Radio InSights

Is PPM Killing HD Radio?

Nielsen has now confirmed that PPM under-counts some formats.

Unfortunately, things are even worse than Nielsen admits.

As bad as PPM is in accurately measuring some formats on traditional (analog) AM and FM stations, HD (digital) stations have virtually no chance of getting their full credit from PPM regardless of format.

For reasons we’ll explain, an HD station playing identical content to a traditional analog station is unlikely to encode as well as the analog station.

Consequently, with identical audiences the HD station will have lower ratings.

PPM relies on the presence of masking content to insert inaudible identifying codes in a station’s programming. The greater the level of masking content, the “louder” the codes. The more often programming contains masking content, the more codes broadcast.

Some formats broadcast more masking content than others, so those formats broadcast codes more consistently than other formats. More consistent encoding means better ratings.

On the other hand, if a station broadcasts insufficient masking content, the encoder can’t insert codes and the station is essentially off the air as far as PPM is concerned.

Digital radio such as HD radio adds an additional wrinkle to this process.

To enable HD to deliver multiple digital streams within the bandwidth of an AM or FM channel, the digital channels are highly compressed using a proprietary algorithm that removes a great deal of content.

In this regard, HD radio is like a low quality MP3 copy of a song.

If you want to better understand what this means and you have access to a Voltair, replace the CD version of a song with a low quality MP3 version and watch your green encoding bars turn to red.

Were it not for PPM, the quality degradation that comes with the HD radio compression algorithm wouldn't be a ratings problem for HD Radio.

However, the process of compression eliminates large amounts of masking content, the very content PPM needs to consistently encode the broadcast.

HD radio turns highly encodable analog content into unencodable digital content.

Granted HD Radio has issues that go well beyond algorithms, but the medium shouldn't be further punished because of Nielsen's inability to accurately measure its audience.

Nielsen is currently testing enhancements to the PPM encoder to address encoding flaws that Voltair revealed.

Nielsen hasn’t announced any test details, but we’re skeptical that Nielsen will be testing the encoding reliability of HD-2 and HD-3 channels.

And we really doubt that results will be released publicly any way.

In a follow-up post we’ll get into the messy details of HD radio’s HDC compression algorithm (codec for shot) and explain the problem in greater detail.

 

Everything You Know About PPM is Wrong

Pretty much everything you think you know about PPM is wrong.

Do you think that PPM gives you an accurate picture of how people listen to the radio?

Wrong.

Do you believe what you were told at convention sessions about how to compete in a PPM world?

Wrong.

Do you believe the dozens of Arbitron presentations on how people listen?

Wrong.

Pretty much everything radio stations do in the hopes of boosting ratings are based on myths.

The reason is that PPM is less accurate and less precise than we were led to believe.

Audio watermarking, the technology behind PPM, works well under the right conditions. However, PPM’s use of watermarking is flawed and leads to gaps in the decoding process and unreported listening.

Worse yet, the amount of listening that is lost depends on a station’s format, the content broadcast, and the environment in which panelists listen.

Two equally popular formats might have different ratings just because PPM can easily identify one station but not the other.

Remember all those discussions about how listeners don’t like jock talk? Think that PPM proved it? Wrong.

A lot of jocks lost their job, and the ones that remained were told to shut up.

Now we learn that meters don’t decode talk as well as music.

The drop in minute by minute when jocks come on is not because people are tuning away. It’s because encoding shuts down.

So it turns out that it isn’t listeners who don’t like talk. It’s the meters.

While we think of encoding as a continuous process, for most formats it is actually a start-stop-start-stop kind of process, depending on what you’re playing.

The encoding process requires content to “hide behind” so the identifying encoding tones are not audible.

That’s easy with typical music content. All you have to do is be playing something around 1-3 kHz, a high C for you musicians.

No content around a high C? No encoding. No credit.

How about silence or long pauses? No encoding. No credit.

So every time we look at PPM ratings, we aren’t seeing all the listening that panelists were exposed to.

We’re seeing little snippets when the type of content enables the encoder to encode.

Were all formats and stations equally likely to lose credit, at least we’d have a level playing field, but that’s not the case.

Some formats encode better than others, so even if some stations get 99% of the credit they deserve, other stations in other formats might get considerably less.

PPM creates winners and losers not just based on popularity, but also based on format and content.

What about minute by minute? We were told that the granularity of PPM would enable us to see listener reaction to individual elements like songs.

However, if PPM reacts differently depending on content, then we can’t be sure whether panelists tuned away or encoding stopped.

Is a drop in meter count due to bad programming or just inadequately encoded programming ?

When meter counts go up are we broadcasting a better product or just a product that encodes better?

All the PPM truisms, all the tricks and ways we thought we were gaming PPM turn out to be an illusion.

We weren’t looking at a real picture of how people listen to the radio, so we weren’t really learning how to better serve them.

Until Nielsen fixes PPM so that every quarter-hour of listening is accurately logged, we really can’t be sure of anything PPM tells us.

Still trying to get up to speed on the new PPM revelations? Here are links to posts that help you learn what it's all about:

Is Your Competitor a Super-Achiever?

The Myth of Minute by Minute and PPM Granularity

Did Arbitron Sell Radio a Bill of Goods with PPM?

The PPM Presentation Video You Need to Watch

What’s All the Fuss Over Voltair? About $2 Billion

Did Arbitron Mislead the RAB About PPM’s Missing Listening?

The Nielsen Press Release that Kills Voltair

Nielsen’s PPM, Ethics, and Voltair

The PPM Talk that Nielsen Should Have Given

MRC to Dictate Audio Processing?

At the NAB: Processing for PPM

 

 

The Nielsen Press Release That Kills Voltair

So far Nielsen has had little substantiative to say about Voltair other than it is studying the device.

There’s one thing Nielsen could announce that would pretty much end Voltair.

Nielsen could publically declare that PPM is as accurate as it originally claimed to broadcasters, and that Voltair offers no benefit.

Imagine this press release from Nielsen:

Nielsen Audio’s PPM captures and reports 99.9% of all encoded radio listening to which panelists are exposed. The technology works equally well with all radio formats, all programming material, and is immune to environmental interference.

Case closed.

Voltair’s critics would be correct claiming that all this talk about boosting ratings is just hype, a classic example of confirmatory bias.

But don’t expect Nielsen to issue this press release.

All the evidence points to just the opposite: PPM does not capture listening to all formats and program material equally, and that ambient noise can make identifying a radio station much more difficult.

And ponder what it means if Nielsen cannot claim that PPM captures 99.9% of all encoded radio listening under all circumstances.

It means that radio listening is being under-reported by PPM.

The real story that is getting lost in all the hand-wringing over whether Voltair is fair is the implication if Voltair actually works.

If Voltair really does boost ratings, then PPM without Voltair is not capturing all radio listening.

Then we have to ask ourselves what percentage of radio listening is not being reported by PPM. Is it 10%? Is it 30%? Is it more?

Is it OK if PPM misses 10%, but not OK if PPM misses 15%? How much potential listening are you willing to lose?

Spot radio is a $14 billion business where cost-per-point matters. If actual radio listening is higher than Nielsen reports, then radio may be losing billions in potential revenue.

Some claim Voltair is unfair. Is it more fair for radio to give up potentially billions of dollars because of a flawed measurement technology?

The PPM Talk that Nielsen Should Have Given

Think that the technology behind PPM is simple, flawless, and without potential pitfalls?

You should have been in Las Vegas to hear Dr. Berry Blesser, Director of Research for The Telos Alliance, describe the science and technology behind watermarking like PPM, the process of embedding and then retrieving information concealed within audio.

