Two years ago, Seth and I talked about the future of radio. Time to revisit that topic in a brand new interview.
Last week, I serialized this interview in seven daily chapters. Here is the complete audio Q&A followed by a lightly edited transcript. It’s long – and it’s the most important thing you’ll read this year.
Seth, there’s a lot of discussion in media circles about “The Long Tail,” but your book specifically focused on the inverse of “The Long Tail,” namely, “The Big Head.” Can you talk about what that is and the significance of it?
Sure. Chris Anderson wrote a book called The Long Tail
But, if you have to choose between having one title out at the end of the tail or one title up in the short, fat, juicy head, as I call it, you should pick the one that’s up at the top. As the Long Tail stretches out, the hits are worth more than they were ever worth before – what is paying off these days is being a superstar.
So Google gets way more searches than Ask.com because it’s the easy one to pick, and Paris gets way more tourists than Tampa because it’s the easy one to pick. So once something becomes a superstar, once it gets to be in the scarce collection of winners, then the Internet drives way more people to it and it continues to succeed. And so the lesson of the book, I think, is unless you’re lucky enough to be Amazon or the iTunes store or someone who can own the whole tail, you’re better off figuring out how to break through the clutter and be in that short head.
Then why have a “Long Tail” at all? Why not just create hits?
The answer is surprising. The answer is that most of the things we set out to do in our lives are controlled by one of two curves. Most things are dead ends or cul-de-sacs. They are flat paths. They’re hamsters on a wheel – somebody who is doing the same thing every day pushing along, pushing along, but never breaking through.
But a few things are controlled by “the dip,” and the dip is the screen, the filter, the thing that separates those who are scarce, the professionals, the superstars, from the masses, from the amateurs.
So, let me use a couple examples from the music business to make this clear. In 1968, the dip was getting a record contract. The dip was whether Clive Davis picked you out of a crowd, because if you made it through that, then you were a professional. Then you had a shot. Then you were going to go on tour and sell records, and if you didn’t, you were a failure. You could see that dip and you could identify it and work your way and maybe get through it.
Well, today, that dip has disappeared. And if you’re an independent musician today the good news is you’ve got a chance at making it without that. The bad news is without that dip, without something to get through, it’s a lot harder to keep slogging. It’s a lot harder to know that there’s going to be scarcity on the other side.
Here’s another example: Suppose you’re a standup comic, “The Tonight Show” is your dip. Either you’ve been on the “The Tonight Show” or you haven’t, and until you have, you’re not going to make it on the road because that’s the thing that separates. It’s like taking organic chemistry on your way to becoming a doctor. It creates scarcity.
And so, what we need to do as organizations and as individuals is to seek out dips, not avoid them, but seek them out. Find those hard things that if we just focused all our energy and talent on, we could get through, and if we can’t find one, if we’re on a dead end, we should quit what we’re doing immediately and go find one. So contrary to the Donald Trump advice of never, ever, ever give up, you’re saying, in some cases, you should absolutely give up because you’re faced with a cul-de-sac and you have nowhere to go.
That’s right. Take the Space Shuttle. Our government spends more than $1 billion launching each one, 50,000 different people work on each launch, but still the Space Shuttle is never going to get better or safer or cheaper. It’s broken. We shouldn’t have it. We should quit right now. We should stop the Space Shuttle program, because if we did that, we would create an emergency, and the emergency would cause lots of talented people to put enormous amounts of effort into making something significantly better than the Shuttle and we’d fix the problem.
But as long as we say, “well, we’re doing our best under the circumstances, and we’re trying really hard,” we’re always going to have a mediocre product.
Put yourself in the position of a radio broadcaster. Their aspiration is for their station to be number one and they’re trying, trying, trying, trying. How do they know that what they’re in the midst of is a dip or a cul-de-sac?
If you are running a radio station with the consultants and the conventional wisdom and trying as hard as you can, you need to ask yourself an honest question, which is: Is it likely to ever be any better than it is now? Meaning, is satellite radio going to become less popular? Is Internet radio going to become less popular? Are people going to find fewer things to do when they’re in their cars?
I think the answer to all of those questions has to be “no,” that traditional, terrestrial radio is a zero-sum game. In fact, it’s worse than a zero-sum game. It is clearly headed towards a dead end. There’s no dip ahead. There’s no breakthrough that’s going to occur.
