Radio’s Deadly Game of "Hi-Lo"

For those who may not know, radio when it was in its second heyday used to employ a contest giveaway called "Hi-Lo" where callers to the station eventually guessed the jackpot and won money.

Many of us, as program directors, also ran contests similar to “Beat The Bomb” where a contest caller went on-air to see how long they could hang in before a bomb went off (a sound effect, not the real thing). Tell the jock to stop at 35 seconds before the bomb goes off and win $35. Stay with it too long and the bomb blows and you win nothing – except a consolation prize like a 45 rpm record or an album if you were lucky.

Ironically, today’s consolidators like Clear Channel and Cumulus who are leading the charge to go private are playing their own versions of these once popular radio games.

They’ve mastered their own deadly game of "Hi-Lo" because the industry has gotten investors to buy public radio shares after consolidation was enabled in 1996 at prices that were generally much higher than they are now.

That’s where the “Lo” comes in except I think I’ll spell the consolidator’s low “L-O-W” as in decreasing shareholder value.

Radio companies – particularly our consolidation cheerleader, Clear Channel – ain’t what they used to be especially if you, like many investors, bought into the company you thought would be a growth industry.

Radio is no growth industry.

It has no future just a glorious past. Tomorrow’s youth wants little to do with it and radio stations have obliged them by ignoring the demographic.

Then there’s the “Beat The Bomb” aspect of consolidation.

Maybe we can call it “All In The Family” where the Mays’ and the Dickey’s head for the exit with their investment bankers and hangers on poised for the future as they would have us think.

What future?

Theirs – of course.

Look at their managers, programmers and salespeople. Their investment has not paid off.

Look at their shareholders. Well, enough said. "Hi" is high and "Lo" is Low. That’s easy enough.

Remember when Mel Karmazin used to use the words “shareholder value” what seemed to be every other sentence he spoke? But, ah, I reminisce.

You can’t blame Clear Channel and Cumulus for leaving this sinking ship. They helped to sink it. No wonder they want to get out while they can and be ready for their future.

More public radio companies are sure to follow.

The consolidators are playing a high stakes game of “Beat The Bomb” trying to time their departure at the best moment to line their pockets and before the bomb explodes – so to speak.

A major difference between “Hi-Lo”, “Beat the Bomb” and what today’s consolidators are doing is that back in the day (before consolidation) you could actually win something if you played "Hi-Lo" or "Beat The Bomb".

Today, with consolidation, you always lose.

Your share price is lower.

Your industry is worse off.

Your top managers are devalued.

Your future with the next generation is compromised by greed and a lack of vision into the digital future.

Well, there’s always “Cash Call” – the evergreen contest from the ratings wars where a listener had to answer the station’s call and know what was in the jackpot.

Today, the call comes from an investment banker and only the family gets to win.

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Prince and the Paupers

Prince is one of the most exciting, controversial, sexy and savvy acts in the history of modern music so when he does something different he gains a lot of attention.

That’s why when Prince decided to give away the “Planet Earth” CD to his British audience in the pages of London’s “The Mail On Sunday” tabloid he also made headlines.

You can’t say Prince is not entrepreneurial. Putting aside his long, ugly feud with Warner Records where he became known as the artist formerly known as Prince (represented by only a symbol), Prince has tried a lot of things. Some worked. Some did not.

Prince has done concerts for relatively affordable prices. He has played Vegas in the club he took over and renamed “3121” – his obsessive and compulsive number fetish. This has worked.

He has also tried to sell music directly online and this has not worked that well.

That brings me back to what Prince is doing now.

Prince is not a record industry mogul.

Actually, record industry moguls are not record industry moguls any longer.

When Prince made his much-publicized deal to distribute the “Planet Earth” CD stuffed in the pages of a newspaper, it was free to readers but cost “The Mail” approximately what Prince would have made from CD sales according to published reports.

This is good for Prince but not so good for the 99% of recording artists who are not Prince.

Prince also irritated his record label that then refused to distribute the "Planet Earth" CD in Great Britain – silly and stupid in my view. See, even record industry moguls are not what they once were.

And, those geniuses in the recording industry are not counting Prince’s newspaper distribution as sales although money presumably changed hands.

Prince has not been immune to the woes of the Compact Disc. At almost 50, he defies age but cannot champion the CD no matter how hard he tries.

His previous album “3121” sold a half million copies. The prior one went platinum. In any case, Prince has always been able to muster sales, publicity and utilization of the Internet to sell out his concerts – as he will do once again this time around.

Enough about Prince.

What about the other 99% -- particularly the next Prince and the artists who embellish the existence of a musical genre.

This is the inconvenient truth – if I may borrow that term.

Prince is doing what’s good for Prince and I guess you can’t fault him for that. But his experimentation such as giving free CDs away in the pages of a newspaper won’t work for the new artists that are working their way up in an attempt to find their audience.

The CD is dying. It appears that no artist or label can save it.

File sharing is here. Downloading is the new standard delivery form for new music. Monetizing that model has been difficult for labels, artists and everyone involved. Even Apple only makes a small profit on its iTunes sales although I find it hard to fret for Apple which is making money hand over fist selling hardware.

In fact, Apple has been seen as the problem with the music business today even though iTunes sales are legal. But the labels complained about Napster back in the day when music was being shared illegally.

Prince isn’t just purple, his favorite color. He’s green – rich beyond most artists expectations

Aspiring young artists are poor as they always have been. They don't have those small entrepreneurs with big ears in Memphis, Nashville, Motown, Philly looking for the next major act.

Giving away CDs for free when the artist actually gets paid is nice for Prince but a bankrupt idea for the pop music industry which badly needs to build a robust and inclusive industry where Prince as well as the aspiring young paupers can also get a chance.

The Internet is a tool – not the enemy.

Live music performance is the future.

Internet radio is the new “radio” where listeners will be able to sample the goods before buying the products that may include CDs, but may not. May include t-shirts and merchandise, but may not. But will always include revenue from live performances.

The record mogul currently known as Prince can't save the CD by stuffing albums in newspapers that his fans probably don't read.

He's being hailed as a genius by some but nothing is smart about a record industry strategy that is available to name acts only that doesn't encourage all musicians to be heard.

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Internet Radio’s Twilight Zone

It’s easy to get lost in all the drama surrounding the Congressional Royalty Board battle now going on between SoundExchange (referred to henceforth as “The Executioner”) and Internet radio.

There are plenty of issues there and I don’t think they will satisfactorily get worked out in the coming months. “The Executioner” wants to avoid the wrath of Congress and streamers want to wake Congress up and get them to act in the name of fair royalty rates. I see an unfortunate compromise coming that resolves nothing and once again leaves Internet radio in limbo in a year or two. But we’ll see.

What I see for the future of Internet radio is not so much 24-hour streaming – although no question we’ll have plenty of that. I see delayed listening programs delivered by the Internet to mobile devices and computers. There will be 15-minutes shows, three hour broadcasts. Content will determine the length. Enhanced podcasting in a way. The 24-hour broadcast standard may disappear.

The next generation isn’t going to listen to radio on the go the way radio and satellite companies hope they will. These Gen Y’ers have shorter attention spans. They will waltz in and out of musical genres and content of interest. Their emerging mobile devices such as iPhone and iPod give you an indication.

Some of my students report that their younger brothers and sisters already have shorter attention spans with their iPods and they tell me with some outrage that they (the brothers and sisters) can’t even listen to an entire song all the way through on their iPods.

Don’t tell this to traditional media but they're going to have to change what radio is because the next generation has changed their expectations.

Sprint has committed to a 20-year plan to build a WiMax system nationwide. It’s fraught with problems for Sprint but if they succeed they will leave their competitors in the dust and will enable mobile Internet on the fly. Internet radio will then be as available as terrestrial radio in theory.

But having said that, it will also be very different.

The big broadcaster of tomorrow – online or on land – will be broadcasting thousands and thousands of streams not a handful of 24/7 stations. The niches will be very small indeed. I was born in Hoboken, NJ and love all things about that little town that Sinatra made famous. If there are 1,000 people like me, you could monetize that “station” -- something that terrestrial broadcasting could never do.

Streams for all kinds of people with various interests and musical tastes are starting to arrive already on Internet radio. This excites the next generation even though they must listen to this content tethered to their computers.

