For Immediate Release:

Wednesday, December 1, 2004

The Predictive Shakeup of Radio

I’ve been curious as to the many ways the radio industry compares to other industries, especially regarding the question of competitive flanking and guerilla strategies.

2004 was the year digital media began to gain some traction. (See "Where Did My Listeners Go, Pt. 2") Some say traditional radio is going through significant change due to new competitive threats, while others see recent soft times as part of the ‘cycle of life’ of industry in general and that radio is simply dealing with a lull right now.

At Bridge Ratings we are currently studying the impact of these new technologies on listener behavior. We have released some preliminary information from these on-going studies and will continue to do so. But I was interested in a business expert's view.

I recently spent some time with a professor of Management in Boston and was interested in her recent published paper on something she refers to as the “Trajectories of Industry Change”. I was curious as to her analysis of industry change and what she thought of the changes the radio industry is currently experiencing.

According to Anita McGahan, who observes all types of industries and companies, traditional radio is at a crossroads and should not be distracted by new competitive media. She suggests we stand back and understand how the whole audio entertainment industry is changing, view our place in the larger landscape of all things audio. Broadcasters are misreading growth clues and arrive at false conclusions all the time, says McGahan.

I asked Ms. McGahan what her message to the radio industry’s leaders would be. The most important thing to appreciate, she says, is that all business goes through lifecycles during which obsolescence becomes a consideration. New technologies shake up all industries and all companies at some time are faced with defending their turf.

Radio is caught in an evolution as a result of Two Types of Threats of Obsolescence from digital media:

• A threat to our core activities (those activities of attracting listeners with programming and delivering consumers for advertisers), and

• A threat to our core assets (our durable resources such as talent and programming and intangibles such as programming knowledge and brand capital, that have historically made radio effective at delivering audiences).

Based on the nature of these threats, industry will find itself on a growth curve with the following identities:

Phase 1 – The Stable Trajectory when neither core assets nor core activities are jeopardized. During this phase the industry is operating effectively and efficiently, it understands its strengths and weaknesses with no significant outside competitive threat(s). There is a balance between investing in product and sales. However, over time this phase tends to begin to weaken after an extended period of wealth and profit-taking.

Phase 2 - The Intermediary Trajectory – the period after successful times when the industry begins to experience new competition generally aided by new technology when either core activities or core assets are threatened – but not both. It is a time when a “tipping point” is approaching but there is still time to adjust and avoid significant damage to revenues, profits and consumers.

This phase is often characterized by short-term profit-taking as a reaction to this new threat while avoiding investment that could later prevent competitive inroads. Radio is at the beginning of this cycle with competitive media making advances. Industries at this point should fend off attacks to either core activities or core assets by reinvestment in those core strengths. Defensive strategies come from company marketing, product and sales innovations which refresh perceived obsolescence.

Phase 3 - A Radical Trajectory, the most serious, occurs when core assets and core activities are both threatened with impending obsolescence. Often considered too late in the lifecyle to recover from severe competitive and technological inroads, industries in the radical phase may never be able to infuse enough funding back into the business to fend off the momentum of on-coming competitors.

With radio sitting between the late stages of stability and the early stages of the Intermediacy, our business has great opportunity. This perspective will motivate the industry to bring its most creative and hard-working people together to find answers.

Historically, radio has found a way to reinvent itself to suit the times every decade or so. Whether it was movies in the 1930’s, television in the 1940’s or abrupt changes in music preference in the sixties, radio has always figured it out.

Therefore, when analyzing our industry's current state, it is important to appreciate all the change that is coming fast and furiously - not just one element of that change. Radio's best people are working on our future, a future that will concentrate on both product and sales marketing in ways we've not seen heretofore. I'm looking forward to it.