Record Industry About To Stab Its Last Friend (Radio) In The Back

One of the regular readers of this blog noticed some interesting associations being made in the FAQ.pdf and other parts of the SoundExchange "Legislative Alert Center".

Sit down. Stay away from sharp objects and read this in amazement:

• Webcasting is to blame for the slump in CD sales.
• "CD sales have slumped 25 percent since 2000, while webcasting audiences have grown dramatically."
• "Do AM & FM stations pay these royalties? Not at this time."
• "The United States stands alone among the major developed nations in denying artists any right to collect royalties for performances on traditional FM/AM radio and television."

Unless your head is buried deep in the ... in the sand you can see what's going to happen next. Your friends in the record industry -- distraught over the alarming drop in CD sales -- are about to do what it seems to do best. Lash out against its friends in the radio industry.

It's telling what SoundExchange is peddling in the bowels of its "Legislative Alert Center".

That webcasting is so powerful it alone is responsible for a 25% decline in CD sales since 2000.

Are they serious? Really? That's like blaming The Netherlands for all the deaths in the Iraqi war.

Webcasting is getting to be a big deal, but there are lots of other reasons why CD sales are slumping.

How about consumers would rather cherry pick the individual songs they want?

How about they want them in digital form for their iPods and computers?

How about record company acts have by and large been sucky since 2000?

Or that record labels are watching the bottom line more than what's happening on the street?

And what's this? "Do AM & FM stations pay these royalties"? "Not at this time." (Italics are mine). Oh boy, I don't know if not at this time means maybe later to you but that's how I am reading it. Does this make it any better? "The United States stands alone among the major developed nations in denying artists any right to collect royalties for performances on traditional FM/AM radio and television".

This is going to get ugly.

The record labels are clueless as to how to reengage the music buying public with what the public wants. You don't have to be a genius to know it's not CDs and that CD sales will continue to erode. So why take it out on radio?

Radio is a chump.

All those music stations have been exposing the record industry's new music and future stars and the labels have been making all the money from this free over the air exposure. Meanwhile the stations are also paying rights fees for the right to make the record labels rich.

Such a deal.

Who wouldn't want it? Apparently the record industry. And that's why you don't have to look any further than the CRB flap over royalty rates for Internet streamers to know that radio stations are next.

Let's see if we can look at this situation with a bit of sanity.

As the labels falter, they do what they do best -- sue and complain. The market is telling them that they are selling the wrong products at the wrong prices and in the wrong places. They no longer have control of Sam Goody or Tower Records. The consumer has control of the Internet and if they don't like the price of music, they can steal it. And many still do. So much for the RIAA scare tactics.

As radio falters, they do what they do best -- cut their playlists. The market is telling them that they are doing the wrong thing. Radio no longer has control of what music receives exposure through its playlists alone. The consumer has control of it through the Internet, peer-to-peer file sharing, social networks and Internet streaming. So much for strong arming listeners.

These two dying business models -- radio and records -- are acting contrary to what the marketplace is demanding.

I went to Temple not Harvard but even I could tell you that this strategy will not work. Why can't they see it? Maybe they went to Harvard and not Temple? Just kidding.

Radio and records is trying too hard to hold onto the past. Their executives have reason to -- it's called obscene profits. Both industries are still profitable -- very profitable -- even if Wall Street doesn't think they're a good investment. Wall Street operates on futures and radio and records doesn't have one without the next generation on board. Radio can be a good business for a long time to come because it throws off a lot of free cash flow. Has anyone noticed that Warner Records does pretty well?

This is about the future.

The consumers who are in college now and will be joining the work force and having families later don't want CDs. They don't want tight-playlist radio.

Everything they want is either on a computer or a mobile device.

So, if the record industry wants to be around in ten years it had better cut back the RIAA lawsuits against its customers and back channel plans to assault its only remaining friend -- radio -- or else they'll both be history.

I'm not optimistic for the very reason I've just stated -- record labels and radio stations still make plenty of money. They don't really think things are that broken.

But one day these executives will wake up and find that they have no future because they've lost their consumers to a place they fear and cannot fathom.

That place is the future.

My Students Program Your Radio Stations

I know. I know.

You have a hard time believing that college students -- in this case my students at USC -- can tell you anything you don't already know about programming your stations for them.

In that case, you should stop reading. Scroll down to some other stories you may have missed or page over to a traditional radio trade publication and read how good radio really is and how important HD radio is to attracting the next generation and how everything will be just fine.

On the other hand, if you're one of my thoughtful readers in a position to influence a troubled radio station, I'd like to offer the advice the next generation asked me to pass along to you. You may not like it, but remember, this is a generation that doesn't have the close affinity to radio that we have. They live in a digital, on-demand world so they are very different.

I'm generalizing, but on target, when I say this generation hates radio. Believe it or not, they don't hate it because it's analog. They hate it because its stupid to them. They have so many better choices. And swallow your bitter medicine -- the radio industry let them get away easily while we were consolidating.

Having said all that, I received no shortage of suggestions from these young people. They seem to think you'll never listen to what they're saying. And I agree. I know you won't. After all, what do they know about programming your radio station.

Well, if you have an open mind and because you're still with me so far, read on.

To the next generation, content is everything. They feel you are loose with your content. That it is nothing special and it's repetitive. They are used to choices. You are used to pairing down playlists. That's not going to cut it.

So, let's look at what my students would do if they could program your stations:

1. Add production values. You're too bland. You've run one sweeper too many. One sound effect more than they can stand that is supposed to pass for production. Please sit so you don't hurt yourself. Many of them love Radio Disney -- the same station radio people make fun of. They love the production values and to get a college student to point to a kids radio station as something good gets my attention. Did it get yours?
2. Better talent. We are the industry that slobbered all over virtual voice tracking when Clear Channel tried it. What were we thinking? Local jocks are bad not just in the small markets where you might expect less polish, but in the major markets. Satellite radio, are you listening, too? The jocks who play the music are not really jocks, they are what we used to call board ops before computers.
   
3. Intelligent jokes. This is not a bunch of college students looking for egghead humor. They just want something less moronic than what your putting over the airwaves. They would put jocks on the air with a better sense of humor. Find out what they mean by "better sense of humor".
4. Jocks that speak locally to them. Local is a big deal. They have social networks online and are big into communities. Radio may want to sound national, but my evidence is that Gen Y wants to feel like the station is local. Consultant Mike Joseph, as all of you old timers remember, was an early adopter of throwing in the names of towns in the listening area to make his stations seem more local. This generation demands more.
   
5. DJs who are fans. Isn't that an interesting way to put it? I've typed it exactly as it was said to me. This generation craves on air personalities who love the music, the bands, the venues, the sports. They like to hear djs who have knowledge about the music. They're not into put down artists. And while we're at it, read the next one.
6. Less arrogant djs. You fail in this category. As one student told me, I wouldn't pick a radio dj to be my friend. Why? They sound arrogant. Gen Y doesn't understand what radio djs are so arrogant about because these listeners are laughing at them and then turning them off.
7. Unique content you can't get elsewhere. If its something that can be done online, then why listen to radio? So they're telling you that a good rule of thumb is to create content that can't be created by anyone other than your station and then it has great appeal. If Big Boy at Power 106 in Los Angeles can bring Jay-Z in for an in depth on-air visit, then podcast it, then it is something that begins to take on some uniqueness. If you got your PDs together to brainstorm about unique content, you'd make progress with this group. Maybe this will drive it home exactly as it was told to me: Gen Y expects from you "something you can't get on an iPod".
   
8. 8 commercials an hour. See, you're starting to say, "these kids don't understand". Yes, they do! In the end they will continue to leave you if you continue to run as many spots as you do. They're telling you something you should know. Pressure your inventory. USAirways pulled a larger A-319 Airbus off the LA to Phoenix run that I make weekly and substituted a small, cramped regional jet. Now they sell out both planes that leave within ten minutes of each other and if it weren't for low priced competition from Southwest, they'd be able to raise the prices. But they fly full. And you can run full and not lose the audience if you run 8 spots an hour. Oh, and don't cluster them.
9. Run one commercial then get back to the music. Bill Drake was right. All the geniuses that said cluster the spots and run longer music sweeps -- they don't like it.
   
10. Experiment with one sponsor per hour. Hell, the nightly network news shows are trying this. Sell the hour for what you'd make from 8 spots and don't run 8 spots. You can run some. You can run a mention or two. How is this "Less Is More" not the other one?
11. Live reads. They didn't know the term but they know the concept. Save your production for other things. They like it when djs talk to them directly (not recorded). Live. You know what they're saying.
12. Special request hours. My students want you to do what WCBS-FM Program Joe McCoy did for 20 years in New York -- tie a new ribbon on the same music everyone else has. This is one way.