Look to social networking.

I’ll be writing more about social networking going forward because I want to share with you what is developing among the next generation. They live online, but they interact through social networks. This will become more prominent as the years go on and broadcasters will have to understand and incorporate some social networking into their business plans.

Internet radio has been a smash hit already with lots of obstacles in its path.

Internet radio doesn’t have universal portability (as terrestrial radio does).

Internet radio doesn’t have a fair royalty agreement (like radio currently has but may not if “The Executioner” gets its way).

Internet radio is not run by seasoned professionals (maybe that’s an advantage in some ways).

I’d like to see terrestrial and satellite get into the Internet radio business. I plan to. Many of my friends are moving to that space as well. Cyberspace is friendly to radio program directors.

The future is Internet radio.

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Professor Jobs Is In The House

I’ve often wondered how so many smart record label execs and radio managers could wind up looking so stupid. They’re not. In fact, they are very bright and intuitive.

Then I think of how this quirky man from Cupertino, CA -- Steve Jobs -- succeeds even when he fails and most of us never fully understand why.

All those Newsweek cover stories later and we don’t seem to get it.

In about four weeks I am going to return for another semester at USC and the first thing I will tell my new students in “Music, Broadcasting and the Mobile Future” is -- study Steve Jobs.

Cut class but study Jobs. (Okay, I’m lying about the first part).

Apple's CEO Steve Jobs has done it all and he just put his legacy, reputation – whatever you want to call it – on the line unnecessarily with the iPhone to do it all over again.

Let us pray.

After starting Apple, creating Pixar, returning to Apple to save it and creating the iPod/iTunes duo, Jobs’ legacy was safe and secure. He didn't need to take another risk.

He was unceremoniously dumped from Apple by the board of directors in favor of John Scully who almost took the company down. Jobs never failed. Apple’s board did.

This is not simply an appreciation – although it is that. It is recognition of some of the ways Jobs’ skills and insights have made him an ideal man for this changing of the guard in music media.

He’s a baby boomer. No kid. No Gen Y’er. Yet he knows his fickle, young market better than they know their own wants and needs.

Meanwhile even the previously mighty Sony misread the marketplace.

Sony was more concerned with its corporate needs after the Walkman success yet it couldn’t sort out the needs of its record label vis-à-vis digital devices. Sony also didn’t understand cool.

Jobs is cool.

Everything he touches is cool. He operates off gut feeling. He is not an engineer – not even a true geek. He is said to be unreasonable. He knows what won’t work and pushes his people to deliver what he thinks the Apple market wants.

Radio groups, by contrast, suck up to Wall Street and get whipped into budget cuts and unfortunate decisions while Jobs defies them. Have you seen the Apple share price lately?

Jobs is strange but so are record and radio people. Yet Jobs seems proud of it. He flaunts it. He’s as human and fallible as we all are and yet somehow he made it a management trait.

Imagine the Mays’ running Apple. Go there – just for a paragraph or two.

They might have missed the iPod because it’s not their core business. They might have blown the chance to sell music to the public. A radio group alone or with a record label could have started iTunes but it took a computer company to do it. That’s just not right.

The Mays’ might have fired their best designers and engineers to please Wall Street for a few quarters. Jobs hired the best and spit in the face of Wall Street “wisdom”. The Mays' might have pissed off their best talent, but so does Jobs. Why do they stay? Because Jobs sees the future and knows what he is doing.

No record label could have made iTunes work. They would argue it is because they weren’t in the music device business. I would argue that they could have gone into the iTunes business. Apple went into the record business.

Earlier I said Jobs didn’t have to take any risks after the iPod. He would have been the icon all universities studied until the end of time. Instead he put it all on the line for the risky business of developing an iPod phone that he couldn’t have really been sure people wanted or guaranteed that it would work (say AT&T’s slow EDGE system).

And that’s no small thing because the number one trait of this new age music media leader is that he is drawn to winning like the San Antonio Spurs are drawn to being NBA champs.

That other San Antonio sports franchise – Clear Channel – is not (in my opinion).

The four major record labels resigned to getting by on ring tone sales and music rights revenues are not.

The burning desire to win – and willingness to take the risks associated with winning – is a lesson worth an entire semester (or career).

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Clear Channel – The Private Version

Sometime in the next few months – probably sooner rather than later – Clear Channel – will probably get shareholder approval to take the company private.

Clear Channel as the “Evil Empire” has earned plenty of scorn beyond what I’ve written since it became apparent what their end game was. They’ve earned their reputation whatever it means to radio people.

So I thought I would look toward the future to a world with a “smaller” consolidated giant – the new private Clear Channel. Cumulus has also announced its intention to go private and more will follow. So, what will Clear Channel -- The Extra (Private) Terrestrial look like:

1. Don’t let its size fool you – six hundred or so stations is a lot less than the 1,100 plus they have now, but they will remain powerful. They own some of the best real estate in all the top markets.

2. The private Clear Channel still won’t be able to run these properties. Their owners and current top management do not value the talent and, dare I say, independence of the best general managers, programmers and sales executives.

3. They don’t have to run these properties exceptionally well – a few winners per cluster will be all it takes to keep things warm for the sell down that is coming next.

4. My belief is that the new private Clear Channel will be caretaker of these valuable properties until they can be repackaged, re-purposed and sold. They may sell them down gradually but I expect a few “big bangs” for large, large amounts of money. Radio is in its sunset. It has no next generation to keep it growing so you can expect the next sell-off to happen within five to ten years.

5. This San Antonio gang that couldn't shoot straight really missed the boat because radio is still doing remarkably well in smaller, local markets. The large markets are more vulnerable to the ups and downs of advertisers. So they go and sell their smaller markets. Go figure. They couldn't run them.

6. I predicted Radio President John Hogan would be back working again and he has in fact taken over responsibility for some very large Clear Channel markets. LA for example. Some of those who knew his work in Atlanta say in effect “God forbid”. I even think Mark Mays may have to get more active in everyday operations. But even this crew won’t kill off the increasing value of the Clear Channel remnants.

7. The private version of the “Evil Empire” won’t be getting any kinder or gentler. It’s not in their DNA. This band of consolidators has always had one thing in mind – shareholder value and when they are the private shareholders nothing will change.

8. Big money investors don’t typically amp up the expenses, they prune and fine-tune. My poor friends and their associates at the new “Evil Empire” are going to see things get ugly. Stress. More cutbacks. Virtual programming. Google “AdNonsense”. Smaller sales staffs. Betcha Premiere Radio Networks gets sold! Your regional managers aren’t going to get any smarter. Maybe their outstanding managers will turn to the emerging new media business. Your many skills will make you a superstar here.

9. I could say that the next five years will be like rearranging the deck chairs on the Titanic but this ship isn’t going down. Employees may wind up overboard but the Mays' will be rescued in a life boat operated by a few Wall Street money people. There are still sharks around.

10. The radio industry that needed a consolidation leader – a company that loved radio – got Clear Channel instead. It was the worst of times to come up lame. Since 1996 the Internet took off, the iPod entered on the scene, record labels self-destructed, digital downloading came of age, the smart phone arrived and social networking has now emerged. Damn.

The other major consolidators are nothing to write home about either, but Clear Channel was, is and for the near future will continue to be the poster child for wrecking a pretty damn good business.

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Mickey Mouse Record Labels

It’s really poetic justice that the Walt Disney Company has become such a great example of how to run a record company.

In this era, the big four and even independent labels are beleaguered by a generation that is downloading music – legally and illegally. These labels are also suffering from a decline in CD sales. As much as they try, they can’t stem the decline.

The majors have taken solace in selling ringtones for fun and profit and relying on publishing rights. Downloads don’t seem to be the cure for declining CD sales.

Over at Disney – not a major label – things are looking up (again).

Their record company targets “tweens”, the generation before Generation Y. They target them very well.

Miley Cyrus – their Hannah Montana on its Disney Channel hit TV show -- is also their top recording artist. Of late, she is also the industry’s top recording artist with all due respect to rap, hip-hop and other “cooler” artists.

