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Radio is next to get disrupted

What’s our response
to ‘3 megabits to the hip’?

Imagine the year 1876. You work for a leading bank. Your boss comes to you with a deceptively simple question: “Alexander Graham Bell has developed a way to transmit voice over a wire. What does this mean?” How would you go about answering that question? The world’s leading communications company, Western Union, called Bell’s innovation a “toy.” No data exists to help guide your analysis.
—Clayton M. Christensen et al., Seeing What’s Next

Originally published in Current, Sept. 11, 2006
Commentary by Jim Paluzzi

Paluzzi and cellular "smartphone"Six years ago, the Public Radio Satellite System convened a “Great Minds” conference in Seattle. Public radio leaders gathered with the brightest people they could find to explore where technology might take us later in this decade.
Our keynoter, computing and telecom consultant Mark Anderson, had much to say about the future, particularly with regard to our hips. In five years, he confidently declared, everybody would carry a single broadband phone/radio/computer capable of receiving “3 megabits to the hip”—where we presumably would wear the things.

Back then, in fall 2000, most of us were carrying laptops that could double as free weights at the gym. Plugged into telephone lines, their dial-up connections had a hard time reaching 32 kilobits a second. We had just scraped through Y2K, and some futurist was telling us connectivity would increase a hundred-fold in five years, devices would shrink 90 percent, and we’d be wearing wireless connectivity on our hips.

Yeah, right . . .

At a meeting the other day I took notes on my new “smartphone” equipped with Microsoft Office and cellular broadband. It doesn’t communicate at 3 megabits a second, but it’s plenty fast to let me listen to the Internet streams of Colorado Public Radio, where I work, or those of KUOW or WUNC or a thousand other Internet radio stations. I don’t need Wi-Fi to connect, I don’t need an ethernet cable, I only need to be in range of a cell phone tower in just about any metropolitan area. If I wasn’t afraid of setting off the geek alarms at our studios, I could even wear this device on my hip.

OK, Anderson’s prediction was off by about six months. Nobody’s perfect.

Six years ago, many public radio membership drives featured fundraising pitches that claimed their stations’ programming was “radio you can’t get anywhere else.” The geographic limits of our transmitters made it so. Some stations still use this pitch, but it’s not exactly the case.
Now we know from our Internet server stats that half of our Internet listeners will leave us during pledge drives and listen to stations that aren’t fundraising at the moment.

Goodbye to “radio you can’t get anywhere else.” Welcome to “radio you can get everywhere,” even if it originates halfway around the world from your hip.

Both Verizon and Sprint are currently marketing the latest smartphones with EVDO (Evolution Data Optimized) technology. It gives users connectivity equivalent to half of a speedy T-1 line from the phone company—more than enough bandwidth for Internet radio or even live Internet TV.
This single device allows users to make phone calls, edit Word documents, review Excel spreadsheets, practice PowerPoint presentations, send e-mail, browse the Web, shoot photos and videos, and listen to thousands of radio stations on the Net at monthly rates comparable to DSL or cable broadband. I pay about $45 a month for both voice and unlimited data service.

At that same Seattle conference six years ago, we heard from Jim Gable, president of a startup company called Kerbango. Kerbango radio prototypeHe showed a prototype for an Internet radio that could receive hundreds of stations. Conference delegates swarmed that radio like bees to honey. We could hardly wait for it to come to market.

Kerbango was a victim of the dot-com bust, but today we can choose among at least three stand-alone Internet radios that sell for $300 to $400, far less than the price of a computer. Along with smartphones, these radios introduce our listeners to a major disruptive technology that may force public radio to change its approach to content creation.
Let’s say that 5 percent of a public radio station’s audience listens on the Internet. Does anybody believe that this number will go down in the next five years? Of course not. As listeners switch from relatively awkward computer setups to these appliance-like Internet listening devices, including car radios, listening to a public radio station from across the country — or across the ocean — will be no harder than switching from AM to FM. The world of radio will change forever.

Internet radio appliances are already on the market — at early-adopter prices. How long will it take for sales to reach critical mass and prices to fall?

The iPod’s history may offer some insight. The original iPod went on sale in 2001 for $399. Five years later, iPod sales have topped 50 million units, with full-featured units starting at $169. And that doesn’t count the sales of 158 million other digital audio players. It’s simply a matter of time before Internet radios are a common consumer product.

In this context, does it make sense for hundreds of public radio stations to program the same schedule — with station breaks and local newscasts making the only difference in their air sound? Or for public radio stations to continue striving to “super-serve” their core audiences with national programming? Or to continue seeing the stations primarily as a distribution system for national programs?

Stations’ longtime business model of purchasing national programming wholesale and retailing it to local listeners seems vulnerable to complete disruption by the disruptive technology of Internet radio.

