The electronic media is standing at the crossroads.
But unlike the legend of Robert Johnson, we're not quite sure who to sell our souls to if we want to control the future. So many options, from digital, satellite and Internet radio to iPods, downloads, blogs and podcasting seem promising. But like disillusioned children clutching at an empty string, we have already watched in horror as our dot com bubbles burst. The path to the future is anything but straight. Just as soon as you think you have discerned a direction, a new tangent pops up and the public's tastes scurry down another road.
If life has taught me anything, it is that I know nothing at all. But since I can't end the article here, I'll go on.
In May in 2006, the CRTC gathered together many of the radio and music industry's best and brightest to review the future of the medium in Canada. The air was heavy with politics, statistics, cultural debates and pragmatic concerns. Not surprisingly, self-interest dictated many positions, leaving us with some partisan presentations that directly contradicted each other. Given the overwhelming length of the sessions, it was particularly surprising that certain topics such as CANCON and cultural diversity were matters of intense discussion. Other vital topics such as fragmentation of the medium, projected radio ad revenues, and the radically changing media/ entertainment landscape were given relatively little detailed attention. In order to speculate about the future, it is critical that we examine some of these issues and the underlying facts.
Most of us (broadcasters, advertisers and the music industry) play by the numbers in one way or another -- audience reach and share of hours tuned, ad expenditures and target demos, chart positions, playlist adds, etc. The key is to understand the interrelationship of all of these disparate factors as we project into the future. The following is an examination of some of these issues:
We began by looking at the percentage of radio buys for target demos across Canada. We also looked at the anomalies when these percentages were compared to the make up of the Canadian population.
Make no mistake, the Canadian radio industry remains healthy from a financial perspective-its 2005 ad revenues, according to both Statistics Canada and the CRTC, were $1.3 billion, up 8.7% from 2004, with local sales accounting for approximately 74.1% of the total. In terms of audience tuning, radio delivers a 93.5% national weekly reach and 21.3 hours tuned weekly per listener (A18+, BBM Survey 4, 2005). While the industry is currently in good financial shape, will this good fortune continue unabated...or are there warning signals on the horizon?
The chart Radio Buys for Target Demos details the estimated percentage of all 2005/2006 radio buys nationally directed toward each target demo. (While many local buys lack a defined target, there is good reason to believe that these figures are roughly indicative of overall radio advertising activity.) The impact on radio format for commercial stations is quite simple and direct. Potential ad revenue is dependent on the target group delivered by a station. This, in turn, is tied to the format. Maximizing both reach and hours tuned is critical in order to generate the best possible average quarter hour audiences on which rates are based. This why so many stations seek be "on all the time" in stores and offices.
An examination of spending by target group reveals that ad spending does not directly correlate the size of a demographic within the population. Below is a national population breakout:
It is increasingly apparent that, with commercial radio, certain demographics command attention disproportionate to their size.
For example, despite comprising 28.10% of the population and being the fastest growing segment, the A55+ group commands well under 1% of radio ad spending. Despite comprising 9.13% of the population, A12-17 command well under 1% of radio ad spending. As such, commercial broadcasters devote little of their attention to these groups. Formats are programmed to generate tuning with "money demos". From a cultural perspective these other demos are often being overlooked. A recent example is the move away from CHR stations (with strong appeal to 12-24) to Classic Hits such as JACK, DAVE, BOB, etc. (appealing to 25-54). As a factor of this trend, average hours tuned per capita for teens has declined dramatically over the last five years.
When one looks at the past couple of decades, it is apparent that advertisers have shown no intent of changing the core 25-54 demo buying patterns despite evidence that would suggest that advertisers should move with bulges in the population bases as well as adapting to more of a qualitative buying approach (niche targeting) defining users more by product usage than demographics alone. The traditional buying approach, focusing on the 25-54 demographic has changed little in the last two decades despite major technological changes. This, in turn has played a major role in the conservatism of programming trends. While the CRTC has worked toward adding cultural diversity, they have been able to do little to address this underlying issue. Until we find a way to capitalize on niche targeting, we are left with the status quo. Sadly, excellent buying tools such as RTS and BBM single source qualitative diary data are woefully underused. In this atmosphere, trying to add cultural diversity amounts to treating the symptom without recognizing the disease.
One consequence of the targeting noted above is the dramatic decline nationally in teen tuning over the last five years. There is no reason to believe that the medium will repatriate these listeners who have gravitated to other entertainment choices in an increasingly fragmented media universe. My Space, YouTube, iTunes, MP3 players, podcasting, downloading, etc. have won over younger listeners. A closer look at teen tuning reveals a 23.9% decline in average hours tuned since 1999.
There is every reason to believe that, as we look down the road and these youths become key target consumers, that radio will experience a financial crisis with advertisers following the audience to new mediums. All too often we focus on 90-day P&L projections and proclaim that all is well. But when we look 5-10 years into the future, does the picture remain the same? Radio has struggled mightily with adapting to technological change and there is little reason to believe the future will be any different. Take, for example, the search for a digital alternative to outdated analogue services. Despite tremendous efforts (DAB, IBOC, etc.) consensus and a unified marketing effort (from existing broadcasters) have not been forthcoming.
In addition to cultural diversity, the subject of CANCON prompted vigorous discussion and numerous proposals at the CRTC hearings. Predictably, music industry groups pushed for expanded CANCON mandates while broadcast groups proffered a more restrained approach. All realized that CANCON regulations will undoubtedly remain in place for the foreseeable future. Many in both camps offered up the observation that simply increasing CANCON from 35% would, in all probability, result in little more than pushing Avril, Celine et al into even higher rotations. What seems likely is an extension of the "new and emerging artists" qualification that played a significant role in the satellite radio decisions. Possibly some sort of a bonus or quota system with broadcasters getting an incentive to provide airplay for relatively untried artists.
For example, a cut from Avril or Shania might count as 1 play while airing of a song from a new or emerging artist might register a credit of 1.5 for the broadcaster. Of course, there's any number of shapes this concept could take, not to mention the likely friction over who or what qualifies as "new and emerging".
Still, the general idea met with a great deal of approval. Unfortunately the cultural roadblocks we face from the pragmatic side of the business were not fully analyzed. As much as we like to view programming and sales as two completely separate worlds, they are not.
Until advertisers take a more sophisticated approach to targeting niche demos, it is virtually impossible for programmers with commercial stations to push headlong into the brave new world of originality. Ultimately most will be sucked into the 25-54 tar pits, i.e. the financial necessity of remaining conservative and delivering the broad demos that deliver the most revenue.
So, in conclusion, as I stand at radio's crossroads monitoring the going rate for a soul, I realize that my bargaining power falls somewhat short of Aretha Franklin's. As was stated earlier, I don't have the answers. I do know that the future is just over the horizon and it may not be what we bargained for. Stay tuned.
Sources: BBM, RTS, Canadian Broadcast Sales
David Bray is Sr. Vice President of Hennessy & Bray Communications (www.hennessyandbray.com) He may be reached at email@example.com