Future Receivers May Incorporate Broadband Wireless, Broadcast Services in a Single Device
Last time we discussed how the radio industry must cope with both incremental and disruptive change simultaneously. Part of the latter includes the potential for dramatically changing business models engendered by the ongoing transition to digital broadcasting.
The biggest challenge for broadcasters is adapting to any business that does not maintain the fundamental premise of zero marginal cost per additional end-user, which the broadcast model has always observed. In other words, once a broadcasting transmission system is built, there is no incremental cost to the service provider as audience grows. Listeners buy their own radios and can tune to a station with no impact on that station’s facilities or operational costs.
While this approach offers very low cost per listener, its inherently unidirectional, point-to-multipoint service structure implies that little or no personalization or interactivity can be offered. Those features are the primary appeal of online services, of course, but with them come an incremental cost per user that runs contrary to the broadcast business model.
Such is the conundrum that broadcasters face when contemplating addition of online services to their operations.
Converged devices
For radio broadcasting, online services have been strictly differentiated from on-air services for consumers because they each use different receivers. Most online listening is done on a personal computer, and few of these have AM/FM reception capabilities.
The near future may change this, as new portable devices debut with both digital broadcast and wireless broadband capabilities. Think of these as cell phones with digital radio and/or TV – the so-called “converged device.”
This is not altogether new; a few cell phones have already included FM receivers, but these have not been widely deployed. The reason for their lack of success is fairly simple: Wireless service operators don’t like these phones because they get nothing out of the additional FM tuner capability, and in fact may lose something since whenever users are listening to the radio they aren’t making calls.
For the converged device to gain traction, both broadcasters and wireless telcos must mutually benefit. Such a process should play toward optimization of both industries’ divergent business models. For example, if a listener likes a song he hears on the radio, while he’s still listening to the radio, he can order the song for download to the converged device’s memory via the wireless broadband link. The cellular operator makes a sale, and the broadcaster gets a piece of the action, all while the user is engaged with the broadcast side of the device.
The station could also invite listeners to send in requests via SMS, again stimulating use of the wireless operator’s network; and so on. The two technologies and businesses could work together in synergistic ways: Broadcast reception capability motivates the user to “take the phone out of the pocket,” which is the wireless operator’s greatest obstacle to increased revenue. The interactive capability of the wireless phone adds new functionality to the broadcaster’s service, which provides significant and timely value to an otherwise increasingly old-school medium.
The two services could also interact in deeper ways. Consider that the wireless broadband device might serve as a radio-like receiver for a broadcaster’s online streaming offerings, placing them at near parity with on-air channels. Or the converged device could also gather content via ancillary data carried in digital radio broadcasts.
Finally, any such downloaded content to the portable device can be synched to a PC or to an entire home media network when the phone is next re-connected (via USB dock, WiFi, Bluetooth, etc.), reversing the more traditional flow of content from the PC or network to the portable device. In this way, the user no longer needs to be sitting at a computer to purchase digital media content for a home media ecosystem, thereby increasing revenue opportunities for online content providers.
The converged device therefore allows broadcasters and wireless operators to both move forward while still doing what they each do best, and not trying to force-fit their services into one other’s business models.
Challenges
While the scenarios above may sound quite appealing, they depend heavily on harmonious cooperation of all players involved – broadcasters, wireless network operators and converged-device manufacturers. Such an arrangement is unprecedented, but not inconceivable.
Perhaps the biggest question in this context is, “Who will control the device?” Broadcasters, wireless operators and consumers will all have to feel adequately empowered in this respect for the converged-device scenario to be successful. Terrestrial broadcasters have already had a taste of this, in sharing space on a dial they once unilaterally controlled with satellite radio service providers on today’s AM/FM/satellite-radio receivers. Meanwhile, consumers are becoming familiar with such processes as they adapt to devices that combine portable media players with cell phones.
So it may be wireless network operators who have the toughest time coping with this new reality. They are used to having unilateral control of the device, particularly in the U.S. market, where most cell phones only work within the network of a single service provider.
Consider also that as services continue to proliferate, no single platform will enjoy the aggregation that existed in earlier times. This could mean that the critical mass that enabled a given medium’s success may evaporate as time goes on. Even though clever silicon can make the user believe that he or she is connected to a unified whole, the service networks seemingly connected in transparent fashion must all still operate as separate businesses, and each must remain viable in its own right.
Put another way, what made broadcasting great was compelling content, which takes substantial revenues to produce. The aggregation of audiences to a single or small number of platforms (e.g., AM and FM radio) made this a workable proposition. Will any new platform be able to amass the same commercial engine that can drive production of equally desirable content? Additionally, as technologies and audiences diverge, will incumbent operators retain the requisite agility to adapt, or will they be replaced by new (and less satisfying) services?
Only time will tell if audiences of tomorrow look back on the current day as the last golden age of radio, or a hopelessly antiquated predecessor.