It was the second NAB engineering talk on PPM at this year’s convention, this one delivered by the technical expert the US government called on when the Feds decided to look into complaints about PPM.

The issues and challenges Dr. Blesser discussed impact every radio station in PPM markets.

He delivered the sort of information Arbitron should have delivered in 2007 instead of the happy talk that filled NAB convention PPM sessions back then.

We’ve asked Dr. Blesser for permission to reproduce his PowerPoint presentation, and we intend to publish the presentation at Radio Insights. In the meantime here are some key issues to ponder.

The ability of PPM to determine which station a person is listening to depends primarily on the content the station is broadcasting. The greater the proportion of content between 1 kHz and 3 kHz, the “louder” the embedded information, and the more likely you’ll get credit for the listening.

That’s because PPM codes ride beneath the content in this range, so if there is no content, there is no code. You might as well be off the air.

The amount of information in this range varies by format, but even within formats, the density of 1-3 kHz information can vary, so the belief that some formats do better than others in PPM is only partially correct.

Our take: Start monitoring the spectral content of your programming. At least download a Spectrum Analyzer iPad app and pay close attention to how much content falls between 1 and 3 kHz.

Talk stations and music stations with morning shows that talk a lot may be surprised how seldom they broadcast 1-3 kHz content.

A second issue is ambient noise in the listening environment.

Ambient noise can compound the problem of getting credit. The PPM encoder adjusts the level of the codes based on the level of the content, maintaining a level that is a fraction of the content.

The problem is that the encoder has no idea what environment a listener is in, or what the ambient noise level is.

If your 1-3 kHz content is low, the code level is low too. But what if it’s drive-time and a large proportion of your panelists are listening while driving? There’s a good chance you’re not going to get credit for a portion of that listening.

Ironically, this point was driven home during a separate presentation by John Kean, Senior Technologist at NPR. He presented results of an NPR study showing how people listen to the radio in noisy environments.

People do not turn up the radio to fully compensate for greater noise. They just listen at what effectively is a lower level.

Worse yet, a great deal of ambient noise like road noise falls into the 1-3 kHz range, further burying the PPM codes.

Combine a low level code with a noisy environment, and you are probably going to lose credit for some quarter-hours.

We recently wrote that PPM can kill formats, but it turns out that the problems are much broader than we thought. Every format has some content that encodes poorly.

Radio stations using Voltair are finding that some songs don’t encode well. They are either pulling the songs or giving them sound codes so they don’t play around each other. They also may only play them late in the quarter-hour.

It turns out that compressed audio like MP3s don’t encode well. MP3s tend to lack a dense mid-range so there’s less energy for the PPM codes to hide behind.

After the presentation we tuned around the Las Vegas radio dial with a Spectrum Analyzer. The first graph at the left is a well known talk show host speaking. The energy (think volume) of the content is the vertical axis. The frequency is the horizontal axis. (Click on them to enlarge.)

Notice the absence of content in the 1-3 kHz range. This is an extreme example where the host was speaking quietly for effect. At other times there were opportunities for the encoder to inject information, but for much of the time the encoder was probably silent.

The second example is a music station close by on the dial.

The song shown here is a pop alt hit, and while it looks much different it too shows low content in the critical range relative to the rest of the spectrum. There’s more content for the PPM codes to hide behind, but not as much as other songs the station played.

Listening to Dr. Blesser speak we were reminded of the many panels at NAB Radio Shows where program directors talked about PPM and how they were shutting up their jocks.

The conventional wisdom was that PPM panelists don’t like talk. They just want lots of music. Little did we know that it was the meter not the panelist that didn’t like talk.

Much of what we’ve “learned” about PPM is just plan wrong.

 

Format Winners of 2014

Which radio formats were the big winners in 2014? You may be surprised.

While Nielsen relies on their PPM national database to identify winners and losers, Harker Research believes there’s a better way to determines format success.

Nielsen numbers are unduly influenced by a few large markets. We believe a better way is to track the performance of all stations in a format, determining the percentage of stations that are gaining share.

The winners are the formats where a majority of stations are growing. The losers are the formats where a majority of stations are losing share.

To determine the winning formats of 2014 we compared October through December 2014 to the same months in 2013. We excluded the Christmas book because of the distortions it causes.

We used the same format designations that Nielsen uses, and excluded formats with too few stations to reliably make a determination.

We then ranked formats by the percentage of stations that gained share, with the top format having the highest percentage of stations ahead of where they were this same time in 2013.

So what formats were the big winners in 2014?

The winningest format for 2014 was Christian.

More than two thirds (69%) of Christian AC and CHR stations ended 2014 ahead of where they ended 2013.

Think of the winning percentage as your odds of being ahead for the year. If you are a Christian station, your odds of being ahead at the end of the year were two to one.

If your station is among the one-third that lost share last year, it signals a need to take a hard look at the station. Is there a difference between your approach and that of the winners? Are there special circumstances that temporarily hurt the station’s performance?

The second most successful format in 2014 was Adult Hits. Slightly less that two-thirds (63%) of Adult Hit stations ended 2014 ahead of their 2013 numbers.

Classic Hits also had a good year, ranked third. Sixty percent of Classic Hit stations ended the year up over the previous year.

News followed close behind ranking fourth at 59%, still in positive territory. Sports followed at a plus 56%.

Urban Contemporary was also in positive territory at 56%, tied with Sports.

Adult Contemporary and Soft AC (Nielsen combines the two formats) comes in seventh at 53%, just barely over 50:50 in positive territory.

Country may surprise you. Nielsen’s analysis claims that Country is on the ropes, but a better way to think of the format is “moving sideways.” Country comes in eighth at 52%, tied with News-Talk.

Two Rock formats, Alternative and Classic Rock ended the year essentially tied.

Alternative edged out Classic Rock by a single percentage point in gainers (51% to 50%), but when we take into account stations that were flat for the year, Alternative did a little better than Classic Rock, 54% to 50%. Active Rock was down, but few stations identify themselves as Active on their Nielsen forms.

Urban AC tied Classic Rock at dead even. As many Urban AC stations lost share as gained share in 2014.

Crossing the 50% mark we move into negative territory. It means that for formats below this level, more stations lost share as gained share in 2014.

So these are the 2014's losers:

The big loser in 2014 was Contemporary Hit Radio.

Only a third (37%) of Rhythmic CHR stations found themselves ahead at the end of 2014. A relatively small number of CHR stations call themselves Rhythmic, so the losses might not seem significant. However, mainstream CHR was not far behind.

Only 45% of mainstream CHR stations gained share in 2014.

Hot AC wasn’t too far behind. Fifty-four percent of Hot AC stations ended the year down from their 2014 numbers, leaving just 46% ahead.

Spanish is next, essentially even for the year. Forty-nine percent of Spanish stations were up, 49% were down, and 1% were flat.

You will find differences between Nielsen’s analyses and ours. That’s because of the way Nielsen calculates the company’s “national” numbers.

The company’s national database includes tens of thousands of panelists, but most of those panelists live in New York, Los Angles, Chicago, San Francisco, Dallas, and the rest of the top ten markets.

The Nielsen “National Regional” database creates national estimates by summing up all the quarter-hours in all Nielsen markets, then calculating a share for each format. This dates back to the way Arbitron calculated shares for the yearly Radio Today releases.

The problem is that when we add up quarter-hours across markets, most of the quarter-hours come from the largest markets like New York, Los Angeles, and Chicago.

A quarter of the 45 PPM market quarter-hours come from just these three markets. Half of all PPM quarter-hours come from the top 10 PPM markets.

