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Tuesday, May 18, 2004

The Future of AM Radio

While Caribbean broadcasters shut down their Medium Wave (AM) radio transmitters one by one, reports of the death of AM in the United States, whose economy we ape, are greatly exaggerated...
AM RADIO YESTERDAY, TODAY, AND TOMORROW

Every day, Americans spend more time with radio than TV or newspapers. Radio is everywhere. If you want to buy a car without a radio you’ll have to special-order it. Talk is radio’s most-listened-to, most Sales-opportune format. For 30 years in this industry, I’ve had lots of fun, worked real hard, and made a great living. But radio isn’t all I do. I’m also in retail, and am myself a radio advertiser. I’m a big, big fan.

Every industry is changing. Like airlines, banks, and the family farm, life is very different in radio today than it was “when we got into the business.” And we can already see that radio will change even more in the near future than it has in the recent past. It’s human nature to dread change, but I am very optimistic about radio’s future.

What won’t change is who’s winning. It’s been said that if the government confiscated all wealth and issued every American the same amount in new currency, the same people would end up rich and broke a year later. Radio’s winners will continue to be the stations that are most alert and resourceful, that have the most fun, in short, those that care. Places where employees high-five each other when something great comes out the speaker.

When Marty Riemenschneider invited me to speak at this convention, I asked him what I could say that would have the most value. He sent me some specific questions, and I’ll give you specific answers. But what kind of consultant would I be without explaining “the latest trends?” So first, The Big Picture…

Yesterday…

Music on FM was either Percy Faith or Buffalo Springfield, music on AM was everything in-between.

Double-digit shares were common. There were fewer radio stations, and fewer other competitors for Time-Spent-Listening, as the Internet and hundreds of TV channels have become today.

Other than Paul Harvey, most of what you heard originated locally. This was a very redundant industry. There were always a half-dozen young men sitting between two turntables, even in medium markets like Springfield, Massachusetts, where I grew up.
Still, it was a buyer’s market for help. Even with Viet Nam draining the demographic that produced most radio talent, there were more applicants than on-air jobs. Talent felt lucky to be working, and management often treated them accordingly.

Stations with the highest ratings usually got most of the radio ad dollars.

The Internet was “the future.”

Today…

Listeners think of FM as music radio, AM as non-music radio.

Super-successful stations have single-digit shares. The aggregate cume of many clusters is now greater than the declining circulation of the metropolitan newspaper, though print rates still dwarf radio’s.

As self-serving as the following observation sounds coming from a vendor who sells systems, this historic deregulation has endowed owners with more stations than they have the think-time to manage. And it’s typical for more attention and resources to be allocated to defending topped-out music FM shares than to growing AM shares that are sooooooooooooooo much more Sales-friendly.

Most of the programming on non-music AMs comes from another city, and lots of it has franchise value. But at any given moment, there are no human beings in AM control rooms, even in big markets. I knew that The Talk Radio Revolution was over when visiting a client station and seeing them learn that one of their AMs was off-the-air only when a concerned listener phoned the switchboard.

Recently, some AMs who talk-the-talk about being the market’s information button failed to walk-the-walk when weekend how-to shows went uninterrupted by live coverage of the John Kennedy missing plane story. Station-in-a-box just chugged on.

The dark side of an 11,000 Dow is that service has deteriorated in a seller’s market for help. As a consumer, you suffer this every day, when receptionists who ask you to hold disconnect you…or you stand at a retail counter waiting to be waited on while employees chat with each other. Radio’s version of this is the uninformed Talk host, or the local newscaster reading the newspaper on-air and telling you what happened yesterday. Want to stand out from the other stations? Act like Nordstrom! Over-deliver! Hire a great receptionist! After all, this person is responsible for 99% of your station’s off-air PR.

With so many mediocre career radio performers lowering the bar, some of the biggest on-air salaries now go to people who haven’t spent their lives on-air. Before becoming Minnesota Governor, Jesse Ventura parlayed his wrestling persona into a Minneapolis morning show; and WJR/Detroit’s Mitch Albom and WRKO/Boston’s Howie Carr established themselves in other local media before hosting their successful afternoon shows. Are there “real people” in your market who should be on your air?

Two consultant buzzwords you’ll be hearing a lot are “repurposing” and “convergence.”

Example of repurposing: That gardening show is only on your air 2 hours on Sunday morning. Why must that be the only time you make gardening information available? How about reiterating your expert’s shtick as a point-and-click menu of gardening topics on your station’s web site…sponsored by your local advertiser…and paid for by their national co-op or vendor bucks?
Examples of convergence: ABC’s NFL Monday Night Football Pre-Game Show from originated from Baltimore’s ESPNZone restaurant. In the process, several Disney-owned brands and assets cross-promoted each other. Dr. Laura plugs a catalog of “Now Go Take On The Day” sportswear; and rather than giving away cheap T-shirts, smart stations sell high-end logo’d denim shirts.