Okay, so you're still with me. Not arguing that this generation doesn't know what they're talking about. Or these kids are crazy, we can't make money like this. Or, they're naive.

In other words, you're intrigued. You're challenged.

What's a radio person to do now?

Get to work.

The next generation spreads the word virally in their online world. Because word travels fast with this crowd, start winning these listeners back one by one and who knows?

Maybe your audience growth in this neglected but important demographic will become exponential.

My Near-Death Experience With Clear Channel

Shortly after the new millennium, Clear Channel engaged me as publisher of Inside Radio in a very high priced lawsuit. I responded with a similar counter suit. The legal battle went on for years. Never went to court. Was eventually settled and Clear Channel purchased Inside Radio.

You do the math.

Fortunately it all ended fine for me and Inside Radio wound up in the hands of some very talented people in editor Tom Taylor and General Manager Gene McKay. I am still very proud of how these two gentlemen have continued to maintain Inside Radio as the industry's most respected news publication.

I'm not going to re-argue the lawsuits here. It wouldn't be fair for me to represent anything that took place in the proceedings let alone tell just one side of the story. It's all in the public record for the curious. You're free to draw your own conclusions.

But there is another story that might even encourage others who have felt compromised, pressured (or even ruined) by the many radio consolidators that took over the industry ten years ago.

Defending myself against a multi-billion dollar consolidator at the height of its power was a near-death experience for me. There were a lot of consolidators who didn't like my early predictions in Inside Radio that consolidation would be the ruin of radio. I took a lot of heat over that and let the record show I never budged on that position.

We all know what happened.

No one can argue that consolidation was a positive thing for the radio business. Instead, it may have even inflicted more damage at a time when the Internet was coming of age.

But out of bad comes good.

Had it not been for the evil that lurked in consolidation, I probably never would have sold Inside Radio.

Probably would never have been able to take the position as professor of music industry at the University of Southern California.

USC helped me realize just how much trouble radio is in with the next generation. It is terminal. No format can fix it. Radio fiddled while the next generation turned to social networks, file sharing and mobile devices.

Had that Clear Channel lawsuit not happened I would have probably not enjoyed watching the big consolidators prove me right about consolidation -- they can't run their near monopolies and they can't build shareholder value for investors who were promised better results.

Had I not had that near-death experience with Clear Channel, I might still be writing about which program director got fired in the latest economy move somewhere, someplace -- a story that sickens me to this day.

Everything backfired on the consolidators.

Ironically enough, their actions have made me financially independent.

I'm back -- speaking out on the issues and my voice is a strong as it was before I sold Inside Radio.

I was vindicated. Consolidation really was that bad.

All of this would not have been possible for me without the "Evil Empire".

See where I'm going with this?

Many talented radio people are enslaved by consolidators. Employed to be the Lewis Libby for consolidators who couldn't even use a monopoly to build a growth business.

The worst is over.

Now the consolidators will head for the exit. Clear Channel can't downsize and go private fast enough.

Anyone buying into this business now is just wasting money.

Any company staying in radio now without spending considerable time living with the next generation and coming up with a mobile and Internet strategy is history, too.

Here's why I am so optimistic about the used and abused managers, programmers and sales people who have been undervalued and disregarded these past ten years.

Had they been left alone, you can take it to the bank, they wouldn't have lost the next generation to the Internet and mobile devices.

They would have adapted.

Remember, 1996 was before Napster, iPods, iTunes, texting, social networking, YouTube -- before all today's competitors to radio.

They would have told their handlers that satellite radio was not the enemy -- that big corporate consolidators were. Of course, they would have been fired. Instead they stayed on to provide for their families and they paid a great price for it.

The consolidators are dying off.

Radio is on the decline.

Internet streaming is the next big thing and these talented people now have the resume to do what they did so well in radio for the new radio -- on the Internet, and through mobile devices.

The Clear Channels and CBS' of the world have not been able to deliver on their promises of increasing shareholder value, but in a painful and ironic way, they squandered their greatest asset -- their people.

Now it's payback time.

The Dan Mason I Want Back At CBS Radio

I take back everything critical I have ever said about CBS CEO Les Moonves.

Finally I can say "Les is More".

Moonves came up big yesterday. A television man who knows little about radio knew enough that he needed a proven radio executive to turn his slumping radio division around. So he hired back Dan Mason. Mason had been doing some projects for CBS since he relinquished his duties to Joel Hollander. Now, Moonves showed Hollander the door and welcomed Mason in with open arms.

I have to say that I have known Dan Mason a long, long time. I like him immensely and so I may not be as objective as I'd like to be. Plainly put -- I'm happy for CBS programmers, managers and sales people that Dan is back.

In all fairness to Joel Hollander he had a tough tour of duty at CBS Radio. Moonves had it tougher. He works directly for Viacom and CBS chairman Sumner Redstone. Redstone is legendary when it comes to taking the temperature of his companies by sticking a thermometer up the -- well, shall I say -- up the mouth of Wall Street. And lately CBS stock and all the other radio stocks are in the toilet.

But Hollander made matters worse for himself.

No succession plan for Howard Stern, a moneymaking morning show whose absence has hurt CBS earnings since he departed for Sirius Satellite. Hollander had a year to come up with something other than David Lee Roth. He still didn't get it right when he exited.

Poor programming choices. This is what happens when you put a sales guy in charge of programming decisions. Oldies WCBS-FM was blown up leaving anywhere from $16 to $35 million on the table (depending on whose numbers you believe). The "Play What We Want" Jack format was a joke in comparison. In music, we'd call it a mid-charter. Hollander's other attempts at programming especially at WNEW-FM was not pretty. There was management discontent among some in the company when the noose was tightened around Hollander's neck. But make no mistake about it, the noose was of Hollander's making. He dropped it around his own neck. Now he'll be fine. He's a radio guy. He's one of us. Differences or not, we forgive and forget.

But wait.

I want Dan Mason to succeed for his sake, the sake of all those great and talented people at CBS and even for Redstone.

But this is the Dan Mason I want back at CBS:

• The Dan Mason who can pry some money loose from Moonves to hire salespeople and invest in programming, research and people. This is a tough order because Dan worked for Mel and Dan knows how to run the company on spit, but now CBS needs money to reinvest in infrastructure. Without that, you've got a talented and proven executive trying to do what he did under Mel Karmazin's regime. This would be bad.
• A Dan Mason who will be left alone by his boss, Les Moonves. Moonves is a pretty good TV guy. Not so good when it comes to radio. Moonves was smart enough to bring the right guy back. Is he smart enough to leave him alone? By leave him alone I mean, don't sell stations out from under him. And don't micromanage.
  
• I want the Dan Mason who is going to protect the CBS all-news stations. These are assets that can't be recovered if they are lost. Scott Herman is the guy who knows news. Give him the ball.
• I want the Dan Mason who can do strategic planning further in advance than those radio dummies on Wall Street who can only see three months ahead. Moonves can use his eloquence to fast talk Wall Street. Mason has to be turned loose to plan for the future and anticipate things like the generation radio just lost (Gen Y) and the generation it is trying to lose by blowing up oldies stations in New York and Chicago (Baby Boomers).
• The Dan Mason that can separate himself from HD radio. He's been an advocate, but HD is a distraction not a solution. Although he may personally believe in the future of HD radio, CBS needs a President who can objectively look beyond questionable technology to Internet streaming, mobile content and social networking.

So, Les Moonves -- you did good.

But we'll all be watching to see whether you are prepared to give the outstanding candidate you chose to help rebuild CBS something even more important -- your confidence and your financial support.

Radio is not going to be a growth industry. Period.

It has no next generation. It has antiquated technology and it's idea of new technology (HD Radio) is a nonstarter with young audiences.

But radio is also not going to go away anytime soon. It produces large amounts of free cash flow. It can be a good business for a while -- just long enough to go to school on this quirky and fickle future generation and the one coming of age next.

Radio needs to move its content to where the listeners are.

The hiring of Mason is not just a fix -- it is that, but it must be more.

Someone has to lead a major consolidator into the future. Under the right circumstances, Dan Mason could be just the man.

Oh, one more thing.

As a statement that sanity is back at CBS I say give Joe McCoy a call. Tell him to bring back CBS-FM on 101.1 in New York. Admit the mistake in New York and Chicago. It will speak volumes.

The Zen of Starbucks Records

So Starbucks is starting a record label.

Will we someday have to use the term "The Big Five" labels when referring to the majors? Even if the record business stinks we can say Starbuck's record business smells great.