“High School Musical”, Cyrus’ big soundtrack album has sold four million units according to Nielsen SoundScan. The “Hanna” soundtrack sold 2.7 million. Hilary Duff’s “Metamorphosis” 3.9 million. Ally & AJ’s “Into The Rush” 800,000. Don’t forget the Cheetah Girls.

These current or previous Disney Channel stars are hitting platinum and gold without the help of Top 40 radio whose formula is still to skip the tweens for the teens and young adults – perhaps out of fear of media buyers who don't target them.

Oh, did I mention that the lyrics are clean? No Tip Drill on Disney’s record label.

The Jonas Brothers are being worked now. They do guest appearances on Hannah Montana and they are the number three-requested act on Radio Disney’s 43-station radio group according to the Journal.

Did I say radio?

When the rest of the industry was consolidating, Michael Eisner, the brash former CEO of Disney, resisted the temptation to buy expensive, over-priced radio stations. He just bought cheaper, crappy little AMs. These crappy little AMs are driving its music business today.

You know Clear Channel, CBS and the others are not going to play Miley Cyrus, right? Disney knows it, too.

Disney knows its music market a lot more than the majors.

The Wall Street Journal reports 10-14 year olds spent $875 million on CDs and song downloads last year (RIAA figures).

Disney knows how to do merchandising with the best of them so you can see how they achieved the success that they’ve gotten.

1. They concentrate on one market (tweens).

2. They have TV covered (Disney channel).

3. They get airplay from their Disney radio stations and eliminate the middleman.

4. They have a comprehensive merchandising plan.

Radio could have done this.

Record labels could have done this.

Both industries lost their focus and got caught looking the other way.

To Wall Street.

Disney performs for Wall Street by never losing focus on Main Street.

There are many lessons and you can also tell me what they are. I just remain amazed at how in our sophisticated world of music and media the Mickey Mouse company makes the others look like – forgive me, please – Mickey Mouse operators.

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Email Is Out, Social Networking In

You know email has arrived when everyone you know has an email address.

But you also know when email has hit critical mass when your youngest generation turns to social networks instead.

One of the many benefits to working with the next generation is that you can get a preview as to how the music media industry is going to change. I know few people in the industry who even pay attention let alone understand. I'm not being critical here. They are just looking in the wrong direction.

I've had the opportunity at USC to see changes that appeared in the student body spread to the general population which is one of the reasons why I have been commuting from Scottsdale, AZ to LA every week since I sold Inside Radio to Clear Channel. I'd like to pass along my observations for whatever it may be worth.

One of the big things I've seen develop over the past few years is the rise of social networking.

I've seen it.

I've noted it.

I've written about it.

Still, the many, many implications for a new generation hooked on social network sites like Facebook and MySpace is mind boggling.

It all hit home for me when my daughter, a student at Arizona State, decided to forgo the use of her instant messaging service from AOL without any withdrawal symptoms or trauma of any kind.

How could she survive, I wondered.

Quite nicely she explained. Communicating on social networking sites is more interesting than even IMing each other. True, IMing continues, but I am going to make the argument that the tipping point has come and Facebook, MySpace and the others are going to become the logical extension of basic email.

I should have known earlier. See, you can be with this generation every day of the week and still not get it.

One of my classes insisted -- and I mean challenged me -- to start a Facebook page back in the day when only students and a handful of teachers could access it. Today everyone is welcome on Facebook.

I went to my daughter and asked for her help. Together I put up a primitive page just so I could go back to my class and say, "here, I did it".

So, I said "here, I did it" and they said, "where are your pictures?"

I said, "Now you want pictures?". Keep in mind this is almost two years ago.

Today much of the communication I get from students is via Facebook. They broadcast interests, events and talents to their group of friends (and they count their friends).

They "poke" the ones they may be interested in the way I would have walked up to a girl in one of my college classes and said, "hi, I'm Jerry". They don't have to rusk rejection in front of others. They simple hit a radio button that says "poke".

They go to the social networking sites to check out the people they meet and openly admit to me that they like to spy on each other -- especially ex's.

My students wanted to see their professor in casual clothes. They wanted to see what my son and daughter looked like. My wife. Where I live in Arizona and Los Angeles and anything else they can see.

They are not the only spies.

Businesses and future employers have learned to use social network sites to counter-spy on them. When a woman Facebook member says she prefers women she may mean she's a lesbeian and she may not (as quirky as that may seem to older people). They are playing with you. But sometimes employers take note -- especially when students brag about their drunken escapades (a college age condition you may be familiar with from your day).

Email has become passe with this group. Young people who tend to spend lots of time on social networks still use email to communicate with elders and for business purposes (i.e., summer jobs, internships).

I write a lot about the convergence of traditional and new media and ask my students to understand the sociology of our trends and our media habits.

Social networking is worth keeping an eye on if you have an interest in the media business.

MySpace is a popular way young people access new music. My talented performers even have their MySpace page pumping out what they hope will be their future hits.

Facebook has opened its architecture to outside companies that can help users do more things in their social networking circles.

There are problems -- to say the least.

MySpace doesn't speak directly to Facebook and vice versa. Perhaps this oversight will be worked out in the future, perhaps not. In the interim many young people join several social sites -- the more friends to make, keep and yes, collect.

In radio, there are still enough Gen Xers and Baby boomers to keep the industry a cash cow. But not a growth business. They can only mark time without the interest and participation of the new generation.

Those of you who read me regularly know that I have mourned the beginning of the end of radio, big trouble ahead for TV, the demise of the record labels and more.

It's odd to be writing about the decline of email as a main form of communication since it is so popular right now -- especially with older people. But that's what I'm observing.

Think of it like this.

What's the one thing that every teen and young adult has that you couldn't wrestle from their being?

A radio?

Are you kidding?

A newspaper?

Okay, I am kidding there.

An iPod?

No, not even an iPod.

What every young adult has and can't live without is a cell phone. And you may have helped them pay for this entitlement if you are a parent.

Cell phones.

My daughter said she can't imagine how I went to college without a cell phone.

Now imagine this.

Cell phones and social networking.

Apple just did. They invented the iPhone.

To remain viable, stay ahead of the next trend.

Social networking is the next trend.

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Finally, A Good Use for HD Radio

Utilizing HD Radio for additional revenue opportunities other than audio programming is more promising than traditional broadcasting applications.

Engineers have been busily at work on this functionality. Mobile tests were done by iBiquity in Chicago that proved no loss of service or dropped data.

This is good because HD Radio's chances of making it to prime time are slim to none -- and you know what they say about slim.

HD -- high definition, as they erroneously call it -- is too late to the party. The industry and a bevy of engineering companies fought the good fight to get what they wanted and by the time they did -- the audience didn't want it. And technology passed digital audio by.

The younger audience doesn't want a terrestrial radio signal. Give any young person a choice between an iPod or a radio and you know the verdict. Offer an iPhone and look out. Many young people are going to need their parents to come through with an iPhone for the holidays this year.

And, HD radio will not be under the tree.

HD radio is a virtual garbage dump for terrestrial programmers. There. I've said it.

When CBS dropped oldies for "Jack" on WCBS-FM in New York a few years back, a mere shadow of the former legendary station was relegated to online and HD broadcast. Now that "Jack" is off the 101.1 frequency, guess where "Jack" went. You've got it -- the garbage dump.

Numerous broadcasters who drop terrestrial analog formats that are still popular with a segment of the audience use the old HD maneuver to calm down the displaced listeners and in their fantasy -- keep them. But HD is virtual Siberia for a listener.

Few people even have HD sets.

And for those who can also listen online, keep in mind that they can't currently listen on a mobile device -- perhaps radio's chief advantage.

Thanks a lot!

Groups are not spending any real money on HD programming -- certainly nowhere near what they spend on a terrestrial signal -- yet somehow they expect listeners to buy these ugly, useless digital radios.

And, Listeners are expected to pay for new HD-capable radios.

Radio groups pay the fees to broadcast digitally and then invest virtually nothing in the programming that goes with the set.

Could HD have worked?

Perhaps.

Maybe before Internet streaming began to take hold and even before satellite radio arrived. Satellite radio can't compete with terrestrial radio for numbers of listeners but it creams HD radio and probably will for a long time to come. At least both satellite companies went hog wild buying program content.

Could HD have been been an impact event?

Probably not as big as the move from AM to FM -- timing is everything.

