We’ve all heard the criticism:
“Many terrestrial station owners resistant (streaming), in part because it is human nature to resist change.”
“The inability of today's leaders to see tomorrow is as old as industry leadership itself.”
“The sooner broadcasters step into that space (streaming), the better.”
But like the calls of religious zealots, the self-assured beseechments of new-media types are based on faith rather than facts.
BIA/Kelsey thinks that digital will contribute half a billion dollars to radio this year. How much more would digital contribute to radio’s $15 billion revenue if radio moved faster?
Critics don’t have a clue. Like a scene out of Field of Dreams, they just believe if you build it, the dollars will come.
Jerry Lee, owner of Philadelphia’s WBEB, disagrees:
For me to go out and sell digital is playing with pennies against the dollars I could make by becoming sharper at selling my product. The money comes from selling commercials.
As it turns out, radio just may be doing what Lee warns against, working too hard to bring in digital pennies instead of working to bring in more spot dollars.
Harker Research recently analyzed radio revenue patterns going back to 2009 and to no one’s surprise found that a growing proportion of revenue growth is coming from digital.
Radio critics point to this as proof that digital is the key to radio’s future growth. But is it?
We have indexed quarterly revenue for spot radio, spot TV, and newspaper print against 2009 as media were coming out of the recession. To smooth out seasonal effects, each data point is the average of four quarters.
Television has rebounded from its post-election doldrums, and is now growing steadily. It now stands ahead of where it was in 2009. Newspaper continues its free-fall, now at 70% of 2008 print revenue.
Radio is better off than newspaper, but worse off than television. It appears stuck at about 92% of 2009 spot revenue.
The contrast between the three media’s recovery from the recession suggest that each is on a different trajectory.
Television spot growth is considerably stronger than radio’s, suggesting that radio might be inadvertantly following newspaper's path. Instead, perhaps radio ought to emulate television’s growth strategy.
The medium that has focused primarily on its traditional product, television, is the most successful, while the medium that has essentially gutted its product, newspaper, is the least successful.
If digital is the key to growth, why is television, the medium that has done the least preparing for a digital future doing better than either radio or newspaper?
Newspaper was the first medium to decide that the future was digital. Newspapers put all their resources into re-inventing newspaper as an online product.
They fired reporters, writers, and editors, eliminated whole newspaper sections, and in most ways hollowed-out the product they delivered to readers.
During this time, print revenues dropped like a rock. $23 billion of annual print revenues have evaporated.
After eight years of gutting print to grow digital, newspaper has $3 billion of annual digital revenue to show for it, still leaving the medium $20 billion in the hole.
Radio has approached its digital future much like newspaper. It too has taken an axe to the product, firing air staff and program directors, cutting marketing and research dollars all the while it pours more money into digital.
If gutting newspapers backfired and left print in a deep hole, will it happen to radio too?
As with the first graph, the data points are four-quarter averages of quarterly digital revenue as reported by the association, in this case indexed to 2003 revenue.
Revenue grew steadily until the recession, fell back, and then returned to pre-recession levels. Perhaps digital revenues will continue to grow, but so far this year digital growth has been anemic.
Newspaper may be facing a future of falling print revenue, combined with stalled digital growth.
The second trend in red on the graph is radio’s performance indexed to 2008 when the RAB started breaking out digital.
At this rate, digital revenues will reach about 8% of radio’s on-air spot revenue in about five years.
Newspaper’s failure to stop the bleeding with a digital focus, in contrast to television’s continued success improving its traditional product should be a warning to radio.
Digital has turned out to be a trap for newspaper. Gutting its print product to fund digital efforts has not solved newspaper’s problems. If anything, it has made the problems worse.
Television seems to be doing just fine with only 3% of its revenue coming from digital.
Television’s focus on creating a product that consumers want–even in a digital age, seems to be paying off.
Time spent sitting in front of a television set has inched upwards even as time with computer and mobile video consumption has grown.
Maybe if radio devoted more energy in creating compelling products like television has, radio might grow its revenue like television has.
Otherwise radio might find itself in the same deep hole in which newspaper finds itself.