Starbucks is aiming to release eight albums in its first year. You'll be able to buy them while you're ordering your coffee, but they are also doing a distribution deal that will enable others to sell their albums as well.

And, Starbucks is launching with a big splash signing Paul McCartney to a one project contract now that he is no longer contracted to Capitol Records. I like McCartney, but I don't think that his deal will launch Starbucks Records into orbit. I may be wrong. Who would question Starbucks on marketing? But any McCartney album would have to have it "in the grooves" as they used to say back in the day. Nonetheless, by signing McCartney Starbucks has just gotten everybody's attention.

I must confess to being worried about this announcement. Not for Starbucks. But for the record labels that may very well now say, "ah ha, Starbucks knows how to run a business and they want into our business, selling CDs".

No. No. No.

Yes, Starbucks will sell CDs and that is probably an appropriate way to start, but this is the company that stated their intention to outfit its stores with equipment that would allow coffee drinkers to plug their MP3 devices in and fill up with music (at an additional charge, of course) while also ordering a latte.

That is the future.

The CD business is over. On its way down progressively and steadily.

You don't build a successful business model for the future on an outdated product that the next generation doesn't really want. My students at USC drink a lot of Starbucks coffee (perhaps to stay awake for my classes) but they are more likely to plug in and fill up their iPods than they are to buy a CD.

But will my students be Starbucks' target market for its new label? Not likely if the signing of McCartney signals any strategy. If they wanted to send a message to Gen Y they could have gone after a Gen Y artist. If their experiment succeeds, they probably will, but this label will likely also be true to its main business -- socially selling coffee. The Starbucks experience will be all over and deeply embedded into its music.

The future of the music industry is digital.

The new record store is iTunes, maybe Starbucks and other destination locations where socialization and other consumption is going on.

The new radio is social networking and probably Internet radio once WiFi is available. Starbucks doesn't need radio to push its music. And don't forget that Starbucks already sells a lot of music.

As an aside I wonder if Starbucks, when it gets to be a big player in the music business, will have its own answer to the RIAA suing customers who steal music. Maybe Starbucks could scald music pirates with hot coffee instead. I actually think that would be more effective than the RIAA's strategy. And it would be cheaper because Starbucks mixologists would cost a lot less than lawyers.

So drink up! Support the music industry!

And rest assured that a smart company like Starbucks is not about to get into yesterday's record business. They are using their heads to enter the digital future --- mobile music.
Because they see what record label execs cannot or will not see. Music consumption will be like food consumption. Customers want it when they want it. The record label's production of a product (CD) or download is antiquated.

Music is the new food.

Even Nicole Richie can be on a heavy diet of music and not worry about gaining weight.

Sam Goody can't sell food. It wouldn't work.

God forbid, Tower Records added coffee it its day.

Or Virgin superstores feeding you and quenching your thirst.

MySpace can't serve coffee, but Starbucks can serve MySpace.

Starbucks has it right. Coffee is the new sustenance.

The next generation can cut back on eating, but they can't live without music so when they do one, they'll be inclined to do the other.

And, if this is true, Starbucks Records is likely to have a hit on its hands.

How Can You Tell The Hollander Roast From Real Life?

The outstanding John Bayliss Foundation had themselves an American Idol-type roast last night by choosing CBS Radio head Joel Hollander to be the honored as a roastee. Who would have known that Hollander would be the hot topic in New York, in The New York Post, in the radio industry and everywhere on the evening of March 22, 2007.

See, he's apparently on the way out of his job in a high profile firing/resignation that has become quite public. Hollander is supposedly unhappy with his boss, CBS CEO Les Moonves, a television man. It's hard to tell the spin from the sin here. Who leaked to The Post? Who got fed up with whom? The word is Hollander is out before his contract is up by year's end. Ya think?

While CBS radio station managers, salespeople, programmers, talent and staffers dangle in the wind waiting to see who their next leader will be, the jokes were on Hollander at the black tie event.

I am really happy for the Bayliss people. What a great group doing great things in the form of college scholarships. I am really unhappy for the CBS executives -- not because they have been trying to steer their ships while the harbormaster has emptied the harbor -- but because they all couldn't be at Hollander's roast. Hell, what I really mean is that they couldn't be participating in his roast. Who better to burn the boss than the people who know him best.

I wasn't at the event. I've got my responsibilities now teaching the next generation about the music and media business in Southern Cal, but don't think I didn't think about a red-eye back to the greatest city in the world.

My God, some years the poor Bayliss people got stuck with "stiffs" for roastees and the good and kind radio people who support this foundation showed up to yuk it up anyway. This year, they're getting their money's worth.

How can they tell the roast from the real deal?

Do you do jokes about his performance at CBS -- sub-par at best by many accounts? Do you joke about the strained relationship with Moonves when the axe is being prepared? It would be like kidding Mark Mays about all the jobs he's eliminated since consolidation reared its ugly head in 1996. Would anyone dare to laugh? Is surreal really funny when it is pathetic?

For the rest of us not laughing, we'll have to be content to know the following:

• Hollander was in charge and made the decisions. If he didn't like Moonves he could have left CBS long ago on his terms and probably would have been hailed as a hero -- a man who stands on principle. Instead, he's going out like the Hollywood stars who get caught doing the nasty and then checking in to rehab. Except in radio there is no rehab. Where do you think an ex-radio executive goes for help? To Clear Channel or another competitor. This is rehab?
• If you're one who is rooting for Hollander's early demise, be careful what you wish for. The man making the decision is Les Moonves, a television executive. A guy who thought radio was a place where you syndicate David Letterman's Top Ten TV List (it failed, by the way). This is the man who will choose your next boss. Scared yet? My decision -- and I know you're going to play the academia card because I have been teaching for the past few years -- is that Moonves should promote the most competent, most respected CBS executive already in the company. Someone who can get along with people, inspire them -- a proven leader. It won't take long to find that person. He or she is not at corporate and their record is clear for everyone to see. But prepare yourself for a blast from the past -- a former leader or a right field choice. Life's not easy for a CBS employee these days.
  
• If you're one who thinks CBS Radio has a future in terrestrial radio I am going to be back to tell you "I told you so" when more and more of my students (Gen Y) reject radio and compromise your future. Therefore, it's time to build a company on content and distribute it everywhere -- on the radio, special content for Internet radio and mobile devices, social networks. Go to school on this challenging generation or you will be the one to fail. And, skip HD radio. They don't like it. It's not an iPod. It's not in their world.
• It's amazing that the man who gave us "Jack", Hollander, wound up not knowing "Jack" about the audience. WCBS-FM was doing between $16-36 million when he blew it up. WNEW would have been a moneymaker as a rock station. I am not a surgeon so I avoid operating on my friends. Hollander is not a programmer and should have avoided doing surgery on his programming. And who was it who said "an old listener is better than no listener"? So, the next CBS Radio head should admit the companies mistakes. Fix the mistakes. Build platforms for listeners of every age. It's a big Internet out there.
  

So, only the paying customers got to hear what I'm sure was a hilarious roast of Joel Hollander last night. Can we get a bootleg copy on YouTube? Or will Viacom have YouTube pull it? Okay, I'm kidding.

Although we've had some fun with this at Hollander's expense, the issue is not a laughing matter.

The two biggest consolidators -- Clear Channel and CBS have failed in their mission to build shareholder value and in their ability to grow the radio segment for their investors even with a virtual monopoly in place. Forget the audience, it seems like they have.

All the major radio groups are deficient in planning for the digital future. You can't come up with great ideas until you understand the generation you're missing.

Most post-consolidation radio executives have had to put up with budget cuts, slashed staffing, lower standards, less research, antiquated diary ratings, an empty minor league for future talent, failed policies on commercial loads, needless litigiousness, lack of leadership, lack of vision, a bunker mentality -- and I'm just getting warmed up.

And these needless hindrances in an age of unprecedented media competition is no laughing matter.

Radio Ga-Ga

By Steve Meyer, Inside Music Media™ Contributor

We watch the shows - we watch the stars,
On videos for hours and hours,
We hardly need to use our ears,
How music changes through the years

Let's hope you never leave old friend,
Like all good things on you we depend,
So stick around cos we might miss you,
When we grow tired of all this visual,
You had your time you had the power,
You've yet to have your finest hour,
Radio.

-- Roger Taylor (QUEEN), 'Radio Ga-Ga'

The above lyrics from one of Queen's best records, are more potent today than when the song first was released twenty three years ago.

How many of you listen to the radio to hear music anymore?

More importantly, how many people do you know, young or old, that are listening to local stations to hear their favorite songs? All you need do is talk to anyone ages 12+ and you'll find out real fast.

They are not "tuned in" to radio.

They have no affinity for listening to it at all.