That's why I was happy to hear that even the folks at iBiquity are looking at other options.

They have to.

HD as an programming medium is a turkey. Don't take my word for it -- listen around.

When Apple or other new age media companies announce a product, they invest in it. Radio does it on the cheap.

Microsoft's iPod imitation known as "Zune" is also a failure -- and they at least tried. They invested plenty in it.

And that's the other thing.

You can't come to the market with something consumers don't want. Consumers will always choose what they want not what you want to sell them.

An iPod or HD radio?

An iPhone or HD radio?

A TiVo or HD radio?

A laptop or HD radio?

A terrestrial radio or HD radio? (Sorry, I asked).

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Google Radio "AdNonsense"

Imagine what some geniuses who have ruined radio through consolidation have in store for their medium next.

Selling unused inventory (as they call it) via Google's AdSense biding system.

Tomorrow, reduce the sales force and cut costs as Google makes selling radio sales as easy and inexpensive as selling any commodity.

Beyond that, the world!

It's all in the very experimental stage for Google, for radio and for advertisers.

We are on the brink of moving beyond (or should I say below) the world of vacuum cleaner sales in radio.

I'm not saying that some radio stations I have known didn't have questionable sales skills but most are pretty damn good and very professional.

Just like every other "damn good" professional in radio, they are going to be invited to leave if this Google "AdNonsense" idea takes hold.

In a way, one part of me would like to see it gain traction so the consolidators could salivate over selling their airtime without effort or expense. Then those doubters among us would see pay back when the market place might bid down radio spots -- as they have a way of bidding almost everything else down.

But most of us love radio too much. Let's just say it was an evil thought.

The declining radio industry is not exactly saying no to the concept of selling radio like a commodity. Some groups including industry leader Clear Channel are testing the waters. Far be it for me to insinuate that Clear Channel would even think of treating radio stations like a commodity.

I remain unmoved by the assurances of Google and some radio groups that "AdNonsense" would pull in advertisers radio is not currently attracting.

Maybe.

Maybe not.

But at what price. Or should I say -- what unit price. Let the bidding begin.

Radio sales as we know it will be over if eBay and Google can sell radio by bidding. The art of salesmanship -- whatever that has become during radio consolidation -- is on its way out.

I agree with Citadel CEO Farid Suleman who didn't mince words in reminding the industry recently what trouble it would be in if it allowed radio sales to be turned into a c0mmodity available for bid to the lowest advertiser.

Radio needs to own up a little bit here. Even before consolidation, the industry operated on incredibly small sales staffs.

The reality that the major broadcast groups did not at any point significantly grow the size of their sales staffs, improve selling skills and develop a stronger national sales organization is evidence enough that radio really wants this eBay and Google stuff to work.

I am aware that lots of industry execs will dismiss the idea that salesmen will go away anytime soon.

Please remember that this is the same industry that always insisted that jockless stations would never replace live personalities. And look what happened.

Look what's going to happen when Clear Channel goes private. Think you hear a lot of virtual voice tracking now -- just wait.

This from an industry that preached the virtues of consolidation as a benefit for the average listener and advertiser.

Oops.

I guess fewer jocks could been seen as a benefit of consolidation, right?

I'm reminded of the time when Mel Karmazin was in terrestrial radio (either CBS, Infinity or whatever the name was at the time). He ordered up a massive hiring of salespeople. The knock on it was that if the candidate had a pulse they had a job -- a job working for 100% commission. Some of the best salespeople in the world will only work on 100% commission. So do some of the worst.

For a while -- a short while.

I always liked the idea of expanding sales staffs, but think it could have been improved if stations paid more attention to who they were hiring.

And train them, for God's sake. Don't just send them out on the street like an Electrolux salesman. (Do Electrolux salesmen still sell door-to-door?).

What you're watching -- in my opinion -- is the official beginning of the fall of radio as an entertainment medium and the beginning of "let's make a deal".

If the radio industry could have written a worse ending, I don't know what it could have been. I thought consolidation was bad enough.

Internet radio, on the other hand, is a commodity where it presently exists and competes. Its future may very well involve a Google or eBay. The average streamer may not be able to field a sales staff. So Internet radio might thrive with bid-for-airplay commercials while terrestrial radio may suffer.

Even though many people have a hard time understanding how resolute the next generation is about not needing radio -- in a head-to-head battle with Internet streaming -- terrestrial radio looses every time. And dismiss them for being young or being students, but lots of them graduated in June and another ton of them graduate next June -- to jobs, families, having families, buying consumer goods. Radio is dead without them.

There is no benefit to terrestrial operators to even have a small part of their unsold inventory treated as a commodity.

They will discover this too late -- as they have on other major issues -- to their continuing disadvantage.

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Radio Turns To Pirates for Playlists

Radio stations are beginning to use research about pirated music trends as part of their mix that includes increasingly difficult to get passive research in determining what to play on the air.

Clear Channel's Premiere Radio Networks through its Mediabase division is marketing the information to its parent company, Radio One and Emmis.

Even record labels are holding their nose and subscribing to what's popular among their nemesis -- the digital pirate. Universal wants to see what's hot on the Internet so they know what to pitch to radio stations. Wall Street Journal subscribers can read an excellent piece on this trend.

The article points out that the Mediabase info is beginning to influence airplay in a significant way.

There's irony all over the place.

Pirated music, which is on the increase in spite of the nasty legal war the RIAA has waged against consumers, is impacting the decline in CD sales.

Illegal music downloaded from the Internet is growing and hurting legitimate record sales. Meanwhile record labels may be doing more to hurt themselves than even pirates.

Consumers want Digital Rights Management (DRM) removed from any downloads they buy. They are demanding the same benefits they would get if they purchased a CD -- the ability to use the music as they wish and share it with anyone -- legally.

The record industry is once again slow to acknowledge what the marketplace is saying and is dragging its collective feet on DRM-free music. The labels are going to lose on this issue sooner or later.

Meanwhile, there is a new generation of consumers who don't see anything wrong with downloading music for free. It's not always easy to explain because most of these folks would not steal a CD from a record store (if they ever went to a record store). Nonetheless, like it or not, there is a problem here. Lawsuits aren't stemming the tide.

Another significant point is that when radio relied on call out research it was testing music radio stations were attempting to make popular over their airwaves.

Now, considering the preferences of Internet music pirates in terrestrial airplay decisions can be seen as conceding that radio is losing influence among the record buying youth market.

Radio stations are no longer the sole hitmakers among this demographic.

Even the record labels are not able to work a "record" using their radio partners. Now the "record" works itself in cyberspace.

The only group gaining influence is the massive young music market that has soured on CDs, doesn't like the DRM restrictions and isn't listening much to radio.

Ignoring them or threatening to sue pirates won't make the problem go away.

Labels and radio stations need a realistic business plan that takes into account the real world where -- like it or not -- piracy is the hottest thing.

They are acknowledging just that by turning to music trends of pirates to help determine popularity in the mainstream.

Five years ago few thought labels and radio stations would turn to music pirates as taste makers?

Now, allow yourself to imagine five years from today.

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Clear Channel Firings Just Keep On Comin'

Most of the trades have reported the latest, poorly-handled firings at Clear Channel.

I say the latest because, in my opinion, Clear Channel has been squandering its outstanding talent since way back when it was putting together its 1,1o0 station group.

So, a week or so ago the very capable and well-liked Minneapolis exec Mick Anselmo was fired while on a fishing vacation with a heavy-hitter advertiser -- not easily reachable. So imagine Anselmo's shock to be summoned for an emergency call to hear that he was relieved of his duties.

These Clear Channel honchos I'm sure have an excuse for firing a man without telling him first, but I can't imagine that it is a good reason.

I've gotten into a lot of trouble with these folks over the years for criticizing the way they run a radio group. Still, they somehow don't get it.

They put together a group of outstanding properties with some of the best talent in the industry. For whatever reasons -- perhaps economy, conflicts, political -- these managers are getting away.

A sample not-all-inclusive list: Randy Michaels (say what you want, but he put the group together and he was sent to "Siberia" for years while employed by Clear C hannel). Andy Rosen. Jay Meyers. John Gehron. Mike Glickenhaus. Roy Laughlin. Bill Richards. Dave Ross. Ken Spitzer. Jack Evans. And don't forget Kraig Kitchen (a departure that I predict will bite them in the butt at Premiere Radio Networks).

