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A Primer on Radio’s Future – an Interview with MediaPost’s Diane Mermigas

Diane Mermigas is a columnist for Media Post. She is one of my favorite analysts on the topic of media in the 21st century, what it is, what it means, and where it’s headed.

Check out the full audio interview with Diane here.  What follows is only a transcript of highlights.

Let’s focus on the world of radio and the trends you see around us. What are we up against, we radio broadcasters? 

Well, it’s not so different from what TV broadcasters are up against, in that these are traditionally static media businesses that are attempting to ease their way into the interactive world and they’re not quite interactive yet. 

Station owners are probably up against some of the most difficult challenges of most media, but they are presented with some of the most promising opportunities. By that I mean, what has been and what is increasingly slipping through their fingers: Their dominance and the leverage they can exercise in their local connections with advertisers, merchants, service providers and with the local consumers – with the community. That’s still a strength and advantage that they have, but so many others are beginning to encroach there. 

So, if radio and TV stations are going to really make the leap into the digital age and into interactivity and develop the future revenue streams they must have, they’re going to have to do it even during these very challenging economic times. 

Essentially, you’re saying not to expect over-the-air revenue to spring back to where it was once the recession ends.

Oh, absolutely. 

What everyone really needs to understand is, there’s nothing normal about anything that’s going on. There’s going to be a new norm, we’re not sure what it is yet. But all the more reason why no one should expect any of what was trending before to just resume trending as it was, say, eighteen months from now when perhaps, with any luck, we’re into a full-blown recovery. 

One of the really interesting dynamics during this time is that the digital revolution has every bit the same kind of impact the industrial revolution had, not just on the US, but on the world. And that continues with consumers, even though they aren’t spending, even though advertisers aren’t spending, even though the focus has shifted from hardware and the introduction of new gadgets and platforms to applications on the existing hardware and platforms because people can’t afford to replace their iPods and their iPhones, but they can afford to adopt new applications and deeper uses of those things. 

And so all of this continues even while the basic economics of these businesses are either falling or at a standstill. And that’s something nobody in media, no matter which sector you’re in, can afford to lose site of, and that’s why when I say radio and TV broadcasters have to go from static to interactive, they really have to wrap their heads around that now because when they come out the other end, consumers are even going to be beyond where they are now in using these new services, platforms, and devices. 

And if radio and TV broadcasters aren’t there, as most of them are not now, they are not going to be able to compete with those who are there. 

It seems to me that the power you’re talking about in our local communities, the real center of gravity for any broadcaster, is the relationship that it has with the advertiser and with the listeners because those relationships are still quite strong. The issue is monetizing those and spreading those across the digital platforms and viewing the digital assets as more than just the website for the radio station, is that right?

Well, it is but I might suggest taking it a step further and saying that it’s really a willingness to redefine those connections and those relationships in accordance with what the consumers want – and this is something that traditional media are having trouble doing. 

Because while you have some very defined dynamics in the space – you have social networks, you have personalization and customization, you have all kinds of forms of engagement that are beginning to emerge – it’s very difficult for anyone to monetize that. 

The traditional media players, radio and TV stations, absolutely must redefine their relationships with consumers and advertisers in accordance with what’s relevant to them and “relevance” is absolutely the key word here. 

So in other words, you have to be able to back up, back off of your former assumptions and expectations and say to yourself, okay, what is it that I need to deliver to the consumers, how do I need to deliver it and how do I need to follow up on it? 

After all, local media exists for only one purpose, whether we want to admit to it or not, and that’s connecting advertisers with consumers. So how do I connect advertisers and consumers in some meaningful, ongoing way where they’re soliciting value from each other in a permission-based situation and I’m getting a piece of that because I’m facilitating their connection and enhancing it with content and with community-based services? 

Now let me give you an example for radio. Gap Broadcasting owns 119 radio stations and they're in like 25 midsize markets. What they have begun doing is seeing themselves as a premier provider of local content over the air and online – so in other words, pushing out into mobile platforms and devices, which is absolutely necessary because what we mean by “online” now is “mobile.” And they push content out into different services that maybe had nothing to do with radio in the past, but that define what is important to the consumer that they’re servicing. For example, they’ve got an auto dealer inventory site. It’s searchable by zip code and all the rest. 

So in other words, they’re finding ways to play to these broader monetizable interests and needs. 

It goes to show you that if you think about it, and you think outside the box, you can actually get there. 

So radio should plan for, envision, and prepare for a time when the majority of our revenue comes not from over-the-air interruptive ads, but from a spectrum of digital solutions aimed at the consumer and the advertisers, the respective centers of the universe?

Yes, and more importantly, defining and redefining the relationships in accordance with what their digital needs are and how they’re defining them – what is relevant to them. 

So all of a sudden dawn has arrived and radio is in the digital business, not in the radio business? 

Yes, I think that’s true of all media, actually. I would go so far as to say it’s not just the digital business, but it’s the business of connecting interactively with your primary constituents, which haven’t changed. 

It’s still advertisers, and it’s still consumers, but you’re now seeing them as having special interests, special needs, which create special content, special advertising and marketing opportunities. And so if you’re willing to go completely outside your model, understanding that whatever your business model has been is collapsing anyway, then you need to begin looking around the marketplace to see what others are doing – talk to them and reach out to those ad agencies, those operators, those consultants who really do get it and can help you develop your business accordingly. 

Well, the beauty in radio’s case is that we have so many great relationships with advertisers locally. We have so many great relationships with listeners/consumers locally and with agencies locally, which seem that all the elements are there

But the consumer is many steps beyond all those other players. A lot of advertisers and agencies and broadcast owners are still very reticent about moving into the digital space, especially during these economic times and for reasons that we talked about. It’s imperative that they absolutely do it right now, because this isn’t even a blue sky situation anymore. 

In fact, Gordon Borrell just came out with a new piece of research that showed that TV broadcasters who “get it” and have started to actually implement and aggressively operate digital business models have been able to increase their revenues by anywhere from 40% to 200%. Now these are the early stages and 200% might come off of a base of zero, but the point is that you can see some actual returns now, even in bad times, whereas even five years ago, it was still kind of blue sky. Those days are gone. 

Simply said, the local broadcasters cannot lose sight of what remains their core strength of local connections, because in another couple of years, those will slip through their fingers if they don’t use them properly. 

Earlier you said “online means mobile;” what do you mean by that? 

Right now, there are more mobile devices, cell phones, PDAs in regular use by consumers – they outnumber TV sets and radios by many times. The mobile screen is already the screen of choice, whether anyone wants to admit it or not. 

The fact is that the mobile devices are becoming much more engagement-oriented. Social networks are finding ways to make them more easily embraced by consumers. The text is easier to read, they’re making the interactive choices much easier to manipulate on a small keyboard. They’re just adapting themselves to the smaller devices. 

Remember that even a few years ago people were saying no one will ever watch a video on a screen that size, no one will ever use their thumbs to incessantly text back and forth to each other. I have four kids and I can tell you, I’m texting all day long because it’s convenient for us. It’s relevant to our needs and so we consumers will adapt. 

And so if the radio and TV broadcasters understand that consumer behavior is where they should take their cues from, then they should use that as a guide for either creating new services and content for those platforms and devices in accordance with consumers needs and what’s relevant to them, or they should adapt their existing content for those needs.

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