Least Worst Options

I was reading Mark Ramsay’s piece about Pandora. If you don’t know, Pandora is a (very popular) streaming radio service in the US. It’s something we don’t really have in the UK. I imagine that’s because of a combination of different things – music rights, early Spotify deployment and a strong existing radio product.

One of the Pandora hot topics is whether it’ll start hitting existing radio operators revenue and audience. It’s getting some audience traction and better yields on advertising – ie a thousand Pandora listeners generates more revenue than a thousand analogue radio listeners.

Personally, I think it’s getting these revenues because it’s ‘hot’ and there’s limited inventory. Longer term the thing that will make it truly successful is the ability to target really narrow demographic types. If you want a 21 year old in New York or a 50 year old in Santa Monica you’ll be able to drop your add into the platform and it will serve it to the right people. I imagine, at the moment, there isn’t enough demand (or understanding) from the ad agencies to be able to develop that much creative to really take advantage of it. However, should agencies want to go down that route, Pandora will be in a great position.

It’s something that Absolute Radio talked about with their new streaming options. They’re asking users to register so they can do similar things.

Quite often the discussion about platforms and new services is whether they’ll ‘kill off’ older ones – the analogue radio killer, the iphone killer, etc. I think often it’s the wrong kind of question though. Just because something new comes along, doesn’t mean what’s gone before it vanishes. If that was so, radio – around 100 years – would be long gone.

What actually gets replaced are things that serve consumers better than what went before. Often they’re things that highlight products or services that we’ve ‘put up with’ or, have up to now, been the ‘least worst option’.

The iPhone was revolutionary because it showed up old feature phones or existing smart phones to be a bit rubbish. Its introduction necessitated the entire industry to revise its mobile strategy and now all phones really take as their baseline iPhone-popularized features – touch, apps etc.

Often these changes take companies by surprise, when really it’s just a combination of outside innovation and inside complacency.

I sometimes worry about complacency and UK radio.

In the analogue world we have some excellent stations, some average stations and some poor stations. However, providing they are solvent businesses, market forces do not have the same impact as in other sectors.

This is primarily because analogue radio has massive barriers to entry for new entrants. A combination of lack of frequency availability and the heritage position of many stations means that new entrants rarely get a look in. So my question for existing stations – are they doing okay because they’re good, or because there’s no one else able to compete with them?

Generally, competitive radio markets have better radio stations. When you really have to compete for audience and revenue two things happen – you work harder at being good and you sort out your positioning. You have a better focus because you need to have a better focus. This competition means there’s less chance that people listen to you because you’re the least worst option.

The world is definitely changing and it’s digital availability that’s caused many sectors to change and quite happily dispose of their heriatge operators. Whether it’s job ads or buying music, consumers jumped when there was a better way to do something and they could junk their existing least worst option.

I don’t know whether it will be Pandora-type services that gives radio an iTunes vs CDs moment. What I do know is that analogue radio’s barriers to entry are living on borrowed time. A mandated digital switch-over or not, the concept for today’s consumers of a limited FM dial being the basis of their radio choice is laughable.

As I talked about in a previous post, listeners are already stopping being analogue pure-play consumers. DAB, DTV and Online is a growing part of their consumption habits. It is now much easiser for them to dispense of their least-worst option and pick something that better suits.

If I was an existing analogue operator I would be worried that, to quote someone else, I was standing on a burning platform. How do I develop my business that harnesses the power of consumer change – hello, Autotrader – or crumbles underneath it – hello, Borders or HMV.