Oh sure, they hear it on their school bus on the way to and from school (if the driver has one on), might hear it while at school someplace, but they don't turn it on like previous generations. No, they get home, flip on their computers. They are online chatting and/or downloading songs their friends recommend, or they're listening to the CDs they burned as they surf the Internet.

But most of them (and we're talking large numbers) are not listening.

Unless of course they find out there's a free concert being put on by a local station and they want to get tickets. Ditto for any contest that offers something they want (tickets to a major concert, cash, prizes) at that particular moment.

But somebody must be listening, right?

I mean Clear Channel, and other media monoliths do have profits. Those profits are generated by ratings that reflect numbers of audience listening, so where's the logic? Simple. Much of music radio has become a media largely dependent on a great number of on-air promotions to drive (inflate?) real audience numbers.

Radio always was promotion oriented and always went big time promotion during sweeps months. But, first and foremost, people listened to hear their favorite music. And they listened for long periods of time to their favorite stations.

Who's doing that now?

Ask anybody you know, then ask their children -- high-school or college age. Radio is incidental to them at best and many admit the only reason they listen is to get "the free stuff."

So while there are profits, radio (like the record labels) should undertake the task to closely examine where it's going. Because while Nero is fiddling (in this case Clear Channel, et al), Rome (the audience out there) is burning and seeking "shelter" in alternative media.

Radio should remember the way it was at network TV a decade ago.

Big hits equaled big profits. Then two years ago cable viewing beat the big three networks (CBS, ABC, NBC) for the first time ever in total viewer ship. 'Madison Avenue' had to adjust those media plans they set for clients and all of a sudden (for the first time ever) a 30 or 60 second spot on a Top 10 or 20 show wasn't as expensive as it used to be. (Exclusive of events driven programming like the SuperBowl, the Oscars, or the season finale 'Friends', which NBC has created sidebar programming for - the two-hour DATELINE for example - to exploit every available revenue stream).

The TV landscape changed forever as more and more channels became available to the audience and they had other options, other choices, they could make. A Top-10 show two decades ago used to mean a buy from Ford, General Motors, or Chrysler because so many people were watching. That guarantee is no longer there. The number of viewers for a Top 10 show today (again, exclusive of events driven programming) is not the same as it was before viewers had alternate choices.

So that's why smart network folks now use events-driven programming during all sweeps so they can maximize ratings and increase advertising rates and hence revenues. That's why you're bombarded with promos to promote these events. So much rests with the ratings that without these events and promotions, profitability of a network can be jeopardized radically. (Witness Disney's ABC-TV) But the fact is, whether its events driven programs or the networks regular schedule, they want to sustain and increase their audience by entertaining them.

So now, back to radio.

As Madison Avenue has forever adjusted media planning strategies on the TV side, they are also examining radio more than ever for clients. This week I spoke to a media buyer that represents an agency that spends hundreds of millions a year on TV and radio...and she told me: " Radio now is still a must buy for too many of our clients...but what we're seeing is a shift in listening habits of teens, 18-24s, and even upper demos from focus groups we do. If these shifts continue, it's going to be difficult for stations to keep existing ad rates because at some point, we'll be able to make segmented buys in print, on cable, online, for the same or even less if we do it right, and still be able to deliver audience for clients. The big shift of course is clients wanting creative online campaigns."

I've said for a long time now that the music industry is not going to go away. It's just going to exist in a different model.

I've also said that the industry's survival depends on having music people run the companies because they are the salvation. I believe the same holds true for music radio. The music is the most important product music radio offers the public. Not the contests, free concerts, or traffic reports.

At some point (and that time is closer than you think), music radio will have to adjust to what's happening out here in the world they live in. Satellite radio now has twelve million plus subscribers. That’s twelve million willing to pay for something more than what’s available on terrestrial radio today.

Radio does indeed have the power to be such a potent force. It can create a relationship with its audience so strong (as it does today with many syndicated shows like Howard Stern, Limbaugh, et al) that it can create audience as big as that of any Top 20 network TV show. I hope radio indeed has yet to have its "finest hour" as it says in those song lyrics. But I have my doubts. The clock is ticking; the audience at-large is looking for new music as I write this. And millions of them aren't turning the dial on their radio to find it.

Steve Meyer is one of the music industry's top professionals and publisher of the new media newsletter DISC & DAT.

Hey Radio -- They're Coming To Take You Away, Ha-haaa!

Just like in the novelty record by Napoleon XIV. It's now radio's theme song:

Remember when you ran away
And I got on my knees
And begged you not to leave
Because I'd go berserk?
Well. . .

You left me anyhow
And then the days got worse and worse
And now you see I've gone
Completely out of my mind
And. . .

They're coming to take me away, HA HA
They're coming to take me away, HO HO HEE HEE HA HA
To the funny farm
Where life is beautiful all the time
And I'll be happy to see
Those nice, young men
In their clean, white coats
And they're coming to take me away, Ha-haaa!

Yes, the record industry -- the one you made all those hit records for over many decades has fallen on hard times. Blame it on Steve Jobs. Blame it on the Bossa Nova (oh sorry, my USC readers may not know this song by Eydie Gorme). Or blame it on those computer happy kids of generation Y. But don't blame yourself. Right?

Wrong.

The Congressional Royalties Board has already given you the biggest warning you could get, but you're not getting it. The CRB is choking off all but the Clear Channels of Internet radio by imposing royalty payments that are so onerous that it threatens to shut down the burgeoning business of streaming radio as we know it. (And when have you been able to use the term burgeoning in music media of late).

You, the radio industry, think that this isn't your fight. But it is, because they're coming to take you away.

You thought it was a joke
And so you laughed
You laughed when I had said
That losing you would make me flip my lid
Right. . .

You know you laughed, I heard you laugh
You laughed, you laughed and laughed
And then you left
But now you know I'm utterly mad!
And. . .

They're coming to take me away, HA HA
They're coming to take me away, HO HO HEE HEE HA HA
To the happy home
With trees and flowers and chirping birds
And basket weavers who sit and smile
And twiddle their thumbs and toes
And they're coming to take me away, Ha-haaa!

Maybe the radio industry is suffering from post-traumatic stress syndrome and is in denial that it has lost the next generation and more and more people are listening to their entertainment on mobile devices other than radios. Maybe that's why you think everything is going to be alright.

If we could just get some HD radios into their hands, they'd see!

If we could just get the FCC and Congress to let us own more stations then we could compete against the iPod -- everybody's favorite whipping boy for audiophile dysfunction.

If we could just run one or two fewer commercials, they'd come back and see what they're missing.

Why that's insane! Which brings me back to "They're Coming To Take Me Away, Ha-haaa!".

I cooked your food
I cleaned your house
And this is how you pay me back
For all my kind, unselfish loving deeds?!!
Hah. . .

Well you just wait
They'll find you yet
And when they do they'll
Put you in the ASPCA, you mangy mutt!

Yes, radio, you not only cooked their food, you helped them bring home their bacon. You played their records. True the music provided you with content, but they made all the money and then turned around and charged you for the right to make them rich.

Suddenly the words to this song aren't so insane anymore. Remember, you made this one a hit too. You just didn't know it was all about you.

For all my kind, unselfish loving deeds?!!

What ingrates, the record industry!2 It's like don't they know radio has problems, too?

The music business is over.

The labels are dinosaurs. They have had every opportunity to get with the changing times (iPods, mobile devices, downloading, DRM-free music, etc) and they resist. They sue students. The RIAA sued a stroke victim last week. They just want it all to go away so they can crawl up into the fetal position hugging a few CDs.

The radio business is over.

Listeners are aging. They admit they've lost the next generation. They seem incapable of responding with truly new content. They have no mobile plans. No Internet radio plans (other than streaming their own signals). They've forgotten they're in the content business not the broadcasting business. They just want it all to go away and pretend that making more of what the audience wants less of on HD subchannels will make radio a booming business again.

TV is over.

They just don't know it yet. That's why they are muscling their way into the online content delivery business. But they have no content -- maybe with the exception of HBO. They're in the cheap programming business. Reality TV shows. Rebroadcasts on the web. Video pre-rolls are not a business model. I knew television; television was a friend of mine. TV, you're no YouTube.

Newspapers and print.

Oh, don't go there. That all happened before the digital revolution. A textbook lesson on how to blow up your business before the digital age. In fact, the Internet can save print.

But the deepest cut of all is the one that is coming to the radio industry from their friends at the record labels -- the people they helped make!

The signs are all there.

Flat royalty rates are in your future. What's happening to Internet radio will wake you up when it is too late. No one is going to feel sorry for radio when the final nail in your coffin is hammered in by your former partners -- the very music industry you made and nurtured.

