Is internet radio really radio?

Technically speaking, no.  Here is how radio is defined in the dictionary:

ra⋅di⋅o

[rey-dee-oh]
-noun
1. wireless telegraphy or telephony: speeches broadcast by radio.
2. an apparatus for receiving or transmitting radio broadcasts.
3. a message transmitted by radio.

Therefore, the internet, something relying on wired connections for the transmission of data for the most part, is not radio.  A radio station that is streaming audio, is a different matter.

Aside from that technicality, there is something else that is important to note.  Internet broadcasters (AKA webcaster) lack some other key components that make a radio station a radio station;  A specific set of rules that govern their behavior.  Things like profanity, copyright infringement, slander, payola, plugola, syndication rights, advertising rules (things tobacco, alcohol) emergency information, public issues and so on.

A radio station license is granted in the public interest.  Time was that radio station were required to do a certain amount of public service broadcasting, things like the news, religious programs, community interest programs.  Many station still do this.  An internet broadcaster is under so such constraints.   Some would say that is better and it just might be.  However, when Tim Westergren says “don’t call it internet radio, just call it radio,” sir, you are wrong.

The FCC is studying the state of Journalism

The FCC has drafted a Notification of Inquiry (NOI) examining the state of media journalism in America. Why?  No harm can come from this, right?  Let us read a little further:

A major issue the report details is the possibility of “behavioral rules” for broadcasters, according to the official. Behavioral rules might include guidelines that broadcasts serve the public interest.

Bringing back Cold War-era guidelines mandating that broadcasters do “non-entertainment” programming is another idea being examined, according to the official.

From CNSNews.com

Doh! Now that most radio stations have fired their news departments, the government wants news.  Frankly, I think it is a dumb idea.  The hands of time can’t be turned back so there is no use trying.

There are radio stations out there that provide good local and national news, most NPR stations for example.  There are also a few commercial stations still doing it.  Those that can make money on it will and that is the way it should be.

I listen to the local NPR station’s (WAMC) program called “The Media Project.”  It is an interesting show where a Television news anchor, a local newspaper editor and the radio station president talk about media issues.  Often, it turns into a lament about how the internet news sources are cutting into their own audience because the internet is “free.”  The news paper editor in particular often feels that he is shouldering the burden (by paying the reporter’s salaries) of gathering the news and the free loading internet people who write blogs, like this one, merely leach off of the newspaper’s hard work.  And he has a point.

So charge for it.  I’d pay a $3-5 per month fee to have full on line access to a good local paper.  I think many other people would too.  When they started giving away their content is when they got into trouble and that is their own fault.  This would be a good formula:

  1. Media outlets (newspapers, TV stations, Radio stations, Cable companies, etc) get together come up with a policy for online content.
  2. A good example would be, limited free access to national stories and front page items and advertisements.  Charge a nominal subscription fee for locally generated content and full access.  Charge a higher fee for content without advertising (except classifieds).
  3. Create a website that is laid out like a newspaper.  Keep all the sections the same and make it very easy to navigate around in.

Some newspapers, like the New York Times, are already doing things like this.  The reality is that online media is here to stay.  Those legacy media outlets that want to survive are going to have to figure out a way to compete and make money online.

Fragmentation

The opposite of consolidation is fragmentation. Rumors abound that Clear Channel Communication is on the verge of bankruptcy, Cumulus stock is trading at $0.61 per share, Citadel Broadcasting Corporation is a $0.038 per share and so on.

What does this mean?  The great consolidation experiment of the 90’s and 00’s has been an abject failure.  Remember when deregulation was going to save the day?   Instead, it merely prolonged the day when many small non-revenue generating radio stations should sign off and turn in their licenses.

A quick review:

  1. Major corporations formed with the express purpose of buying radio stations and consolidating operations.  This was supposed to save money and make stations run more efficiently with smaller staffs.
  2. These corporations swooped into large, medium and small markets, often paying multiples of 14 to 18 times cash flow.  Books were cooked to make non-revenue generating radio stations look good, thus soaking the buyers.
  3. The new owner’s discovered their stations were not doing all that great, even with the “market synergy” of group ownership.
  4. Most of the station’s staff were replaced by computers, programming was handled by wizards located hundreds or thousands of miles away with no awareness of any particular location’s uniqueness.
  5. Radio formats become homogenized, bland, and boring.  People begin looking around for other entertainment
  6. Radio becomes irrelevant.

Which leads us to our current situation.  When the economy tanked in late 2008, advertising revenues dried up over night.  Since all these radio groups were operating at the top of the business cycle, with no (zero, zilch, nada) room for error, many owners began to have troubles making loan payments.

The semi good news is that all of the radio corporations are in the same sinking boat.  Even if the banks could force the sale of radio properties, the values are so low now that they will never re-coop their losses.  So the waiting game begins.

Clear Channel,  however, may be liquidated anyway.  The Bain financial group is not known for being nice.  They likely have anticipated a bankruptcy even before they financed Clear Channel’s move from public to private and did it for the fees they could charge.  In short, they don’t give a shit if Clear Channel lives or dies, they have already made their money.

If Clear Channel begins selling stations, will the other groups start snapping them up?  There are two key considerations, financing and FCC regulations.

The lending institutions that are holding the paper on these stations now will likely have a long memory.  It may not be so easy to get loans in the future, especially for those companies that leverage themselves to the hilt and refinance every few years.

The Congress has been considering tightning ownership regulations, this may force the FCC to adopt rules that do not allow current radio station owners to buy up the Clear Channel scraps and add them to their own collections.

What we may see is many stations fail.  These are the stations that should have failed in the 90’s but were “saved” by consolidation.  Those stations that are still economically viable, may be bought up by the dedicated radio professionals and run semi-profitably.  Those stations that can be locally important can reclaim some of their lost audence.