  Especially as the growth has been coming, to date, from pure-plays such as SiriusXM, Spotify, Apple and Pandora.

Is it too late for American radio companies to back into the “audio” business, instead of just the “radio” business? Has the train already left the station? I hope not.

Let’s move on the next thing our advisors talked about: Content.

CONTENT


So many points of interest here.  Everyone is talking about creating more and more content – about essentially flooding the market.  In particular, podcasting is growing and exciting, but there is actually only so much taste or interest in speech-based content.

Because most people, at most times when they want to consume audio, want to consume music.

So I want to talk about one aspect of what Rüdiger Landgraf was discussing.  There is an irony involved in the fact that the deal that has helped make American Radio billions upon billions of dollars over the last eighty years – not paying for music – may be the biggest threat to radio today.

What do I mean by that?  As most all of you know, radio has essentially not had to pay for the biggest chunk of its content – music – forever.  Music is what most people want, and American Radio can leverage it for free, so of course what happened?  Radio in America has smartly delivered “More Music with Less Talk.”  And boy that has worked great…until it didn’t.

Just like the train companies, radio could carry the music freight until the trucks of Pandora and Spotify and YouTube came along.  And once people enter the digital environment – they expect a level of interactivity that listening to the radio doesn’t currently allow.  So what radio really needs to do is sit down with the music companies and negotiate an entirely new deal.  Maybe – dare I suggest it – give in on a small broadcast performance royalty in exchange for the ability to make radio over the internet interactive.  Let people skip songs they don’t like.  Let radio companies create customized music streaming and put radio in a position to compete with the pure-plays.

HOW CAN RADIO COMPETE?

So how can American Radio compete in a world where everything is digital and radios no longer exist?  Let’s hear one more time from our advisors.


There is one crucial part that I want to emphasize here: this notion of “Agree on technology and compete on content.”

Let’s take our imaginary scenario of a world with no radios and expand it further.  What if radio had simply never existed.  Would we have understood the value that the dial creates?  The radio dial is the perfect example of “agree on technology and compete on content.”  The consumer need only to buy that radio – that single device, to listen to all the content available from it.  Can you imagine instead if it had been set up so that you needed a different radio for every station?  One radio for NBC, a different radio for CBS, another for Mutual?  It is, indeed almost unimaginable.  Surely radio would never have grown into the medium it is today had it not agreed on technology from the beginning?  Instead, radio created the smarter world, one in which a simple turn of the dial quickly allowed one to try to find the content she is seeking.

And yet, think about radio’s digital offerings today.  Many radio stations have their own station-specific apps or you can listen to iHeart Radio stations on iHeart’s app, and now you can only listen to the streams of Entercom’s stations on the Radio.com app.  Changing from Z100 to WCBS-FM, a process that is incredibly easy along the FM Dial, now requires you to close the iHeart app and open Radio.com and only then attempt to navigate to WCBS’s stream.  It’s impossible.

Which should make anyone involved in American Radio quickly understand that beyond all the other reasons people are not choosing the streams of AM/FM Radio in big numbers in the digital sphere, beyond all the content-oriented reasons, the biggest issue is that we have made listening to ‘radio’ on digital, a terrible user experience. We have taken something marvelous, an environment of pre-set buttons and scan and seek and simple easy switching to find preferred content, and made it difficult at best.

So the biggest answer I can give for how ‘radio’ can compete in a world where no one owns a ‘radio’, is for the radio industry in America to unite around this precept of “Agree on technology and compete on content.”  I certainly don’t know how this can be done, as I know almost every big radio company has their own platform. But we simply must take American consumers back to a place where listening to ‘radio’, their beloved, local, in-market, targeted content is easy.  With a single, unified, easy-to-use technology – like the RadioPlayers in place in Canada or the UK or Australia and other countries.

Recently SiriusXM announced that they are acquiring Pandora. When we combine the Share of Ear of Pandora and Sirius XM we see that twelve percent of American’s listening time goes to one of these companies. Radio is competing against this. If your competitors are consolidating, you don’t have a chance without finding a way to work together in the digital sphere.

TAKEAWAYS

So to review – here are my main thoughts on what radio needs to do to win a world with no radios:

  • Redefine your business to all forms of audio – the ‘radio’ business simply can’t fully compete in the on-demand environment of digital
  • Work to renegotiate the relationship with the music companies so that the biggest part of radio programming – music – can be delivered from radio companies in ways modern consumers expect
  • Agree on technology and compete on content.

Again, no one is loyal to FM. If people are loyal – it is to your content and your brand. Every second a new person makes the switch to digital. What will you do to make people choose to listen to you – in a world with no radios?

Miles Different Title Slide

Miles Different: In-Car Audio 2018

Thank you for joining us at The Radio Show in Orlando today to see Larry Rosin present Miles Different: In-Car Audio 2018, a look at AM/FM radio in-car and the total in-car audio landscape.