If I'm radio, I open my wallet, pull some of those attorneys off the petty lawsuits and start firing on the real enemy.

Laugh if you must. But...

Those nice, young men
In their clean, white coats
And they're coming to take me away, Ha-haaa!

They're coming to take YOU away. Do something now.

HD Radio Is Scaring Me

CNN Radio asked me to do an interview last week on their show "Digital Downbeat", a fast-moving, excellent show I had never heard of prior. Bob Struble, President, CEO and Chairman (all that) of iBiquity, the surviving and only HD technology company, represented the traditional radio side. You know who was asked to take it from the other side.

What transpired was spin-doctoring in the image of White House Press Secretary Tony Snow.

Struble was good. Real good.

He was also wrong. Dead wrong.

He led the audience to believe that HD radio was the hottest thing around. That HD was the future of radio. He also had a few Pinocchio moments where he said things were in place to get better for HD radio. Can any consulting adult really believe HD is the answer when there is next to no consumer interest in it?

Okay, maybe you can forgive this man for simply being a believer in what he does. He's probably a great guy when he's not hawking HD radio. But what is really scary is that the radio industry may be believing this pap.

The HD proponents believe that Wal-Mart's decision to sell affordable HD radios will do what bad programming on their sub-channels can't do -- sell more radios.

Does that make sense? No, not to me it doesn't.

They believe that HD radio actually sounds better and that people care about audio fidelity when it comes to their radios. Couldn't sell that to me when I see computer users listening on those lousy built-in speakers. Or on iPods. Fidelity is something young people think is what you do in committed relationships -- not their music. At least not right now.

And they represent the next generation. The people the radio industry now admits to letting get away.

HD proponents also believe that the specialty programming on the sub-channels will be an attraction when the radio industry is having a tough time just keeping their one main signal popular. Certainly, it's less popular with the younger generation. Research has been done that shows radio will take it on the chin in the years to come because of digital alternatives. That's, of course, if you need research to tell you that.

Yet, Struble drones on.

So hear him out. Hear me out. See if you don't get the feeling I got that the radio industry has its head up -- well, let's just say up in the clouds on this issue.

Here's the link to CNN's "Digital Downbeat" (it's a very interesting show, but if you're pressed for time advance to the very end for the HD part).

The Fall of CBS Radio

Clear Channel was first in every way.

First to amass over 1,000 radio stations. First to not be able to run 1,000 radio stations. First to move to sell off 400+ radio stations -- a mini-Clear Channel. First to declare victory while share prices fell from the $90 range to the $30 range. First to know when to fold 'em and get out.

But the other Clear Channel is CBS.

I'll give you that CBS doesn't have the hard nose, take no prisoners attitude of the Mays family business, but when it comes to running radio stations into the ground they are in good company -- they take a backseat to no one -- except, of course Clear Channel.

Last week, The New York Post said CBS Radio Chairman Joel Hollander is getting ready to step down before his contract expires at the end of the year -- "sick of (Les) Moonves' Radio Ga-Ga". As they say in South Philly, "who don't know that?"

CBS Radio has been second in revenue. Second to Clear Channel as a big, bad consolidator. Second to realize that even with every advantage that the near monopolistic powers of the Telecommunications Act of 1996 gave consolidators, they can't run the stations they own to the lofty standard of increasing "shareholder value". Down from the $50 range when consolidation was going strong after the turn of the century to --- you guessed it -- the $30 range today.

So you may be asking, is all of this just because radio people are incompetent? Isn't it all Steve Jobs' fault (ha! ha!)? No, radio people are not the problem. They are the general managers, program directors, sales managers, talent that has to work for these suits. The suits are the problem -- and I say that cautiously, since I wear suits.

Well, let's get back to that incompetent theory.

I can't remember the name of the magazine that used to run a feature called "Can This Marriage Be Saved?". Maybe it's still out there somewhere, but I was thinking if I offered the CBS dilemma to my very astute readers (industry types, professors, students, the press), maybe they could answer the question "Can This Consolidator Be Saved?".

Obviously, Joel Hollander would be Houdini if he escapes with his job after the public dissing The Post is claiming. Let's look at CBS' problems and you decide:

• So, Howard Stern tells CBS he is leaving for satellite radio a year before he goes. CBS CEO Les Moonves keeps Stern on the air until he bolts for Sirius Satellite Radio -- $500 million richer. Hollander reportedly wanted Stern off the air. Moonves wanted the money and kept him on the air then sued him when he left for misuse of airtime and plugging his new show. Who is the goat here? Hollander can be faulted for not finding a suitable replacement for Stern with a year's notice. Stern's first replacement, David Lee Roth laid an egg. Mornings are still hurting for CBS depressing their stock. Wouldn't you think the radio guy should know that if his number one biller leaves (and in morning drive at that) that he is responsible to find the next big biller. Moonves knew that without Stern CBS Radio billing would be hurt so he kept Stern on the air and went with the money. Shame on your Black Rock -- someone should have either paid Stern $600 million to stay (and that would have been a bargain) or have a plan B without Stern. Blame goes to both Hollander and Moonves.
• What Einstein blew up WCBS-FM in New York -- the legendary oldies stations that sources say was cashflowing $15 million a year before they turned it into "Jack" -- the station that plays what it wants? CBS had other options in New York to put "Jack" on the air if it was burning a hole in the hot clock of Hollander and his brother Les who was brought in to help with sales in the nation's biggest market. What kind of strategy includes blowing up an oldies station that is still churning out that kind of billing? This one is on Joel Hollander. I'm not sure Moonves even knew what kind of music WCBS-FM played.
  
• It gets worse -- what about the old WNEW? He inherited "Blink" from the Sykes regime, approved another dance station (The "Mix") and wound up in desperation flipping to "Fresh". Ching...Ching...another $10 million in estimated revenue down the drain. Arguably, WNEW as a rocker might have done $15 million a year.
  
• Oh no, more? K-Rock. Gone. Millions more down the drain. I don't have enough room to go into Chicago. All of this is on Hollander.
  
• Who picked Rob Barnett as National PD even though he hadn't worked in radio for 15 years? He was gone six months later. A coincidence? Could an alien from Art Bell's world have kidnapped Barnett and taken him away from the insanity of post-consolidation radio? Oops, it's got to be on Hollander. He was in charge.
  
• Selling 39 stations -- hard fought and paid for as part of the consolidation run-up -- for $668 million. Now what's that all about. Who sells stations when your government and regulators just about craned their necks to look the other way and allow you to consolidate? Maybe a company that can't run 39 more stations. Is this sounding like Clear Channel again? Never mind, I don't want the stations. Where's the door? This one is on Moonves. Hollander would have had to be crazier than a loon to go to his boss and say, "let's sell some stations and only bring in $600 million".
  

So, "Can This Consolidator Be Saved?" or better yet, "Can This Consolidator Be Saved From Itself?"

Who makes stupid moves like not having a backup to their bread-and-butter morning guy?

Who flushes tens of millions in in-the-pocket revenue down the drain by blowing up successful radio formats with no proven way to even equal the lost billing?

Where do they come up with these silly formats like "Jack", the station that brags "we play what we want" while the next generation counters with "We play what we want -- it's not a radio anymore, it's an iPod".

What would I do? Thanks for asking.

Since Joel Hollander is supposedly leaving anyway, I'd beg WCBS-FM Program Director Joe McCoy to come back and fire up the beloved oldies station and New York will love me. I'd make WNEW a rocker again. I'd call some of my many talented program director friends and consultants and have them fix the broken stations. How about some of the talent they already have in the house at CBS -- untie their hands and let them do it. I'd get an Internet strategy real fast. A mobile strategy. I'd get a five-year plan going to develop future talent (I mean, if the morning show represents 50% of your total station revenue, could you trust me on this one?).

But, I can hear it now. What do you know, Jerry?

You're happily lost in academia now. You're the former owner of Inside Radio and you sold to to Clear Channel! How do we trust you? And I heard your act back in the day. And you did the Drake format, isn't that the original "less is more" (less commercials, more music)? And your friends are all former PDs from the 60's, 70's and 80's and what do they know? Okay, Okay. The "Can This Consolidator Be Saved?" game sounded like such fun, I wanted to get in on it.

Hey, it doesn't take a genius to figure out what CBS has done to waste its radio assets.

And that's exactly what we've got -- two geniuses who have for whatever reasons wasted a perfectly good radio company.

Inside The Copyright Threat to Internet Radio

My longtime friend Kurt Hanson, publisher of Radio & The Internet (RAIN) has just done a spectacular piece on copyright law and the Congressional Royalty Board (CRB) -- what went wrong.