But not to worry.

They still have John Hogan.

It's only fair to point out that Clear Channel isn't the only major radio group to disregard and dismiss talent. It is the largest operator and therefore has more opportunities. They've had a tough way of letting some people go over the years buit I've also heard of generous exit packages.

One thing is true. The consolidators tend to cut their talent loose -- or lose them to other companies -- more so than the smaller companies and the privately owned firms. We all don't have to be geniuses to understand this aspect of employment, either.

What's sad is what's likely to happen when Clear Channel goes private. I think you're going to see more economies of scale. Hey, you might even see John Hogan running a division of stations.

My point is that companies that have a future usually hire people rather than fire or retire them.

Look at growth companies.

Apple continues to grow by making investments in the best talent.

Same for Google. And believe me young people want to work for Google.

Once you see a company start to shore up profits by cutting down expenses, the company is telling me that they can't continue to do it any other way.

And once you let your top talent get away, it's a caution sign that this business is not going to be in the growth mode.

That's why outside venture capitalists who buy up companies, cut them down, sell off parts (I call it slice and dice) and make money when they flip it again.

That's what I think Clear Channel has in mind when it goes private. More pruning. More economies of scale. More sales of "unnecessary' assets and another play somewhere down the line.

This is no way to run a growth business unless you're the private individual who profits from the sale of assets.

No way to run a business in the process of losing their next generation distracted by the Internet and mobile devices.

No way to grow.

It's not programming that's killing radio.

It's not the Internet that's killing radio.

Poor management is killing radio -- and you won't have to look very far in the days ahead to see more examples of it.

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CRB Royalties: An Unsound Exchange

SoundExchange, the record industry body that collects royalty fees, now wants Internet streamers to trade a lower license fee (or no fee for small webcasters who qualify) and a cap on minimum fees of $50,000 per 100 channels in exchange for full compliance and paying legally.

SoundExchange's Executive Director John Simson told Radio & Internet's Kurt Hanson in a recent interview, "Our biggest desire is to have people paying legally and being compliant".

Sounds harmless enough, right? But it's a bad deal for Internet streamers -- a sorry exchange.

Just when Congress seems to be waking up to what an explosive issue unfairly taxing America's music online is Simson comes off like Tinker Bell.

Quote: "Look, Monday's not that magical a day. It's going to be business as usual at SoundExchange -- trying to process data, trying to get deals done. We're not gonna be filing lawsuits".

Excuse me!

Have we been shaking in our boots for nothing. Have Internet streamers been unduly concerned about their great friend SoundExchange. Or is it something else.

I'm hear to tell you it's something else.

I can't tell you how many streamers have reacted to the stay of execution with emotions from euphoria to just plain relief. No one I know has expressed possible suspicious motives.

Let's examine Simson's comments:

"Look Monday's not that magical a day".

What a curious choice of words. I don't know anyone -- no one -- who ever referred to Monday as magical even in jest. Get the feeling he's playing with us.

Bully. Bully.

"It's going to be business as usual at SoundExchange -- trying to process data, trying to get deals done".

Damn -- I guess every one of us got excited for nothing. Yeah, business as usual to you collecting the paltry fees you collect when you could be collecting a treasure trove of money by fairly and equally taxing this pioneering new medium as it gets off its feet and grows.

"We're not gonna be filing lawsuits".

Well, as Gomer Pyle used to say, "Golly" (pronounced Gol-lee). You mean you scared the crap out of an entire industry for no reason. Are you saying to us, "never mind"?

How stupid do you think we are?

Here's how I see it.

With Congress considering a 60-day cooling off period during which negotiations would presumably be mandated, SoundExchange sounds like Internet radio's new best friend.

Not a ferocious pit bull.

A lovable puppy.

All of a sudden the Monday deadline isn't the be all and end all to SoundExchange. Will someone please get them to answer why they waited until a few days before the July 15th deadline to be so conciliatory, understanding -- and shucks -- all around nice guys.

Can you feel a screwing coming?

Are we to believe that all of the sudden SoundExchange's hardball has been replaced with Mister Roger's Neighborhood? Won't you be my neighbor?

I'm from New Jersey. I'm not buying it.

What's happened is that even as disorganized as Internet streamers are -- their passion and concern is being heard by members of Congress. Yes, there's Iraq and immigration but do these duly elected officials dare to want to mess with the Internet. I think you're seeing their answer.

They don't want to get involved in a legislative fix -- but don't take it personally. We're spending untold billions in Iraq and spilling American and Iraqi blood -- and they don't want to fix that, either. It's just Congress being Congress.

Here's what I recommend:

1. Negotiate hard and tough as if you had every advantage -- not as a loosely knit group of poorly funded small business people.

2. Negotiate for as long as all the parties want. I hate the instability but I dislike short term agreements that we'll regret okaying in just a few short years.

3. Bombard every congressman and senator with calls and emails every day. March, protest, complain, enlist other powerful allies (back home in their states and districts). Maybe SoundExchange thinks of this as a truce but only a fool would negotiate like it. This is a fight for survival in the future more than wiggling away from the next rate increase now. Use your streams and use the Internet to name names and give contact numbers.

4. Don't settle for any agreement that doesn't have long term stability -- a long term deal. Remember in three to five years the record industry isn't coming back. They won't be selling more CDs and they likely won't make a boom business out of selling 99 cent downloads. Oh, and piracy will continue to increase because the record labels don't get what they're doing wrong.

5. Since SoundExchange and their Infinite One -- the record labels -- will be facing a sustained decreasing revenue stream in the next three to five years, warn our friends in terrestrial and satellite radio. (They may not know they are our friends yet, but we can always school them, right?). Terrestrial radio is next and will be hit with an attempt to get performance fees added on to their existing music rights payments.

6. Organize a summit of terrestrial, satellite and Internet streams. Get Kurt Hanson involved. I'd love to be involved. There are many others. We must speak as one going forward. Radio will know the value of unity when the labels come after them next -- which they will do. Mark my words.

No exchange that involves murdering Internet streamers less in return for convincing Internet radio to commit suicide on their own.

That's unsound.

While the greedy record labels don't know it -- the Internet and their streamers are their future. Only a fool would blow up their own future.

And we all know that the record labels would never live in a place called denial.

Would never shoot themselves in the foot.

Would never turn on the people that helped them make obscene profits all these years.

Would never be the only industry that could not see and seek money in the Internet through arrangements that help their partners help them. (Think Google here).

And I wouldn't call the record labels fools (wink, wink).

Let's not be like them.

Fight for fairness.

Fight for stability.

Fight for a fighting chance.

As Alice Cooper says in "No More Mister Nice Guy":

"I used to be such a sweet, sweet thing
Until they got a hold of me...
No more mister nice guy"

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The Record Label's "Seven Years of Silence"

You heard about the iPhone almost every day on the run up to the big day when it went on sale. You hear the AT&T network sucks and hundreds of thousands of people don't care.

They want creative solutions.

In this case, make the telephone do something other than call and do rudimentary texting. Make it intuitive. Forget about cell phone coverage or data speed.

You see Internet streamers fighting for their lives against the big bad wolf -- SoundExchange. The clock ticks. Streamers beg their congressmen to do something. The gun is to their heads with the July 15th deadline for new royalty rates approaching, but the streamers are busy at work trying to win a compromise.

They want creative solutions.

In the case of streamers, they're willing to pay more, but they want to keep it fair. Right now the CRB's new rates are discriminatory against streamers. They are so unfair and burdensome they could shutdown Internet treasures like Pandora and others. Streamers don't want to get into a fight with the labels, they just want to survive.

Terrestrial radio is taking a beating in revenue, in ratings and in its pursuit of younger listeners. Say what you want about them but terrestrial radio people have been fighting hard to turn it around. That they haven't been successful yet is not the point. They are trying. Whether they can ever turn it around is moot. They are trying.

They want creative solutions.

Ways to use their terrestrial signal with the Internet and mobile applications. Everyone in the U.S. it seems has been consumed with WCBS-FM's exciting return to "oldies" (really Classic Hits) in New York. Damn, they're trying.

Record labels.

That's another story.

