'Radio Rocks My Phone' - The NAB's Simplistic and Comical Campaign

Includes: EMMS, IHRT, SIRI
by: SA Editor Rocco Pendola

While I still think Clear Channel (CCMO.PK) can be formidable competition to Sirius/XM (NASDAQ:SIRI) and other audio-entertainment providers, the latest inane move by the increasingly irrelevant National Association of Broadcasters (NAB) brings back concerns over terrestrial radio's complete and total state of ineptitude. It's really hard to fathom how the supposed mouthpiece for an entire industry could respond to fierce competition with such feeble attempts. While not dead, terrestrial radio sits at death's doorstep, and this is what the NAB comes up with?

"Radio Rocks My Phone" is as simplistic of a campaign as it is comical. Simply put, the NAB -- backed, presumably, by the nation's big radio entities -- wants Congress to force companies to outfit mobile devices with FM chips. This would allow users to listen to radio for free, as opposed to having to do so as part of whatever streaming data plan they have. If you don't think cluelessness has killed the radio star just yet, consider their core reason for advocating this requirement. The NAB wants mobile phone users to have immediate access to local radio in case of an emergency.

Of course, ads supporting this initiative will run primarily on local radio. As Mark Ramsey of Mark Ramsey Media points out in his scathing (and fantastic) critique of the effort, this is yet another instance of radio diluting its own worth by giving away airtime as opposed to selling it or filling it with content worthy of a person's time. Why doesn't the NAB spend its cash hiring local talent to replace the same Ryan Seacrest show that runs in middays on countless stations across the country? Or do something to help Clear Channel and others beef up their digital efforts? It's probably because radio company CEOs like Emmis's (NASDAQ:EMMS) Jeff Smulyan are just as out of the loop as the NAB is. Radio executives, if they serviced their air talent and listeners as opposed to their debt, could hostilely take over the NAB and turn it into somewhat of a force.

Instead, they leave investors with few choices for investing in radio companies. You're better off speculating on Chinese penny stocks than you are most radio companies. And this campaign comes at a time when Pandora is about to do an IPO and become even more powerful, companies like Apple (OTC:APPL) and Amazon.com (NASDAQ:AMZN) are expanding consumer's music listening options and methods, and Sirius/XM appears ready to steamroll into its next stage of evolution -- SatRad 2.0.

There's a lot SIRI CEO Mel Karmazin could cry about right now -- lawsuits from inside and out, stiff competition, the risks inherent to auto sales in an uncertain economy -- but he doesn't seem to be. Despite my concern over SIRI as an investment going forward, I have always found it difficult to question Karmazin. When he speaks on his company's next earnings call in May, he will undoubtedly do so with confidence. He will look forward. He will act, not react. He will give people reasons why they should invest in his company and keep an eye on how it progresses. Evolution. Progression. Innovation. To compete with everything from crafty cable television companies to iPods to online streaming to social media, you need to put your head down, filter out the noise, and be your best. The chips a mobile phone company places in its devices should not enter the conversation.

"Radio Rocks My Phone" basically tells investors and the throngs of people embracing new media that terrestrial radio feels like it cannot compete. We cannot rely on mobile customers using their data to consume our programming over somebody else's. We cannot rely on people turning on one of the nation's most ubiquitous pieces of hardware to hear what we are doing. We cannot count on them to hit the AM or FM button instead of the Satellite button if they do turn on their radio in the first place. We cannot leverage local news, weather, sports, play-by-by, and what's left of compelling local and national talent to win over listeners; instead, like the most shameless politicians, we have to use national security to get what we want.

If the NAB really (A) gave a rat's nose about national security and your safety and (B) believed in the ability of the companies and stations it lobbies for, it would ask Congress to make radio available -- for free -- only in times of real emergency. It would not be difficult to do. Somebody innovative could probably harness current technology to make it happen. Under this scenario, radio would probably have to hand the task over to the engineers at companies like Apple and Sirius if they could fit it into their busy schedules.

Disclosure: I have no positions in any stocks mentioned.

Additional disclosure: Author may enter a long or short position in AAPL or AMZN, possbily though options, at any time.