Click here to download Miles Different: In-Car Audio 2018

The complete presentation may be downloaded by clicking the link above.

The Top 10 Takeaways from Miles Different: In-Car Audio 2018:

  1. The car is as important as ever.
  2. The car is the top location for audio listening.
  3. Broadcast radio remains the king of in-car audio.
  4. Consumers have many more options for audio in cars.
  5. When people have more options they use more options.
  6. Drivers of the newest cars are…miles different.
  7. The agent of change is SiriusXM.
  8. Traffic reports as we know them are doomed.
  9. Streaming not yet a big factor, but…
  10. We are just at the dawn of change.

Miles Different: In-Car Audio 2018 uses data from Edison’s Share of Ear® study, The Infinite Dial in partnership with Triton Digital, and a special in-car survey in partnership with NPR.

 

About Edison Research:
Edison Research (http://www.edisonresearch.com) conducts survey research and provides strategic information to a broad array of commercial clients, governments and NGOs, including AMC Theatres, The Brookings Institute, Disney, The Gates Foundation, Google, the U.S. International Broadcasting Bureau, Oracle, Pandora, The Pew Research Center, Samsung, Spotify, SiriusXM Radio, and Univision Communications. Edison Research works with many of the largest American radio ownership groups, including Bonneville, Emmis, Entercom, and Radio One. Another specialty for Edison is its work for media companies throughout the world, conducting research in North America, South America, Africa, Asia, and Europe.

Since 2004, Edison Research has been the sole provider of Election Day data to the National Election Pool, conducting exit polls and collecting precinct vote returns to project and analyze results for every major presidential primary and general election.  Edison conducts more than 100,000 interviews in a single day for this project. For the 2018 and 2020 U.S. elections, Edison will provide exit polls and will tabulate the national vote across every county in the United States for ABC News, CBS News, CNN, and NBC News.

In-car radio dial

The Car is the Top Audio Listening Location

Americans love audio and make it an enormous part of their lives. In any given day, nearly everyone will consume at least some audio, and on average, people spend four hours per day listening to music, news, personalities, and sports.
Edison’s Share of Ear® study notes the location of all of this listening — and the location that people are most likely to consume audio is in the car. Seventy percent of Americans age 13 and older listen to audio in the car each day — higher even than the portion who listen to audio at home.

Car Top Audio Location

What are these people listening to? How is the in-car audio environment changing? The answers to these questions will be revealed at a session called Miles Different: In-Car Audio 2018, at 1:30pm on September 27 at the Radio Show in Orlando, produced by NAB and RAB.
 
Edison’s Larry Rosin will summarize data from Share of Ear®, Infinite Dial, and a unique tracking survey performed with NPR, to show the state of in-car audio today.

SiriusXM + Pandora = ?

This morning it was announced that satellite radio service SiriusXM will enter into an all-stock deal valued at $3.5 billion to acquire music-streaming service Pandora. The deal will create the world’s largest audio entertainment company.

The consolidation of these audio entities raises the question of what kind of share this combo will own in the total audio landscape in the United States.

For an answer, we look to Edison’s Share of Ear® study.

According to the latest Share of Ear data from Edison Research, a Pandora-SiriusXM combination would get about a 12% share of the total time spent with audio in the United States among persons 13+. Americans age 13+ spend an average of 4 hours per day consuming audio, which includes all audio sources.

SOE Pandora and Sirius

 

About Edison Research

Edison Research (www.edisonresearch.com) conducts survey research and provides strategic information to a broad array of commercial clients, governments and NGOs, including AMC Theatres, The Brookings Institution, Disney, The Gates Foundation, Google, the U.S. International Broadcasting Bureau, Oracle, Pandora, The Pew Research Center, Samsung, Spotify, Sirius XM Radio, and Univision Communications. Edison Research works with many of the largest American radio ownership groups, including Bonneville, Emmis, Entercom, and Radio One. Another specialty for Edison is its work for media companies throughout the world, conducting research in North America, South America, Africa, Asia, and Europe.

Since 2004, Edison Research has been the sole provider of Election Day data to the National Election Pool, conducting exit polls and collecting precinct vote returns to project and analyze results for every major presidential primary and general election. Edison conducts more than 100,000 interviews in a single day for this project. For the 2018 and 2020 U.S. elections, Edison will provide exit polls and will tabulate the national vote across every county in the United States for ABC News, CBS News, CNN and NBC News.

Randy Brown VP Edison Research

Quality of Survey and Sample Design Key to AM/FM Radio Estimates

In a recent Radio World article, Edison Research’s Vice President Randy Brown tackles the topic of online-only samples versus online and offline samples, plus the difference between diary and recall methodology. Most importantly, he addresses how these differences in samples and methods can affect listenership estimates.

Speaking about the underestimation of listening to AM/FM radio, Randy says, “…if you take a closer look at how some audio research is being conducted, it should give you pause before you prepare your eulogy for AM/FM radio.”

Read the full article at Radioworld.com here.