• by Michael Shields , July 22, 2004

Two significant moves by radio giant Clear Channel Communications this past week have the potential to radically improve the listening experience for the medium as well as boosting the recently struggling radio advertising business. The company has promised both fewer commercials, which should make listening more pleasurable, and digital signals, which may change the way the medium is transmitted and consumed.

Earlier in the week, the media conglomerate announced that it was adopting self-imposed commercial load limits on its 1,200-plus stations after receiving much criticism from listeners and advertisers alike over severe clutter.

That move has been greeted enthusiastically by buyers.

"It's a very good thing," said Mark Lefkowitz, executive vice president at Furman Roth advertising. "This issue has been a cancer for radio. Some stations are quite frankly unlistenable."

It is Lefkowitz's hope that fewer commercials will bring back listeners who have been turned off. But he cautioned that it would "take a while to undo the damage."

Clear Channel sales reps have been contacting buyers in the past few days trumpeting the news. Though one buyer, who did not wish to be quoted, feared that Clear Channel would try to maintain its current advertising revenue despite lessening its available inventory. That would mean rate increases, which would not thrill buyers.

Lefkowitz shared a similar sentiment. "There will be pressure [on radio stations] to revert [to overselling] when the economy is better," he said.

Meanwhile, on Thursday, the Clear Channel made an even more intriguing move, announcing that it was making a concerted effort to dial up the adoption of digital radio, or high definition radio, by supplying digital equipment to 1,000 of its stations. Using iBiquity Digital Corporation's HD Radio technology, the company plans to install 95 percent of its top 100 markets within three years.

Essentially, digital radio is better radio, as it offers those listeners who have plunked down a few hundred bucks for an HD radio a CD-quality signal.

For starters, Clear Channel Radio believes that HD will drive more listening and more business their way. "We expect more of them will listen and for longer periods," said John Hogan, Clear Channel Radio CEO. "This will translate into a better, more desirable environment for advertisers and we expect they will use radio to a greater degree."

Similarly to what has happened in the HD TV world however, adoption is slow, knowledge is scarce, but the potential is large. As a result, the radio business may not experience major changes for several years.

The effect is "still far down the road," said Lefkowitz. "If they change 100 stations a year, it will still take 10 years to get through all their stations."

Yet some see tremendous potential in this new version of the medium. Like HD TV, digital radio programmers will be able to offer multiple signals in each market, and may be able to transmit more than just sound. Even now, some satellite radio providers deliver text messaging to radio displays in cars (and in some cases, text advertising).

As a result, radio may become more direct-response orientated. "There are other TBD opportunities for advertisers," said Clear Channel's Hogan. "Even more specific demo targeting, the ability to send different commercials to different receivers, etc, that will increase the attractiveness to advertisers, thus potentially increasing our revenues."

Tim Hanlon, vice president and director of Emerging Contacts at Starcom MediaVest Group, believes that digital radio could make for an exceedingly dynamic medium. "The magic to come from that will depend on the imagination of those building the receivers." That could mean a radio version of TiVo, says Hanlon.

He acknowledges that for the time being, digital radio is about better sound, but feels that change may happen faster than in the TV space. "Radio has been a more creative medium in the past," he said.