But, you have all these assets. You have advertisers. You have access to creators of content like record companies. You have access to some listeners. Why not use those assets, use that leverage to build something new where there may very well be a dip. If I ran a radio station today, I would say, “How do I get every one of my listeners to sign up so I can have a direct relationship with them by phone and by email? How do I learn what their zip code is? How do I discover what they’re interested in?”
Because if I could do all those things using the assets I have now, I could find a new dip and get through it. I could be the go-to source for where listeners should go when they want to party, where they should go when they want to go out for dinner, where they should go when they want to buy a car. And if I use the stepping stone of my terrestrial FCC license to create something new, knowing that I’m going to quit radio as soon as it’s done what I need it to do, then I can move forward, find a dip and build behind me a moat, a valley of death, a dip so deep my competition could never get through it. And the station’s Internet strategy is the key to transforming listeners into relationships?
Yes. I want you to close your eyes for a minute and think about what the world will be like when every car sold has Wi-Fi in it – and it’s only four years away. When Wi-Fi blankets the city of Philadelphia and every car has a Wi-Fi receiver, that means I can listen to a million channels, not ten. And what’s that world going to be like? Every listener is going to choose is the one that’s tailored for him or her and it won’t necessarily be based on geography.
But when I look at a typical radio station website, what I see is every radio station trying to do a slightly above-average job of building a radio station website. I don’t see any radio station saying, “How do I completely reinvent my interactions with users so that when my FCC license is worthless, I’ll be glad I did what I did?”
So what advice would you give to the management that has to answer to the stockholders and the Wall Street folks to say, “look gang, we’ve got to get through this dip. It’s going to be time consuming. It’s going to be expensive. It’s going to be worth it.” What do you say to them when they’re face to face with the money guys?
Well, Wall Street has doomed a lot of companies. Wall Street doomed AOL. AOL saw the Web coming. If they told Wall Street the truth, AOL would be Google today. And it isn’t because Wall Street scared them.
Now it’s not your fault, Mr. Radio Station Man, that your company went public. But, you are public and now you have two choices. You can either say “Wall Street’s going to force us down a dead end, I’d better make sure my pension is fully funded,” or you can just go to Wall Street and say, “Look, this industry is changing. We have a plan. It’s going to take several years to get there. We’re going to continue running radio stations the best we can. But, guess what we’re going to build for the future? For the future, what we’re going to build is space-based, location-based mobile interaction on a custom basis that no one will ever be able to surpass, because we’re not going to define ourselves by our FCC license anymore. We’re going to define ourselves by how many people have come to us and said, ‘Here’s my contact info. Here’s my Twitter address. Here’s my Facebook info. I want you, Mr. Information Man, to keep me up to date with music and information that’s geography based for the rest of my life.’”
And if you don’t start doing that now, there’s zero chance you’re going to be able to do it in five years.
You’re talking about leveraging the strength that stations have with their audiences, the strength they have with their advertisers?
Right. The beauty of this is that the guy who runs the Chinese restaurant 40 blocks away, he doesn’t need to advertise on Google and he never will. He’s not going to advertise on television or YouTube because it doesn’t make sense, but he advertises on radio right now, and he advertises on radio on a local station because it pays for itself. And geography is what radio stations have going for them; they are local.
And so, if each radio station figured out how to find the 12,000 people who that Chinese restaurant and that Laundromat and that car dealership need to reach regularly and could spend all their time not yelling at them with ads, but doing that local interaction that information and entertainment that these people want, then they’re going to have an asset that’s worth $100.00, $200.00, $500.00 per person. Add up the math. If you own enough zip codes, you win. Now, technologically speaking, AM stereo was once thought to be a dip but it turned out to be a cul-de-sac. One of the solutions that broadcasters have proposed to combat the ten-million-station Wi-Fi universe is to create more versions of stations via HD radio, so every station becomes two or three stations. Is that, because it’s an extension of the license, a non-solution to the problem, in your view?
Well, what The Long Tail shows us is that once you start spoiling people a little, they want to be spoiled a lot. Starbucks used to have 100 combinations of beverages and now they have 19,000. When I turn on the radio, I want the traffic report only for people who are leaving my neighborhood and going to where I’m going in New York City. I don’t care about the Kosciusko Bridge. I don’t even know where it is. Don’t talk to me about it.
And you know what? I’ve heard that Elton John song too many times; I never want to hear it again, and on and on and on. I want it to be about me all the time. I want to hear the report about my school district, not a school district that has nothing to do with me, and I don’t like basketball, but please, please tell me about what happened at the billiards tournament. And there’s all this stuff that I want that is going to get customized for me by someone who isn’t hampered by a history of owning radio stations, and so if you’re going to walk in with this radio station thing on your back and say, “No, we’re only going to have four flavors because the technology won’t let us have eighty,” then I’m just going to leave because I can.
