I was spinnin' 'round a dead dial
Just another lost number in a file
Dancin' down a dark hole
Just searchin' for a world with some soul
This is radio nowhere, is there anybody alive out there?
This is radio nowhere, is there anybody alive out there?
Is there anybody alive out there?
-Bruce Springsteen, Radio Nowhere
In its Q1 2011 letter to shareholders, Netflix (NASDAQ:NFLX) conceded that one of the biggest competitive threats it faces could come from deals like the recent Comcast (NASDAQ:CMCSA)-Time Warner (NYSE:TWC) link-up. In a nutshell, anybody can watch select programming for free, but only Comcast subscribers get access to premium content. This partnership represents just one of the many streaming initiatives to enter the space Netflix, Hulu, and others run in. The term, TV Everywhere, has become a broad descriptor for efforts beyond the Comcast-Time Warner one that allow a cable company's subscribers access to what they can see on their television on mobile devices, tablets, and computers.
While clicking through the latest rankings of Internet audio streams from Triton Media, I wondered why terrestrial radio does not have the vision to do something similar. Instead of wasting its time on feeble and reactionary campaigns, the industry should realize that the people, united, will never be divided... or something like that. Radio companies, large and small, should cut themselves off from the hapless National Association of Broadcasters (NAB) and, charges of collusion be darned, stop competing against one another. Have a look at Triton's Internet audio leaders from February.
(click to enlarge)
You can read more about the rankings and Triton's methodology through the link provided before the chart.
While Pandora's (NYSE:P) numbers have come down, Triton notes that a technical glitch might have prevented a significant chunk of the Internet radio company's mobile listenership from getting counted. And while Slacker continues to post impressive numbers, terrestrial radio companies make up practically the rest of the top 20.
A combined venture -- let's just call it Radio Everywhere -- would make perfect sense. I have even heard rumblings from a few people I respect inside the industry that the idea is not all that far-fetched. One went so far as to say that it could happen.
Pandora's session starts dwarf that of its closest competitor, CBS Radio (NYSE:CBS). Even radio giant Clear Channel (CCMO.PK) pales in comparison. The rest, including Disney's (NYSE:DIS) ESPN radio, are left to pick up the scraps. As they stand, each of these efforts are little more than fledgling attempts to take on Pandora, companies such as Apple (NASDAQ:AAPL), and satellite radio powerhouse Sirius/XM (NASDAQ:SIRI). One thing that terrestrial radio's Internet streams have going for them, however, is time spent listening. Triton's stats show that terrestrial radio audiences, at least in February, listen longer while streaming online.
In the old days of Arbitron (ARB) ratings, we referred to time spent listening as "TSL." Often, TSL proved more important than an actual ratings number when it came to securing advertisers. TSL suggests loyalty on the part of listeners. It also allows you to conclude that listeners not only love what you do, prompting them to listen longer, but that your audience consists of lots of "P1's." P1's are people who listen to your radio station first and foremost over their second and third choices. If you combine a large number of listeners with solid TSL, ratings tend to go through the roof. Triton uses a similar form of measurement.
A combined website -- comprised of every terrestrial radio offering under the sun, ranging from individual stations to network programming to ESPN Radio -- would draw millions upon millions of online listeners. It's too early to speculate on the many ways terrestrial radio could take such a concerted effort, but, needless to say, it would be incredibly powerful. It would not only draw listeners, but it would give advertisers the type of platform radio has tried to give them through selling space on clusters of radio stations. With a Radio Everywhere effort, the industry can begin chasing the advertising dollars it now loses when agencies turn away from increasingly irrelevant terrestrial radio delivery methods and move towards a new media model. And, of course, the ability to charge for subscription access to online-only premium content and features looms large.
Terrestrial radio, sooner or later, must see the writing on the wall. It's in the early stage of being the rotary phone or, now, the touchtone phone. It's VHS. It's the DVD. It's about to go extinct. Maybe not tomorrow. Maybe not in five or ten years, but it's going to happen. Thanks to the debt burden the industry carries it fires talents who often land on Internet radio or at Sirius/XM. Many terrestrial radio talents choose to leave the medium for these options before getting canned. Terrestrial radio should take off the blinders and picture the day when brick and mortar stations, as we know them, no longer exist. It should slowly but surely morph itself into pure-play online radio. It would save itself a ton of cash and be able to hire back worthy personalities in the process, making the programming once again on par with its competition.
Just as Netflix has admitted that TV Everywhere provides a more than formidable challenge, Radio Everywhere, particularly if it made its way to mobile devices and automobiles through some type of seamless setup, would make Pandora's, Slacker's, and Sirius's lives much tougher. As it stands, investors sing the tune of Radio Nowhere if they even consider seeking out terrestrial radio trading opportunities in the first place.
The bold moves made by companies such as Disney and Time Warner Cable (TWC) to deliver programming to the devices and platforms their audiences want to consume it through makes them attractive long-term plays. I don't see television companies that embrace streaming, the Internet, gadgets, and mobile as remaining old and stodgy for long. Terrestrial radio, on the other hand, needs more life injected back into its relatively pathetic bag of bones. Clearly, the streaming efforts of individual companies -- while profitable in some cases -- have fallen short in the industry's now sad history of playing victim to new and innovative forms of media. If, however, radio companies combine forces online, investors might just have a reason to come back into the fold.
Disclosure: I am short NFLX via a long position in NFLX put options. Author may initiate a long or short position in AAPL or SIRI, possibly through options, at any time.