What happens to a single station in a top five market can cancel out what’s happening to a half dozen stations in smaller markets.

Here’s the problem:

Let’s say a new format signs on in Austin, New York, Pittsburgh, Raleigh, and Sacramento. The format takes off in all but New York. It’s a huge hit everywhere else, but bombs in New York.

So is the format a winner or loser?

We call it a winner. Four out of five stations in the format are doing well. That means 80% of the stations have bested their previous numbers.

According to Nielsen’s way of looking at it, it could appear to be a failure. New York has something like 4,000 meter panelists, while the other four markets have that number of panelists combined.

If the station in New York tanks and its shares collapse, it could cancel out all the gains in Austin, Pittsburgh, Raleigh, and Sacramento.

And consider the opposite. Let’s say the New York station is a huge success but the stations in the other markets aren’t.

Nielsen could conclude that the format is a winner when four out of five stations are failing.

It’s a hypothetical example, but it illustrates how large markets have a huge impact on Nielsen’s “national” trends.

If we want to talk about US radio listening as a whole, the Nielsen approach is great. Most people live in large markets, so what’s going on in larger markets should matter more.

However, if we want to know how formats are doing, discounting what’s going on in the majority of markets is the wrong approach.

Every station in a format matters just as much as every other when it comes to assessing the health of formats.

Harker Research regularly reports format winners and losers here at Radio Insights. We believe our approach is a better tool to see what’s going on with formats. Check back regularly.

Making Sense of Radio Format Trends

In our previous post we explained why Nielsen national format trend reports can reach misleading conclusions because Nielsen reports are skewed towards what’s happening in just the largest markets.

To get an accurate picture of the health of a format we have to look at all markets, not just the biggest ones.

Are most stations growing or declining? And is there a consistent trend over several months? These are the metrics that matter.

Since 2003 Harker Research has been analyzing formats this way, and we’ve often found a contrast between what Arbitron (now Nielsen) says about formats and what’s actually going on across the country.

We can illustrate the difference between Nielsen’s approach and our own by looking at a recent Nielsen headline that created considerable angst for one format.

In reviewing September PPM results, Nielsen noted this:

For the first time in memory, Country has seen two consecutive months of downtrend in listener shares.

Then a month later, the author emphasized the decline even more by noting that:

The  Country downtrend has now extended into a third consecutive month....October marks the third consecutive month of declining shares. Among listeners 6+, the trend has tracked 8.4%-8.3%-8.2%.

Sounds ominous, doesn’t it?

If you’re a Country station reading this, you might fear that your station might get caught up in this Country downdraft.

But is this downdraft real?

To determine what’s really going on we have to look at Country stations across all markets. Look at the number of stations trending down versus the number trending up, and see which side is winning.

We know that month to month wobbles tend to be random, some up, some down, so most stations wobble somewhere around their "true" share.

This randomness means that in any given month about half of the stations in a format will be up, and half will be down.

So for any format to really be trending down or up, we have to see a steady move in one direction over several months.

It turns out that about half of Country stations actually had good months in August, September, or October.

Here’s the percentage of stations that rose each month in the past three months:

In August the trend was about even with equal numbers of stations going up and down.

In September more stations declined than rose, and then in October the trend reversed, with the majority of stations increasing.

There’s no predominant trend up or down. About half of Country stations went up and half went down each month.

If we average the changes, the three months are pretty much flat with a winner to loser ratio of 48:52, hardly an ominous sign. That’s generally what we see for most formats if we look at short time periods.

Real trends only emerge over time. Crunching the numbers comparing the first half of the year to the latest three months, it turns out that two-thirds of Country stations are actually ahead of where they were in the first half of the year. 

So is Country in trouble? Not according to Nielsen's own numbers, despite the onimous headlines. Quite the opposite.

Next we’ll look at the most recent Nielsen releases to see who the real format winners and losers are.

When a Trend is Not a Trend

Nielsen’s Newswire rating analyses create headlines with their portrayal of rating trends like a horse race. For example, this from a recent release:

“With the release of the August PPM radio listening trends, we can see which formats benefitted the most from summertime audience trends, and a surprise contender has emerged from the pack.”

The problem is that these “trends” are not what they seem.

Nielsen claims that the analyses are a national measure of the health of formats. Their press releases describe formats as “cooling” or “falling” giving the impression that those formats must be declining.

The truth is that Nielsen’s trends have nothing to do with how the majority of stations in a format are doing. In fact, the majority of stations in a format can be trending up at the same time that Nielsen is telling us that the format is declining.

The ratings service derives their “trends” by crunching all radio listening in the 45 non-imbedded markets to determine a national PPM Average Quarter-Hour (AQH). If the total AQH (ultimately expressed as a share) increases, they speak as if the format is growing. If AQH declines, the format is too.

The problem with this approach is that large markets contribute most of the AQH. More than a quarter of all PPM listening takes place in New York, Los Angeles, and Chicago. As the graph at the right illustrates, half of all listening takes place in the top ten markets (click to enlarge).

It means that the Nielsen analyses mostly reflect what's happening in the top markets.

A major swing in one direction for a station in the majors can nullify a swing in the other direction on the part of dozens of stations in smaller markets.

The Nielsen trends are also sensitive to format counts. Over the past year almost fifty new Sports stations have signed on. Is it any wonder that according to Nielsen:

Sports radio, already on the uptick as we reported last month, shot upward in October, setting several records along the way.

Every new station contributes quarter-hours to a format’s AQH. The more stations that move into a format, the higher the format’s share.

This phenomenon can result in upbeat Nielsen reports on formats where the majority of stations in the format are losing share!

A positive trend generated by growing numbers of stations reflects the industry’s belief in a format, but it tells us nothing about whether the format is growing or fading with listeners across the country.

Combine the impact of large markets with the impact of changing format counts and the Nielsen reports can be very misleading.

Not long ago a Nielsen report fueled a “Talk Radio is Dying” meme, leading to a great deal of hand-wringing within the format. According to Nielsen, Talk radio was seeing significant declines in the national trends.

The problem with the analysis was that most of the “trend” was actually driven by what was happening at a few outsized major market Cumulus Talk stations.

WABC, KABC, WLS, KGO, and others had lost a third of their collective quarter-hours. No reasonable rate of Talk station growth in the other PPM markets could make up for the cratering of these few stations.

The listenership losses were the equivalent of an entire small PPM market signing off.

Remember this next time you see a Nielsen report on the health of your format. It really tells us nothing about how the majority of stations within your format are doing.

To find out how a format is really performing, we have to see how all stations in the format are doing, not just a few large market stations.

We’ll show you how that is done in the next Radio Insights.

NAB Radio Show 2014: Going Through the Motions

The 2014 NAB Radio Show will be remembered as one of the most glitch-free Radio Shows in memory. No major on-stage gaffs, everything was on-time, and there were some great moments.

However, those great moments can’t disguise the fact that it felt like the NAB was simply going through the motions. In that regard, radio’s trade representative was all too representative of the state of radio.

Let’s compare this year’s show to an earlier show. As the chart illustrates, 2014 was a very slim show compared to previous years. Less than half the sessions, a third of the exhibitors, a single suite compared to sixty or so in the past.

Most telling was the decline in numbers of sessions. Compared to (say) the San Francisco event in 1991, the number of management sessions was reduced by 44%, management sessions were cut in half, and programming sessions were virtually eliminated, cut by three-quarters.

Yes, radio isn’t what it used to be. Maybe a slimmed down Radio Show is just symptomatic of a slimmed down radio industry.