Billboard reports the global music market is off for the seventh consecutive year in 2006 with ominous signs that the decline is worsening in 2007. Sales are off 5% year-to-year according to the International Federation of the Phonographic Industry (IFPI). The so-called value of physical music shipments are off 11% to $17.5 billion.

There's piracy.

Diminishing CD sales.

No new music trends in sight to stoke the sales fires again.

There's a war brewing with their traditional partner radio over performance fees that will add up to no good.

Hell, The Wall Street Journal reported Thursday that pirated music is now helping radio develop their playlists -- and Clear Channel's Mediabase is leading the way. You read that right. Music pirates are becoming radio's new call out research. Let me get this right, did someone just wake up to discover that the Internet is going to be music's future hitmaker.

Radio did. Not the record labels.

Seven years of decline and what do you hear from the record labels?

Nothing.

No new ideas.

Nothing.

What do you hear from their lawyers -- the same old thing.

Let's screw Steve Jobs and dangle taking our library off iTunes (I'll bet Jobs is shaking in his boots). Betcha the evil in the other labels would love a stupid competitor to drop out of iTunes. Still, it solves nothing.

Cutbacks. When at first you don't succeed, fire the people who could help you. It's the new American way -- thanks to Wall Street.

Whatever happened to all that record label hype we used to hear at radio stations? Radio misses it. At least it was a sign that the labels were trying. There's very little new. Even their hype is weak. What I wouldn't give for some good old fashioned record label b.s. about music -- artists, performing. God, I don't believe I said that.

Radio is hurting so the labels do the only thing they know how. They take out a 44-caliber hand gun, aim it at their foot and pull the trigger. I can imagine the lawyers who are working behind the scenes (billable hours, remember) to litigate, legislate or levitate performance royalty taxes on their old hit-making friends.

Where are the record industry suits? Wait, most record execs don't wear suits. Where are the record industry jeans?

While they twiddle their thumbs and do nothing -- nothing -- their lawyers are finding new ways to sue ten year old music pirates.

DRM -- digital rights management -- is so yesterday -- so gone, yet it didn't make the "A" action list with three of the four majors. Hey, in 12 shorts months they can count yet another year of revenue declines.

If they were good at math they would see that seven years of decline coincides with seven years of silence.

I have my theories why most of the label execs are standing around while their business goes to hell. I also know record execs who are sick over this -- but they are not in the driver's seat and can't do anything about it.

Radio was the record industry.

What I mean is the labels produced the records, pressed them and distributed them to traditional retail chains. But radio stations -- in lock step -- made the artists, the hits, promoted the concerts and sustained their big stars over decades in some cases. Now that the radio industry has fallen on hard times with enough problems of their own it can't fix the record industry. What a great time to saddle them with performance fees.

Record labels are only manufacturers -- with a small cast of "characters" who think they have the ears of a hitmaker.

They don't know where to begin - that's obvious because seven years later we have seen no beginning to stemming their decline.

A few suggestions:

Embrace the Internet. Get over piracy whether it's fair or unfair -- it isn't going away. Use it like promotion which is what it is in our digital world.

Sell what consumers want -- downloads. Invest in selling other merchandise. Put a call in to the surviving members of the Grateful Dead. They've been letting fans plug in and record their concerts forever and all they get for it is -- richer.

Stop trying to tax radio. Help radio. Team up, work with them while stations figure out what, if any, role they will have with the next generation.

Oh.

And fire all those lawyers except one -- the one to review the next contract Steve Jobs rams down your throat.

If you want to regain control of the record industry, act like a leader.

Do something.

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Classic Hits vs. Oldies

The high profile switch of WCBS-FM from its "Jack" format back to oldies is going to require very carefully considered programming moves to be successful in the long run.

What CBS is doing today is introducing to New York City the classic hits concept that has been working very well in some of their other markets. New York, you remember, is where disenfranchised oldies listeners have literally willed their oldies station back on the air.

That is, if it is their station -- the one they remember. Two years time can blur the memory. Will CBS-FM be as listeners hold it in their memory without most of the air talent they loved and the huge playlist of music that wended its way back into the 50's when rock and roll began? I'm flying back east in a few weeks and I plan to give it a large listen.

This is a good problem to have.

As I mentioned in a previous post, name the last time listeners recalled a radio format they didn't like and got the previous one put back on the air.

One more time -- former CBS Radio President Joel Hollander's decision to drop the format because ratings and billing were slipping is only one of his many blunders. The problem could have been fixed. Now CBS gets to fix it.

It's tricky.

For one, the last term I'd use when CBS-FM returns is "Greatest Hits of the 60's, 70"s and the now 80's" as they were doing in promos on the run up to 1:01 pm. Thursday is probably not the time to even say the word "Eighties" when they have been waiting to get their oldies station back. You could just agree to call it "The Greatest Hits" and forget being so specific as to name the years.

I sure wouldn't add one new jingle to the new format for a while. Those classic JAM jingles mean, we're back. There's time to augment but not replace the jingle package later -- no rush.

The "New York, New York" station I.D. needs to be on the top of the hour every hour even when some of the format pruning takes place.

It means "your station is back".

On day one, the former listeners are going to return -- you can bet on that. These listeners are to radio what the base is to a political party. You play to the base first and then -- in the case of a political party -- moderate on the way to the general election. In this case, make the library younger.

I fear the short music rotation.

Somehow I get the creeps that such a short playlist won't work the second time around. It may not have been intentional but the GM's press release on the format change mentioned the hundreds and hundreds of songs the station would play. If that's true, hundreds and hundreds sounds like formatic suicide even though we all know that short playlists get ratings. But this situation may be different.

CBS really created its own problem.

For over 20 years PD Joe McCoy made listeners fall in love with the station. This may be a problem because will the station they love be the station they get when it returns.

I'm not naive. I know CBS has to make the music appeal to a more youthful and "desirable" demographic. My friend, the respected programmer John Rook warns on his website that there will be trouble if CBS-FM -- the sequel -- avoids some 50's music. Several of my program director friends also think Billy Joel for Elvis may not be a smart trade. Proceed carefully at first.

And don't judge any ratings until the People Meter comes to New York because this station could be a blockbuster once the diary is out.

So with great admiration for CBS Radio President Dan Mason and much respect for his talented management staff I humbly recognize that getting to blockbuster status isn't as easy as I'm afraid everyone seems to think.

They can do it.

Just don't fear the word oldies. Don't use the words classic hits until you have a hook in your listeners' mouths. Don't be too proud to get Joe McCoy on the phone to seek his advice on the care and nurturing of his station - he created that monster. And remember, as the song says, "Love is lovelier, the second time around" which means this audience is available for a second love affair with a terrestrial radio station.

Good luck, my friends. I'm wishing you every success.

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Radio's Jihad Against the "Nutty Professor"

Since I have been at USC, I have been very careful who I call a "Nutty Professor" for obvious reasons. For every finger you point, you have three pointing back at you.

Stan Liebowitz, a distinguished University of Texas-Dallas professor has riled the radio industry with his Business Week comments. In fact, radio people are in quite a snit.

It all has to do with his study titled Don't Play It Again Sam: Radio Play, Record Sales and Property Rights. You're going to want to read this 40-page report.

You may have heard about his work because the radio trades and others have launched a holy war against Professor Liebowitz for in essence saying that radio airplay is actually hurting record sales.

Liebowitz argues: why buy the music when you can get it for free.

Precisely.

That's what many of my students are saying but they don't listen much to radio.

All of a sudden, we're outraged!

How could the good professor argue that radio is actually hurting record sales? It seems like radio just can't get any respect these days?

First the record labels want to charge radio for the right to play the music which we always assumed was helping them sell records and CDs.

Inside Radio Editor Frank Saxe had a great response the other day when he quipped that perhaps radio ought to charge record labels not to play music on the air.

There's no stopping radio when it gets dissed.

NAB's Dennis Wharton provided the usual NAB smart-ass comment "Everything's bigger in Texas -- including the imagination of professors who claim that radio airplay of music does not boost record sales". That ought to discredit Professor Liebowitz, right?

Edison Research's Larry Rosin wants the industry to fight Liebowitz's assertions and not let him get away with his attack on radio's prowess.

It's just radio being radio once again.

