Living La Vida Local — Or Not

How should terrestrial radio react?
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How should terrestrial radio react?

As the once-exclusive domain of broadcast radio continues to erode, many have pointed out that the medium’s strongest remaining attribute is its localism.

Yet broadcasters don’t seem to be taking full advantage of this feature — so much so that the FCC is now considering reinstituting mandates in this area.

This seems strange given the quickly growing cadre of competitors, most of which offer little or no localized content. Terrestrial radio should therefore be well positioned to exploit its exclusivity in this respect; but this doesn’t seem to be case.

Meanwhile, radio groups have built strong national and regional portfolios of stations, but they don’t seem to be using them optimally to defend against growing competition that is also nationally based.

Traditional revenue growth rates, and even their absolute numbers at some commercial stations, have begun to drop. At least some of this trend may be attributable to early signs of new competition’s effects.

Look to the telly

How should terrestrial radio react?

One way is to learn from history, and for that it need go no farther than to broadcast television. Terrestrial broadcast TV once was the only game in town, but then it too was assaulted on multiple fronts. Cable and satellite TV added hundreds of additional channels, while VCR/DVD home video stole additional eyeballs.

Nevertheless, the local terrestrial stations (i.e., broadcast TV network affiliates) are still the ratings leaders in their respective markets, usually by very considerable margins. Yes, the stations’ overall audience shares are down from what they once were, but by nowhere near a proportionate drop given the amount of additional new competition, and their revenues have generally not suffered.

Importantly, this has occurred without the regulatory relief allowing ownership consolidation that radio broadcasters have enjoyed.

Sure, there are far fewer TV stations to begin with, but just as in radio, TV’s new competition is subject to less regulation, and barriers to entry are otherwise lower for those non-broadcast entities.

One obvious method for TV stations’ survival is based on their exclusivity of content as a result of network affiliations. But another is their continuing localism, mostly through news, sports, weather and traffic. This is a costly enterprise, and occupies a minority of most stations’ content schedules, but still generally proves worthwhile.

(Note also in this analysis that TV stations are beset by additional regulation and contractual obligations on what dayparts can contain local vs. network content, and what availabilities for local revenue are offered during network-content periods. Radio has far fewer such constraints.)

With all this going against them, TV stations generally have found continued success by operating as the exclusive local outlets of well-established national brands.

In this respect they follow the trend that the U.S. retail industry has strongly embraced in recent years. Decry it as you will, it has clearly proven successful, as any walk through the mall or drive down Main Street will prove: Starbucks, Wal-Mart, McDonalds, Best Buy, Old Navy and on and on — hardly a sector of the physical sales market is not dominated by national brands today, highly promoted and scrupulously maintained through uniform local outlets, either in franchised or wholly-owned arrangements.

With this model in mind, most TV stations have adopted a clever and succinct dual branding that combines their local and national identities, like “NBC-4.” In this way they obtain the best of both worlds — the national brand and the local presence.

Most TV stations have also established rich Web sites (with help from their networks’ Web departments) to further strengthen their national and local branding, often with on-demand TV content. While this is aimed primarily at the local audience, it is also accessible to expatriate and traveling viewers around the world.

Concurrently, the networks themselves have diversified, producing differentiated content and establishing branded presence in numerous other venues (e.g., cable channels, online portals, podcasts, content deals with online media stores, etc.), all the while trying to steer clear of cannibalization or direct competition with station affiliates in the process.

Radio’s lose-lose situation

Terrestrial radio has mostly taken a different approach.

While it has benefited from relaxed ownership rules, allowing it to build national chains with numerous local outlets in many markets, these outlets have not embraced the national branding concept.

The only exceptions to the latter are public radio stations, many of which have benefitted from leveraging the NPR brand as appendages to (or in some cases, predominant over) their local identities.

So, as in the local TV environment, these stations optimize a local-plus-national identity, which fits well to today’s mobile lifestyle.

Commercial radio seems to be missing the boat on both ends of this process. Most stations don’t generate much local content (some observers note that the only localized content on many radio stations is the advertising). Meanwhile, these stations also don’t benefit from any national brand identity or loyalty — even though many are part of large chains having as many outlets as any of the familiar brands above, or more.

So they don’t gain traction in the competitive marketplace dominated by national brands, but they still manage to antagonize regulators with their lack of localism. It would seem pretty hard to lose on both those bets at the same time, but radio is managing to do it.

To be fair, there are some significant exceptions where commercial radio stations are working hard to produce lots of local content. Yet these are few, and because they generally don’t show any clear and direct revenue boost for this extra effort, their admirable approach is not setting a trend for many others to follow.

Witness the similar fate of Clear Channel’s gutsy but ultimately unsuccessful “Less Is More” attempt at reducing ad clutter.

Thus commercial radio largely continues to serve up a type of pseudo-localism, which is now wearing thin on listeners, advertisers and regulators alike. Meanwhile, national or regional station groups do nothing to differentiate themselves from one another, preferring to stick to the old format-based branding alone.

What if Clear Channel had tried a competitive, national-chain based approach with “Less Is More,” using heavy rotation at all its stations of on-air announcements like, “We’re a Clear Channel station — we run fewer ads”?

Similar national branding campaigns by station groups could stress their commitment to audio quality, high-end talent, credible news, the most up-to-date traffic, broader music selection or other desirable attributes that can apply across multiple content formats.

Perhaps it is a fear of re-regulation that keeps radio groups from even acknowledging (let alone extracting any promotional value from) their association with national chains. Or maybe it’s in hopes of gaining even more relaxed ownership regulation in the future — as if not mentioning it on the air will make it go away (“If I can’t see you, you can’t see me …”).

Either way, the only ones who really care are some lawmakers and regulators — as opposed to most listeners — and those influentials are already well aware of the numbers whether it’s mentioned on air or not.

So why not step up to the competition — satellite, Internet and even terrestrial public radio — who are all overtly leveraging their national brands and watching their curves head northward? While doing this, why not also try to increase local content, as only terrestrial radio can do?

If commercial radio chooses instead to continue along its current path, it may soon find itself in an unhappy place where the revenues are low and the regulations are high.


Survival in a More Competitive World

But it is worthwhile to consider how the medium might fare in a new digital world. In fact, as my industry colleague Glynn Walden has recently pointed out, after Feb. 19, 2009, radio will be the sole remaining analog mass medium in the United States.