Broadcast Radio's Epiphany

On this date in 2005, I wrote an article that appeared in several industry trade publications regarding the future of broadcast radio.

This was at a time when radio was just beginning to feel the hint of a changing competitive landscape. In 2001 a company called Napster planted seeds about the idea of music consumers being able to listen to all the music they wanted to download anytime they wanted on the internet. While it was considered illegal, millions of music fans got a taste of the power of the internet.

Satellite radio had also started gaining traction in the early 2000s and, this too, presented a sizeable quake in the dominance of broadcast radio as a source of music and talk.

As the first decade of this century progressed, radio management began to realize the facts of new consumer behavior relative to the internet and that it would eventually impact radio's revenues as well as time-spent with the medium.

This was all before Smartphones were introduced by Apple in 2007 and shortly thereafter, the economic slump that affected us all.

So, on this date in 2005, my article was about how broadcast radio management would put their properties in a much better position to withstand all this new competition if they could find additional revenue streams to bolster potential advertising revenue losses at the hands of smart Internet companies selling (at the time) new fangled digital advertising solutions.

Broadcast radio was excruciatingly slow to adopt new revenue streams and the business has been playing a defensive roll up until 2010.

Then something changed and radio's smartest companies began to appreciate the power of digital advertising. The business had also produced respectable off-air revenues through non-traditional advertising campaigns which typically would leverage radio/client relationships into in-store promotion or station events such as concerts with sponsors.

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The Radio Advertising Bureau (The RAB) just released its analysis of broadcast radio's business during 2015 and for the first time radio's digital revenues topped $1 Billion while off-air sales grew 11% over 2014. Combined, the digital and off-air sectors comprised nearly 20% of radio's bottom line for the year 2015.

Broadcast radio groups that have done well in adding these additional revenue streams have been criticized by some who apparently believe that radio should only rely on its on-air advertising to support its businesses despite the obvious drain on that revenue by alternative media.

Finally, broadcast radio has joined thousands of other successful businesses that have known for decades that multiple revenue streams provide some protection should recession or some other economic slowdown come along.

Haven't investors followed the wisdom of diversified portfolios for this very same reason?

Broadcast radio is now gaining the traction it needs to reinvigorate its business. It should come as no surprise at this juncture that with all of the new entertainment options available, radio's consumers will dedicate some of their time to these new options and - for good or bad - advertising dollars will follow.

Traditional advertising is likely to continue to atrophy as advertisers and their agencies realign their ad budgets in order to dedicate more to digital platforms.

It should come as no surprise, then, that off-air and digital advertising will continue to increase as a percentage of total revenues for broadcast radio.

There's nothing wrong with this. In fact, a diversified collection of revenue streams strategy - one in which more emphasis is placed on non-traditional advertising - will likely be the impetus the industry has needed in order to reduce the number of on-air commercials.

This evidence that these new revenue streams are helping to offset traditional declines is just what the business needed to hear.

I only hope industry leaders will double-down on this strategy since the "good old days" when broadcast radio had a verifiable monopoly on audio advertising - are likely gone forever.