Internet Radio is the future of broadcasting and it is in serious jeopardy now due to a recent CRB ruling. Many Internet radio stations -- especially the "little guys" (the lifeblood of streaming) could be in jeopardy. They may even have to shut down as a result.

Kurt is leading a major effort to get the CRB ruling reconsidered. It's life or death for Internet Radio. I've known Kurt as a man of integrity for many years. I have personally read his site almost every day since it debuted. If you're not a regular reader, you'll want to subscribe and have it delivered to your email box.

As publisher of Inside Radio I called him the day he launched with compliments about his product and his editorial foresight. Kurt, like a lot of us, has roots as a terrestrial broadcaster. He wishes no harm to local radio but he has always seen the future clearly on this issue and he is right.

When I started Inside Radio all those years ago, publishers tried to bring the news to their readers -- scoop each other if possible and reflect the colorful nature of a once booming entertainment medium. Today, the Internet has altered that mission -- certainly in some cases. This blog is an example of advocacy journalism which could only happen because of the Internet. In my opinion RAIN is another example of excellent reporting and championing competition.

Kurt is the lead man on the CRB issue. I urge you to take a moment to read his brilliant piece. To make a difference you'll want to understand how the context and current situation is critical to being able to impact the greater good and save the diversity that Internet radio promises -- and terrestrial radio has lost.

Read it here.

Fear Channel

Clear Channel, or should I now say, Fear Channel, has rescheduled its vote on taking the company private from March 21st in just a few days to April 19th presumably to have more time to seek shareholder approval.

Mark Mays has already warned his employees that whether the deal goes through or not, there will be many changes ahead for them. Again!

So I ask, what's new?

On the radio side the poor people of Clear Channel have lived through the Randy Michaels era, John Hogan's stewardship and now the prospect of not knowing what the future may hold for them one more time. More change? That's all they've had at radio's poster child for consolidation. To announce that Fear Channel employees better be ready for change is liking telling a resident of Buffalo that they'd better be ready for snow.

This company has been its own worst enemy.

It had everything going for it -- everything a consolidator could ask for. All the top stations in the most important markets. A green light from regulators and legislators to go out and consolidate. Financial support from the public markets and a battery of attorneys to sue anyone who got in their way.

So how does this conglomeration of radio, TV, outdoor and other assets wind up in a situation where shareholders should be happy to vote "yes" for $37.60 a share plus dividends by the end of the year?

Maybe it's because many of those shareholders owned the stock when it was in the $90 range. Okay, maybe that's not fair. How about the $50 range. Still a drubbing no matter how you look at it.

Fear Channel, ever the sly fox, is postponing the "more is less" vote because arbitrage funds have been buying the stock since the former January 22nd voter eligibility date was announced and they are more likely to vote "yes". In other words, they bought in low not high like the other poor investors who preceded them. And some companies like Fidelity Investments are selling off their holdings -- considered a good thing for proponents of the deal.

This exit stage left by Fear Channel is not a slam dunk. In fact many analysts think the company is still worth more than the $37.60 share price it is offering and that en mass shareholders will see through the buy-out strategy.

So, longer term investors may fear that Fear Channel will sell off the 400+ non-essential radio stations (translation: the ones they can't run) and emerge with a private business that looks better the day after they get their $37.60.

I have a hard time believing Fear Channel would pull a fast one like that, don't you?

Obviously, some on Wall Street smell a skunk.

It's yet another example of great irony to me that Fear Channel, the company built on fear -- of employees losing jobs or status due to consolidation and the "benefits" of consolidation such as voice tracking -- could now have to fear a "no" vote by their investors. Another irony is that in the Fear Channel-friendly state of Texas all shareholders not voting will be counted as a "no" vote.

The company whose lawyers spread fear by suing or threatening to sue some of your friends and mine especially in the early days of consolidation now has lots to fear itself.

Fear Channel's employees -- well, they obviously can't be scared off any longer if they've lived through the implosion the company refers to as consolidation. They are a hearty and talented bunch -- and loyal -- they are victims not perpetrators of the rule of one.

So now, it's payback time.

Fear Channel has to fear that the shareholders are smarter than they looked when they first bought the company's stock and thought it would be a good investment.

And Fear Channel has to fear that even selling off their 400+ radio properties, they may have to actually continue running the company for a while selling depressed stock and unable to spike its value unless or until it can find another way to sell off the assets they can't run which right now is just about everything they own.

The whole thing is a damn shame.

It's a shame Mark Mays had to tell his employees even more change was coming when his departure and the departure of his cronies isn't one of them.

Iceberg Dead Ahead!

By Steve Meyer, Inside Music Media™ Contributor

A long time ago, in a galaxy far far away from MTV, VH-1, too much disposable music, misused call-out research, corporate radio, the Internet, downloading, there was a whole lot more great radio, a whole lot more great label promotion people, departments called 'Artist Development' at all labels, and more people in the music business who really cared about music, not "product" and fashion videos.

Now we're engaged in a civil war between the states, i.e., the states of mind-set in the music industry versus the states of mind-set in the consumer marketplace, and this war will test whether this business of music can so long endure.

In my opinion, it's the failure of the music industry to fully understand the changes that have occurred in the consumer marketplace over the past decade that have contributed to the chaos existing at all major music companies today. While millions were illegally downloading in the late 90's, the industry seemed to put its collective heads in the sand, and didn't pay attention to what was happening at light speed as computers replaced stereos and TVs for many young people.

The industry answered largely by having its useless association, the RIAA, file lawsuits against several hundred individuals monthly they identified from a variety of online P2P websites. Here it is 2007, all the lawsuits have done nothing to decrease or diminish downloading in the consumers' mindset, and this week, the RIAA is now riding into college campuses on white horses and trying to round-up all the "outlaws' who are downloading illegally.

Again, complete failure of the music industry and its association to fully understand and comprehend what changes have occurred in technology in the past five years. There are intranets on almost all college campuses which cannot be tracked, and "darknets" all over the web that fly underneath all detectable online radar. If the industry and RIAA are cognizant of these facts, would they even bother to pursue action that has so far been as effective as the people who threw ice from the iceberg the Titanic hit, off the decks back into the ocean, thinking it might actually help the ship from sinking?

At the Digital Music Forum East conference in New York recently, Greg Scholl, CEO of independent music label The Orchard said, " The economics of the business are over for good and aren't ever going to be the way they were before."

Mr. Scholl has said it all in that sentence. Maybe, just maybe, someone in the industry heard those words and said it's high time to "turn the page" and start lowering the lifeboats onto the seas of cyberspace before the ship (the industry) sinks in a sea of continued chaos.

Steve Meyer is one of the music industry's top professionals and publisher of the new media newsletter DISC & DAT.

YouTube Fight Is Viacom's Iraq

It's just traditional media companies being traditional media companies.

Viacom and its subsidiaries like CBS, Comedy Central, etc are simply acting like Universal's NBC and Disney's ABC. They have "Seen-us envy" -- that disease that has old media companies becoming paranoid because the audience gets to see their content, they even get paid, but they can't control the distribution.

So, Viacom let the other shoe drop yesterday in Federal Court suing Google over YouTube for more than $1 billion in damages. This suit makes Clear Channel look like a nickel and dime litigator. Viacom is becoming the new Clear Channel while Clear Channel which put off a shareholder vote on taking the company private must be abiding by less is more in the lawsuit department. (By the way, do you think a company postpones a shareholder vote if they think they have enough votes to approve? Just asking.)

Back to Viacom.

Google is not intimated by the lawsuit. Google prints money -- lots of it and even though it has had some lousy ideas like selling TV, radio and print time like a commodity, it is one of the few new age media companies that still lives in the future. Viacom, on the other hand, is a prehistoric entity using its might and the courts to enter into a battle to save itself and the industry from those insurgents who would threaten democracy as we know it in the media world.

In short, the $1 billion Google lawsuit is Viacom's Iraq. A no-win war that squanders time and money. The battle keeps them unfocused and unable to fully concentrate on little things such as their digital future.

Viacom will lose this war.

The burden of proof is high. It has to convince the federal court in the Southern District of New York that its rights and ability to profit from time sensitive material like "The Daily Show" have been detrimentally impaired by appearing on You Tube.

Most of you know YouTube takes content down when requested. Viacom wants it to be automatic. There is law that appears to give YouTube the benefit of the doubt as to whether removing content when asked is enough.

Some people believe Viacom is just bluffing.

The thinking of Bob Peck, a Bear Stearns analyst, was attributed in yesterday's Wall Street Journal article saying "the lawsuit is likely a negotiating tactic aimed at pushing talks forward on better terms for Viacom" in doing a financial deal with Google. That's how big media companies work -- sue 'em and soften them up.

