We never called it sex

In his post We Never Called it Content, Dick Taylor gives us an insider’s view of the implosion of terrestrial radio.  He points out, quite correctly in my opinion, that “radio is an art form. When you remove the artists, there’s not much left.”  He goes on to describe the transformation of the business from being driven by the passion of the people running it and performing it for the music and the towns they served, into a distillation of numbers in spreadsheets, automation technology, and a lot of empty office space.  Great post Dick, but it stops short of describing the feedback loop fueling radio’s death spiral.

I quit listening to radio in the early days of the consolidation because there were almost no live DJs on the air in the formats I enjoyed in my market.  Sure there was some guy with a subscription to my town’s paper preparing local-sounding break banter during his otherwise off-mic time in some larger market, but there was nobody local who, as you say, kept their “hand on the pulse of the community you’re licensed to serve.”  My formerly vibrant and compelling local station had become a zombie.  It gave the appearance of life but had become a mindless automaton without heart or soul.

As an early quitter, I was considered a curmudgeon at the time by my radio-listening friends.  Perhaps as an autistic I was quicker to feel the loss of human presence on my favorite stations.  Fast-forward a decade and today almost nobody I know listens to radio anymore, and those who do listen do not do so regularly as far as I can tell.  People my age probably remember when conversations often began with “did you hear what so-and-so said this morning on the radio?”  There was an assumed common experience and relevance.  That assumption is gone and the only time I ever hear radio mentioned in conversation anymore is to mourn its passing.

Consolidation made this outcome inevitable for several reasons:

  • Profit is precisely measurable down to the penny whereas value is subjective and in mass markets can only be estimated.
  • The monetary effects of changes in ownership, policy, staffing and technology show up quickly, whereas changes in value lag significantly behind.
  • Business is optimized for value short-term profits over long-term value.

Broadcasting enabled an economic model that was entirely new to the world at the time. The reach and immediacy of radio made it possible to make a lot of money by earning so little of it from each listener that the service appeared to be free.  The larger the audience, the greater the earning potential.  Better yet, audience growth due to increased population density or greater market share meant more revenue but no corresponding capital outlay.

Over time, Radio’s business model optimized for megastations.  Markets grew until they hit the artificial cap imposed by ownership limitations.  Growth had always been the key to profitability and that underlying assumption shaped the incentives built into the model in which bigger is always better.

The artificial cap imposed by ownership limits masked the presence of a natural growth limiter lurking just below the surface: geography.  The personal nature of the relationship between the DJ and the fans is limited by the distance people will travel to a club, concert, festival, or other cultural event.  The farther beyond that distance the market expands, the less personal it becomes.

Had the ownership limitations been eliminated before the advent of broadband, ubiquitous computing power and cheap magnetic storage, radio might have reached a natural equilibrium balancing geographic reach with intimacy.  Tragically, ownership caps were relaxed at a time in history when audience was no longer constrained by the Newtonian physics of atoms.  There is no limit to the size of a digital audience, therefore no limit to the growth aspirations of today’s radio business executive.

But living off of a fraction of a cent for every listener only works with truly massive numbers of listeners who value the service.  Consolidation of radio ownership and program assumes that increased profitability gained from automation and combined operations permanently offsets the resulting loss in audience value.  That is in turn based on a more fundamental assumption that the value of the service to the listener remains constant through the transformation.  The model breaks down in a declining audience.  More important but less obvious is that the model breaks down when the audience places less value on the service over time.

What audiences have always instinctively known and corporate owners have consistently ignored is that the source of value is the personal relationship between the DJ and the listeners.  If that relationship is akin to marriage then the studio is the wedding chapel.  To the horror of radio fans everywhere, when the new owners moved in they immediately converted the beloved chapel into the Moonlight Bunny Ranch. They turned something unique and personal into a commodity but were so distracted by quarterly numbers they failed to see the obvious flaw in the plan.  They still call it radio but they are selling a completely different service.  After swapping our chapel for a brothel, what did they expect to happen?  That the community would embrace it?  For radio fans the relationship is primary, not the sex.

The spiral then follows a predicable pattern.  Some revenue initiative, such as firing an on-air personality and moving to voice tracking, makes the station more profitable immediately.  Happy executives set new financial targets based on these numbers.  But the audience reacts negatively to the change over the long term, reducing profitability and eventually jeopardizing financial targets.  Managers and executives are then forced to make more changes to meet their current financial targets and, blindly following the prevailing wisdom, invent a new ways to boost revenue by plundering value.  Cue up another round of temporary gains masking pervasive underlying system failure, rinse, and repeat.

When nobody pays attention to the audience’s value judgement then there is no attempt to understand the source of that value and preserve it.  “Did you see the book?  Just look at our numbers!”  Hence Dick’s comment that “the buzz you hear is that the fat cutting has become cutting the bone.”  They say you get what you measure.  Radio took it a step further and became what it measures.  The heart and soul are long gone.  What remains is an empty husk optimized for meeting financial projections.  What’s left of radio is mostly computers performing to and for the benefit of other computers.

If the business were run by people who understood it well, they would address the  problem with a long-term solution to restore audience value and ride out the unavoidable financial hit.  It would take significant investment, a long-term commitment, and the ability to operate in the red for an extended period of time.  Radio would need to serve its audience on a local and personal level like it did in the early days.  Because building value takes time, things would get worse before they get better.  But since the radio business can’t see beyond the next calendar quarter or two and there’s still value left to extract, it’s more likely radio will just get worse until there’s nothing left to save.  If it had a Do Not Resuscitate order, someone would have pulled the plug already.

About T.Rob

Computer security nerd. WebSphere MQ expert. Autist. Advocate. Author. Humanist. Text-based life form. Find me on Twitter or LinkedIn.
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2 Responses to We never called it sex

  1. T.Rob, your blog post had a lot of meat in it. Thank you for amplifying on my thoughts and expanding the conversation.

    After I posted my blog post this morning I read this blog post by Greg Satell on “Why Business Defies Logic.” It too, illuminates the problems faced by broadcast.

    In essence, broadcast radio has been operating in a period with “Joseph Effects” and with the advent of the Internet of Things (IoT) finds itself operating with “Noah Effects.” And this business dilemma occurs across all types of businesses and industries; not just broadcast.

    To really understand what I’ve savagely condensed, I urge folks to read this blog post.

    • T.Rob says:

      Thanks for the read and comments, Dick. WordPress broke your link so I took the liberty of embedding it in very slightly edited text when I repaired it. Satell’s post is well worth the read.

      I was going to link to definitions of Noah Effect and Joseph Effect but they are surprisingly difficult to find online. There are of course thousands of references to them, and Wikipedia mentions them in its article on Chaos Theory, but the only broad definitions I found were in very specific contexts such as financial markets or hydrology. According to the Wayback Machine, the dearth of definition for these terms has persisted for quite some time. I predict this situation will continue as-is indefinitely, until it changes dramatically without any warning. 😉

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