What Happens When the Cash Flow is Gone?

For an industry that has trumpeted the amount of cash it throws off; what happens when that cash flow evaporates? We are witnessing what happens--it's happening in the radio business right now. Forget about debt service...forget about stockholders...forget about EBITDA...simply look at the most basic of measures--a station's/cluster's the top line revenue minus the expense line and what we are beginning to see is red ink. As I talk with people around the country and hear stories of business, in some cases, declining 30 or 40 percent over last years weak performance something has to give.

Late Friday Radio and Records published a story outlining how Clear Channel has begun using centralized music logs and talent with local PD's adding weather, traffic, news, promos and other local content. Initially this has been rolled out on 17 stations around the country. Don't be surprised when that number grows to 170 stations before too long.

When the ink turns red, all bets are off.

Reading stories like this is very painful for radio pros and fans like us. But then, at least for me, I step back and think I am not surprised at all. In our quest to improve the product and maximize this or that we sucked the fun and creativity out of our product. It's like running an amusement park without the amusement.

"Shut up and play the music" was the order of the day. Did it work? Yup and still does. But the truth is, when you make the music the only star you don't need local people to pull that off. Sorry. Is it worth the cost of an entire staff to be able to play your locally focused music library that varies from other markets by maybe 10 or 15%? No.

The fact is that when the personality factor was factored out of local radio you might as well just put it up on the bird or have a centralized programmer handle your music. The fact is when your air talent talk for six seconds 3 or 4 times per hour and say nothing you might as well put it up on the bird or have a centralized air talent read your liners.

It's the perfect storm--negative cash flow and bland & sterile local radio stations.

Are you mad yet? I hope a little bit.

If a local radio station can't or is not allowed to produce a product that is unique and compelling, then it should simply pull back and play the music with little else. Is the current revenue situation, at least in part, equalizing to the quality of the product?

HD Radio = Bad Engineering

And that's where this story begins. Add that to the fact that HD Radio does not fulfill a [consumer] need or solve a real problem [for consumers] and now we are witnessing a technology struggling to find a reason to exist.

Can it be saved? Maybe, but I think the odds are long.

Two things that might have made a difference:

1. A different interface. Instead of frequency extension i.e. 102.1-2 the IBOC system should have been marketed as a NEW band with new channel numbers. AM, FM, and the new DM (digital modulation). Even those under 25 might have been intrigued to sample this new DM radio broadcasting. This still doesn't address the signal issues related to low power and topography.
   
2. New, original, and unique programming that is not solely dependent on music programming. Music channels are cheap and easy. Entertainment programming is expensive and certainly not easy.
   

Can these issues be addressed now? Seems to me that it might be too late on the engineering side of things and it's never to late to produce great programming.

Let me share with you a great column I read written by Brad Burnham on the Union Square Ventures website (a venture capital firm in NYC). It is talking about computer technology and its applications, but I think the article applies nicely to HD-R. Read the entire piece here.

In the old days, electrical engineers focused on getting computers to work not on getting people to engage with the systems built on top of those computers. The folks that built enterprise software were vaguely aware that their systems had to be accessible to the humans that used them but they had a huge advantage. The people who used them did so as part of their job, they were trained to use them and fired if they could not figure them out.

Today, no one tells you to use Facebook. There are no employer sponsored training sessions on the use of del.icio.us. The burden is on the designer of the system to meet a need, entertain, or inform their users. They also have to seduce those users, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with power and the pleasures of the service.

Designing a system that does that is not an electrical engineering problem. It is a social engineering problem. The best social engineers are working today on consumer facing web services. They understand that there is enormous potential leverage in those services. The creators of these services recognize that services like theirs will ultimately disrupt the economics of many, if not most, parts of the global economy in much the same way that Craigslist collapsed the multi-billion dollar classified industry into a fabulously profitable multi-million dollar web service.

Innovation = Growth

Here's 22 slides that remind us how to better entice listeners AND how to council our clients to better connect with their customers--our listeners.

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The Generation Gap

I started to write a post that was going to talk about the technology generation gap and its impact on the radio business. Once I started writing I thought it might be a good idea to try to find some statistics on the subject. Of course there was no shortage of information! Then, as I was searching and reading I came across a terrific article written way back in 2004 by a PhD named Larry D. Rosen (not the same Larry Rosen many of us know from Edison Media Research). This Larry Rosen has a site called http://www.technostress.com/ and wrote an article Understanding the Technological Generation Gap that quite simply does an outstanding job of explaining what is going on.

It is interesting that way back in 2004 IM was all the rage and text messaging wasn't even mentioned. If just shows how fast things move in today's nanosecond world. This article suggests many things, but I can tell you this, we (yes, all of us) better find some unique ways of entertaining listeners because if we don't someone else will.