The Internet is no longer “the future.” Though most stations don’t yet make real money on-line, many GMs will soon awake in a cold sweat realizing that they can’t meet Mel’s goals without this revenue stream. Rather than the station web site being a distraction or sideline, smart stations make it someone’s job.

Converge your on-air and on-line programming, and dollars will follow. Example: The day after the USA women won that World Cup soccer game, America Online was polling members:

Why do you think Brandi Chastain took off her shirt?
To show off her fabulous abs
To get a sports-bra endorsement
She was hot
Male athletes do it, why shouldn’t she?
As one of the world’s best soccer players, she was celebrating an amazing victory.
Do that on your web site. Put a client ad panel on that page and name the poll after the client.
Lots of stations are still peddling dots-and-spots, bidding-down the value of inventory by selling against other stations to “get on the buy” made by agency radio buyers who are too young to understand AM radio. But if you remember one thing from this whole rant, it’s the mantra I chant to my client stations, and it applies to both Programming and Sales: Do what only you can do.

View Programming this way, and you’ll exploit the value in your franchises, like play-by-play…or Rush Limbaugh… or being the market’s Weather Channel radio affiliate. “NOW YOU CAN GET THE LATEST WEATHER CHANNEL FORECAST EVEN WHEN YOU’RE IN THE CAR…OR IF YOU DON’T HAVE CABLE!”

Ditto for Sales: When I managed USA TODAY Sky Radio, we created avails with a unique listener profile: business travelers listening live aboard Delta, United, and Northwest Airlines. Those spots weren’t shotguns, they were laser beams. But what got us the Toyota Avalon buy was our value-added: We included an ad panel on the monthly Sky Radio play-by-play schedule you found on your meal tray. This is what cops call “access to restricted areas.” What doors can you open for advertisers?

Tomorrow…

AM stations that feel lesser than FMs today will get the last laugh in the digital future, when In-Band-On-Channel multiplexing turns WXXX into WXXX1, WXXX2, WXXX3, WXXX4, etc. It’ll take a few years for new receivers to proliferate, as with UHF TV. But when it does, AM will sound as good as FM, and can offer Americans whose lives keep getting faster and faster just what they want…instant gratification.

Some TV stations have already shown us how, swapping Retransmission Consent rights for a second cable channel they use to constantly replay newscasts, or show logo’d weather graphics. So radio, which will always be the #1 in-car medium, and AM (the information band), will be even more handy and relevant to busy people. While Rush is pontificating on WXXX1, you can be constantly playing and updating your Weather Channel forecast on WXXX2; with neither interrupted by the afternoon baseball game on WXXX3, or the replay of that great interview your morning show had earlier when many listeners might not have been tuned in.

Build key images and encumber programming franchises now, and you’ll be known for them later.

And the answers to your specific questions are…

Q: “3 person morning shows: a good idea?”
A: Hard to generalize, since opportunities vary locally. One advantage of an ensemble: separate vacations. With only one person gone at a time, you’ve never got the “B” team subbing.

Q: “What to pay on-air people?” and “Good incentive/bonus plans for on-air people?”
A: Peg rewards to Sales rather than ratings results. Example: a smart GSM I know preps for a new business pitch by inviting all on-air people to submit spec spots. Then, rather than asking the prospect yes-or-no, the AE asks which spot works best. And the winning talent gets a cash award. Some stations pay talent a small fee for live spots, or a bonus for new accounts renewing. Results can be dramatic.

Q: “Are we playing too many commercials today?”
A: Read The Impact of Higher Spot Loads on Radio Listeners, FREE at www.EdisonResearch.com

Q: “What other incentives do you recommend, other than money?”
A: Whatever you award is most meaningful when it’s recognized as an award, rather than simply an entitlement. But what gratifies on-air people most is so obvious you might overlook it: listen to them. Hey, they talk for a living! Bring them into brainstorming meetings that they otherwise feel left out of. Even if you don’t do everything they suggest, they’ll feel very included; and you’ll get better execution.

Q: “How do you see AM radio competing against digital radio (i.e., XM, CD Radio, etc.)?”
A: National media can never do what solid local radio can: be local.

Q: “How will ‘virtual radio’ (radio on the Internet) impact us?
A: Cyber-surfers have already demonstrated that they’re not as interested in hearing distant broadcast stations as other on-line audio (i.e., the LAX tower talking to pilots). But that’s a novelty, compared to how day-to-days useful a hustling local station can be.

copyright 1999 Holland Cooke