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How Did Terrestrial Radio Lose its Audience ?

Posted By Barry Ritholtz On December 5, 2004 @ 6:15 am In Finance,Music | Comments Disabled

Avrhomepagelogo [1]

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Fascinating question [2] posed by Jerry Del Colliano of The Audio Revolution [3]:  "After decades of dominance, how did terrestrial radio lose its audience – and will it ever earn them back?"

"In FM radio’s heyday from the late 1960s to right after deregulation of radio in America in the mid-1990s, radio was the single most powerful source for consumers to find out about new music. On a no-cost media that was installed in every car, Walkman and AV receiver, radio was everywhere and had the power to literally make or break an artist overnight.

Financially, radio has always been TV’s bastard stepchild, with some radio insiders saying the media has never earned more than seven percent of the total ad revenue in a given year. Despite this relatively small portion of overall ad revenues, radio stocks boomed with almost the same enthusiasm as dotcom stocks in the late 1990s. It was during this time of consolidation when radio’s leadership took their eye off the ball, looking to economies of scale to cut costs and boost profits. Wall Street loved it, but what FM radio needed to be doing was creating new formats.  But who needed new formats when the stock price is through the roof? FM radio did – badly."

Of course, they didn’t realize that until way too late:

"Enter satellite radio in the early 2000s.  For the first time in radio’s history, it potentially had a real competitor on its hands. While the numbers of satellite subscribers were relatively small, this new media looked at the business and media of radio in novel ways, ways that stubborn terrestrial radio might not have an easy answer to, other than mergers and acquisitions. On a programming level, satellite radio has the ability to offer many times more channels than any major U.S. radio market. With these added channels, satellite radio is able to niche-program while terrestrial radio is trying to cast a big net around an audience that is increasingly difficult to capture. With dozens of niche stations ranging from death metal to ‘70s ballads, satellite radio’s odds of finding the exact genre of a listener’s tastes are far better than FM’s offering, which results in increasing listener loyalty for satellite."

The uphot of all this? As we mentioned back in Radio’s Wounded Business Model [4], "Traditional radio will likely never be the same nor is it likely to recover."

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Source:
What Makes Satellite Radio So Great Anyway? [2]

Jerry Del Colliano
Audio Revolution, November 24, 2004

http://www.avrev.com/news/1104/24.satellite.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/12/how-did-terrestrial-radio-lose-its-audience/

URLs in this post:

[1] Image: http://bigpicture.typepad.com/photos/uncategorized/avrhomepagelogo.gif

[2] question: http://www.avrev.com/news/1104/24.satellite.html

[3] The Audio Revolution: http://www.avrev.com/

[4] Radio’s Wounded Business Model: http://bigpicture.typepad.com/comments/2004/07/clear_channels_.html

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