As reported on Chief Marketer an e-newsletter produced by Primedia

Radio: Embattled Broadcast Medium Seeks a Savior
By Andrew Grossman

Elvis Costello once sang, “Radio is our sound salvation.” Now it turns out his ironic tone may have hit just the right note: The question today is, Who will save radio?

Two recent marketing events spell out the broadcast radio industry’s woes in today’s digital communications world. Last week XM Satellite Radio and Hyundai Motor America announced that the Korean carmaker will become the first to install XM as standard, factory-installed equipment in every vehicle, starting with its 2006 models. Competitor Sirius Satellite Radio made a somewhat smaller splash saying it would market its receivers as factory-installed options beginning in May on some Jaguar models and in July on some Range Rovers.

Two weeks earlier, a less publicized event still had troublesome implications for the industry. Radio YourWay rolled out a major upgrade to its TiVo-like device that enables listeners to record and playback radio programming at their convenience. The company joins Griffin Technology’s Radio Shark—$69 at Griffintechnology.com—in marketing devices that enable radio listeners to skip the ads.

Braodcast radio is in enough trouble as it is. According to the Radio Advertising Bureau, sales revenue was only $19.6 billion in 2003 compared with $19.8 billion in 2000. Alternatives to broadcast radio, such as satellite radio, Internet radio, iPods, and the growing “pod-casting” phenomenon—in which users can download free content from the Internet to use on their portable devices—have put heavy pressure on the industry.

Some blame the major radio ownerships for audience and advertising erosion. “Clear Channel and Infinity [Broadcasting] have been essentially undermining the quality of the listening experience,” says Ted Schlader, an analyst at Forrester Research who last week released a study on digital audio.

Ad clutter has gotten so bad that Clear Channel last year reduced its commercial load by 20%. Music lovers have also grown tired of the numbing sameness along the dial, as few nonpublic stations will stray from strict play lists of hits in whatever genre they air.

So is radio-TiVo ready for the top of the pops? Not yet, according to Schlader and a “New York Times” review of Radio YourWay, (which was listed for $200-$250 at radioyourway.com).

“They don’t have a program guide because one does not exist,” Schlader says. “So they are fancy VCRs rather than like TiVos. … It’s not a breakthrough as TiVo was for television.”

Schlader says a true radio-TiVo will not arrive until a company invents an end-to-end solution that includes the application and the guide. “That won’t come to broadcast radio anytime soon,” he added.

“The New York Times” was also skeptical. In his Feb. 26 review, David Pogue panned Radio YourWay for its tinny sound, skimpy battery time, poor reception, and clunky software. “In short, almost every aspect of Radio YourWay needs improvement,” he wrote.

Satellite radio is a bigger threat, as XM and Sirius listenership has grown 150% in the past year to 4.5 million subscribers. Sirius signed ratings powerhouse Howard Stern away from Infinity Broadcasting with the promise of no FCC-imposed censorship on his bawdy broadcasts.

Online radio, an 11-year-old growth industry, is thriving as well with major players such as Yahoo, MSN, AOL, and Live365 competing with commercial radio stations. Clear Channel and Infinity have already announced plans to create similar platforms.

In its study, Forrester found that radio still has a huge advantage because 56% of music lovers listen most frequently in the car. Nonetheless, 48% listen to music on portable devices and 21% on their desktop computers.

Does radio have a savior? Schlader and others believe it could lie in high-definition technology, which will vastly improve audio quality and give local stations a second or third channel for data services.

Like HDTV, HD-radio will start slowly, Schlader predicts, because of its initial $500 price tag for receivers. But by 2010, he says, the costs will fall to $150, and 9.7 million homes will have HD receivers. By that time, “broadcasters [will] introduce multiple-channel programming over the existing airwaves and services like continuous traffic updates,” he wrote in his report.