Google pays compensation to others. The BBC just did a content deal. Google had even been negotiating with Viacom until the talks broke off. At least Viacom is willing to sit down and negotiate face-to-face with the "enemy".

So this is now war.

Viacom unleashes its troops (the lawyers).

Asks Congress (Sumner Redstone) for funding.

Gets the generals (company heads) on the field to play nice and win one for the company.

But the insurgents don't use roadside bombs, they use the power of the people who support free expression and distribution on the Internets (as President Bush would call it). These radicals are not so destructive as to think that the video clips should be stolen. No, they are willing to pay handsomely -- just not as handsomely as the Great Satan (Viacom) wants.

They'll battle in court. Lose valuable time fighting terrorism (cable system fee hikes, etc) on other fronts while they spend feverishly on their obsession of "fighting them there (in court) so they don't have to fight them here (in the marketplace)".

Both sides will get nicked. Wills will be tested. The money -- whose counting?

In the end after much time and expense, neither side will allow a Federal judge to rule on this matter. Neither side is that stupid.

So, welcome to "America's Funniest Video Screwups" -- the show that asks the question how dumb do you have to be to spend years fighting over what is not a winable war.

No, I'm not talking about Iraq here -- although if the shoe fits go ahead and wear it.

I'm talking about the digital future.

Viacom may not like what the Internet has done to them but the sooner they get real (get back to producing content) the sooner they will find the compensation they deserve in a digital world.

Record labels, radio, television, newspapers and soon the movie industry are being rocked by the realization that it would be far better to send your assets to Afghanistan (Internet) to fight terrorists (those who would do anything to upset traditional media's status quo) than join other nations (new and existing media companies) in rearranging their digital futures.

See what I mean, YouTube is Viacom's Iraq?

No one can win this war and fighting them there doesn't make the digital future any safer for a traditional media company here.

What If Radio Got Tough With The Record Industry

An Unlikely scenario

Right now the ever weakening record labels are sticking it to broadcast radio. And some of those bullies over there in terrestrial radio are just taking it.

There is growing evidence the music business is looking to charge AM and FM stations flat fees for permission to play their music. The CRB has already dealt a blow to the fledgling Internet radio business by jacking up royalty payments beyond which most operators can afford to remain in business.

Let me get this straight. Isn't this biting the hand that feeds them. I mean, what is the record business without radio? Most record sales are still influenced by airplay although Internet-based alternatives are growing in popularity with the next generation. I guess you can forgive the labels for not being able to see the coming power of Internet radio when universal WiFi is available -- they aren't good at seeing trends these days. But radio? Are they really going to stick it to radio when radio is down and out?

Oh yes.

So here it is. A game plan I'd ask the radio industry to consider:

• Take one of your too-many stations in a cluster and designate it as a station that will play only DRM-free music that is submitted to them by artists who are willing to waive their royalty rights. (I know what you're thinking, what kind of music will this be -- it will suck). Not so fast. The next generation is happily involved with this kind of music on social websites.
  
• Make all the music available for sale on the station website -- even take a piece of the action. Be fair here. Put the proper legal announcements on the air to avoid payola problems and let the music make it on its popularity not on pay for play. Try. Really try. This is your future you're playing with.
• Have a game plan to make all the music you play for sale via mobile as soon as you can. Mobile is the future device all young people own and will continue to own. You need to be there.
• When your station breaks acts, make sure you have a piece of the action because you could also handle the touring (or corporate could). They will smell money.
• Start a social networking site --- local, please. Can link with a national one, though.
  

If you're still with me you'll see many challenges and many benefits. The challenges, having faith in music that isn't spoon fed to you by a record label, abandoning the traditional way of putting music on your station, learning how to market the music you play (legally).

If you're not motivated to overcome the challenges and problems then don't worry, Internet radio will do this for you. They will have no choice as the royalty fees make playing licensed music impossible for them. And they will embrace social networking. And they will be addicting to the next generation. If this is too much for you to try, then sit back and spend years battling over royalties while your listeners continue to abandon you.

Now I said, take one of your terrestrial stations and try this experiment. And remember the lesson of Westinghouse Broadcasting, the founder of the all-news format. It takes a long, long time to develop a new business model. They stuck with it and let the market eventually come to them thus, the success of all-news radio.

If all this talk about flat fees and the ability of the CRB to put most of Internet streaming out of business doesn't scare the hell out of you then maybe this will.

Apple -- and the music industry's nemesis Steve Jobs -- is already doing it.

A Royal(ty) Screwing

Kurt Hanson in his March 9th edition of RAIN quotes Beta News as saying that ""CRB rates would make SoundExchange a '$2.3 billion per year business'" and "based on the CRB's royalty rates for 2006, AOL Radio is expected to receive a royalty bill for last year for about $23.7 million...".

It gets worse:

"On a per-listener scale, broadcast radio stations paid $1.56 per listener on average during 2006; and in 2010, that figure rises to $1.94 per listener. BetaNews estimates that Internet radio sites, by contrast, will pay $8.91 per listener for 2006, rising to $15.59 per listener in 2008 and staying flat beyond that time.

"Thus an Internet radio music provider is likely to pay in royalties almost ten times the amount for each of its listeners throughout the year, than the terrestrial broadcaster."

This is pure insanity.

It's murder to the streaming audio business and it's suicide for the record industry which finds new ways all the time to give the partners who help them sell music a royal(ty) screwing.

And what's about to happen next should be the final nail in the coffin for radio, the sales engine of the record business as well as Internet radio, their future sales engine. The labels are pushing for a public performance license for radio in the US.

That's flat fees!

These labels are playing a high stakes game. They are going after everyone who can help them.

Radio stations.

Internet radio stations.

Their customers.

ISPs-- look for a get tough approach to get them to actively police their networks for illegal downloading.

So far everyone is taking it.

Internet music streamers are praying that they can get the CRB to revise their mistake or else they will not be able to afford to be in the Internet radio business.

Terrestrial radio should be helping their Internet radio brethren fight these ridiculous rate hikes. Not because radio consolidators are nice guys. But for one self-serving reason.

Radio is next.

I have a unique scenario for you to consider if the radio industry and Internet radio decided once and for all to turn the tables and get tough with the record labels. I'll have that for you tomorrow.

(Click on the item below if you'd like it delivered to your email automatically).

The Advantages of Disadvantages

The FCC and your elected officials are responsible for the current sorry state of the broadcasting business. Wall Street distracts us. Steve Jobs attracts us. And Congress, the enabler of many of today's problems for broadcast media whacks us.

Congress passed the Telecommunications Act of 1996 tacking on radio consolidation before the final vote. Congress in its infinite wisdom (or lack of it, thereof) developed the template of growth for the radio industry. A few owners own virtually everything worth owning. It created Clear Channel, the Clear Channel clones and made it impossible for small owners not to sell out to the big boys. But it was Congress that sold the radio industry out in the end not to mention America's radio listeners.

The FCC used to hold radio broadcasters to a high standard for license renewal. As a program director I knew -- and my contemporaries knew -- that if we planned on staying employed we had better serve the public interest, convenience and necessity. We had to know the market and the audience and it was a ritual I didn't fully appreciate back in the day, but I sure appreciate it now. As my friend Bill O'Shaughnessy says, radio licensees are "permitees" of the public trust. (I hope you're not laughing at me, but it really was that way at one time). The FCC sold radio out. This is not about politics. FCC chairman in both Democratic and Republication administrations are guilty.

Radio never had a hard time dealing with indecency until the FCC tuned out in the 90's and then refocused as a political issue after the turn of the century. I've always been amazed that Janet Jackson's exposed breast on the infamous Super Bowl half-time show caused more trouble for radio than it did for television.

I'm thinking, what's the fuss about letting the two satellite networks merge. In this country one company is not a monopoly, is it? Look at how Clear Channel singlehandedly took over the radio industry legally. Who would call them a monopoly -- not our Congress and not our regulators. Now radio is crying fowl because the satellite companies (not their real competition) want to merge. I'm betting the merger goes through. DOJ -- no problem. Congress, FCC -- maybe a few meaningless caveats. How do I know? History teaches us. Radio's indignation is laughable on this issue.

And outside interference on Internet music royalties threatens to shut down the only potential growth business that's on the horizon because the next generation is born of the Internet not radio and increasingly not TV.

Every problem that I've mentioned so far was created by or is enabled by the FCC, Congress or our legal system.

And, I haven't even gotten to the real problems: Steve Jobs, the iPod, music downloading, mobile devices, the Internet, social networking, the next generation and on and on.

In other words, who needs competition when our establishment has reduced or removed competition and even that hasn't helped.

Radio is concentrated in the hands of a few and it's on the decline. Go figure.

