The State of Radio

The State Of Radio: Liberty Media Says The Medium Has 'Interesting Potential' But A Revenue Fix Remains Elusive

Steve Knopper is a Billboard editor at large, a former Rolling Stone contributing editor and the author of MJ: The Genius of Michael Jackson and Appetite for Self-DestructionThe Spectacular Crash of the Record Industry in the Digital Age.

Is radio in the midst of a decline or at the beginning of a transformative moment? New research says it can extend the life of a hit single, while digital advertising growth and Liberty Media's investment in iHeartMedia suggest the medium is evolving

On a Sunday in late July, Johnny Chiang, operations director for Cox Media Group/Houston, which owns three FM stations in Texas’ most populous city, says that he received multiple texts from executives at Sony Music Entertainment “begging” him to air Maren Morris’ single “Girl” “a couple times more” on country station KKBQ in hopes of pushing the song to No. 1 on Billboard's Country Airplay chart. Chiang complied -- as, presumably, did a number of other programmers who received similar texts -- and, sure enough, Morris topped the Country Airplay chart on Aug. 3. The singer-songwriter’s ascension to No. 1, a climb that had begun way back in late January, then resulted in a two-week spike in her streaming numbers.

“If radio’s not relevant to the music business,” says Chiang, “then record labels would not be blowing up my phone like 10 times a day.”

Despite mounting evidence that radio audiences are aging and listening less; broadcast advertising is declining; and a host of digital entertainment and information alternatives are whittling away consumers’ attention in homes, cars and wherever mobile phones can get a signal, confidence in the long-term viability of the medium and its effectiveness as a promotional tool remains strong despite the assertions of longtime media analyst Mark Mulligan, managing director at MIDiA Research, that radio faces “a real existential crisis ... about the role of radio in music” and “a Wile E. Coyote moment when you're running and you realize nothing's beneath your feet.” Not so, say station operators and programmers, record-label promotion executives, artist managers and other industry insiders interviewed for this first in a series of Billboard's Deep Dive reports. Radio isn’t dying, they say. It’s evolving.

Although radio continues to break songs such as Ella Mai’s “Boo’d Up” and Ava Max’s “Sweet but Psycho,” labels have determined that, instead of using it as a tool for music discovery, it is more effective for extending the life of a song that has bubbled up on streaming platforms, as was the case with Morris’ "Girl.” Meanwhile, station operators that have invested in streaming their broadcasts via apps and websites have found a growing revenue source in digital advertising and marketing, which are projected to continue rising for at least the next five years. And Liberty Media’s recent investment in iHeartMedia, which emerged from bankruptcy and went public earlier in 2019, could also be seen as another indicator that radio’s stagnation will eventually give way to transformation.

The recorded-music industry’s changing relationship with the medium is highlighted in an internal, data-driven Universal Music Group analysis from January 2019, obtained by Billboard, that shows how radio’s reach and influence have shifted significantly in the streaming world. The study by the label’s global insight team indicates streaming and radio can play complementary roles when it comes to maximizing the life of a hit song -- albeit one in which radio follows streaming rather than leading it. In addition to finding that UMG’s top 300 singles peaked on streaming platforms twice as fast in 2018 as they did in 2017 -- five weeks versus 10 weeks -- the research found that, in 2018, its top singles peaked much later on radio than streaming -- 10 weeks versus five weeks (or less, in the case of hip-hop tracks). The report concludes, “U.S. radio is increasingly a tool to slow the decay of a single on streaming, rather than propel it to its peak,” and suggests using it in “phase two” of campaigns to break singles. “We’ve seen radio help maintain streaming levels by reminding consumers of a track, taking them back to it on streaming, while reaching a new more casual audience,” the report continues. It further notes that timing is key to a radio promotion campaign, but no real strategy is offered as to how to determine when such a push should begin. Instead, it poses the question, “Should we automatically go to radio if a top track peaks in weeks one to three [on streaming platforms]?” The answer: “By the time the radio audience kicks in, the track will likely be generating less streams (for a giant track this still might make a lot of sense).”

Finally, the UMG analysis also points out that emerging acts “take longer to peak as they are still building their audience” and adds: “When your track peaks later than average, you have a much higher chance of maintaining streams at a higher level with radio,” noting that “the U.S. radio curve is better aligned to that trajectory.”

The report dovetails with what a number of artist managers that were interviewed have found. For Matt Pollack, GM of the artist management company Monotone, which represents Jack White, Vampire Weekend and Margo Price, among others, radio can elevate much more than streaming totals. “I look at it as the final gasoline on top of the fire," he says. "Radio marries everything else that's happening -- in the streaming sphere and touring. That is what creates mass-level hits."

“Radio remains at the top of our list when we’re talking about our strategy for rolling out songs,” says Jason Aron, co-manager for Halsey. “We're still concentrating on radio as much as we did,” says Peter Katsis, who manages Jane’s Addiction, 311 and Morrissey. “We've added streaming, but it’s important that we have both."

Indeed, industry sources say that the introduction of promotion departments geared toward streaming have not diminished the size of radio promotion staffs, which can number as high as 50 at the major labels, or budgets. Sources say that one pop single still costs hundreds of thousands of dollars to promote to mainstream stations.

“Is radio as important today as it was five or 10 years ago? Absolutely, it is,” says Capitol Records executive vp promotion Greg Marella. “The repetition of radio, in your face, for the average consumer -- where else do you get that? We have data that reinforces the fact that radio is taking our artists to the next level and making them household names.”

