• by December 22, 2005

The buzz around satellite radio and its digital brethren has been deafening recently, with everyone from New York Times Media columnists to Wall Street analysts shouting its praises. This noise from a yet-to-be profitable product with relatively small market share has served to shake up radio broadcasters (and their stock prices) and driven them to develop innovative new business models (Clear Channels' "Less is More") and technologies (HD broadcast radio).

Despite the hype, satellite may not be the real challenge for radio broadcasters.

Recently, the University of Southern California Media Lab released a survey of 2,000 12- to 24-year-olds entitled "How to Make Music Radio Appealing to the Next Generation." The analysis found that 85 percent of the total sample "would choose their MP3 player over traditional radio as a preferred option for music." Additionally, the sample revealed that when given a choice between listening to music over the Internet or broadcast radio, 54 percent preferred the Internet while 30 percent preferred radio. And, interestingly enough in a medium that can have dozens of formats in large markets, 54 percent of the total sample said there is not a radio station in their area that plays their favorite music. Only 2 percent of the total sample listened to satellite radio.

This corresponds with a recent OMD/Yahoo study showing that "47 percent of 13-24 year-olds in the U.S. said they preferred the Internet for music, while 27 percent preferred radio." According to a press release on the study, "this generation often consumes multiple media formats at the same time, and traditional media are often pushed to 'background' status in the 'media-meshing' hierarchy."

This is scary stuff for radio broadcasters whose growth strategy has always relied on creating habits in teens that would later result in lucrative "drive time" adult behavior. But, more than any other of the so-called "traditional" media, the Internet offers broadcast radio a second chance, and probably its best opportunity to not just survive, but thrive in the face of the digital onslaught.

Broadcast radio's window of opportunity is closing rapidly, however, and in order to maintain its relevance with a new generation of media-savvy consumers, it will need to leverage its key assets--targeted formats, strong local identity, complementary technology and inherent product appeal to younger demos--to make it through in time.

Radio's focus on providing formats and content that appeal to specific age/demographic groups has always made it more like cable than broadcast television. Targeted programming that allows audiences to "self segment" is a luxury that newspapers and broadcast television have never been able to fully capitalize on, and which has allowed radio to avoid the malaise of an aging consumer base. Rather than lose listeners to other, more age-appropriate, media, radio has had the ability to cycle listeners through formats as their tastes change. The recent "Jack" fad notwithstanding, radio's ability to leverage formats as a way to target prime demos is no different than the clustering of affinity groups in community sites that advertisers have been salivating over recently.

Radio can still be the most local of all media. When you take a look beyond the syndicated countdown shows, radio has a great deal of true grassroots activity and appeal. Remote broadcasts, zany contests, local personalities and in-studio interviews give radio a local flair that national Internet--or satellite--radio cannot replicate. This has always been the Achilles heel of the big Web players. They just can't figure out how to get local. (Hint: it takes people and legacy, not just maps and yellow page listings.)

When it comes to the Web, if they had a choice between a local stream with local attitude or a robotic national audio stream, my bet is that consumers would pick the former. Based on a recent MediaSpan/Frank N. Magid study, over 50 percent of their online audience of 6M monthly unique visitors went online at least monthly to stream their local station if it was available. Nothing to sneeze at as far as a cross-media conversion rate.

Radio truly has the ability to be with a person from morning drive to the drive home. And, the technology of radio makes it easily transferable to the Web. The local online radio product can be delivered on variable bandwidth connections, with little modification other than the insertion of new (even more targeted) commercials. And, simple station applications can enable multiple local online channels under the same brand, empowering stations to meet the demands of an ever-fragmenting market looking for even more targeted programming. Podcasting of original content is easier yet, and allows radio to be in places where a signal (or a broadband connection) just can't reach.

Finally, since the "Rock Around the Clock" days, radio has been a medium for teens to sink their teeth into. Formats like Alternative Rock, Hip-Hop, and CHR reach out to young fans, and unlike broadcast television, which keeps getting an older audience, radio continues to appeal to Generations Y and Z. This appeal can be leveraged to continue on the Web. Strong station Web sites that have contests, games and interactive features that integrate with broadcast programming are a natural fit for a group of listeners who are apt to be juggling several media at once. Securing a relationship with this generation, at this juncture in the market, is critical to avoid the current generational malaise that newspapers now face.

What all of this means for advertisers is that local radio in its portable, on and offline forms has the potential to become the hidden jewel for savvy marketers: fully targetable, with high brand affinity, a deep local comfort level and audience that can engage with the medium on different platforms from dawn to dusk. A group of top radio group CEOs met in New York recently to announce their consolidated efforts to launch HD Radio into the market to compete with the growing array of digital devices. This effort, combined with a continued focus on extending their powerful core assets on the Web, could make radio the surprise media success story of 2006.