The Radio Show like radio itself talks a good game, yet today delivers far less than in the past.

What does every industry leader highlight as radio’s strength? What do we hear time and time again?

Content! Unique compelling content is the key to radio’s continuing success!

The declaration has evolved from a credo that radio lived by to a hackneyed clique that too many of radio’s leaders mumble as they carry on the business of systematically eliminating original content.

The attitude was evident in the Radio Show’s programming "track." Very little time was devoted to content.

Most of the programming sessions were devoted to online issues.

New platforms, social media, and related issues. Do we really need more discussions about Twitter? Do we really need to devote the little time set aside for programming issues on Facebook versus Instagram?

Growing Your Mobile Audience was an hour devoted to "engaging the mobile device listener."

The session consisted of two vendors selling their online platforms. One platform allows listeners to engage directly with each other and the station in real-time, on a platform you own and control.

The other enables listeners to connect with news, sports and their favorite artists and bands using real-time keyword/ song/ artist search, (to) connect with their friends and make new ones from all around the world.

Both are probably fine products, but is either one going to save radio?

If the key to radio’s continued success (and some would argue the key to its survival) is content, maybe the Radio Show ought to make content THE programming topic.

Yes, there were a couple of personality oriented sessions. Kudos to the participants because they were the only people who talked about content and meant it.

But content includes much more.

Any new formats worth discussing? Is EDM really a format? Is Talk Radio really on the ropes? How is the oldies format evolving? Anyone at NAB notice WCBS-FM’s success in a format theoretically well past its use-by date?

The only time mellennials come up is in the context of social media and their obsession with smartphones. OK, we’ve got that. To reach them we need to be on phones and use social media. Got that too.

Now, what formats do we need to offer to get them to listen? Will the next generation want news on the radio? How do formats need to evolve for the next generation of radio listeners?

After all, if your product sucks, who’s going to want to hang out with you, no matter the platform?

The Radio Show is the last surviving national forum to discuss these critically important difficult questions. And instead it offers discussions about Pinterest.

It may seem unfair to pick on the NAB, but these are challenging times. The industry has to make a great many difficult decisions to defend itself against digital competitors. The NAB Radio Show is the perfect (and last) forum in which to explore and debate the many critical issues.

Maybe the direction radio is headed is the right one. Or maybe we’re headed down a dead-end road. The NAB can help show us the way, but it has to take the Radio Show seriously.

Today everyone in this business is expected to do more. Why should the NAB be the exception?

Talk Radio 2.0

Is Talk Radio dying?

There are plenty of pundits who think so, but as we recently pointed out every mainstream radio format goes through repeated life cycles. At some point every format seems to be near extinction only to come roaring back, renewed and stronger than ever.

We’ll save a deeper discussion of format life cycles for a later day, but here’s the one aspect that we need to keep in mind as we debate the health of Talk Radio: As a format gains more momentum it attracts listeners of a certain demographic and psychographic.

These listeners become the core audience of the format, and continue to listen as they age. The core audience grows older, moves through the demo, and ultimately ages out of the demo.

The format’s momentum stalls because the format cannot replace its aging listeners with younger listeners.

Talk critics delight in pointing out Talk Radio’s aging audience as proof that Talk is on its last legs, but every format reaches this point in its life cycle.

At this very moment virtually every mainstream format is aging. CHR, AC, and Classic Rock as well as Talk are all getting older.

(Consolidation and radio’s current fixation with centralized programming is worsening the problem, and the major groups that operate cookie-cutter formats across markets are going to pay a price in wilting market shares. But we digress.)

The basic problem is this: People don’t listen to their parent’s radio stations.

Listeners who are aging into Talk Radio’s prime demos have parents who listened to Talk Radio. They may be as politically engaged as their parents, they may share many of the beliefs and viewpoints of their parents, but they still want their own radio station.

If you’re in a format that’s getting a little too old, you have a choice. You can stick with the old format and squeeze as much money out of the aging audience as possible, or you can bite the bullet and recreate the format for younger listeners growing into the target demo.

History shows that the first option makes more money in the short term, but only delays the inevitable. Worse, it opens the door for a new competitor to reinvent the format and hasten your station’s demise.

(There are rare heritage stations that manage to reinvent themselves every decade or so, but the odds of success are low, particularly if there are competitors ready to pounce.)

What does all this mean for Talk Radio?

As formats go, Talk Radio is long in the tooth.

The formula has worked well beyond any other format’s normal life cycle. But while Talk has proved it’s ability to outlive other formats, a format’s age span is no more elastic than a listener’s age span.

The title of  Part 1 of this discussion, Talk Radio is Dead, Long Live Talk, is a reference to the 15th century phrase The King is Dead, Long Live the King, addressing the ephemeral status of a king. A king is the ruler of his empire, but upon his death, a new king becomes the ruler. Thus the notion of succession, that kings may die, but the throne is forever.

One day Talk Radio 1.0 will run its course, but that does not mean the end of Talk Radio. It will simply herald Talk Radio 2.0.

History and the cyclical nature of formats makes this a certainty. The only question is what form Talk 2.0 will take.

Pundits and self-proclaimed futurists speak confidently of the future as if they have some special gift for seeing the world over the horizon. However, study after study has shown that the only accurate futurists are the ones that admit we can’t predict the future.

CHR was pretty much written off as a tired out-of-fashion format when Saturday Night Fever reignited the format in 1977. Alternative came out of nowhere to reinvigorate a stumbling Rock format twenty years later.

Reborn formats rarely announce themselves before they take off, and rarely take the form that radio assumes. That’s why we suspect that Talk Radio 2.0 is not going to follow the arc that Talk pundits are predicting.

A lot of the punditry predicts that Talk Radio will become less tempestuous, more measured, less extreme. Nicer.

We don’t think so.

Stations will try it. We’ll have more intellectual hosts, more balanced discussions, less verbal bomb throwing.

But it will fail.

We talk with literally thousands of Talk Radio listeners every year, and our research has shown that the next generation of Talk listeners is different than this generation’s, but no less passionate.

They are not looking for a watered-down version of Talk Radio 1.0

We think Talk Radio 2.0 is going to sound considerably different from today’s Talk, but more from a structural standpoint, not an ideological standpoint.

Perhaps when Rush Limbaugh and Sean Hannity decide to retire there will be others capable of filling their shoes, but perhaps not.

In their absence, the format will begin to experiment with shorter faster paced shows, and there will be few three and four hour shows. Talk 2.0 will have more in common with the old radio networks than Talk 1.0.

So is Talk Radio dying? No. Talk 1.0 maybe, but there will be a 2.0. Long live Talk!

Talk Radio is Dead. Long Live Talk.

Have you heard? Talk Radio is dying.

At least that’s what the pundits say. Talk Radio is dying. It’s history!

Of course it has been dying for years according to the critics. Newsweek alluded to its passing in a cover story in 2009.

The fact that Talk Radio is still alive while Newsweek is gone should not go unnoted.

Since then there has been a steady stream of stories questioning the survivability or relevancy of Talk, invariably invoking the name of Talk Radio’s bad-boy poster child Rush Limbaugh.

Remember Sandra Fluke? Rush Limbaugh called the poor Georgetown law student a slut, and all hell broke loose.

The Fluke controversy led to sponsor boycotts, and a condemnation pile-on that included many Talk Radio “experts” and high profile personalities including Don Imus of nappy-headed hos fame. (There’s the pot calling the kettle black.)

Look at the impact of the Fluke remark on Limbaugh's Google search traffic below (click to enlarge). The blue line is Mike “more conservative less controversial” Huckabee’s searches over the same time.

