Sunday, June 06, 2010

Will Radio Really Be Dead in 10 Years?

The Internet will change radio. It already has and it will change it even more in the coming decade. NPR President and CEO Vivian Schiller thinks the change will be so rapid that traditional terrestrial radio will be dead by 2020.

The implications for public radio are staggering whether she is right or not. NPR is the 800 pound gorilla in public radio. Its corporate position and planning dramatically affect policy, funding, spending, and partnerships throughout public radio. NPR itself won’t cause traditional radio to go away but this new posture could accelerate the process and damage member stations and NPR along the way.

The next few RadioSutton postings will explore the implications of NPR’s new position and will test some of the assumptions being made by NPR and others on the future of public radio.

Today -- will radio really be dead in 10 years?

A large part of Schiller’s logic rests on the assumption that bringing the mobile Internet to cars will kill the need for broadcast towers. Built into that assumption:

• By 2010 every vehicle – or at least the vast majority -- will be equipped with the technology to receive mobile web services, even if it’s just a mini jack for a mobile phone
• A vast majority of vehicle users will be willing to pay fees to access the those services in every vehicle
• A vast majority of people will replace the 3 to 5 radios they have in their homes with wireless Internet audio devices
• Portable radio use – such as listening on a walk, at the beach, or at a ball game – will occur completely on mobile Internet devices or go away all together

Let’s do some numbers.

There are 254 million passenger vehicles registered in the U-S today. The median age of cars on the road today is 9.4 years. The trend is for people to hold on to cars longer these days but let’s assume the median age of cars doesn’t change in the next decade.

In 2020, half of all cars on the road will be from model year 2011 or older. Put another way, almost half of all cars expected to be on the road in 2020 are on the road today.

A small fraction of cars in 2011 will come with pre-installed mobile Internet devices. All of them will come equipped with radios. That trend will continue for several, if not many, years.

Implicit in Schiller’s vision is that cars will eventually come without radios at all. Why put a radio in a car if there are no towers? That argument assumes there will be a tipping point when listeners across almost all demographics and all radio formats, commercial and non-commercial, will abandon the free radio on the dashboard for mobile content that costs money in the form of data usage. The argument assumes the same behavior will simultaneously occur in the home over data networks and personal wireless networks.

Based on Arbitron data*, some 228,000,000 people age 12 and older use broadcast radio each week. Billions of time each week, they choose to turn on the radio. They spend more than 3.8 billion hours listening to broadcast radio each week.

How much of that behavior has to change and how much of that consumption has to go away to kill the entire radio broadcasting industry? Technology itself won’t be enough to drive the change. Certainly not in just 10 years. The listening experience has to be better too, worth paying for with at least data costs. That’s not going to happen in the next decade either. The overall marketplace will change some, but not that fast. Radio will still be around.

Public radio stations will still operate their transmitters in 10 years. The question now is whether it will be economically viable to broadcast NPR News over those signals. That is in Vivian Schiller’s hands today. More in the next posting.

* Source: Arbitron Radio Today 2009

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Anonymous Chris W. said...

Thanks for tackling this issue with such clarity, John. Your numbers seem sound to me. Cannot wait for future installments.

10:40 PM  
Anonymous KW said...

FM radio won't be dead in 10 years, but it will have much more competition from what are now AM talk and sports stations that will migrate over to FM. It won't be the internet that kills FM music, it will be performance rights fees.
Looking forward to the next installment.

11:07 PM  
Anonymous Anonymous said...

It's taken 10 years to get cell phone technology to the point where I'm only dropping about 15% of my calls. It will be another 10 years until wi-fi will be LISTENABLE as a consistent alternative in cars. But that's my 2 cents. Just because it's possible doesn't mean it will take over the world in 90 days.

11:21 PM  
Blogger Rob said...

To kill an old technology, you don't have to wipe it out - you only have to take away the best margin - take away the best listeners and then the costs of the system cause it to implode as we have seen with the newspapers.

8:57 AM  
Blogger RadioSutton said...

Rob -- I address that in the posting. I don't think that point comes in the next decade for radio in general. However, NPR can wipe out the margins for NPR News stations in the next few years and may very well be on the path to do so. That will be in the next couple of postings.

9:37 AM  
Blogger Justin said...

Radio, at least in the traditional sense, is "dead to me" now. I live in a city with two NPR affiliates, and a non-commercial music station. I can't find myself supporting any of them financially.

For the past few years, I have sent pledges to a public-radio station in another state, one which emphasizes new music and has effectively pushed an online presence for at least the past 10 years.

My local NPR affiliates offer very little that interests me, and I'm finding myself streaming and podcasting more and more every month. It's sad, but if I had to, I could drop local radio completely right now.

1:27 PM  

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