The digital revolution took its time getting to radio. Now it's exploding -- and the big bang goes far beyond podcasting. As radio shows are turned into digital bits, they're being delivered many different ways, from Web to satellite to cell phones. Listeners no longer have to tune in at a certain time, and within range of a signal, to catch a show or a game. As the business goes digital, the barriers to entry -- including precious airwaves -- count for less and less.
ADS AND MINUSES. Traditional radio powers are already feeling the pain. On Feb. 25, Viacom (VIA ) announced a $10.9 billion write-down in assets at its Infinity Broadcasting division, a clear signal that earnings prospects were dimming. A day later, Clear Channel Communications (CCU ), the nation's largest radio chain, took a $4.9 billion writedown on its radio licenses, although the company says it did so to comply with a new Securities & Exchange Commission requirement to value its businesses.
Whatever the reason, there's no denying a stark reality: Listeners, increasingly bored by the homogeneous programming and ever-more-intrusive advertising on commercial airwaves, are simply tuning out and finding alternatives. Says Rishad Tobaccowala, chief innovation officer at Publicis Groupe Media: "Radio pissed on their own product and then cluttered it up."
The industry tumult comes down to a simple phenomenon. As digital forms of radio proliferate, listeners will enjoy an abundance of new programming -- but much of it still lacks a proven business model. What's more, even tested radio businesses could see ad revenues wither as new rivals snatch away listeners. No one is saying commercial radio is going away: It still draws more than 200 million listeners a week. The industry "is challenged, but not dead," says Laraine Mancini, an analyst at Merrill Lynch & Co. Still, the biggest fear, for old-timers and newcomers alike, is that even as audio programming grows by leaps and bounds, ad dollars will shrink.
SKY-HIGH AMBITIONS. Already the forces of commercialization are circling. Entrepreneurs are offering software and services to help podcasters turn out more polished shows. Advertisers such as Volvo (F ) are sponsoring podcasts. And traditional radio stations, such as the British Broadcasting Co. (BBC) and National Public Radio (NPR) station WGBH in Boston, are launching podcasts.
"One of the reasons to do this is because we don't know what it will add up to," says Ruth Seymour, station manager at NPR station KCRW in Santa Monica, which on Mar. 1 began podcasting 22 shows. For now radio stations aren't charging for podcasts, hoping instead to lure more listeners nationally.
If podcasting is for now more of a potential threat to traditional radio, satellite is already drawing blood. While the two players, Sirius and XM, aren't expected to turn a profit until at least 2008, they have lined up high-priced programming talent and are making an aggressive play for the classic car-radio market. But drive-time radio isn't their only goal: They're stepping up marketing of handheld receivers that allow people to record shows and are placing programs on desktop programs such as Microsoft's (MSFT ) Media Player. "Satellite-radio companies are at the beginning of their growth curve," says XM CEO Hugh Panero.
via Om Malik