Meanwhile others were taking a wider swipe at radio. The Hollywood Reporter gave a bitter Tom Leykis a platform to vent in a breathless piece called How Radio Will Kill the Radio Star.

Shirley Halperin, who penned the piece tells us that:

Leykis left his first love (broadcast radio) not because he couldn’t get paid, but because he believes traditional radio is dying.....Radio audiences are getting older (more than a third of talk-radio listeners are 65 and up) and the personalities are aging out of relevance.

And if there were any doubt whether Talk Radio was dying, it was put to rest when a major Captain of the Radio Industry, Lew Dickey, confirmed the prognosis.

Even a year after the Fluke incident, Lew Dickey was still talking about the destruction that Rush had done to Talk Radio and his company. And it was newsworthy enough that the Huffington Post picked up a radio trade story quoting Dickey:

Clearly, it's been well documented that the talk side has been challenged....There has been residual hangover on the talk side in terms of advertisers sitting out and not placing there.

Clearly that's had an impact not only on our network business but it's had an impact on some of the news talk stations that we own.

Arbitron added its official imprimatur to the Talk Radio is Dying meme last month noting ominous trends in Talk Radio’s ratings:

News/Talk's lead over Pop CHR and Country has shrunk in each of the past two months, and for the first time since we began keeping our format records, it recorded two consecutive books below a 9 share, finishing at an 8.7 in July.

Now summer is historically the lowest time of the year for News/Talk listening, and we will be keeping a close eye on the results as August and September approach, but it's worth noting that the format's summer shares have declined about 10% since 2011.

So is it true? Are we looking at the end of Talk Radio?

No, to paraphrase Mark Twain, the report of Talk Radio’s imminent death is greatly exaggerated.

All formats go through periods of boom and bust. Every one of them.

Think about Top 40. According to Arbitron, CHR is currently the top rated format in PPM markets, in 25-54 no less! Yet Top 40 has been declared dead more times than Generalissimo Francisco Franco.

CHR might be riding high now, but in the 1980s stations were bailing out of CHR right and left. And many stations that stuck it out denied they were CHRs.

It was a time when every CHR tried to pretend they were really AC and every AC wanted to call itself Mix. Now look at the two formats.

Today Country is doing well, but there have been dark days for that format too. Remember when the Eagles were in power rotation?

Every format experiences different levels of success in repeating life-cycles. Every format goes through periodic transformations, periods of creative destruction.

For the most part, a cycle is roughly every ten to fifteen years, coinciding with generational shifts in tastes.

Few people want to listen to their parent’s radio station.

The CHR format dates back to the 1950s, but today’s CHR is very different from Gordon McLendon’s KLIF, Bill Drake’s KHJ, or Mike Joseph's WCAU.

The KSAN of Tom Donahue was unlike any of today’s Rock stations, but AOR continues to thrive. The same is true of virtually every other mainstream format.

What about Talk Radio?

Modern Talk Radio was born on August 1, 1988. That was the day that Rush Limbaugh debuted on WABC, 25 years ago.

Back then Ronald Reagan was President. Miami Vice and Murphy Brown were hit TV shows. Rick Astley, George Michael, and Richard Marx all had Billboard’s Top 100 hits.

In those 25 years we’ve seen at least one boom and one bust period for every music format. Yet Talk Radio has not really changed that much.

Why? Because Rush Limbaugh is still on the air.

Limbaugh is about all radio has that is still relevent for many people. Were it not for Rush, radio would hardly be mentioned at all in general market news sources, and the few mentions would be the same old radio is dying story. 

The clock has stood still for Talk Radio because the format’s spiritual leader continues to command the biggest megaphone, the most buzz, and the largest audience.

The pattern of radio format transformations suggests that formats evolve because they have to. Even after a format falters, intrenched leaders refuse to adapt.

Leaders make too much money to risk taking a chance.

Talk Radio is too successful, and Limbaugh is too critical for the format’s continued success for stations to try something new.

But what if Limbaugh quits tomorrow? What if he tires of carrying the format and decides bottling tea is more fun?

Talk Radio will have to reinvent itself. It will have to experience (some might say suffer) the same transformation that every other format experiences.

And like every other format before it, Talk Radio will ultimately be stronger because of it.

In part 2 we will explore what Talk Radio 2.0 might look like. Hint: It won't sound like your father's Talk station.

Admitting Internet Radio's Failure

After nearly a decade of declaring broadcast radio near death, a touch of reality is beginning to seep into the internet radio discussion.

Digital pundits now admit that local radio is far from dead. And you won’t believe what they think will save internet radio.

Writing at Engadget.com, Brad Hill, former VP of AOL, admits that American use of local AM/FM radio hardly budged between 2001 and 2011:

So it’s evident that people are dipping their toes into various forms of internet radio without abandoning their terrestrial stations.

Dipping their toes?

Mr. Hill is way too kind to internet radio.

As we have repeatedly shown here at Radio Insights, large numbers of people have sampled various streaming services, but the numbers are tiny compared to American consumption of local radio.

But in the digital world, hope springs eternal.

In the digital world, pundits believe a major disruption is always just around the corner, just one gadget, one line of code, one algorithm short of a major breakthrough.

The latest digital straw pundits are grasping at is Apple’s iRadio.

While admitting that internet radio hadn’t hurt local radio much yet, he notes that Michael Robertson CEO of DAR.fm, feels that Apple’s recently announced iTunes radio service will accelerate consumer adoption of internet radio:

There’s no question that it will change from 10/90 (digital/analog) to 90/10 because FM cannot compete with the benefits of internet-delivered music.

What’s odd about quoting Robertson is that DAR.fm is a broadcast radio time-shifter. According to the website:

DAR.fm is a service that lets you record radio stations and shows so you can listen whenever you like. Please browse the site to find some radio to record.

The home page lists suggestions that include Rush Limbaugh, Rachel Maddow, Glenn Beck, Sean Hannity, Stephanie Miller, and many other broadcast talk shows.

Noticeably absent are internet originated shows.

Apparently Robertson hasn’t found any internet content worth recording, so he has built a business model around recording AM and FM shows.

After declaring Internet radio flawed, flailing, and failing, Hill finally gets around to the point of his piece. Internet radio can succeed only if it has compelling content!

Yes, Internet radio needs content!

After a decade of watching Internet radio sputter and stall, at least one digital pundit has finally admitted the problem: Internet radio doesn’t have compelling original content! Local radio continues to succeed because of it does.

And Hill has a solution:

It is up to Apple, or Google, or Rhapsody, or Spotify, or Pandora, or Amazon, or another internet player to break down the perceptual walls within which internet radio is trapped, developing content or importing stars that will compel users to commit more of their attention to the platform.

Well that’s simple enough.

Of course, internet radio is now twenty years old. Internet radio isn’t new. It’s not novel any longer.

If any major internet company knew how to create compelling content, it would have already tried.

Remember how Google was going to create original content for YouTube? How’s that going?

Hill’s alma mater, AOL, has been trying to create compelling product for years. So has Yahoo.

Internet companies are brilliant at creating new technologies to steal and repurpose content created by others (like DAR.fm), but they are really lousy at creating original content.

Amazon create original content? Not likely. Apple? Forget about it. iRadio is about selling more tunes on iTunes, not creating original content.

Hill reveals the depth of his naivete when he closes with this:

Technology alone might not be enough to disrupt the nearly 100-year-old technology of terrestrial radio. But technology plus killer content can do it.

Technology has nothing to do with success. It's all about content.

The continuing success of local radio proves that compelling content  trumps technology.

