Reinforced here the past several weeks was the sometimes painful reminder that, in a number of different
ways, 2006 was a benchmark year.
As we shift attention from personal finances specifically to our beloved industry, we can’t help but realize
youthful demos don’t have an exclusive lock at experimenting with new media and the latest technology.
It’s becoming more and more pervasive through just about every demographic. “Even my 90-year-old
mother is aware of at least some things that are going on from a digital product opportunity offering,”
remarks Bridge Ratings President Dave Van Dyke. “She’s not necessarily interested in using them,
although she does listen to stuff on the Internet. We have legitimately gone beyond the `tipping point’
people talk about. That probably happened several years ago. The tipping point really occurs at about
That means it’s become a concern for traditional (local terrestrial) radio, which has done a good job of
introducing podcasting – or “netcasting” as Van Dyke prefers to label it. “We did studies [in 2005] and
some very passionate hobbyists were getting into it,” he recalls. “It had its limitations because of the type
of content that was preferred by those hobbyists. But it became a more mass appeal product in 2006 that
traditional radio certainly helped spread the news on. Different types of stations are out there offering
their programming in a TiVo-like way [so] it has at least begun the prospect that traditional radio has
found something to help it become more interactive.”
TSL Concerns
A time-spent-listening dip in certain formats is making some programmers understandably uneasy.
Rather than reflecting TSL, Bridge measures “favorite-ness” and Van Dyke explains that hasn’t been
affected by new media. “People still have their favorite stations and cume hasn’t been impacted very
much,” he comments. “The best thing we can report is there’s a younger generation prone to prefer their
new toys but these [15-21 year olds] would like traditional radio to get it together and offer a product they
would listen to. Traditional radio has been afraid. There’s no courage there to develop [certain] things.”
In-Demand Items
It was projected the two satellite radio companies would be at 15 million subscribers by the end of 2006
and Van Dyke points out they were off their calculations by about 1.5 million. “We’re finding [several]
things are happening [but principally] I think it’s more a function of consumer sophistication than it
necessarily is about the satellite radio companies. Some of the blame [though] may be placed on them
as far as keeping up with their consumers.”
There’s been considerable speculation about a Sirius-XM merger although Van Dyke is skeptical it will
eventuate due to questions of legalities oriented toward the two satcasters. “I don’t think [it will happen],”
he notes. “They continue to lower their projections going out two and three years. The sector added
about 4.4 million subscribers [in 2006]. That’s pretty damn good, but we’re looking at 3.9 [million in 2007]
and the numbers are going to continue to drop. I don’t have anything against [Sirius or XM but their]
business model is questionable [and] the interest just isn’t there. A lot of credit has to go to traditional
radio for trying to adopt some new technologies.”
Given that Bridge is present in stores doing research nationally for its weekly satellite radio analysis, Van
Dyke has access to noteworthy spending stats. “For whatever reason, people had money and weren’t
afraid to [spend] it [during the 2006 holiday season]. It continues to astound me how many iPods are
sold. They just can’t keep them in stores. They also bought digital cameras, portable DVD players,
plasma television sets and GPS devices.”
When Bridge asked people to isolate the top things on their Christmas wish lists, satellite radio wasn’t a
top preference. “It’s not about money – it’s about interest,” Van Dyke emphasizes. “Other things have
captured peoples’ imaginations.”
Marketing Challenge
There’s a legitimately significant story regarding the 1130+ stations providing HD programming, yet
mirroring what he just stated about satellite radio, Van Dyke virtually repeats the same malady for HD.
“We have very little consumer interest [in it],” he maintains. “Most people have heard of [HD] but don’t
know what it is. [Furthermore] - many of those who have heard of it [but] don’t know [exactly] what it is
are confused, because stations are [mistakenly] marketing it. There’s a great challenge in the industry to
market it in a [clearer] way.”
Online ad revenues are approaching $17 billion and don’t appear to be stopping. “It’s creeping up on
traditional radio and will surpass it in the next two years,” Van Dyke predicts. “Traditional radio has begun
to figure out some things it needs to do in order to offset attrition. New technologies can help traditional
radio take back some of that advertising revenue [but] it won’t be enough to offset this approaching
It makes perfect sense that the significant majority of online advertising revenue is non traditional radio-
based and as Van Dyke states, “It’s not that ad agencies don’t like traditional radio. They are just trying to
follow the consumer and the consumer is all over the place.”