Remember when Clear Channel Radio President John Hogan made a big deal out of "Less Is More" -- his failed attempt to lighten the spot load a bit and increase sales and ratings.

It didn't work.

What "Less Is More" did succeed at doing was screaming from the roof top that radio has a clutter problem scaring advertisers and giving them every reason to wonder whether we have gone nuts.

You don't have to listen to me but if I'm in the radio industry I'm going to scroll back up, read the report and then keep my mouth shut. More publicity is not what this study needs whether you agree with it or disagree.

Translation: Liebowitz's study is an academic pursuit. It's not the holy grail. They do those kind of things on college campuses. I'm sure his methodology is correct. Trashing the professor is not necessary.

You might disagree with his conclusion.

I do.

Making a big stink out of it can only hurt radio.

But you may not like what this "Nutty Professor" is going to share with you. I'll take my chances and be brave.

My observations of the next generation not based on research -- taking into account the bias that some of my music industry students may have -- is that radio's effect on music sales is a moot point.

The record industry is dying by their own stupidity and the radio industry doesn't have the strong influence it used to have over the key music buying demographics. It's the blind leading the blind.

If radio wants to defend itself, start by explaining why radio companies let consolidation and Wall Street make them take their eyes off the next generation of listeners.

It's easier for the radio industry to attack Professor Liebowitz's flawed conclusion than it is to look in the mirror at their own flawed actions.

If you haven't already clicked on "comment" below to put me in my place, maybe you will after these next predictions.

Music will eventually be free or cost next to nothing.

Radio will no longer be the way consumers find out about music. Social networks and Internet-based web sites will be. They are right now.

The biggest music growth business will be live music performance.

The biggest "radio" business will be Internet streaming.

With all that bad news, Professor Liebowitz's study doesn't sound so maddening anymore, does it?

Quibbling over an alleged 20% loss of music sales because of radio airplay is so minor compared with the outcome I'm predicting.

Can't radio people find anything better to do.

Look, Professor Liebowitz could be wrong.

I could be wrong.

Or...

You could be wrong.

But one thing is remarkably certain.

This next generation is changing everything.

Lead.

Follow.

Or get involved in a pissing match with an academician who is trying to get you to think.

Take your choice.

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Learn more about my USC programs for music, broadcasting, interactive and mobile as well as my private practice (in the right hand column).

How CBS-FM is Like the iPhone

I hate to say I told you so, but in the case of CBS dropping arguably one of the best radio formats in the country for an unproven, not-ready-for-prime time format like "Jack" ("We play what we want") I must say it.

I told you so.

I can't brag about being the only one to say it because almost everyone in radio knew dropping CBS-FM's oldies format was a mistake.

Forget about the fact that CBS never bothered to listened to its New York listeners preferring instead to let a salesman named Joel Hollander listen to his gut. For a man who is reputed to have trashed the popular oldies format and ordered the "Jack" format up and running on a mere whim it was rather gutless.

The fact that Hollander's concern over slipping revenues of the oldies station was premature as some estimates put "Jacks" ratings around $16 million a year making CBS-FM's $40 million look good.

Be careful what you wish for.

It took the courage of CBS' new radio President Dan Mason to switch the station back to its oldies roots. In my mind there was never any doubt that Mason would do the right thing. He's been doing the right thing ever since he started mopping up Hollander's mess. Mason rightfully started with the format only a salesman would think of -- Free FM -- by replacing it everywhere he could.

And anything I've ever said that was critical of CBS CEO Les Moonves I take back.

Moonves is a TV guy who obviously knows more about radio than "the radio guy" Joel Hollander. Moonves knew enough to bring Mason back to CBS and to give him the mandate to fix the place. (Notice how I didn't mention Katie Couric?)

So I'm reading a lot of trade accounts that wax nostalgically about the return of CBS-FM to its listeners, but there is a bigger story as far as I'm concerned.

When have listeners ever been able to talk our arrogant radio companies into returning a format they obviously love and cherish? I know of no time -- and it never happens in a major market like New York.

The last time I saw an outpouring of love and devotion like this (not to mention eager anticipation) was when consumers lined up at AT&T and Apple stores to buy all the iPhones they could get their hands on.

CBS-FM is radio's version of the iPhone.

You'd be hard pressed to come up with another time something radio did got so much love and devotion from listeners. Listeners generally use radio like toothpaste these days without passion but they use it nonetheless.

The reason for this love and devotion to WCBS-FM is the station, the music, the personalities, contests, weekends -- the feeling it was real and personal. Radio doesn't seem to do real and personal very well these days. Some Einstein thought "Jack" would inherit the 101.1 frequency by using no djs and by playing "what we want". Now they know they were wrong.

To pay for their mistake "Jack" will be relegated to HD2 Thursday when the format flip-flop takes place. HD2 -- a fate worse than death. It will forever burn in HD hell -- at least in New York.

"Jack" is a multi-year format at best -- in some markets where there is a formatic hole for it. It's not a franchise like CBS-FM's oldies format.

Joe McCoy, the steward of CBS-FM all these years is the main reason for the station's success. He lived it, breathed it, respected it -- more than its detractors did before they took it down.

And I want to weigh in on the old dj issues -- Cousin Brucie may be around 70 but listeners of all ages appreciate his connection with them. This doesn't mean CBS-FM has to hire all their old djs back -- they can, but the younger ones would be wise to go to school on this vanishing breed. They won the loyalty of their listeners.

At the end McCoy had to fight off near assassination attempts by programmers and others who wanted to tighten the playlist when his better judgment said otherwise.

So now it will be Classic Hits (music from the 60's, 70's and 80's) which is working on other CBS stations. But the new PD of CBS-FM will have to be cognizant of what this station's listeners whose loyalty spanned over 20 years expect of the station now. And like the iPhone, their expectations are high. He will have to adapt to be successful. This is not a slam-dunk.

You only get one comeback.

Just as Les Moonves is trusting Mason to make the right decisions, Dan Mason will have to trust his PD.

My students at USC listen to K-Earth 101. Many of them can even sing the K-Earth "1-Oh-1" Johnny Mann jingles for you with the emphasis on "oh" and all. They listen to other stations first as is to be expected, but include K-Earth on their very wide music palates.

They also would not ever think to write K-Earth 101 down in a paper Arbitron diary.

In fact, they wouldn't think of writing down too much on paper.

And they wouldn't fill out a diary, either.

So here's where Dan Mason is more than simply nostalgic -- he's shrewd.

Mason would never have made the decision to return to oldies if it wasn't a good business decision, too. Especially in New York.

With Arbitron's People Meter coming to New York, CBS-FM stands to greatly benefit from electronic ratings. In Philadelphia, which went live with The People Meter recently, CBS oldies station WOGL-FM gained huge numbers of cume listeners with the new technology. The same is likely to happen in New York and CBS-FM is likely to be a clone of WOGL and other CBS Classic Rock stations musically.

No need to get all excited about making the oldies station younger. How about making your ratings more accurate so it picks up listening that might not have been reported in diaries.

CBS-FM never lost it.

The diary system of ratings lost it for them.

And broadcasters are the ones who stubbornly held on to the antiquated diary system at their own peril.

Joel Hollander will go down in radio history as the ogre who killed off the beloved WCBS-FM oldies station. The old CBS-FM motto could now be modified to describe what happened to Joel Hollander, the man who killed it who ultimately took "The Greatest Hit of All Time". He lost his job for that and other poor decisions.

Dan Mason will be remembered as the CBS executive who knew a mistake when he saw it and had the smarts to fix it.

The diary system of ratings contributed to the disconnect between what the listeners were thinking and what the suits at CBS were thinking.

The return of CBS-FM to its listeners is more than a warm and fuzzy story.

For me, it's a USC case study for one of the many things that are wrong with terrestrial radio.

Listen to your listeners (write this on the board 1,000 times).

Fight for the best audience measurement system -- don't impede it.

Listeners love personalities who are knowledgeable and connect with them.

And the most important lesson of all...

Never build a station around the concept of "playing what we want".

Play what they want.

Oh.

And make sure you know who they are because they may be younger than you think and they may like music older than you give them credit for.

Beware.

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The Music Formerly Known as a CD

Is the record business getting more insane every day?

Is that possible?

