|Radio’s Real Estate Bubble To Bust Soon|
|Home Theater News Industry-Trade News|
|Written by Jerry Del Colliano Jr.|
|Thursday, 03 November 2005|
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California residents like myself follow real estate as if it were sport more than business. With 20-plus percent gains yearly, a small home purchased after the Northridge earthquake of 1994 for $300,000 in a top West Los Angeles neighborhood can easily be worth $1,750,000 today. Even homes bought more recently can see increases in the seven figure range, while the homeowners laugh over a perfectly chilled glass of Central Coast viognier about how they locked their interest rates for 30 years at five percent. They know what they own and that while there is a lot of talk of a real estate “bubble,” there will more than likely be a small correction to the U.S. real estate market, concluding in an end to the past few years of insanity.
One place where real estate isn’t booming is the terrestrial radio business. Other than the effervescent world of dotcoms in the late 1990s into 2000, no sector boomed harder than radio. Powered by industry deregulation in 1996, along with easily accessible capital companies like Clear Channel and Infinity, not to mention every other smaller group, bought up every radio station they could. To this day, Clear Channel owns over 1,200 radio stations with creative deals that reportedly allow them to run as many as 800 more that they “warehouse,” waiting for their friends on Capitol Hill and in the White House to add to the number of stations one company can own via additional deregulation. While they wait, listeners are tuning out by the hundreds of thousands for all sorts of new technologies and various social reasons.
Infinity owns fewer stations that Clear Channel, but their properties are considered by industry analysts to be the most premium positions on the dial. They own properties in big cities with even bigger signals that historically have brought in even bigger revenues. Make no mistake, things are far from perfect for both of radio’s superpowers, which also translates into trouble for the mid-sized and smaller radio groups. In the world of Infinity, Howard Stern is the anchor and he has been saying his long goodbye to terrestrial radio on most major Infinity FM talk stations and many of their classic rock properties across America. As Stern is slowly saying farewell, he is either subtly or blatantly suggesting that Infinity’s highly sought-after male demographic should follow him to Sirius satellite radio for his January 2006 satellite debut. Infinity’s problems with Stern leaving actually go deeper than what you see on the surface. With their Wall Street darling and bean-counting leader Mel Karmazin now the CEO of Sirius, the programming brain trust at Infinity is testing wannabe replacements that range from Adam Carolla, the sarcastic host of Loveline, to former Van Halen frontman David Lee Roth. Despite being uniquely talented, both will fail to fill Stern’s shoes. Infinity needs something exciting and new (like the Love Boat, but for radio) to replace Stern. But much like the rest of the terrestrial radio industry, Infinity corporately fears change and will likely try unsuccessfully to replace the King of All Media with a Stern knock-off. Check Infinity’s recent track record and you will see a programming group that made their “hot” new format to be an arrogant new concept called Jack, which sounds just like listening to someone’s iPod on shuffle. Listening to someone else’s iPod is about as comfortable as wearing someone else’s underwear, a criticism supported by the ratings. While programmers are calling Jack a success, its ratings are flat in many major markets, including Los Angeles and New York, where Jack stations replaced the historically successful “Arrow” format and the incredibly successful WCBS oldies format in New York.
The Technological Competition
In the days of terrestrial radio when Mel Karmazin and Randy Michaels walked the Earth as gods of media and business, there was no end to the increases in billing that could come from these new media conglomerates. Less than five years after dinosaurs walked this same Earth, Karmazin has reinvented himself to run the number two satellite network and Michaels is long gone from his role as radio’s leading man. What remains is a whole new landscape that should scare the living hell out of the people who run what is left of traditional terrestrial radio.
Generation X and, more emphatically, Generation Y don’t like radio. They get their information from the Internet. They read blogs and websites for information. Unlike their Baby Boomer parents, they don’t associate with a local radio station or format. They find videogames, MP3s on their iPods and instant messaging much more compelling. They don’t feel terribly loyal to artists and/or record labels and why should they? The RIAA has been suing their contemporaries with John Doe cases that only make today’s college kids want to steal music even more.
Satellite radio reaches in the neighborhood of seven million users to date and the technology isn’t really that entrenched with most automakers. In coming years, millions of cars from makers ranging from Mitsubishi to Mercedes Benz will be selling all of their cars equipped with satellite radios. In five years, satellite radio will be as prevalent in new cars as a terrestrial radio tuner and people will bury the satellite radio fees into their lease or purchase payments to make the investment into commercial-free radio a painless one.
But satellite radio isn’t the real threat to terrestrial radio. While satellite radio beats the hell out of terrestrial radio in terms of programming (consider how many more channels there are and how many more niches they can hit on one feed), it is the fledgling Internet radio that will ultimately put the final nail in radio’s coffin. Forward-looking cities like San Francisco and Philadelphia are installing city-wide wi-fi networks that can be used in homes as easily as they can be in mobile devices, ranging from Blackberries to iPods to car audio systems. This means that if you want to listen to anything from Top 40 hits to heavy metal from the Alaskan tundra to trippy electronic music from pill-popping freaks in Amsterdam, all you need to do is point whatever tuner you may have at that Internet radio station.
Another extremely powerful new competitor for radio is the cell phone. Back in the 1990s, when the Wall Street darlings that ran terrestrial radio groups were buying up FM stations for eight-figure prices, they didn’t factor in that cell phones would become so inexpensive that you might choose to chat with a friend over listening to some soulless, pre-programmed classic rock format that plays the same song in 29 different cities at the same time.