You Better Listen To The Radio

It’s no big secret that traditional terrestrial radio is facing challenges retaining listeners with competition for ears and eyes coming from satellite, Internet streaming, and music downloading. And it appears Wall Street has finally taken notice.

Howard Stern on satellite as well as iPod users are cutting into radio audiences, and while more than 9 out of 10 Americans still listen to the terrestrial version every week, they are listening less, The New York Times reports

In the 1990s, thanks in no small part to the FCC’s deregulation of ownership rules, small radio chains and individually owned stations were getting snapped up faster than you can say “America’s Top 40.” Conglomerates like Clear Channel Communications, Infinity Radio (now CBS), and Entercom led the pack, with Clear Channel amassing more than 1,200 stations nationwide.

But radio seems to have hit the tipping point with the advent of new technologies. Revenue growth has stagnated and Arbitron reports indicate the amount of time people listen to the radio in a given week has dropped by 14 percent over the last decade, according to the Times.

Stocks of the five largest publicly traded companies are down between 30 percent and 60 percent as investors wait for the skid to bottom out, according to the paper.

Infinity Radio, which was absorbed into CBS in a spinoff of the parent company’s non-broadcast sector, began selling off stations last year and reportedly intends to hive off more.

The Walt Disney Co. sold off its Radio Disney and Capital Cities radio interest, getting out of radio altogether last year.

And now Clear Channel, the nation’s largest owner of radio stations, is reportedly considering selling off some of its empire in smaller markets, the Times cites industry analysts as saying.

It’s not only the publicly traded companies jumping the radio ship. Susquehanna, once the country’s largest privately held radio ownership group, was sold last year to another broadcaster.

Broadcasters are hustling to come up with fresh ideas and new technologies to stay in the game, however. New formats, such as Jack FM, have sprung up in recent years and radio has taken the digital initiative by developing High Definition Radio.

HD Radio’s advantage is that traditional stations can broadcast digital signals via side bands – increasing the radio spectrum and allowing for more specialized or eclectic programming.

The drawback, at least for the moment, is that in order to hear it, one must buy a digital receiver. But it’s expected that as demand for digital receivers increases, prices will drop.

“It’s not a debate any more that radio is a structurally declining sector,” media analyst Michael Nathanson told the Times. “What you’re starting to see are strategic changes in operating models to address the sluggishness of growth.”

While terrestrial radio is not the only, nor even the first, entertainment media to take a hit on Wall Street, what the paper points out is the swiftness of that fall.

Unlike other media businesses, radio seemed to drag its collective feet when it came to embracing viable online business models, according to the paper. Digital revenues may be growing fast, but still accounted for only $87 million of the industry’s $20 billion in revenue in 2005, Veronis Suhler Stevenson Communications reported to the Times.

Advertising continues to be stagnant, with a reported 0.3 percent increase in 2005. Veronis Suhler reported that it expects ad revenue growth to lag for the next five years, with only the newspaper industry showing slower growth.

In the meantime, the two major satellite radio distributors – XM and Sirius – have reportedly built an audience of more than 11 million subscribers, though it’s a drop in the bucket when one considers that roughly 230 million Americans continue to listen to free radio.

“As an industry, we’ve lost the hipness battle,” Emmis Broadcasting CEO Jeffrey Smulyan told the Times. “Like a lot in life, it may be more perception than reality.”

Clear Channel remains a leader in approaching new technology.

“We’re going to go to all sorts of different distribution platforms and have an additional five, six or seven revenue streams that we didn’t have even 24 months ago,” Clear Channel CEO Mark Mays told the paper.

The conglom has already been working to improve its corporate bottom line with stock buybacks, the spinoff of Live Nation and part of its outdoor advertising unit. CC also hired away an AOL senior exec to oversee its online music efforts. And it jump-started the “Less is More” program last year in an effort to cut down the on-air ad-to-content ratio.

CBS Radio is close behind in the innovation race, stepping up its Internet presence and starting, a kind of YouTube for listener-generated Podcasts.

But in perhaps the most telling sign of the times, the recent National Association of Broadcasters radio convention in Dallas featured panels with titles including “Learn to Steal Money From Your Local Newspaper” and “Harnessing The Power of Blogging.”

And to top it off, the opening reception wasn’t hosted by a broadcaster – but by Google.