Now Prince, the warrior who fought the good fight against the record labels back when they actually sold CDs is riling all of Europe with his latest marketing move. Prince's decision to giveaway his new album folded into British tabloid newspapers for free is not only ironic it is moronic.

A record artist who fought the system so vehemently that he became the artist formerly known as you-know-who is in bed with a medium that was once formerly known as prosperous. The newspaper business is still better in the U.K. than in the U.S. but it seems that only Rupert Murdoch wants to be in that business these days.

The chairman of the entertainment retailers over there said, "it is an insult to all those record stores who have supported Prince throughout his career."

Insult?

It's a compliment.

An artist having a hard time finding his groove again has decided to give away what nobody wants -- a CD.

And he's a man ahead of his time because a CD is what few in the next generation want.

Only in the music media can they raise a big stink about Prince trying another publicity stunt to sell something that he didn't want to sell when he was a slave to the labels.

Record industry observer Steve Meyer reminds us that Warner Music head Edgar Bronfman, Jr went on CNBC to say "This decline is steeper than we expected, but in some ways it means we'll get to the bottom faster, and after that there's growth."

What!

You can't get to the bottom any faster than you got there by not doing anything.

Steve Jobs dictates the digital music rules these days. Universal Music can even threaten to withdraw their music from iTunes and Jobs continues to sleep well at night. You see, the iPod isn't just a music player. It's a hard drive, a picture album, a video player. And you know all about the version formerly known as --- a cellphone.

On the other hand, a record label is -- well, a record label is a record label. And there's no future in that right now.

Back to that little devil Prince.

When was the last time consumers lined up in front of record stores to buy any artist's CD. In fact, what's a record store? Remind me.

How can you get to the bottom any faster than suing your customers. And while Rome burns, the RIAA will have to answer a consumer's counter suit against the RIAA in defense of her 10 year old daughter accused of being a music pirate. This harassment suit is endemic of what will help drive the record business to the bottom even faster.

How can you hit rock bottom faster than not coming up with new artists and new genres of music to sell?

Maybe the record labels need to hire Prince to advise them on how to handle their non-digital obsession with the CD.

After all, the CD is dying and taking the labels with it.

So what's wrong with giving away music for free?

No, not the way Prince is doing it in the U.K. between the pages of a newspaper. But online -- where the next generation of record consumers live.

I think it's hilarious that they're up in arms in the U.K. over the Prince stunt.

Can't they see that soon you won't be able to give a CD away even in the pages of a newspaper.

Aren't there better uses for old newspapers?

Aren't there better business models for bringing music into the digital age?

Memo to record labels: deal with it and move on.

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Declare War on SoundExchange

The "Day of Silence" to attract attention to the unfair treatment of Internet streamers at the hands of the Copyright Royalty Board (CRB) is over.

Now, it's time to take off the gloves and hit SoundExchange where it hurts them the most -- in Congress.

That's what those of us interested in promoting fair access to Internet streaming wanted the "Day of Silence" to do. It succeeded to the extent that the protest brought the issue into a more general public discussion, but the execution of many small Internet radio operators is still on for July 15th when a new, draconian rate structure will be implemented that could drive many streamers out of business.

A pardon is out of the question. That is a pardon to the CRB.

SoundExchange, meanwhile, has given us a glimpse of their Achilles heel.

They want to avoid getting Congress involved in this issue. It's their worst case scenario.

How do I know?

While the recent protest was being planned SoundExchange made a lightning fast offer to cap streamer's administrative fee structure at $2,500 per organization with royalties still additional. How cool is that?

Not cool at all.

And the proposal was only an 18-month deal. So, security for streamers would still be out of reach of their business plans. And, by the way, how can you have a business plan when your rate structure is renegotiated in another 18 months?

SoundExchange, the group that collects the streamers royalty money, wants the administrative fee reduction in return for a signed agreement that proponents of lower rates would abandon their legislative efforts to protest royalties in the future. This fact was not immediately transparent when SoundExchange was spinning their offer to Internet radio and Congress.

Congress has shown no interest in pursuing the legislative approach to Internet royalty justice. You've heard the politicians -- and they've heard you (yada yada) but Internet streamers remain on their own with the huge increase in fees only a few days away.

Internet radio is going to have to own up to what's going to happen on July 15th. No sniveling and no pity parties. They also don't have to take it sitting down.

Now it's time to hit SoundExchange and the music industry they represent hard where they've indicated they don't want you to go -- Congress. It's kind of like two parties in a lawsuit threatening each other knowing that over 95% of the cases get settled out of court. And why not? Who wants to hand control over to a third party. After all, it's Congress that helped cause the current dilemma in the first place. SoundExchange doesn't want that.

From July 15th forward lobbying and pressuring Congress should not be one day, one month or a one year event. It should be an ongoing fight. Hire the best lobbyists money can buy (that sounds dirty, doesn't it?). Get the best minds together to do a better job articulating the issue to bring about sustained pressure from the general public.

Our elected representatives understand one thing very clearly -- voters.

If the Internet streaming business is worth fighting for -- and it most certainly is the future -- shrewd lobbying and grass roots, gloves-off political maneuvering is a requirement going forward.

The gun lobby gets stronger and stronger even when children are accidentally killed by handguns that their parents did not responsibly safeguard -- when a nut case opens fire on a university campus and police officers are needlessly killed by automatic weapons the public doesn't need for recreation -- even when public outrage against guns hits the boiling point.

Yet the NRA is a force to reckon with. Elected officials from all sides wish to avoid their ire and many Congressmen welcome their political and financial support.

Internet streaming is not like gun control, but death of a young industry is possible before it takes hold. It's worth no less of a fight. No less of a top notch political machine.

Now, to my friends in the Internet streaming business, get smart and make July 15th the "Day of Reckoning" -- the day SoundExchange and the labels will remember as the day when they went too far.

Don't settle until Internet streamers receive fair and equal consideration in royalty fees.

Don't settle until you win stability -- not just measured in years without having to fight new rate hikes -- but in increased influence that guarantees you'll pay your fair share and not a penny more.

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The Fairness Doctrine Is the Internet

Radio is all up in arms because Congress is threatening to reintroduce the hated Fairness Doctrine that could stifle talk radio.

Talk radio is radio's best product right now (I'm not talking about their opinions, either). And radio is a hurtin' pup with advertising revenues being projected as declining in the year ahead.

The absence of the Fairness Doctrine allows a Rush Limbaugh or an Air America to have their say without providing equal time to opposing points of view. I understand what the Democrats are doing by threatening to bring it back, but it's all pointless.

1. The pro-Fairness Doctrine forces know they have no chance to pass legislation that would hamstring radio stations.

2. Reviving The Fairness Doctrine is a political jab to get back at the out of control right wing radio blow hards that have been getting under the skin of the Democrats since Bill Clinton served his two terms.

3. Congress has already demonstrated that they "want their talk radio" in spite of comments made by Republican Trent Lott that made a lot of his own party worry.

4. Return of The Fairness Doctrine is a moot point.

So we have political playfulness and the reality that no such return of the Fairness Doctrine is likely and yet has anyone asked the question -- who cares?

Well let me raise it.

I don't want talk radio to change a thing. Terrestrial talk radio still has a few good years left if all our good baby boomer friends can just stay alive.

When radio was the only thing, you could rationalize a Fairness Doctrine to keep the medium honest and -- well, fair. As listeners got more voices, the Doctrine became unnecessary and was rightfully retired.

Now we have the Internet.

We now have mobile communication -- phones, content, downloads.

We have online social networking.

We also have lots of channels, services and technologies and if any consumer has a problem getting access to a variety of voices they are not trying very hard.

The new "Fairness Doctrine" is the very existence of the Internet.

So, let's sit back and watch the politicians blow smoke.

And enjoy the outrage from broadcasters and Congress who will be damned if the Fairness Doctrine comes back on their watch.

Let's not protest too much.

The Fairness Doctrine is one of the many polarizing issues that terrestrial radio specializes in and builds its audience on.

The great liberator is the Internet -- the provider of endless opinion and an almost infinite number of different voices.

Terrestrial radio used to have that responsibility on another day and in another time.

Now the Internet brings democracy and allows endless voices and less chance of one or two dominating points of view.

Who needs legislation.

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