What's The Frequency, Hamish?

Doc Searls, a man who knows a thing or two about the radio biz, blogged a bit yesterday about the potential for Web radio in his entry, RouteAround Radio. Doc had been asked his opinion about the best way for a school to start a local radio station. He recommended using the Web over a local FM band station because "it's a lot cheaper and easier, and partly because the Net can easily be extended to the air in a clean and unlicensed way."

Over the years Doc Searls and I have traded blogs and emails about the state of radio, and in particular how satellite radio plays into the medium's evolution. For almost two years I've maintained a blog called SatRadio that covers all the various happenings in that new segment of the industry. I posted a comment on Doc's blog about how terrestrial radio has been freaking out over satellite radio, and that Web radio isn't even on their radar screens. One of the more insightful things Doc pointed out was:

"I should add that commercial radio has a split between its customers and its consumers. The customers of commercial radio, as you point out, are their advertisers, not their listeners. The consumers of commercial radio have approximately zero influence on what they hear. They have somewhat more influence over what they hear on noncommercial listener-supported stations, because in those cases they are customers as well as consumers." - Doc Searls

Bingo! That is exactly why satellite radio has radio execs in a panic and the on-air talent is largely barred from even discussing it. Try calling in to your local show and mention XM or Sirius and see how long your call lasts. While satellite radio eats into the listener base on one level the promise of Web radio eats into it on another. The big difference of course being the commercial implications to advertisers.

For the moment your local radio station(s) offers targeted advertising to its customers and local content to its consumers (listeners). In some instances they might offer syndicated content, from Tom Joyner to Howard Stern and Rush Limbaugh, and have the opportunity to offer prime spots to local advertisers during those shows. This is typically how they can afford the syndication fees and it can be a cash cow if they pull in enough audience share. They then sell second-tier spots during the local content shows to fill out the remainder of their traffic schedule.

Satellite radio upsets this whole model because the customer is also the listener. People are willing to pay between $9.99 and $12.95 per month, plus the cost of the receiver, to have greater choice and variety over the content they receive. Sirius prides itself on offering 100% commercial free music, but XM offers limited commercials that put advertisers in a pay-to-play role. Advertisers get greater reach and focus to different audience segments, but the listener is still the customer.

Terrestrial radio fears satellite radio enough that even Clear Channel has some coin invested in XM. Satellite radio threatens the cash cow of syndication on local stations and Web radio has the potential to take away even more listeners. One devours the top line and the other nibbles away at their foundation. Radio's only hope is to listen to their real customers before they turn the dial, flip the switch, or tune out forever. Listeners now have alternatives that in many cases offer more relevant and valuable content.