But under that scenario, where is the space for a hit when everyone wants their own hits?
I’m so glad you asked that. The book talks a lot about a phrase I call “best in the world.” If you’re the best in the world, people wait in line for you, people call you on the phone, people ask for you. But we have to talk about what “best” means and what “world” means.
“World” doesn’t mean the whole universe. It doesn’t mean the planet Earth. It means “my world.” Best in my world means for what I want right now, are you the best? And “best” doesn’t mean most expensive or even highest quality. It just means the one that most matches what I need right now.
So, for someone in the United States who wants an obscure book, Amazon is the best in the world at selling it to them. Between the free shipping, the fact they know who I am and everything else, it’s easy to pick them. That’s why their sales online are 10 or 20 times their nearest competitor.
But, if you’re talking about bread, then for me, best in the world means that guy who makes whole wheat bread six blocks from my house, because for me, I’m not willing to travel more than 20 blocks to buy bread. And best for me doesn’t mean the fluffiest or the cheapest. It means whole wheat.
So, best in the world, when I’m driving from my office in Irvington to mid-town Manhattan, my world is that universe, and so there isn’t going to be one radio station that’s the best in the world. There’s going to be thousands of them for different people, and the beauty of people, when they’re approaching it from the radio station point of view, is if you realize that you could own a 1,000 stations or 10,000 stations, each one of them could be the best in somebody’s world.
So owning 10,000 radio stations is one strategy?
It is. The other strategy is to have content that’s so compelling that large numbers of people tune in because it’s a hit. It’s the Fergie strategy. Fergie’s a hit because…she’s a hit. People are listening to Fergie because she’s on the radio a lot. She’s on the radio a lot because she’s on the radio a lot, and the fickle finger of fate points to a Fergie every once in a while, and it’s great work if you can get it. So, the number one way to become a millionaire is to find a $1 million dollars on the street, because it’s easy and it works, but I don’t think it’s a plan.
But it could be a plan if you’re talking about non-music content. Then you’re talking about something that is even scarcer than music, isn’t it? So, if you’re talking about sports content, the Howard Sterns of the world and so on?
Right, but the problem with this strategy is you have to predict it in advance, or you have to pay full retail if you come in later, so if you want to put the Yankees on, George Steinbrenner’s not going to give you a discount because you’re a nice guy. He’s going to charge you what it’s worth. And so, in my case, my blog is one of the 20 most read blogs in the world, and I’m really thrilled and lucky, and I know I’m lucky. It didn’t happen because I deserved it. It happened because it had to be somebody and it was me, and if I told you when I started writing my blog five years ago that my strategy was to have the most popular business blog in the world, you would be right to laugh at me, because it was a total crapshoot. That’s not a strategy. That’s just hoping.
But if someone came to me and said, “We want to pay you to syndicate your content somewhere,” I’m not going to say, “Well, it was luck so you can have my content for nothing.” And so, my point is, there’s this shuffling of the deck that’s going around, the biggest shuffling since the 1930s. And you need to make a decision, which is are you going to wait for someone to get lucky and then pay them a lot of money to partner with them, or are you going to set yourself up with a strategy that’s based not just on luck, but on following these paths that people before you have followed in other industries and it’s working?
You know, when Google set out to challenge Yahoo!, they didn’t say, “How do we out-Yahoo! Yahoo!?” They said, “We’re going to do one thing: search. And we’re going to tell people that’s what we’re the best at, and if you want search, that’s what we do and that’s all we do. And by establishing that, they pushed through a dip that other people were too distracted to even pay attention to. At the time that they did that, Yahoo! had 185 links on their homepage and Google had two. And so, Google could obsess about one thing and put all their resources and all their focus on doing that, and I don’t think it’s luck that Google accomplished what they accomplished. I think it’s a result of focus and betting everything on pushing through a dip that, at the time, wasn’t so big, but now their competition could never surmount.
So, from the radio perspective, you might be saying, “Take a breath, stand back. It’s not about what’s hot now. It’s not about what Clear Channel is doing in Market X or CBS in market Y. Take a breath. Stand back and think through the way these trends are going. Think through the potential for your brand and your capabilities in the future, and think it through from a strategic standpoint and don’t just plug into whatever the hot trend is.”
