About five years ago I posted a diatribe about terrestrial radio. You can read the original post here. The gist of it was that radio was killing itself by refusing to adapt to changing times. And I said that by 2010, traditional broadcasting giants like Clear Channel and Cumulus will be in the fight of their lives against new competitors.
And you know what? I was right.
In 2007, Clear Channel was voluntarily delisted from the NYSE. They are traded over-the-counter and have fallen from their opening high of $20 to their current $3.10. Cumulus shares have plummeted from $14.81 to $2.52 over the last five years. Citadel is currently bankrupt, probably because they’ve spent the last nine months trading mostly under ten cents per share (although to be fair, they have gained in value by two cents — approximately 50%).
There are a lot of reasons why this is happening. Rampant consolidation in the late 90s and early 2000s, for starters. Eliminating local on-air personalities in favor of (much cheaper) national syndication didn’t help. Neither did skyrocketing advertising rates. And as if greedily selling advertising for every available on-air element wasn’t a direct contributor, speeding up songs by 3% – 6% in order to fit in more commercials certainly was.
While their industry was collapsing around them, what did station owners do? They launched an all-out war against satellite radio, burning uncountable millions in lobbying and attack ads. While making fun of satellite radio for lacking local content (which it doesn’t), they were furiously lobbying the federal government to prevent Sirius or XM from broadcasting any local content whatsoever. And with their own ad revenue slipping (or due to burning greediness, I can’t tell which), they cut back even more content and jammed in even more commercials.
About the only thing they didn’t do was compete.
While Sirius XM (then two separate companies) offered bigger playlists, better station variety, better sound quality, reduced or eliminated commercial breaks, and near-constant signal from coast to coast, terrestrial radio stagnated. A few stations tried charging for online listening, but that didn’t work at all. More national syndication was brought in, advertising standards were relaxed, more music was cut … and more listeners departed.
And just when terrestrial broadcasters had satellite radio in a choke hold — Sirius XM barely staved off bankruptcy last year — along came the iPhone. Say what you will about the product itself, but the iPhone helped usher in a new era of consumer awareness of what cellular data networks can do. Apps like iTunes and WunderRadio enabled users to listen to music on their own terms, either by way of transferring them to the device or streaming customized playlists ala last.fm. Soon, users of other PDAs realized that they, too, could manage their media from their devices. And of course, none of this even begins to account for people who have turned off radio entirely in favor of their favorite MP3 player.
More commercials, less music, more syndication, less variety.
The same issues that have plagued radio over the last twenty years — the same issues that are right now causing the industry’s demise — are seen by radio stations as salvation. Instead of cutting back on the obnoxious ads that drive away listeners, they increase them. Instead of dropping the corporate-sanitized playlists and vanilla no-frills nationally syndicated DJs, they replace another shift. Instead of giving listeners any reason to come back, they flush tens of millions into lobbying and accuse satellite radio of not playing fair.
And in the meantime, cellular carriers have quietly snuck in and stolen the show.
It takes me 20 minutes to drive to work. If I’m willing to constantly flip through the local stations, I might get a traffic update somewhere halfway through my drive — when it’s too late to change. I get my weather from my phone and my news from the Internet. And despite what the morning show thinks, I don’t give two craps what Lady Gaga said on that interview last night.
While radio figures out how to fight off the wireless carriers (who have far deeper pockets), satellite radio has gotten back on its feet. Sirius XM came through the last few years leaner, meaner, and with a score to settle. Their stock is up a whopping 567.5% from this time a year ago, with 24% of that happening just this year alone. They’ve shredded their debt and wound up with a $100 million free cash flow for 2009 — the first in their history. And even after a rate hike, subscriber growth remains positive and continues to grow. Those of us who bought shares this past March are swimming in triple-digit gains and loving every second of radio’s demise.
I don’t see this kind of investor frenzy happening over Clear Channel. Or Cumulus. Or Citadel.
Traditional radio’s response has always been “nobody will pay for radio when they can have it for free”.
It seems that the public begs to differ.