Figures from a recent Harris poll suggest about one of every four current cell phone subscribers (26%)
would be willing to watch advertising on those devices in exchange for free cell phone applications,
prompting Van Dyke to proclaim, “Cell phones are a key in the future. Young demos don’t want to hear
traditional radio on [them but stations] can take advantage of distributing content of some sort - audio or
text - to cell phones. That’s a whole new area that developed in 2006 and will continue to expand in
Let’s Make A Deal
Rumor became reality two months ago (November 2006) when Clear Channel’s Board of Directors
accepted a multi-billion dollar acquisition deal with Thomas H. Lee Partners and Bain Capital. “It seems
to me there were discussions about this long before we heard about it,” Van Dyke maintains. “The fact
that two or three organizations were able to pull together [research] fast enough to respond to the request
for offers in such short time [tells] me [that].”
Since Van Dyke was trying to buy some radio stations in 2006, he’s become even more aware of just how
long that process can take. “Think about the volume of information that needs to [be digested] in order to
make an offer in three weeks,” he remarks. “I don’t see how these guys were able to put packages
together and do an analysis that quickly.”
Meanwhile, it’s still somewhat surprising to Van Dyke that it took so long for something like this to occur.
“[In early-2006], we felt the era of deconsolidation would have to begin sometime soon, either by
companies going private or by selling off stations - and that’s exactly what happened,” he notes. “CBS
and Clear Channel sold stations and Clear Channel went private; Emmis attempted to [do so]. They
understood for a long time the only way to grow as a business is not to be under the microscope every 30
Questionable Grades
It is Van Dyke’s contention that a few more of these situations will surface this year. “It’s going to be
much more difficult for smaller companies but they will have been motivated by what Clear Channel has
done. Frankly, I think Clear Channel will continue in the envelope-pushing development of this medium
now that they have this opportunity. Not having to be concerned with a monthly or quarterly report will
help them invest more. This is the beginning of a several-year pullback which is in conflict with what the
FCC believes they need to do. There may be an opportunity for more consolidation but there hasn’t been
a great report card on the ten-year anniversary of what it’s done for businesses and the industry. It’s a
conflict in my mind how the two will [coexist] in 2007.”
By the way, there’s an interesting side note with the Clear Channel transaction that involves Van Dyke.
Representatives from different Bain offices contacted the Bridge Ratings President at least 12 times in a
four-week span before the sale was announced. “Each person wanted to talk to me about the future of
traditional radio,” he recounts. “They wanted to know about studies we’ve done and what we’re learning.
I wondered why I was getting so many calls about that and why the information wasn’t being shared
[internally throughout Bain]. I later found out they all had a different part to deal with and were all doing
Perfect Storm
As a former programmer (WODS/Boston, KLUV/Dallas among others); General Manager (KCBS-FM
“Arrow 93”/Los Angeles); and someone who now runs a research company, it seems to Van Dyke that
electronic measurement has tremendous potential - so he’s confused why the industry hasn’t reacted to it
quicker. “In many ways, it makes a statement about the industry’s mistrust of Arbitron,” he declares.
“This is an extremely expensive proposition and many companies won’t be able to afford it. The fact
there may be a cheaper alternative that could generate the same kind of result is a major factor regarding
why this has been going slow. I talk with some pretty smart programmers and they have some interesting
ideas about how this will help them. It will create a shift in the way sales and programming develop in this
Many agree something will happen this year that will accelerate the process, and that there will then be a
period where everything is upside down. “All information from a programming perspective will be very
different and off-kilter,” Van Dyke contends. “There are methodology problems [with electronic
measurement] just as there are with Arbitron’s diary method. Every methodology has its own downsides.
In this particular case [however] some really cool parts outweigh some negatives. It will eventually be a
very good development for the industry. But like everything else, a perfect storm of change is occurring to
the industry. The critical part is whether radio can hold itself together and stay focused the next 24
months. It’s very interesting that all this is happening at the same time.”
Regarding his station acquisition progress, Van Dyke has had reason to be “more encouraged” in recent
weeks and points out there are several opportunities on the horizon. “With all this `negative’ news from
the investment world, specifically Wall Street, private equity still has a stomach to support people like me
to buy radio stations,” he explains. “I don’t think it’s as bad of an environment as [many] would like us to
believe. That changed quite a bit in 2006.”
