New challenges for the old media.

A five-part series on traditional media in a new marketing environment.

The ways marketers get their messages to consumers – and, increasingly, the ways they try to get those consumers to enter into a dialog with them and with other consumers – are changing at an ever-accelerating pace. In fact change is about the only constant in marketing communications today. Except, of course, for all the stuff that remains resolutely the same. Like radio.

Part 2: Radio isn't generating a lot of buzz, but the signals are strong.

Will radio keep its strength?  Or are there changes ahead?

Radio's the same? What about satellite? The new Arbitron ratings? Online radio? MP-3 players? Podcasts? Won't they have a massive effect? Apparently not.

• Radio advertising revenues were up 2.8%, from $20.7 billion to $21.3 billion in 2006, according to TNS Media Intelligence. (However they were down 2.1% in the first quarter of 2007, when overall ad spending dropped 0.3%).
   

• Radio's 2006 share of total U.S. advertising spending inched down from 7.4% to 7.3%. (First quarter 2007 dropped a bit more to 6.6%.)
   

• Radio's 2006 weekly reach of total U.S. population 12 and older was flat at 93% in Arbitron's "Radio Today" report.
   

• Total licensed stations have grown from 13,000 in 2001 to 13,793 in 2006 according to the FCC. Compounded, that's just a smidge over 1% a year.

What's earth-shattering about these numbers is that they're not earth-shattering: they're up a little, down a little or unchanged. In an era in which most other old media are experiencing wrenching transformations, radio just keeps on keeping on. Don't they know there's a paradigm shift occurring here?

What happened to the factors that were going to change everything?

Satellite radio's second stage never ignited. There are a only about 12,500,000 subscribers – about 5.6% of total U.S. adults. 

Those subscribers' average listening time is down from 16 hours a week to 12.6. That diminished interest has led to a very high attrition rate.

XM and Sirius (Soon to merge into S&X?) have to fill the pipeline frantically because an overwhelming number of subscribers drop the extraterrestrial services as soon as their free (or very cheap) introductory offers expire.

In an Arbitron study only 15% of Americans expressed interest in having satellite radio in their cars – if it was already installed. Only 8% would even consider an aftermarket retrofit.

With the apparently irresistible impulse weak companies have to join forces and fail together, Sirius is now being heavily promoted by Chrysler. (Beats us why the Mopar folks think a free offer of something nobody much wants will move metal. Sure didn't work with their cars.)

Arbitron's new digital ratings have made a difference, but not a big one.

With the old diaries, drivers jotted down a station when they started out and – surprise – didn't pull over to note the change when an especially obnoxious commercial made them hit the button.

The top stations in each market were the beneficiaries of the panel members' tendencies to just note their default stations. The new digital ratings capture station changes within trips, so the top stations ratings are down a bit and the lower-ranked stations are up a bit. But it's still a broadcast terrestrial radio audience.

Online radio was – briefly – the hot new area of radio. There were no barriers to entry:

• Start-up cost was virtually nothing: there was no need for an expensive transmitter, no studios beyond an announcer booth and virtually no cost for on-air content.
   

• There were no FCC license requirements.
   

• Generating a national audience just required some skill at creating buzz.

But the three judges of the Copyright Royalty Board may have put an end to online radio. They've established royalty rates for online play that will bankrupt most of the fledgling online stations.

Even if the rates are lowered and some stations survive, online radio's audience is relatively small. Although more than a third of all U.S. adults have listened online at least once, fewer than 5% listen in any given week.

MP-3 Players are changing listening patterns. Just not as quickly as anticipated.

Bridge Ratings estimates that MP-3 players will reduce terrestrial radio's penetration of the U.S. listening audience to 85% by 2010. That eight-point decline would be significant.

But MP-3 players usually don't eliminate user's radio listening, they just reduce it. Especially when the gadgets are new. When they first get them, men under 35 and women under 30 spend up to 80% of their audio entertainment time with their new MP-3 players (older groups use them less). Among all age groups fatigue sets in after six months and MP-3 usage begins a noticeable decline.

Still, with 75,000,000 MP-3 players out there in the U.S. – and more coming every day – the technology will eventually erode terrestrial radio's listening time. It just won't erode it that much. In fact, 77% say their terrestrial broadcast radio listening time won't change at all despite MP-3s, online radio and satellite.

Podcasts presently reach just 1% of the U.S. listening audience regularly according to a Forrester Research poll. But an Arbitron study shows that 11% listen occasionally. Most of those listening are young, relatively affluent males.

Podcast listening is growing exponentially. It grew 398% from 2005 to 2005, and 563% from 2005 to 2006. And about one-fifth of listeners listen at least once a week.

Most listening is on computers rather than portable MP-3 players. The ratio is now four to one, but the growing i-Pod nation will almost certainly shift than balance. When that happens, the convenient portability will enable podcasts to take a bigger bite out of radio listening.

Are there any pitfalls?

Two, maybe three:

• A disproportionate percentage of radio spots are really, really bad. A lot of small advertisers think that because they can speak English they can write it, and they script their own spots without professional help. The more clueless among them do their own announcing, too. Almost as bad are the free spots written by the media rep, voiced by a station announcer and mixed with stock music.
   

• People 12 to 24 listen a lot less than anyone else. Just 67% of those 12-17 and 55% of those 18-26 tune in according to an Arbitron study. 33% of the 18-24 cohort spend their listening time with CDs (Still?!) and MP-3s.
   

• If the first quarter 2007 numbers are a trend, they could be worrisome. Although radio lost less than TV or newspaper, the medium was still down versus the totals (boosted by internet's 16.7% growth), and even behind magazine, which grew 4.4%.

What's going to change?

Four main things that we can foresee:

• Radio will probably lose a little penetration as podcasts and MP-3 players continue their rapid growth. But the decline probably won't be too steep.  Even the worst-cases industry scenarios only foresee terrestrial radio penetration falling to 85%.
   

• The advent of HD may give radio listening a bounce, since it will improve audio quality. But like TV, the audience's reluctance to replace their existing equipment may delay the broad scale adoption of the format.
   

• Clear Channel recently hired an extremely capable creative director – someone the BrainPosse principals have worked with on and off for over twenty years – to ratchet up the quality of spots they write and produce for larger advertisers who don't have radio-capable agencies. But they obviously can't afford to provide that service free to small, single-market advertisers. And those small – or simply penny-wise and pound-foolish – advertisers are not likely to realize that their total radio program would be a lot more effective if they shifted a little money away from time and into creation and production.
   

• The incredible variety provided by radio's 47 audited formats will fragment the radio audience into smaller and smaller niches. The new Arbitron methodology show advertisers alternatives to achieve broad market coverage other than market-leader stations.

One thing that doesn't seem likely to change: A significant majority of people will continue to turn the radio on as soon as they get into their cars, and listen for every minute of the 15 hours 10 minutes they drive every week. And that means radio will remain an effective media vehicle until gas prices turn us into a nation of pedestrians.

Part 1:  TV's picture isn't as bright as it used to be.

Next week: Newspapers can't paper over their problems much longer.
 

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