04/15

The Future of AM Radio

Radio Ink made a classic mistake last week when it celebrated the strength of AM radio by trumpeting the financial success of the top radio brands, many of which happen to be on AM.

Why is this a mistake?  Because it confuses the band with the brand.

AM radio is not what makes stations like WFAN so successful.  WFAN is what makes WFAN so successful.

Indeed, the trajectory for AM radio in general is not pretty.

We generally assume that AM, like FM, is universal simply because it exists everywhere.  But existing everywhere and being used by all people are two completely different things.  And the usage of the AM band varies quite widely by market.

Arbitron was kind enough to run some numbers for me.  They gathered a “market basket” of 15 medium and large PPM markets to answer this question: What fraction of the population in each market listens exclusively to FM stations (and not to AM at all)?

Among persons 6+, the answer was an average of 65%.  That is, two out of three persons 6+ across these markets listen ONLY to FM. AM radio may be available to them, but it is not being used.

These numbers obviously vary widely by market – from a high of 81% FM exclusive in one market to a low of 49% in another (Arbitron has asked me not to share the identities of these markets, but if you’re a subscriber you can ping your nearest ARB rep).  Your mileage will vary.

But note that the HIGHEST proportion of persons in any market in my sample who use AM radio was only half.  And while I didn’t plot long-term trends over time, can there be any doubt what direction they’re moving in?

Well, you might say, but if only there were better things on the AM band then more people would listen to it…Says who?  Are you in the business of attracting consumers to your brand – or to your band?!  I suggest that the former is infinitely easier than the latter.

Just look at how this compares to online radio….

The most recent Edison/Arbitron stats indicate that 39% of persons 12+ listen to online radio in the last month.  While the bases aren’t quite evenly matched (the ages differ slightly and the sample frame for Edison is monthly while for PPM it’s weekly), it’s almost possible to argue that online radio today reaches more consumers (39%) than AM radio does (35%, based on my sample of markets), and the trends are moving in opposite directions.

So the strength of many AM radio brands are testaments to those brands, not the band they live on.  It is inevitable in my view that these brands will fare better on FM than on AM over the long run, simply because the distribution potential is greater on FM than on AM.  There’s more “there” there on FM than on AM, and from this point forward there always will be.

This doesn’t mean, of course, that you can throw an FM competitor at an AM institution and kill it dead.  Distribution may not be more important than institution – at least not yet.

It means that institutions deserve to breathe.  They deserve the greatest possible distribution to maximize their audience potential, and the distribution on FM beats the distribution on AM.

The reason Pandora wants into the cars is because of the massive distribution potential there.  The reason TV networks get higher ratings than cable nets do is because of distribution advantages.  The reason why Living Social is better off with Clear Channel than without it is due to distribution.

Distribution, not “availability,” is what matters.

The future of AM radio is irrelevant. What matters is the future of your brands. Your clients buy your brands, not your tower.

You should favor more distribution over less.

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  • Bob Hamilton

    Mark, your comment on AM radio is right on. Owners who own AM still think their property is worth millions. I know different. I hate to say it but AM is the model T as went the Trolley Car!

  • http://www.markramseymedia.com Mark Ramsey

    Thanks Bob. Coming from you that means a lot!

    Mark Ramsey

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  • http://twitter.com/timstansky Tim Stansky

    Mark thanks for the reminder that content rules and the lesson learned that railroads forgot they were in the travel business when airlines took people to more places faster (in theory).

  • http://www.markramseymedia.com Mark Ramsey

    Thanks Tim!

  • http://www.markramseymedia.com Mark Ramsey

    Okay, but that’s not the kind of AM we think about when we think of the revenue-generators that drive the radio industry.

    Your essential point – and it’s correct – is that most technologies don’t disappear, they simply change. But sometimes that change is traumatic and it involves a dramatic shrinking of relevance and utility to the masses.

  • Myt59t

    The NY metro area has been blessed with 8 legacy 50 kw day/night AM stations.  WFAN and WCBS each have among the best of those signals.  Signal comes first – then brand – then eventually multiple distribution channels for those brands.  I think the brands for both of those station would be substantially different had WFAN been on New York’s 1330 instead of 660 all these years, and if WCBS had been on 1600 instead of 880.  You are correct that it was a mistake to celebrate the strength of AM radio.  There is only temporary strength with brands which have substatial AM signals.  Even in smaller markets there is usually only one AM station that has any real ratings impact – and that signal is usually the one with the lower dial postion and a signal pattern that serves the primary selling arae a well both day and night. 

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