The danger is that local radio is starting to pay more attention to delivery systems than content. Radio is distracted and somewhat intimidated by digital competitors, and is responding in the wrong way.

Too much energy and attention is focusing on platforms. Meanwhile, product innovation is lagging. Radio hasn’t created a new format in decades.

In that sense, Hill has a point. If local radio stops innovating and creating compelling programming, it opens the door for internet radio.

If local radio falls into this trap, broadcast will have lost a tremendous advantage.

Humpty Dumpty & the Meaning of Local Radio

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean--neither more nor less.”

With that attitude, Humpty Dumpty might have been the first new-media pundit. Like Humpty Dumpty, new-media types take delight in twisting the meanings of words to illustrate their more evolved view of the world.

An example is the word local as in local radio.

Three years ago one pundit proclaimed:

There is no longer any such thing as "local" as we traditionally use the term....The definition of "local" is both expanding and shrinking at the same time.

At the time we declared it new-media rubbish.

Now Seth Godin has essentially rewritten the piece, writing:

We're discovering that when given the chance, people are a lot more interested in what they're interested in, as opposed to what their physical neighbors are doing. Going forward, then, the real kings of media will be local in a totally different sense.

Humpty Dumpty would be proud.

Godin first fabricates a past, and then declares that the future will be different from this fabricated past. And finally he redefines the word local based on this fiction.

Seth has essentially doubled-down on the original new-media rubbish about local changing, not only redefining local radio, but also distorting the notion of community.

Both the original and this copy-cat post are committing the biggest mistake that new media pundits make.

They believe that delivery systems are more important than content. They then compound the mistake by believing that new delivery systems will change what people want and value.

None of the new-media delivery systems have replaced local radio because local radio is local because of its content, not the location of its transmitter.
 
Yes, today it is primarily delivered through local broadcast facilities, but that is because broadcast is the means by which the majority of local media consumers want it delivered.

One day a majority of listeners may want it delivered a different way, and local radio will have to change the way its content is delivered.

Radio critics keep claiming that the latest new media product whether Twitter, Pandora, Facebook, Craig’s List, or some other new product will make local radio less relevant and ultimately render local radio obsolete.

Yet radio keeps hanging in there defying a decade’s worth of new-media death notices.

And local radio will continue to defy the critics’ predictions as long as it ignores these self-serving criticisms.

The only way that local radio could become less relevant is if radio lets it happen.

Those within the radio business who advocate homogenized centralized voice-tracked radio in the belief that local no longer matters will pay a price as long as there remains broadcasters who understand the value of real local radio.

This latest Godin effort only serves to illustrate how little new-media pundits understand about traditional media’s strengths.

But then again, why should we be surprised? He doesn’t even understand his own business.

 

Will iHeartRadio Kill Radio?

Is iHeartRadio an apocalyptic doomsday machine that will ultimately destroy broadcast radio as we know it?

Or is iHeartRadio a gateway to radio’s salvation, radio’s best chance to remain relevant in a digital world?

The rate at which Clear Channel is signing up new radio groups suggests that many believe the latter.

But is iHeartRadio really the answer?

Broadcast radio’s greatest strength is a station's strong link to its community.

Radio’s local link is the medium’s most potent weapon in the battle for a listener’s heart and soul.

That  personal connection between a listener and her radio station is something that national radio (both digital and analog) fails to understand, and can’t duplicate.

Yet iHeartRadio’s very essence diminishes radio’s local roots.

The service neuters local radio, homogenizing radio into interchangeable undifferentiated lumps of similarly formatted radio stations.

Don’t want to listen to New York’s Z100? We’ve got another dozen stations just like it a click away.

Were these choices really different, it might mean something, but the service offers choice without distinction.

Too often one hears the same national playlists, and the same national personalities talking about the same national contests with the same national promos.

The growing interchangeability of stations across the country is all that more apparent with the convenience of iHeartRadio. A listener is just a couple clicks away from hearing the same thing on dozens of stations.

The message of iHeartRadio is that unique local radio is dead. All local radio stations are interchangeable.

The impact of iHeartRadio is to take local radio’s insurmountable advantage, its local connection, and destroy it.

The message to listeners is that local radio is no better than anonymous generic national radio dispensed by an algorithmic driven computer.

In an effort to demonstrate that an aggregation of local stations is just as good as a national service, iHeartRadio inadvertently proves that local radio is just as bad as a national service.

Why else offer a Pandora look-a-like?

Yes, Pandora is the darling of new-media pundits, those people who can’t understand why anyone still listens to local radio.

Yes, Pandora has been growing exponentially armed with an endless array of metrics that suggest seemingly unstoppable momentum.

But the truth is that Pandora is losing money, and shows signs that it might be incapable of making money.

Last year Pandora proudly generated $240 million is sales. Broadcast radio stations generated over $400 million--in digital sales alone.

Why would a leader in an industry currently billing nearly twice the digital revenue of Pandora want to promote a Pandora-like feature, and do it on local broadcast stations at saturation levels?

iHeartRadio is just one of a number of industry actions that claim to be an effort to save radio, but instead may have the opposite effect.

Radio Insights believes this is an important issue that potentially impacts every radio station, and ultimately how local radio is viewed.

We question the wisdom of radio’s obsessive rush to focus on digital platforms, especially when they emulate trendy but failed and failing business models.

The growth of iHeartRadio could metastasize into something quite deadly for broadcast, a possibility that every broadcaster should understand.

That’s why we’ll have more on iHeartRadio and what it says about radio in the coming weeks.

Stay tuned.

The Myth of PPM Occasions

One of the most entrenched ideas on how to win at PPM is the belief that increasing Occasions, the number of times a person listens to your station, makes a difference.

But is it really true? Is the key to growing share increased appointment listening?

The notion that Occasions is the key to winning at PPM is based on a well-intended, but ultimately misguided, Arbitron analysis of PPM called Key Indicators of Highly Rated PPM Stations (PDF).

Asserting that No One Wants to Be Average, Arbitron compared average station metrics to highly rated stations and declared:

Getting people to listen longer was Old School. New School is to get people to listen more often.

Thus was born the oft repeated (but never tested) mystic power of Occasions and appointment listening.

We recently collaborated with a skeptical client who wanted to better understand the relationship between occasions, listening spans, and share.

The Arbitron study looked at formats across markets, but our client just wanted to look at their own market.

After all, you compete against the other stations in your market, not similarly formatted stations in the other 47 PPM markets.

We looked at the relationship between share and three measures of listening: Occasions, Time per Occasion, and daily cume.

Three graphs shown here tell the story.

The first graph shows the relationship between share and listening spans, Time per Occasion (TpO). Each square represents a station.

Share is shown on the vertical axis. The larger the station’s share, the higher the square appears on the graph.

Time per Occasion is shown along the horizontal axis. Stations shown towards the right have higher TpO, while stations towards the left have lower TpO. The actual numbers are irrelevant, it is the direction of the numbers that matter.

Notice that nearly all the stations are stacked on two piles. The two piles represent 9 and 10 minute listening spans.

This means that nearly all of the stations in this market have virtually identical listening spans.

Arbitron found the same thing in their national study.

Arbitron found that the average listening spans for pretty much every station in every format is the same, either 9 or 10 minutes each occasion.

This curious identical listening span pattern has been repeatedly reported by Arbitron, yet it has generated virtually no curiosity, no discussion.

How can it be that the listening spans of every format from Classic Rock and AC to CHR, Country, and All News are all within a minute of each other?

Is this reasonable? Is it possible that virtually every format has the same listening span?