Well, every time I turn off a radio station, because I get out of the car, because I’m done with something, it may very well be the very last time I listen to that station, because we know that every day, some people decide never to listen to the radio again because they’re going to replace it with something else. And the question I would ask someone who runs a radio station is, how are you going to get me back? Because if I turn you off, you don’t know who I am. You can’t come back and get me. I’m invisible.
And so, every day that you’re talking to me where I’m choosing to listen is your chance to build a relationship with me, a real one. Not one where I can sing your jingle, but one where you know my email address and I want to hear from you, where you’re a Facebook friend of mine, where you’re putting something in my RSS reader every morning on my way to work. And if you can build those hooks and create those relationships, then you have a chance, when I start my new media habits – and they’re coming – to be on the list.
And so, what I would do if I ran a radio station? I’d focus on one thing, say RSS feeds or email subscribers, and I’d say, “Tell me where you live. Every morning the traffic report will be waiting for you when you wake up.” Now, it’s easy for an old-time radio person to say, “That has nothing to do with radio,” and I would say that’s exactly right. What it has to do with is building relationships for the long haul with people who want to hear from you, and that’s the opportunity that every radio station has today that’s an advantage over every entrepreneur that doesn’t.
I started a website a couple years ago called Squidoo.com. And what Squidoo.com does is to anybody build a webpage about anything they’re passionate about, and so it could include links to books, to radio stations, to concert tickets, to movies, to anything you want to describe as your take on a topic. And when we started, we obviously had no traffic, and I went to, I think, the most popular FM radio station in New York – certainly one of the most popular – and I said “we could work together, and bit by bit, you could build an audience, your listeners could create their own pages here, and if every one of those pages linked back to you, you’re going to have a presence in front of a lot of people.”
And because of the politics of the way these things go, and it’s totally understandable, nothing happened. What’s interesting is that a year and a half later, our traffic is 25 times bigger than their traffic. And I’m not saying that to show off. I’m saying that it wouldn’t have cost them anything to use unsold airtime to get all their listeners to create these pages, and all these pages would have kept pointing back to the station, which would have pushed them up. But the mindset is either, “We’re in the radio business,” or, “We’re in the relationship business,” and you have to pick one or the other. Let’s shift gears to the music industry. How screwed is the business of music?
Clearly, music is more widespread and more easily available than ever in history, so music and songs and musicians aren’t going away. It has been demonstrated that human beings like it. It’s not going away. But, the business of it, the business of fairly anonymous labels, labels that have no brand, labels that have no connection directly with listeners, extracting 80, 90, 100 percent of the profit from the musician, that is clearly going away. And it’s going away because polycarbonate and vinyl made it possible for a record to cost $10.00 or $15.00, and when you’re charging $10.00 or $15.00 because of your cost of goods, there’s plenty of room left over for the musician and for the label.
But when the cost of delivering music is zero, there’s not a lot of room left for anybody to extract money from selling the song itself. And treating your listeners like criminals and suing them hasn’t worked, and it won’t work, because either they’re going to avoid you or they’re going to ignore you or they’re going to go to jail – none of which are good outcomes.
What will work is realizing that spreading music spreads ideas, and once people like ideas, they like to buy souvenirs. And souvenirs – concert tickets, t-shirts, kinds of interactions that are not scalable, kinds of interactions that do need to cost money – are profitable. And so, I think the win for the music business is to realize that music is a chance to spread an idea and the souvenir is what they need to do to make money, and my fear is that there’s too much nostalgia in the music business for them to grab a hold of that quickly.
Well, I think the other thing you’re going to see in the music business is extracting more revenue via licensing from the companies who value their content – webcasters and radio stations are obvious sources of extortion via licensing.
Well yes, except that if you charge too much, then people who aren’t going to pay the license aren’t going to spread the idea. What I’m trying to get at is, no one would ever charge Oprah to be on her show. If Oprah calls, you go on even though you’re giving all this content away for free. When you sing a song on the old “Dick Clark Show,” all the people who are watching get to hear you for free. When you’re on MTV, you’re not charging them to put on the music video.
So what I think we’re seeing is being a hit first is the goal, and it’ll monetize itself if you work hard on it afterwards. If you come to me and say, “We’re not going to charge you to listen to this Rickie Lee Jones song, but we will let you join her fan club. We will tell you about her concert. We will put together all sorts of interesting opportunities for you to share this content with your friends,” and all those things cost money, that makes way more sense than saying to someone, “you have to pay me money to hear this Rickie Lee Jones song.”