• by April 25, 2005

By Jonathan Blum

Radio's bawdiest yakker moved to satellite. People are programming their own radio stations and music mixes via the Web. Music programming downloaded via mp3 players is quickly replacing jukeboxes and commercial music systems in bars, hair salons, and even the Muzak mood of doctors' offices. Add to that the au curant trends of podcasting and ripcasting and hd Radio's promises of stellar audio quality, and the forces roiling the radio world get infinitely more intense.

What gives?

Such technologies are spurring seismic changes for traditional terrestrial radio, a medium marketers spend $20 billion on each year. They're also giving consumers the ability to time-shift radio listening, much in the way they program digital video recorders (dvrs) for tv viewing. The bottom line is: Radio content, in the digital age, has the potential to become the most widely accessible and malleable of all media. If that's the case, and more consumers become their own dj and programming executive, where does that leave the fine art of advertising? Skipped? Maybe.

Amid an avalanche of media reports on the sea change underway in radio-land, most notably Wired's dire March cover story, "The End of Radio," how do you think traditional radio will rally to meet the threat? Satellite already carries fewer commercials, touts sharper audio quality, and offers subscribers deeper playlists. Internet radio is popular among hard-core fans of niche genres and a key vehicle for breaking new artists.

Radio Me Nowhere is the sea change in radio more apparent than in your average bar. Consider the case of a Scottish taproom in mid-town Manhattan. Instead of a stereo receiver tuned to a local station, a commercial music service or jukebox, there is a single iPod placed strategically above the bar. All it takes for music to waft through the bar is an amplifier and an iPod.

"Each of the bartenders bring their own," says the barkeep. Any mp3 player can serve as a time-shifting musical surrogate, playing the role of all-in-one dj, record label, and radio station. The bartenders do dj nights where they play their own mixes. The bar's receiver and commercial sound service were ripped out earlier this year. The tapman's response: "That canned radio music sounded like s---." It's not exactly a ringing endorsement for radio as we've known it.

Fighting Back Like some MiniMe monolith from "2001: A Space Odyssey," stunning all who come into contact with it, traditional radio is feeling the heat. It's also beginning to rally. Some stations have abandoned Top 40 formats for more random formats.

For example, alternative, mp3-inspired music formats like Ben, Jack, and a country cousin called Hank, are rolling out in major cities across the country. Clear Channel Communications is pushing its "Less-Is-More" campaign of shorter commercials and reduced ad loads. Some stations are reducing the number of 60-second spots and are cutting the number of ads in some commercial ad pods.

"Radio faces real challenges from commercial-free environments," says Richard Fielding, vice president and director at Insights & Analytics Group, Starcom Worldwide. "There is the potential for a seismic shift in listening."

Internet, and especially satellite radio, are gaining traction. Analyst estimates put the total number of subscribers for xm and Sirius Satellite radio combined at more than 8 million by the end of 2005. Earlier this year, Arbitron projected that the weekly audience for Internet radio, or the number of people age 12 and over who've listened to a song on the Internet, is nearly 20 million people.

Terrestrial radio is searching for ways to counter the onslaught of new forces vying for listeners' attention. Clear Channel plans to offer clips of its programs over wireless phones by the end of the year and will also stream Web imagery from its stations via a program dubbed "Stripped"; No. 2 Infinity Broadcasting says it has similar plans.

"We are going to offer rich visualizations of our radio streams," says David Goodman, president of marketing at Infinity, though he declined to specifically comment on the nature of the content.

Some industry insiders argue that innovations such as Web video are all part of an evolution that builds on the traditional power of broadcast, yet responds to consumers' new habits and tastes. "When I hear trash talk about broadcast [radio], I always ask, 'Who is it from?'" says Irene Katznelson, vice president and a radio buyer at Universal McCann, "Because I do this every day and radio is still a very viable business."

Shift Happens Though it's certainly correct that radio and the advertising that supports it will almost always carry value, it's also true that the iPod and the family of time-shifting devices and software it represents, are bulldozing the radio industry in new, once inconceivable, ways. The fact is, radio faces a stiff challenge from cutting-edge gadgets and services that take time-shifting  and the attendant challenges of loss of audience control and advertising effectiveness  to a level rivaling that which the tv business faces from tivo and dvr technology.

Notably, Griffin Techno-logy's RadioShark enables listeners to schedule, as well as start and stop the recording of live radio shows  a kind of tivo for radio. RadioShark can record any radio broadcast in real time; it can also be programmed to record, thus time-shifting radio listening. Likewise, tivo's Series 2 box offers home networking options that enable subscribers to listen to music and satellite radio on their tivo box from a networked pc. A company called Replay Radio, which positions itself as working "like a tivo for Internet radio," lets listeners record Web radio broadcasts in any format and then makes mp3 files of them. For radio, it seems, the time-shifting future starts now.

Joining the Fray Even as established players downplay the threat posed by time-shifted listening, they are making major bets on the concept.

Next-generation hd Radios, the traditional broadcaster's answer to satellite services like xm and Sirius, are slated to roll out with storage and recording capability. This local storage will allow broadcasters to emulate satellite tv providers' trick of offering interactive services like content on-demand using a hard drive and software, rather than genuine two-way networks like cable tv.

"We see an army of applications from customized gps-based [global positioning satellite] traffic reports, to telemetrics-based commerce, to content on demand," says Bob Struble, president at iBiquity, the company that developed the hd Radio technology.

