Wednesday, December 1, 2004
The Predictive Shakeup
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
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
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
- A threat to our core activities (those activities of attracting
listeners with programming and delivering consumers for advertisers),
- 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
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
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
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.