Wednesday, February 16, 2005

iPods shock radio jocks

“I just hope the radio business lasts until I retire,” a successful 49-year-old broadcasting executive told me the other day.

That seems like a pretty glum outlook for a guy working in a medium that achieved record sales of $20 billion last year and is patronized by 94% of Americans, who, on average, tune in nearly 20 hours a week.

But our friend is right to worry about the future of his industry, because young people, increasingly tempted by iPods and other electronic distractions, are tuning in a lot less often than they did back in the 20th Century. At the very same time, restive advertisers are wondering when and if their spots are being run -- and whether anyone is really listening.

Put it all together, and it's enough to make anyone pray for the health of the Social Security system. Here's the story:

Although 94% of Americans still say they listen to radio at some point in the week, the youngest listeners are tuning out. People aged 12-24 listen to radio a hefty 20% less than the national average (16 hours a week vs. 19.75 hours), according to Radio Today, an audience survey produced by Arbitron, the independent ratings agency. The trend is not good, either. Young people listened to radio 6% less in 2004 than they did in 2001, according Radio Today.

As any parent knows, radio has plenty of competition in a modern kid's room. In a survey of youngsters between the ages of 13 and 17, the Roper Youth Report in 2003 found that 73% had TV in their rooms, 65% had portable CD or tape players, 44% had video games, 32% had cable TV, 21% had cell phones and 17% had computers. (UPDATE: New Gallup numbers in 2005 found 64% of kids had TV and 28% had computers.)

The Arbitron and Roper studies were completed before the iPod craze took off. Back in 2003, when the iPod was a mere gleam in Apple's eye, only 6% of kids aged 13 to 17 had a portable MP3 player.

With 22 million iPods and MP3 players now in the hands of American consumers, 19% of them are plugged into the ears of people under the age of 30, according to a new study from Pew Internet & American Life. "iPods and other MP3 players have broken into the mainstream in a new way," says Pew. "We're projecting a lot more growth, probably an acceleration of growth."

The iPod explosion is going to get a big push this year (and beyond) from the mobile phone industry. Responding as fast as they can to iPod-mania, the major cellphone makers are building quality music players into many of the 725 million new units expected to ship in 2005.

Just this week, Sony Ericsson promised Walkman-brand phones and Nokia teamed with Microsoft to help mobile subscribers port music from their PCs to their phones. As reported previously, Motorola will deliver the Holy Grail by summer when it embeds a genuine iPod in some of its phones.

iPods don't merely compete for listening time. They redefine it, thanks to the ease with which you can search, download, program and play the music (or chat) you want to hear when you want to hear it.

Although iPods are causing the most static, satellite radio also is nipping at the conventional radio audience. MX Radio boasts more than 3 million subscribers and Sirius is projecting 2.5 million customers by yearend.

As if competition alone were not enough to endanger the $20 billion radio advertising market, the efficacy of the medium itself is being questioned by some advertisers. This is ironic in light of the fact that industry revenues hit an all-time high in 2004.

Still, marketers say radio's audience measurement, schedule integrity and accountability are worse than those of broadcast TV, cable, newspapers, magazines and the Internet, according to a study released last week by Arbitron and the Radio Advertising Bureau, a trade group.

Translation: Advertisers worry that they are not getting what they pay for.

With audiences shrinking and advertiser confidence eroding, it's no wonder that our friend, the radio exec, is counting the days to retirement. Until then, he'll keep hustling ads.

And a piece of every commission check will go to buying tunes to fill the iPods he bought his kids for Christmas.

4 Comments:

Blogger brian said...

How is the rise of the Pod and other MP3 devices that much different from when Walkmans and portable CD players were introduced? During that period, the radio industry enjoyed some of the greatsest profits in its history (along with plenty of consolidation).

3:46 PM  
Blogger Irene Done said...

At least you could still listen to the radio on your Walkman.

TV is facing a similar problem. Young men in particular are just not watching -- in addition to all the people who forward through commercials thanks to TiVo. Advertising agencies are responding, in part, by creating product placement divisions whose duties include generating programming ideas. Maybe agencies (on behalf of their clients) can lead radio to such new and different solutions. Or not.

5:10 PM  
Anonymous Anonymous said...

It is true that old fashisoned 'terrerstial radio' is headed for some changes as new technology appears on the horizon. But consider the fact that with ipods and the like, radio still reaches the biggest audience for advertisers today...and probably tomorrow. Also consider the death notices for the industry when the 8-track came around with its trucker friend the CB Radio, followed by cassettes and CD players.

It is all about choice. Choice for the listener and the advertisers. For the forseeable future, Americans will still commute whether via mass transit, gas guzzlers or their new hybred vehicles...they are going to want to know what happened while they slept or were at work and what is coming up in their world today...And that is where radio will live on.

While big over the air TV stations and their affiliates around the country share more and more of their viewers with satellite and cable audiences...they STILL deliver some of the biggest audiences. Why? Choice. If you program the bettter mouse trap they will come.

(The real question to be asking is how will the new FCC rules on 'indecency' change the fabric of over the air broadcast (radio and TV) and will there be a move to bring cable, and satellite back to a gentler era of broadcasting as defined by the ambigious FCC along with the terrestial broadcasters?
But that is a blog for another day.)

The strength and power of radio in the near term will be with 21 plus audiences...teens are not a lost cause, but like Newsosaur points out...they are listening less. However they ARE still listening in significant numbers.

The good news for your 49 year old Radio broadcaster friend...75% of the wealth in the country is controlled by 50+ persons...they also still drive a lot of decisions and business. The baby boomers, while moving off to the right side of the demographic chart, are still a viable market. Radio will still deliver them (25-54's and 50+'s)...advetisers want to talk to them.

Tell your friend to diversify his portfolio and keep hawking radio...we'll be listening.

8:15 AM  
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11:09 PM  

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