Arbitron recently pegged the number of heavy users of online radio at about 11 percent of people 12 and over, or about 27 million. That number is almost certainly too small if you factor Wi-Fi subscribers and the number of pc users who are also capable of time-shifting audio. Regardless, the base is likely to grow as attitudes toward technology evolve. "Consumers are increasingly engaging in behavior of getting what they want when they want it," says Bill Rose, senior vice president of marketing and media at Arbitron.

Many companies outside of the traditional radio sector are also betting on the technology. High-profile consumer electronics makers, like Delphi and Pioneer, are already selling satellite radios with digital storage built-in. Delphi's myfi and Pioneer's xm2go each come with enough digital space to store about five hours of material.

Smaller outfits also see an upside to time-shifted listening. A company called Xact will market rego, which it dubs the world's first all-in-one mp3 and satellite radio player, which comes with an expandable sd memory card allowing for a significant amount of storage. The company will partner with Sirius.

TimeTrax is already selling a device that lets users rip both xm and Sirius satellite streams to cds and mp3 players. The company expects to introduce a docking station that will allow porting to the iPod. Content pro-viders are also seeking to leverage time-shifted listening.

Napster's Napster-to-Go service allows for blended by-song downloads, full rental subscription, or live streaming via the Web. The company almost immediately found itself in a public relations jam when an online chat board posted a so-called "hack" for the service. The "hack," which was reportedly echoed by blogs and then picked up by Reuters, actually turned out to be nothing more than a simple recording plug-in for the Winamp audio player.

Though Napster declined comment for this story, the debate showed that software developers are also looking to cash in on time-shifted radio. Already two bits of code have solid followings, Total Recorder for Windows and Audio Hijack for the Mac. These packages essentially permit limitless personal control of content and point out the allure for software makers looking to sell code.

However, probably the most powerful bit of software for sale will be the radio show itself. In the final twist for traditional radio, much-hyped podcasting will certainly play a role. Here, anybody with a microphone and a pc can create an mp3 recording that can be e-mailed to any, and all takers. Though the trend is clearly overplayed, with the total number of podcasts below 10,000, the potential for greater usage is there.

"It's a reverse of power back to the consumers," says Eddie Keyes president of World Talk Radio, an online radio firm.

Super Shifter However, the most bizarre challenges facing the industry, the truly mind-numbing ones, come from small start-ups that are betting they can disrupt the industry at its very core.

A company called MusicGremlin, for example, rolled out a reference design mp3 player earlier this year. The player seeks to place a digital music store in each user's pocket by providing wireless connectivity for portable music players. Though wireless iPods are clearly a major part of this device's future, next-generation radio is also wrapped into the service.

MusicGremlin is attempting to synthetically replicate the wireless am/fm and satellite radio networks, but instead of using one-way broadcast bandwidth, it will deploy on unstable two-way Wi-Fi and Wi-Max hotspots around the country. The idea is to use hotspots to offer a fully interactive audio experience, a direct competitor to traditional radio.

"We absolutely see a customizable, targeted, fully interactive music service, in effect a private radio station, that refreshes itself anew each night," say co-presidents Jonathan Axelrod and Robert Khedouri. "It's radio on steroids."

As to what the radio industry will do with the promise  and threat  of time-shifting services, it depends on who you talk to. Many industry insiders point out that no matter what technology does, the core business of buying and selling advertising will remain within the hands of a small number of people who can manage the complexity of decentralized media buying.

Andy Lipset, managing partner at Ronning Lipset Radio, an advertising rep firm for several Internet radio providers including aol Music, Yahoo!, and others, says, "There is no Rosetta stone yet that allows traditional advertisers to go from today-speak to newer media." Lipset points out that without market liquidity, it will almost be impossible for newer entrants to gain traction since they will be limited to fringe buys and smaller payouts.

Paul Parton, partner at The Brooklyn Brothers, a firm specializing in non-traditional media, also says he does not see much upside for time-shifting. He maintains that time is the ultimate commodity for consumers and they will not have enough of it to listen to what they record on a time-shifted basis.

"I think listening to radio is done in time that has been carved out for people, like driving or working," Parton says. "It will be tough for most people to get that time back."

And Lisa Namerow, senior manager for aolRadio agrees, saying that targeted radio streams will always be effective. "Once you get used to the diversity of 200 feeds, it is hard to get your fix elsewhere." There are, after all, only so many different sub-genres of music.

Sue Johenning, executive vice president of local broadcast at Initiative, for one, isn't threatened by the changes: "Radio has absolute real value for advertisers now." In fact, she has found that the dire reports about terrestrial radio have made the market soft and pricing competitive. "I just think advertisers are going to wait for the dust to settle," she concludes.

However, not all visions of radio's future are as positive.

Dave Lakhani, president of Bold Approach who specializes in new forms of marketing like podcasting, paints a far darker picture. He believes that decentralized production like podcasting, empowering audio software, and time-shifting methods will eventually create a vast audience beyond the control of the major players. Lakhani also says the radio is protected somewhat by its scale and because it takes so long for people's habits to change.

"Unless the Clear Channels and Citadels of the world are willing create content for the next-to-nothing that the average fan is willing to do it for, they are just not going to have anything to do," Lakhani says. "Look at mtv. The first song they played was "Video Killed the Radio Star." Pretty prophetic wasn't it?"