Imagine you're a consultant and I'm a business owner. I've called you in to advise me on how to improve my business.
I sell ice at a marina in South Florida. Boaters use my ice to keep food, drinks and fish cold. They flock to my ice stand as they set out to sea in the early morning hours, and there's another rush in the late afternoon when some of them come back with the fish they've caught.
The supplier who brings me my bags of ice is very reliable and comes by every hour like clockwork with two 50 pound bags. My stand is open 24 hours a day and two 50 pound bags arrive at the top of the hour, every single hour. I keep them in standard coolers, like the type you might take on a camping trip.
Every morning shortly before 5 a.m. customers line up at my stand, and by 5:10 I'm sold out of ice. Again at 6 a.m. they line up, the ice arrives, and I'm sold out in a few minutes. By the time mid-day rolls around demand has dropped off a bit and I'm usually able to make it through the hour until the next delivery.
When the late afternoon rush comes, again I can't keep up with demand. Then as evening arrives and throughout the night demand falls off and much of the ice that's delivered simply melts and goes to waste.
This supplier is the only one who will deliver to my location. I've tried to get him to deliver more ice during peak times and less ice at night, but due to the limitations of his ice producing operation he cannot alter the quantity of ice he produces and he must deliver it to me every hour or it will melt.
I'm paying for 2,400 pounds of ice every day yet about a third of it is going to waste. During peak demand times I'm missing countless sales opportunities because my inventory has been depleted.
I've asked you for advice. If you're worth your consulting fee you'll hopefully tell me, "Buy a freezer."
Embrace the concept
Radio air time is a lot like ice. The inventory we have during off peak hours could be producing more money for us if it were stored on the consumer's receiver and available for playback 24/7.
What we need is a good freezer for radio airtime.
TV providers like Dish Network, DirecTV and your local cable operator have recognized the benefit of a good freezer. Only they call it a TiVo.
Sirius XM Radio also recognizes the benefit of a good freezer, only it calls it the XMp3.
Last year Internet advertising revenue surpassed radio ad revenue for the first time. The Internet is really nothing but one big freezer with countless shelves in it called servers.
Some people have tried to market "freezers" for free local radio, but these devices usually haven't been as simple to use as a radio receiver. Most often they've been computer peripherals, and they generally have not been embraced by local broadcasters.
I believe that radio broadcasters need to embrace the concept of the freezer. We need to work on developing, deploying and promoting a simple-to-use, consumer-friendly product that will let us migrate from the streaming business we run today to a file transfer-based business in the future.
Same story, different chapter
This article is related to my earlier commentaries, "We Should Buy Sirius XM Radio" (Radio World, Jan. 1) and "Fix Drugs and Rock & Roll" (April 8). Each is a chapter in a bigger story, a story based on the premise that the amount of content free local radio provides to consumers must increase dramatically for us to remain competitive in the future.
The idea of buying Sirius XM Radio was about increasing the choices we provide to consumers. The campaign to fix drugs and rock & roll is about standing up for our rights against those who work to make radio "freezers" illegal.
A major problem we face going forward is that consumers are drawn to places where they have more choice. When Home Depot and Lowes came on the scene there were a lot of small hardware and building supply stores around the country. Home Depot and Lowes are still here, but many of those smaller stores are not.
When Borders and Barnes & Noble came on the scene there were many small bookstores around the country. Many of those small bookstores are not around anymore. And now the big box bookstores are facing stiff competition from online bookstores that can offer an even greater inventory without the brick and mortar expense.
And of course we're all familiar with what's been happening in the "radio with pictures" business. Local TV stations have been facing competition from services that provide consumers with more choice for decades. The accompanying chart shows how they've been faring.
Consumers are drawn to places that offer the biggest selection. Places with less selection can compete, but they often have to do it by specializing in a particular niche and perhaps beating the larger competitors on price, which frequently results in lower profits.
When it comes to radio broadcasting, Sirius XM Radio is a big box retailer. We're a bunch of mom and pop operators. Even companies we wouldn't think of as "mom and pop" operations like Clear Channel and CBS are small-time operators compared to Sirius XM, for they're restricted by FCC rule to owning only eight signals per market. Okay, let's be generous and call it 16 with HD2 streams. Sirius XM has more than 10 times as many offerings.
And just wait until mobile DTV is widely available. It's very likely that there will be single TV stations in some markets that will offer more audio programs than the largest radio operators. Perhaps even more than all of the radio operators in the market put together.
Local TV stations have been facing competition from services that provide consumers with more choice for decades. For us to thrive in the future we need to expand the offerings we provide to consumers.
Acquiring Sirius XM Radio would have been a good way to do this, but it looks like Liberty Media beat us to the punch.
Another service-expanding option we should consider is time shifting. Time shifting allows us to move underutilized inventory from one daypart to another where it will be more valuable. More precisely it allows consumers to move our product from one daypart to another where it will be more valuable to them. And being more valuable to consumers is what winning in business is all about.
Every 24 hours there are 480 three-minute blocks of time. For illustrative purposes let's assume every piece of radio content is three minutes long. A receiver capable of storing, sorting and playing back content would have roughly 5,000 three-minute audio segments on it in 10 days. Now that's consumer choice.
Let me say it one more time to be sure I'm making the point.
Precisely 10 days from this moment, there will be exactly one thing that consumers can listen to on my radio station. It'll be whatever I happen to be broadcasting at that moment.
But if receivers could store and replay content, and they had enough storage for 10 days of programming, then my listeners could choose between roughly 5,000 things from my radio station at that moment.
This is the way to compete with MP3 players and satellite radio.
Store-and-replay would allow us to achieve this dramatic increase in choice without having to deal with the complicated, expensive and perhaps politically untenable process of acquiring new spectrum.
It's easy to imagine how this system would work. Radio receivers would have memory in them, and would store the files being broadcast by the tuned-to station. Content would be recorded whether the receiver was playing audio or not.
When you dock your MP3 player on your radio to charge it up the latest radio content could be uploaded to the portable device. Thus portable music players could be up to date with all of your latest content without having to be on all the time, draining their batteries.
Consumers could search the material from your station easily, actually seeking out paid ads when they want to find a restaurant, nearby lodging or select a movie. They could get customized news and information based on the preferences they program into their devices, hearing only the news for their local community, the sports scores for their favorite teams and so on.
We're not alone
Radio doesn't exist in a vacuum. The world around us has changed dramatically over the past 15 years, and it will continue to change dramatically going forward.
A pre-consolidation AM/FM pair may have competed with 10 or 20 other signals in a market. That same AM/FM pair today must compete with those local stations plus hundreds of satellite channels and thousands of other programs from the internet. Soon it will have to compete with local TV programming beamed to the dashboard, too.
Free local radio needs to provide more content to its customers to compete more effectively in modern society. Consumers are drawn to places that offer more choice. Migrating to a system where our content is stored, organized and filtered by consumers would give them a competitive product for the modern world.
Time is our product, and we're only supplied with 24 hours per day. Some of those hours we use very efficiently, and some of them are essentially wasted.
We need to stop wasting our time.
Dave Wilson's commentaries are a recurring feature in Radio World. He is owner of WHDX(FM) and WHDZ(FM) on Hatteras Island, N.C. He is also senior director, technology & standards at the Consumer Electronics Association. His views are his own and do not necessarily represent the views of CEA or its member companies.
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