Defending the Medium: Radio Already is Great

Posted on March 2, 2012


Don't Take Advice from a Fool

Yesterday, one of my Talent Mechanic clients passed along an article from the AOL Daily Finance page titled “Why Terrestrial Radio Will Never Be Great Again.”

I hate articles like this. Not because they assassinate the medium I enjoy being a part of but because it does so without any regard for the facts.

Here are a few of the conclusions the author, Rick Aristotle Munarriz of The Motley Fool website, arrives at:

1) Radio Will Never Be Great Again Because People Pay for Satellite Radio

Mr. Munnariz posits that because just less than 22 million people subscribe to Sirius/XM Radio that terrestrial is in trouble. Yet he doesn’t mention the Radio Advertising Bureau (RAB) study that shows more than 241 million people tune into terrestrial radio each week. That’s 93% of the U.S. population aged 12 and up spending time with terrestrial radio on a weekly basis.

I’m not criticizing Sirius/XM I’m just hard pressed to conclude that a small percentage of the overall radio audience paying for their service proves anything about the popularity of terrestrial radio.

2) Radio Will Never Be Great Again Because Clear Channel Only Made $3 Billion Last Year

Mr. Munnariz next assertion is that, according to Clear Channel’s recent revenue report, the company only had $3 billion in revenues last year. That’s a 4% increase over 2010 which Munnariz dismisses as being primarily due to purchasing a new traffic company and increases in billing on the digital side.

Wait. I’m sorry did you say the company made $3 billion last year? $3 billion? That’s a lot of money. In fact, the radio industry as a whole grew for the second straight year finishing with $17.4 billion in billing according to the RAB’s revenue release.

I could understand if Mr. Munnariz had said he doesn’t expect to see broadcast company stocks grow quickly; radio is a very mature business and expecting big growth in the sector is crazy. But any industry that bills $17.4 billion and is seeing a modicum of growth in tough economic times is hardly the failure he paints radio to be.

3) Radio Will Never Be Great Again Because of In-Car Streaming and Pandora

There’s little doubt the growth of streaming options in the car is a future concern for the radio industry. It will challenge us to respond in new ways and be more entertaining than ever. Not to acknowledge that is akin to sticking your head in the sand.

However, Pandora, which Mr. Munnariz holds up as the gold standard of streaming companies is just a music stream and does not provide listeners with local information or entertaining talent. The two services are not the same thing and saying one will replace the other is ludicrous.

The author also references Pandora’s growing revenues but he fails to mention the incredibly high music licensing costs the company faces for the music it streams. Those numbers have left many experts wondering if Pandora will ever be able to turn a profit. I, for one, hope it does. I enjoy listening to Pandora. I just don’t see it as a justification for a splashy headline proclaiming terrestrial radio will never be great again.

This is the problem when analysts without any real insight on an industry are given a place to pontificate. Perhaps next time, Mr. Munnariz will write a more balanced article about the true state of radio instead of only telling half the story in an attempt to back up a flashy headline.