We’ll save this topic for another time, but give that some thought.

In any case, if it is true that listeners to every station in every format across all PPM markets listen the same length of time, the only way to increase TSL is by increasing Occasions.

Using that logic, we should find that higher ranked stations have more Occasions.

Take a look at the second graph. Based on Arbitron’s assertion, we should see stations arranged in a sort of diagonal cloud moving from lower left to upper right.

The stations with smaller shares would have fewer occasions and would appear in the lower left, while stations with larger shares would have more occasions and appear in the upper right.
 
We don’t see that. Stations are all over the place.

Some poorly rated stations have many more Occasions than much higher rated station. And some highly rated stations have very few Occasions.

Arbitron’s assertion that winning stations have more Occasions turns out to be untrue when we look at stations across formats in a specific market.

So much for appointment radio.

Then how do you grow share? What’s the secret? The answer can be found in the third graph.

The graph shows the relationship between share and daily cume. As with the other two graphs, share is shown vertically, while cume is shown along the bottom.

Notice that unlike the other two graphs, the cloud of stations cluster around a diagonal line. Small cume stations also have small shares, and stations with larger cumes have larger shares.

Things get a little strange towards the top, but in this market ethnic FMs and heritage AM stations distort the relationship at the upper end.

So here’s the real deal: With PPM, the only reliable sure-fire way to grow share is to grow cume.

To Arbitron’s credit, their analysis does mention daily cume as a key driver, but somehow that got buried in the excitement over Occasions.

Rather than a New School revelation about how to win at PPM, the answer to growing share turns out to be decidedly Old School.

To grow share in PPM, you have to grow your audience. You need more listeners!

Keep that in mind when you start budgeting for 2013 and corporate red-lines your marketing budget...again.

Group Size & Ratings: What about 25-54?

But what about 25-54?

We knew before posting Does Group Size Help or Hurt Ratings? that we’d hear complaints about using 6+ numbers.

Maybe the largest radio groups don’t dominate 6+ because they are too smart to worry about the 6+ beauty contest.

Maybe the big guys know that the real money is in 25-54, so that’s the demo they focus on. Maybe 25-54 is the metric by which they should be measured.

The problem is that publishing a 25-54 analysis similar to the 6+ shown below runs afoul of  Arbitron restrictions on the use of their numbers. Were we or any other organization to release the results, an Arbitron Cease and Desist order would quickly follow.

But we have seen the data.

If you want to know what 25-54 looks like, just take another look at the 6+ chart and visualize the largest groups slightly weaker than they look now.

Yes, the biggest groups perform no better when looking at the money demo.

So there’s no hiding behind the “6+ doesn’t matter” argument.

The edge that smaller groups hold is there even with 25-54.

Then there’s the argument that revenue and profit are better metrics to compare competing radio companies. Admittedly, profit is the ultimate goal of every company, so perhaps it is a better metric.

The problem is the availability of the data. It does not exist in any form that enable us to compare all radio groups.

Using share and rank to compare radio groups may not be ideal, but it uses the most complete set of comparable data available, so it serves as a useful proxy for the more telling data we can’t get at.

Besides, no company regardless of size ignores potential revenue, margins, or power ratios when choosing a format. Formats are chosen expressly because their advocates believe they can become successful and generate above-average profits.

And taking into account demo differences, there is a very strong correlation between a station’s rank and the revenue it brings in–particularly in PPM markets.

But all this is beside the point.

The contrast in performance between the large national groups and the smaller groups suggests that companies are responding to radio’s new challenges in different ways. And those different ways are producing different results.

Jerry Del Colliano in Inside Music Media (paywall) suggests that radio is evolving into two industries, monopolies and local operators.

We can debate the nature of the division, but the divergence is clear.

Radio groups are reaching starkly different conclusions about radio’s future, and in many ways those contrasting visions are reshaping radio today.

And one vision seems to be producing better results today than the other. The subject of our next post.

 

Arbitron Shoots Own Foot. Radio Suffers the Pain.

One of the most deeply imbedded rituals of radio is the roll out of local ratings.

Each market takes its turn in the spotlight, with pundits, program directors, consultants, and managers dissecting each release in hopes of divining the future of formats and stations.

It is a ritual that Arbitron has participated in for more than 40 years. But no more.

Arbitron announced that it will no longer release complete total person shares, only the ratings of paying customers.

Now radio stations who choose not to subscribe to Arbitron will simply disappear, banished to invisibility unless they pay up.

The decision is attributed to client demands that Arbitron enforce rules against non-clients quoting published numbers. This may be true, but the decision is ultimately short-sighted.

In the short term is might help a few Arbitron clients. The strong-arm tactic may even give Arbitron a minor bump in revenue (although we doubt it).

Unfortunately, the move will ultimately harm the entire radio industry. It will nudge broadcast one step closer to irrelevancy, and Arbitron with it.

Arbitron ratings are radio’s most credible weapon to push back on new-media’s relentless assault on broadcast radio.

Radio’s ability to use Arbitron’s numbers to show both the medium’s continued reach as well as new-media-beating TSL are essential.

But at this critical time when the radio industry needs Arbitron’s help to spread the news, Arbitron is moving in the opposite direction.

Soon after William Kerr became Arbitron’s CEO he expressed interest in helping radio.

He promised to make Arbitron an advocate for radio and increase the medium’s profile. He’s got a funny way of showing it.

The company is putting more and more restrictions on those of us who want to use the numbers to illustrate radio’s continued strength and help broadcast radio continue to grow.

We will have more to say about this in the future, but get ready for rankers like the one shown above.

Anything You Can Do, I(HeartRadio) Can do Better.

Clear Channel recently started streaming the 24/7 comedy service, continuing to expand iHeartRadio channels.

It just may be coincidental, but Pandora rolled out it’s comedy channel last Spring, hoping to expand its personalized service beyond music.

Two years ago in a post titled Thanks Pandora, We’ll Take it From Here we pointed out that the barriers to entry onto Pandora’s turf were small:

Pandora may have a tremendous lead over its competition, but it remains to be seen whether the service can sustain its lead. As countless Internet companies have discovered, there is no "first-mover" advantage when it comes to new-media.

Nothing that Pandora does is proprietary. Every aspect of Pandora can be replicated, and ultimately improved upon.

Pandora’s lead may seem unassailable, but think about Netscape, MySpace, or AOL. Weren’t they just as dominant?

On the Internet, being first doesn’t prevent someone else from ultimately eating your lunch.

After Pandora’s lovely honeymoon with Wall Street, the investment community is beginning to recognize Pandora’s vulnerability. As we noted recently, Pandora’s stock price is well off its highs.

Writing of iHeartRadio’s growing popularity, Motley Fool recently declared: This is Pandora’s Biggest Nightmare.

Sometimes even fools get it right.

Radio Rolls the Dice...Again.

Critics complain that broadcast radio leaders are timid and unwilling to take chances.

Quite the contrary, history shows that broadcasters have been more than willing to roll the dice in search of the big score.

The latest example is the consolidation of programming, with stations in multiple markets carrying essentially the same product.

Major groups are in the midst of consolidating programming to an extent not seen in radio.

The most extreme efforts essentially eliminate programming decisions at the local level. All programming decisions are made at the corporate level.

Even groups that continue to allow local stations to make some programming decisions are making more corporate decisions. Corporate people may not be dictating programming decisions, but they are heavily influencing them.

Never have so few individuals had such an influence on the programming of such a large proportion of radio stations.

We call this process the nationalization of radio.

The goal is to create a consistent radio product across stations in the same way McDonald’s makes Big Macs and Starbucks makes Frappuccinos.

