Radio may survive this, too

CRITICAL EYE

Broadcasters hope MP3s and satellite radio won't kill terrestrial market

August 26, 2007|By NICK MADIGAN

With all these new gadgets for listening to music -- from MP3s to state-of-the-art cell phones and laptops, not to mention satellite radio -- it's a wonder anyone is listening to good old-fashioned terrestrial radio.

One theory says that so many listeners are spending money on newfangled technology that the ones left tuning in to terrestrial radio are doing so only because they can't afford the new toys.

"Because of satellite radio, more affluent people are going to use that service, so we have a smaller piece of the pie to slice up with the people remaining, who are not so affluent," said Bob Pettit, general manager of WCBM, the Baltimore talk-radio station at 680 AM. "The younger people are going to the new technologies. Radio used to be a very effective way to reach people aged 18 to 34. Now, not so much."

As a result, Pettit said, national advertisers are not turning to the old medium the way they once did, leaving the field to cheaper, and often local, ad buyers. In turn, the stations are obliged to charge less money because their demographic is poorer, he said, leaving the stations with less revenue.

But other people in the business consider that view heresy, and point to many ways in which the traditional broadcasters are holding their own. While they admit that radio audiences are declining, and that the amount of time people spend listening has fallen, they say that 230 million people, or about 93 percent of the U.S. population, still listen to some radio during any given week -- down from 96 percent a decade ago.

In contrast, upstarts XM Satellite Radio and Sirius Satellite Radio have attracted a combined 14 million subscribers since their launches in September 2001 and July 2002, respectively. The two companies, which earlier this year announced their intention to merge, charge about $13 a month for access to hundreds of commercial-free channels, which can be accessed through special receivers and personal computers.

While those audience numbers are still comparatively small, millions more people have bought MP3 players and other music-playing gadgets, and sales remain hot in the young demographic that advertisers covet.

This month, Orbitcast.com reported the results of a Bridge Ratings study that said satellite radio leads other radio formats by 30 percent in attracting so-called "influentials," described as listeners who are enthusiasts, who influence others to act on or consume products or services. "They're the hubs of word-of-mouth marketing," the Orbitcast report said.

The Bridge study found that satellite radio listeners are 10 times more passionate about their experience than their terrestrial radio counterparts. "They are passionate enough to pay for radio while others simply turn on the radio," the report said.

Trying new things

But Fred Jacobs, a radio industry consultant who is credited with creating the "classic rock" format in 1983, was skeptical of the findings. "It's not about affluence; it's about choice," he said, adding that stations and radio networks have hardly faced the new technological landscape lying down.

"Radio is fighting back in a number of ways -- beefing up and improving Web sites, moving to podcasts to better leverage the strength of their personality shows and, of course, the fledgling HD radio," Jacobs said, referring to the high-definition broadcasts and receivers now available.

"Many advertisers are looking beyond `old media' -- radio, TV and newspapers -- for results and return on investment," Jacobs said. "They have a greater willingness to experiment with digital platforms -- Web sites, podcasts, etc. -- and even word of mouth. The greater the choice for advertisers, the better their ability to negotiate better rates."

Some music stations -- particularly those with the so-called "Jack" programming, named after a fictitious hard-living radio cowboy -- have reacted to the new gadgets by establishing a "shuffle" format, similar to the feature on MP3 players that allows a continuous flow of music, chosen randomly, to play.

"The Jack format is the radio equivalent of an iPod shuffle," said Thom Mocarsky, a spokesman for Arbitron, the audience research company. "Radio programmers are putting together songs that they never would have put together before. Now, they're willing to be eclectic. That's part of the response."

Mocarsky said that while the number of people who tune in to terrestrial radio has been mostly "rock solid" for the past 20 years, the time that individuals spend listening has declined. Ten years ago, he said, listeners generally spent 23 or 24 hours a week listening to radio. Now, the average is about 19 hours. But he said that 70 percent of the people who subscribe to satellite radio also listen to terrestrial radio.

Magic word: `local'

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