The only logical alternative for public radio stations is to focus on creating new and compelling programs of two general kinds:

n Adding real local value to national programming. This involves more than inserting local headlines and weather and traffic reports or covering a segment of Morning Edition with a locally produced package. It requires complete rethinking of stations’ roles and huge increases in editorial involvement. Perhaps only a small number of public radio stations will be able to do it.

n Developing programming for new audiences. While stations produce locally, they also need to think globally. A station at a midwestern land-grant university might be the perfect place to produce a worldwide agricultural news channel. Others might aspire to become superstations in environmental news, education, world affairs, opera or world music. In Internet radio, superstations can be located anywhere. Many of these formats may appeal to audiences new to public radio.

Your next audience: under the radar

In a 2004 book, Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change, futurist Clayton Christensen and his colleagues make a compelling case for going after new audiences: It is easier to meet the needs of previously unserved audiences than it is to try to satisfy audiences that are already close to being super-served.

Others who might serve these audiences barely realize they exist. “Disruptive markets start among customers that appear to the incumbent to be either undesirable or nonexistent,” Christensen wrote. “The initial absolute size of a disruptive opportunity is generally too small to justify any substantial amount of investment or even management attention.”

Ignoring these fledgling markets looks smart to successful businesses, including public radio stations. They can maintain high prices (translation: average pledge amounts) serving their core audiences.

It’s easy to get addicted to the comforts of the status quo. That’s how a powerful company like Western Union made the wrong decision (to ignore the emerging telephone technology) for the right reasons (phones wouldn’t help Western Union in its quest to superserve its core market).
While there is nothing wrong with public radio serving its best customers, one might argue that it has succeeded to date by plucking the low-hanging fruit. Warning: Some listeners will be lured away by proliferating media options and others may stop supporting their stations when they find they no longer provide “radio you can’t get anywhere else.”

The fact that many public radio stations can still make budget and maintain audience today should provide little comfort; Western Union continued to thrive for 30 years after the first telephone was put in service. By the time the company recognized the telephone’s threat, it was too late to respond.

Fortunately, public radio still has time to respond. New, compelling programming for new audiences can work for public radio just as new product development works for any successful competitive enterprise. The problem, of course, is resources. Public radio stations, in general, do not have adequate resources to fund innovative content creation.

How can individual public radio stations devote resources to produce compelling programming? There are two options: raise more money (easier said than done) or create operational efficiencies that free money for program production. This latter option is also easier said than done, but it has the potential for quickly changing a station’s method of operation from status quo to content innovator.
Every public radio station has to struggle with the same functions of engineering, operations, accounting, fundraising, telephone pledge-taking, web development and so on. Every penny wasted on duplicative back-office activities is a penny unavailable for investment in creating compelling content.

No logically constructed national radio system would tolerate such inefficiency. Of course, public radio in this country was not logically constructed. The independent station ownership we value so highly as industry insiders is of little consequence to our listeners, many of whom think the stations are owned by NPR or CPB or even PBS. In the end, the structure of ownership and back-office processes has relatively little to do with what comes out of the radio. What really matters is what we’ve produced lately or will produce tomorrow.

I’m not saying we should strip national programming from local schedules of local public radio stations, nor am I prescribing a particular radio format. What I offer is three recommendations every station management should consider:

But if we don’t have the courage to rethink how we do business, someone else will seize those opportunities and leave us fewer options.

This challenge to public radio is not fundamentally different from the changes that have already come to the neighborhood coffee shop, the family farm, the mom-and-pop corner store and the local commercial radio station.

ust because public radio has not yet seen the equivalent of Starbucks, Dean Foods, 7-Eleven or Clear Channel doesn’t mean it won’t happen. Fortunately, this transformation need not be evil. Technology and structural changes can be harnessed for social good instead of profitability. But the transition can still disrupt life as we know it.

New technologies allow broadcasters to reach audiences without acquiring existing stations. To compete, therefore, public radio must redirect resources toward innovation. What happens if public radio stations continue to view Internet radio as a “toy?” We run the risk of being eclipsed by those who will capitalize on its advantages.

Will there always be a place for the public radio station that we know today? I would suggest that stations choosing to continue with a “business as usual” culture may soon become as rare as the locally owned newspaper or family farm. Technology and consumer demand eroded the viability of these institutions. Is public radio next? Not if we can harness new technologies, manage our operations efficiently and invest aggressively in the development of compelling programming for our current and future audiences.

Jim Paluzzi is v.p. for new media and technology at Colorado Public Radio, Denver.

Web page posted Sept. 26, 2006
Copyright 2006 by Current Publishing Committee

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LINKS

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