Radio InSights

DOJ Approves Sirius-XM Merger: Why It Doesn't Matter

The Department of Justice's Antitrust division has approved the merger of Sirius and XM. The NAB, which has vigorously fought the merger was predictably indignant. NAB EVP Dennis Wharton fumed:

We are astonished that the Justice Department would propose granting a monopoly to two companies that systematically broke FCC rules for more than a decade.

It isn't clear why the NAB feels that the DOJ should be so concerned about their violations when the FCC didn't seem too upset, but when one is tilting at windmills, any stick will do. The truth is that the merger really doesn't matter. Both Sirius and XM are good examples of bad radio. If their products were local radio stations in a small market, they would be well down the rankers. With few exceptions the formats are repetitious, with jocks in serious need of coaching, and marketing that is non-existent to dreadful.

If the merger goes through, we'll have one mediocre sounding satellite radio company instead of two. Without the competition, the formats will have even less incentive to "innovate" (as if what one hears on XM or Sirius is the result of innovation).

Subscription churn is already increasing and new subscription rates are slowing. We are probably close to a subscription plateau. Our research suggests that there are few people on the sidelines who are ready to sign up once there's a single satellite radio company, even at current prices. When the merged company tries to raise subscription rates, the plateau will quickly turn into a plummet.

So let them merge. Let's stop letting satellite radio distract us from the real challenge we face, creating compelling radio that people want to listen to.

Wall Street Doesn't Understand Radio

R&R reports that Radio One's sale of KRBV has Wall Street's approval. They write:

"Radio One is making positive changes" was the headline on Wachovia analyst Marci Ryvicker investment note to clients yesterday, a day after Radio One agreed to sell KRBV/Los Angeles for $137.5 million and its board authorized a stock repurchase program. She said she sees "two key positives" from Monday's announcements, saying they "not only improve the company's financial position, but more importantly, they provide management with much needed credibility." Over at JP Morgan, analyst John Blackledge told clients, "The sale of the troubled L.A. station makes sense for Radio One at this point, as reformatting and focused efforts could not turn around the station's fortunes over the past few years."

So as far as Wall Street is concerned, a radio company selling a radio station that it couldn't turn around and announcing a stock buy-back is proof of management's wisdom, credibility and warrants praise.

Following this logic, public radio companies should announce that they are selling off all under-performing stations and returning the money to stockholders.

Most of us already understood that kowtowing to Wall Street has been corrosive and a major contributor to the sad state of the radio industry, but if you weren't sure reflect on the implications of these assessments.

Yahoo Buys Radio Time

CNET reports that Yahoo has decided to buy radio time to promote their redesigned search engine. Read it here. Quoting Raj Gossain, Vice President of Marketing,:

Gossain acknowledged that it is hard to get people to change their habits, especially for something like Web search where people seem to go on auto-pilot. The radio ads will "introduce Yahoo search to folks who perhaps haven't tried us in awhile," he said. "We've got capabilities in our search experience that the competition doesn't have."

News/Talk's Reach Declining

Media Audit announced today that according to their "National Format Report" scheduled for release in April, News/Talk reaches 11.5% of adults. It notes that in 2005 that number was 14%.

While Media Audit admits that the reach of Public Radio has remained flat at 9.8% for three consecutive years, they suggest that there is a link between News/Talk's decline and the strength of Public Radio:

"The survey further reveals that Public Radio is the second choice among News/Talk listeners, suggesting notable audience duplication among the two."

Our research has detected an erosion of the News/Talk audience, but the decline cannot be attributed to NPR. We show a growing dissatisfaction with News/Talk in general, both commercial and non-commercial.

The history of radio formats suggests that every format needs to constantly evolve and reinvent itself. Listeners change over time and their expectations rise the longer they have listened to a format. Both NPR and Talk/Radio are mature formats, as formats go "long in the tooth." As a result, the audience is slowly drifting away, disillusioned with the lack of change.

With a contentious Presidential election this year, the format should do well in 2008, but beyond November News/Talk faces a difficult future. Every successful format has to evolve to maintain its strength. Despite the continuing success of News/Talk, the format needs to evolve if it wants to reverse the erosion. Unfortunately, the erosion will have to worsen before it gets the format's attention and program directors make the changes necessary to reinvigorate News/Talk.

Cox Radio Posts Q4 and Full-Year Gains

The announcement that Cox Radio increased fourth quarter and full-year revenue by 1% should not pass unheralded. Bob Neil gets a lot of flack for his blunt criticisms of the state of radio. However, given the fact that his company was one of the few to actually grow revenue this past year suggests that maybe he knows what he is talking about.