Maybe radio ought to reject the help that everyone has given them -- monopoly, a free ticket, less scrutiny and go back to the way that works -- running local radio stations that are held accountable for their licenses.

With friends like Congress, the FCC, the courts and Wall Street, who needs competition which is precisely why the next generation will be consuming its media on a mobile device that probably will not have radio on it.

I'd rather be running an Internet radio station. Rather be developing mobile content for the future. Monetizing podcasting. Building social networks. Working out royalty deals that are win-win for growth of digital media. I'd even rather run a record label because digital delivery is their friend not enemy. They just don't know it yet.

See all these disadvantages?

Compare them to every advantage that the radio industry has received and squandered and you'll soon become a believer in appreciating the advantages of disadvantages.

Pardon Clear Channel?

With all the talk about a possible presidential pardon for Scooter Libby, I got to thinking whether the radio industry should consider pardoning Clear Channel -- not for high crimes and misdemeanors because there has never been evidence such acts were committed but for blowing consolidation.

Some members of the jury have come out in favor of the president pardoning Libby even though they just convicted the aide to Vice President Cheney. Since they can find it in their hearts to forgive Libby, can radio forgive Clear Channel?

Can its employees see it in their hearts to let go of the fact that Lowry and Mark Mays could have named Jimmy deCastro to run the assembled group of stations, but instead chose Randy Michaels. Michaels was a bright guy with a style like a hammer. But deCastro was a proven winner from the AMFM station group that Clear Channel purchased. His stations were making money hand over fist at the time. And deCastro had the human relations skills of Dale Carnegie and the enthusiasm of Tony Robbins. Imagine how deCastro could have assimilated Clear Channel's stations into his very successful AMFM group?

Is it time to forgive the San Antonio based group for acting unilaterally creating a one-group coalition of the willing without the support and consultation of other radio groups? That other guy from Texas mounted his horse and road into the Iraq war alone and his job approval rating is as low as the price of Clear Channel stock.

And while we're on the topic of shareholder value, can all those owners of CCU who were guided (or misguided) by investment bank analysts forgive this mega corporation for making their per share investment shrink from the high $90 range to the $30 range? Didn't they think radio was a growth sector when they invested in Clear Channel?

What about for that embarrassing self-serving stunt called "Less In More" that some advertisers called "More For Less"? Did it believe it had the ability to will its commercial cutting strategy on the entire industry when in the end that tactic didn't even work for them? Cutting commercials is a good thing. Shouldn't they have just done it without making a federal case out of it and listeners would have responded with higher ratings?

Or for standing in the way of replacing the antiquated paper diary system in this age of technology with the Arbitron People Meter. Even at this moment, Clear Channel, owner of over 1,100 stations is encoding its signal and subscribing on just one market with no announced plans to back it elsewhere as the national roll-out begins. Can the industry forgive that lack of leadership? What about advertisers who want the People Meter?

Or for giving us virtual voice tracking -- the single most inappropriate way to take radio's main advantage -- its localism -- and squander it by masquerading as a way to make smaller markets sound more professional while cutting jobs and using on-air people to cut tracks for multiple markets?

Is radio ready to pardon Clear Channel for the many careers that were shipwrecked and for tying the hands of many of its key people while it deferred to Wall Street inspired cost cutting? The litigation. The bull in the china shop management. Jimmy deCastro wouldn't have done it this way. His employees loved him -- still do. And the Mays' could have chosen him to run the radio group.

Can Clear Channel be forgiven for doing virtually nothing to help adapt to the mobile devices and Internet that the next generation demanded? But perhaps they will be out of the business by the time the rest of the industry has to seriously consider why it has lost its young demographics to a cell phone with iTunes built in.

Do I mention embracing HD technology -- an idea whose time has come and gone while the industry fought over it and now the biggest group helps lead everyone else to the hemlock?

Or for the biggest sin of all -- exiting the business leaving it no better off for having just about every advantage -- only to anticipate another pay day when they downsize and maybe even another pay day yet when they sell off the remainder of their assets? If you can't make a radio group work (i.e., produce shareholder value) when the law lets you own all the good real estate, then what must you do for your next act? Sell?

Is the industry ready to let go of acts past and future that have not been in the interest of the radio industry as a whole including the possible sale of hundreds of smaller market stations to one buyer thus creating another "Clear Channel". This instead of selling the assets back to individual local owners and minority groups. Helping to finance the purchases would also be the right thing to do.

Congress enabled the modern day Clear Channel. The FCC blessed them. The public believed them.

Will their shareholders forgive them and vote to let Clear Channel head for the door with lots more money or will they nix the sale and force them to use their exit strategy to build up their weak share price?

And, that brings us back to Scooter Libby.

A lot of people are sick of politics as usual and even though they were sympathetic toward him for being the fall guy, they voted to convict.

I'm wondering is radio sick of consolidation as usual and even though they might be sympathetic toward the people who have to tend to what others have called "The Evil Empire", are they willing to pardon Clear Channel and order this first big radio consolidator to the prison of forever being seen as the company that presided over the decline of the radio industry.

Isn't that punishment enough?

HD Radio Wal-Mart Style

The radio industry is all excited about a just-announced decision by Wal-Mart to sell "affordable" HD radios. Bruce Beasley quoted in Inside Radio said Tuesday, "Wal-Mart doesn't pick up on too many bad products to sell."

Unfortunately, HD radio is one of the not "too many".

HD's time has come and gone with the radio industry fighting forever on which system to adopt. HD might have been neat in the early 90's, for instance, when radio had no competition and MTV was the only minor distraction.

And, the price of an HD radio is too steep.

Nobody needs one because the content on the sub-channels is weak. The radio industry has enough trouble keeping its primary terrestrial programming fresh and competitive after all these years of Wall Street-inspired cost-cutting and most of the HD channels that are broadcasting now are not ready for prime time. It's radio on the cheap (that's if you're not counting what you hear on some of the consolidators' main channels, too).

It strikes me as odd that while Internet radio has to fight for its existence due to paralyzing royalty charges that could kill off the little guy, HD radio is paralyzed by a lack of programming by the big guys who refuse to make it a financial priority.

HD is not going to save the radio industry.

HD radio is not going to appeal to the next generation and the radio industry doesn't even have the advantage of the funeral business currently which at least always gets the next generation as a customer. Generation Y is Generation "Why" when it comes to HD radio. It's meaningless to them. And already-happy terrestrial radio listeners aren't exactly running to Radio Shack for all those HD radios that were supposed to save the industry a few months ago. Remember?

All this is beginning to sound like an act of desperation -- finding retail partners to sell an overpriced radio that carries very little appealing programming and that is not much of an improvement over the radio's we already own. Don't start with the digital audio argument. Most listeners plain and simple don't care about fidelity. And we know the next generation could care less as they listen to compressed MP3 files on little iPod ear buds or on computers with awful little speakers.

I don't mean to be so hard on the radio industry. You can't blame them for trying to put lipstick on this pig, but you can't really put lipstick on a pig.

Any other ideas?

The radio industry puts a "stop-loss" on HD radio and puts whatever budget or people power it is now squandering into bolstering their primary terrestrial programming. Give the PD more money to create content. Start there. A no-brainer.

Then, get a group of radio consolidators to spend their time and money not on how to sell this Edsel called HD radio but to contribute legal fees for Internet radio entrepreneurs to fight the battle over a recent massive increase in royalty fees that could wipe out Internet radio.

Now I'm losing you, I know it.

What? Radio help Internet radio. They're a competitor, aren't they?

NO, they are not. They will be your replacement 10 to 20 years from now because you still insist on hanging onto the past. Radio broadcasters are in the news and entertainment business not the terrestrial radio business. This is a fact they either don't realize or don't like.

Hear me out.

Help fight those onerous rights fees being imposed retroactively on Internet radio broadcasters. Then, make alliances with them to produce new and exciting content for your company.

In other words, this is your way to get into the Internet radio business. You can be the Clear Channel of Internet radio. I take that back. You can be the next major force in broadcasting where the next generation of listeners actually reside -- the Internet.

I am under no false illusion that any major radio group is going to take this idea and run with it. But I can promise you that the stubborn and ill-conceived HD concept is going down like the Titanic and radio broadcasters seem hell bent to go down with it.

Get out of HD.

Get into Internet radio.

Then, you own two platforms -- terrestrial and Internet and when WiFi is universal, you'll still be in business. Hey, Wal-Mart's got a lot of problems, too. It seems, just as radio has lost touch with its audience, they have misread their customers. Wal-Mart vows to get back in touch with what made them the world's largest retailer. And if their embrace of HD radio is any indication, they, too, have a long way to go.