While today’s nationalization of radio has been the focus of a great deal of discussion, nervous hand-ringing, and criticism, radio has embraced nationalism in the past.

The last attempt was in the 1970s.

National programmers like Jim Schulke in Beautiful Music and Paul Drew in Top 40 called the programming shots for dozens of stations insisting on a consistent product across all stations.

Music was chosen, liners written and produced, and air staff hires approved. No major decision was made without their approval.

FM embraced automation, with entire staffs replaced with machines. Programming decisions were handed off to syndicators who provided canned formats on tape.

No air staff, no Program Director, just people to change the tapes. (This writer’s first job in radio was changing 14" reels of tape on a bank of Scully tape machines for a Beautiful Music station.)

Ironically in the 1970s, the dictatorial manner in which corporate decisions were handed down didn’t raise many eyebrows. Perhaps because it produced winners.

Jim Schulke stations were consistent ratings winners, more often than not ranked number one in their market. RKO under Paul Drew’s direction had the leading Top 40 station in virtually every major market in which they competed (during a time when all markets had at least two Top 40 stations).

But radio prior to consolidation was very different. Radio groups could only own a handful of stations.

RKO’s success may have heavily influenced the direction of Top 40 at the time, but there were proportionately far more independent Top 40 stations that didn’t have to follow Paul Drew’s instructions.

Consultants like Jim Schulke and Bill Drake programmed dozens of stations, but there were far more independent stations competing against them that continued to be programmed at the local level.

Today’s much larger groups may seem to be following in the path of 1970s innovators. However, consolidation has changed everything.

Consolidation has reduced the number of independent broadcasters creating fewer more powerful groups with many more stations.

Today the actions of just a few corporate programmers has a much greater impact on the industry as a whole than did the legendary programmers of the 1970s.

Consolidation combined with corporate driven programming puts radio in new uncharted territory.

Perhaps central control will take radio to a new level of sophistication.

Perhaps nearly identical corporate-wide products will enable radio to compete with digital alternatives that offer a consistent national product.

But product homogenization will only drive audience growth if those corporate decisions made by a handful of people are the right decisions.

It’s like putting all your money on one roll of the dice. If you win, you win big. If you lose, you lose everything.

The outcome has enormous consequences for radio. With digital alternatives gunning for broadcast radio’s dollars, the fate of radio may rest on that single roll.

In our next post we’ll explore the reasons why radio moved from the iron-fisted control of the 1970s to more decentralized control, and the implications for today’s consolidation of programming decisions.

Stay tuned.

Radio Alchemists, Butterflies, Pasteur, & Matt Damon

Down deep programming people want to believe that there is some magic formula that guarantees ratings success.

We’d like to think that programming a radio station is like baking a pie. Use the right ingredients, mix and cook it properly, and the station will be a winner.

And not only that. Once we found the secret recipe, we’d hope that the recipe could be duplicated in market after market, a success in everyone of them.

Unfortunately, most efforts to replicate successful stations have failed.

Time and time again a format that succeeds in one market fails in others. Each time a radio group replicates a very successful station across other markets, the results are uneven at best.

But like the persistent efforts of medieval alchemists to turn lead into gold, the search continues for that elusive recipe.

Arbitron and Mediabase recently collaborated in an effort to understand what makes a music station successful.

They analyzed music station playlists in an effort to find a link between playlists and ratings success.

Surely there has to be some difference between the playlists of successful and unsuccessful music stations.

Actually no, it turns out there isn’t any:

The percentage of airplay devoted to the most played songs in individual formats is largely the same–whether a station is ranked first in its target demo or not.

Two stations can play the same music in the same rotations and yet one can be a winner and the other not.

You might be thinking that there must be some overlooked non-music explanation. Maybe the winner has a better morning show. Maybe they market themselves better.

Sorry to disappoint, but even if stations in two markets are identical in every respect, the two stations will not produce the same ratings, or even the same rank.

It’s the Butterfly Effect.

Radio markets are like snow flakes: Every market is unique.

A radio station’s share and rank are the consequence of a complex mix of historical and competitive factors.

Long forgotten historical facts (called initial conditions) like a very popular Top 40 or Rock station can tilt a market more pop or rock.

The strength of an Oldies station can have a big impact on a Jack station. A Jack station can have a big impact on a Classic Rock station. CHR can impact rhythmic formats, and rhythmic formats can impact CHR.

A music format does not have some intrinsic appeal that determines a radio station’s share.

Share is determined by music appeal tempered by market history, market characteristics, competitive pressures, and even where the station is on the dial. And a thousand other factors we can’t control.

The Butterfly Effect refers to the belief that the flapping of a butterfly’s wings can help create a hurricane weeks later.

Initial conditions, nearly undetectable earlier perturbations can dramatically change an outcome.

It’s the stuff of science fiction. It’s Matt Damon and The Adjustment Bureau.

But it’s true.

Many if not most of the reasons one station succeeds and a similar station fails is beyond our control.

Skill, ability, and experience still matter. Louis Pasteur captured this by declaring:

Chance favors only the prepared mind.

Chance will determine what rolls past you. It is your skill, ability, and experience that determines what you do about it.

So stop looking for secrets of ratings success. Stop thinking that if you just copy what some successful radio station is doing, you’ll be equally successful.

Winning begins with understanding the Butterfly Effect. Winning begins by understanding initial conditions, chance, and randomness.

And winning happens when you create the best damn radio station possible when you’re handed all these things.

What About Sports-Talk Radio? How’s That Doing?

Sports-Talk radio along with the rest of Spoken Word has been in the news quite a bit lately.

More and more Sports-Talk stations are migrating from AM to FM with Clear Channel's KJR and Entercom's WEEI just the latest in an accelerating trend.

What impact is FM having on Sports-Talk? So far, in a positive way but less than you might think.

There are a total of 51 AM and FM Sports stations now measured by PPM, eleven more than a year ago. Of those, nearly two-thirds (61%) are still on AM.

The median share for all Sports-Talk stations is 2.1. Half of Sports stations have a share higher than this, while half have a lower share. (This is based on stations in all markets now measured by PPM that have at least a one share in the latest three months.)

This places Sports-Talk dead last of the formats we’ve looked at so far. Click on chart at left.

Perhaps even more interesting is that FM Sports stations are not out-performing their AM brethren by much. Median share for FM Sports stations is 2.2 compared to AM’s 2.1.

New PPM markets coming on-line make it difficult to compare current median shares to last year’s numbers because the newest markets tend to be smaller than the first PPM markets.

To look at median share trends, we calculate median shares for just the stations that have been in the format and measured by PPM for at least a year.

Looking at just these stations, AM shares are steady at 2.2, while the median share for FM stations has gone from 1.8 to 2.3.

That means all of Sport radio’s growth has come from the FM side. This is clear if we look at format momentum.

If you’ve read our other format analyses, you know that we calculate momentum by comparing each station’s share today to what it was last year at this time, using a three month average.

Positive format momentum means that more stations are higher today than they were a year ago.

Momentum for the format is slightly positive at 52.5%, but this over-all performance conceals considerable differences between AM and FM stations in the format.

Fewer than half (46.2%) of AM Sports stations in the format are up over their 2010 numbers. In contrast, nearly two-thirds (64.3%) of FM Sports stations are higher today than comparable months in 2010.

Keep in mind that there were only 14 FM Sports-Talk stations in PPM markets last year, so FM’s positive momentum is based on a limited number of stations.

That said, the modest gains thus far may just be a hint of why lies ahead as more stations make the switch. Stay tuned.