While streaming has finally begun to catch on with country music fans, radio remains crucial to promotion. Major labels will shell out as much as $500,000 for the airfare, hotel stays, accompanying musicians and parties for programmers that are considered the norm to create some sizzle for a new artist. Sam Hunt’s manager, Brad Belanger, can walk from his office in Nashville to Spotify’s new headquarters there to drop off new music -- and he will -- but he says radio is still at the top of his promotional agenda, especially when getting the word out to the flyover states. “For what we do, it’s hits on country radio,” he says. “When you get in the middle of the country, when you have to play 60, 70, 80 shows a year, you better have some reach everywhere -- and country radio still has that.”

Artists of all genres continue to go out of their way to build relationships with radio. Blake Shelton and Garth Brooks’ collaboration “Dive Bar” was released exclusively to country radio on June 18 before becoming available to stream (exclusively) on Amazon Prime Music in mid-July. Portugal. The Man added a late-September date in Sacramento, Calif., near the end of its latest tour as a favor (and for a fee) to local station KKDO, which has given the band solid support. “It’s not like you’re coming in and making money -- it doesn’t math out, necessarily, when you add all the costs,” says Rich Holtzman, the band’s manager. But there is a return on investment. “KKDO is going to be promoting the show over two months. They’re going to talk a lot about us and play our songs,” he says. “You get context behind your song and your artist that you won’t get from streaming.”

Artists sign up for radio-sponsored festivals, such as iHeartMedia’s Jingle Ball, for similar promotional benefits, even though those events generally don’t pay the same as a Coachella or Lollapalooza and involve abbreviated sets. “When a major station builds a festival that can attract 4,000, 14,000 or even 40,000 listeners, labels will gladly go to the expense of having their artists on those shows,” says Skip Bishop, a former Sony promotion executive who handles artist development for Nashville’s Studio2Bee Entertainment.

While artists and their labels and managers continue to rely on radio as a career booster, stations and station groups continue to look for ways to bolster their bottom lines, whether through consolidation -- Entercom’s 2018 acquisition of CBS Radio made it the second-largest radio entity behind iHeartMedia in terms of revenue -- a return to superserving local listeners (see “Back to the Future: Radio Returns to Its Local Roots” in this package) or investing in digital radio, where ad revenue is growing. BIA Advisory Services, a research and consulting firm that specializes in local media, reports that digital advertising growth for broadcast stations jumped 8.1% in 2018 to $923 million, and another such firm, Borrell Associates, projects that revenue will grow to almost $2 billion by 2023, although that’s still far short of the $9.1 billion in broadcast-radio ad revenue that stations generated last year. (For more on this subject, see “Is Radio Too Reliant on Digital Advertising to Make Up for Lost Broadcast Revenues?” in this package.)

If there’s a tireless cheerleader for the radio industry, it is iHeartMedia chairman/CEO Bob Pittman. He likes to compare the company he runs to a house that, despite the hefty mortgage attached to it, remains a valuable property. IHeart, which owns over 850 stations, emerged from Chapter 11 bankruptcy in May with a restructuring plan that reduced its debt from $16.1 billion to $5.75 billion. Two months later, the company went public via a direct listing on NASDAQ. “Broadcast radio may be the most misunderstood medium in the world, because very few people look at facts. They all want to project from Manhattan. If they lived in Memphis or St. Louis or Chicago, they would probably intuitively know what’s going on with it,” says Pittman. “Radio has been growing.”

As proof, Pittman cites Nielsen research that 272.2 million listeners 6 years and older tuned in to radio at least once a week in 2018, up from 255 million in 2009. Nielsen’s Total Audience Report for the first quarter of 2019, which was obtained by Billboard, also shows that 92 percent of U.S. adults listened to radio each week, the highest of any media platform, including TV and smartphone. Radio also attracted 229.1 million average weekly listeners (ages 18 and older) in the first quarter, compared with 125 million who were streaming audio on a smartphone and 50 million streaming audio on a tablet in the United States during the same time period.

MIDiA’s Mulligan discounts these numbers because, he says, "broadcast radio still relies on reach measurement, and reach measurement traditionally overmeasures. If you’re in a shop and radio is playing in the background, you are part of radio’s audience,” he explains. “If a friend is driving you to work and has the radio on, you might not be listening, but you are counted as part of radio’s audience. It’s overplaying the picture, and this, I think, is dangerous,” he continues. “The truth will catch up to you.

“If I were a radio exec, I would be less concerned about trying to paint the picture of, ‘Look how big my residual audience is,’ and more concerned about, ‘Where is my business going to be in five years' time if today’s teenagers aren’t using radio anymore?'"

Audio usage in automobiles will almost certainly be a leading indicator of radio’s future. A 2019 study by MusicWatch, a research and analysis firm dedicated to the music and entertainment industries, shows that collectively, Spotify, Apple Music, Amazon Prime, SiriusXM and Pandora accounted for 47 percent of in-car music listening, compared with 28 percent for AM/FM radio (see chart). MusicWatch managing partner Russ Crupnick predicts the streaming and satellite radio percentage to grow. “Younger people understand, even if they’re driving a car that’s 10 years old, how to connect their phones via Bluetooth, and when they get that newer car, the auto manufacturers have done that for them,” he says. For those who drive newer and luxury models, he adds, “streaming levels seem to be through the roof.”

Pessimism over radio’s prospects did not deter Liberty Media, which already holds stakes in SiriusXM, Pandora and Live Nation, from acquiring roughly 5% of iHeartMedia in the second quarter (after scaling back an initial $1.2 billion offer for 40 percent) by purchasing $284 million of the radio giant’s debt as part of its Chapter 11 restructuring. Liberty CEO Greg Maffei echoes Pittman’s contention that iHeart’s massive debt and capital structure do not reflect the overall health of the company. Fixing iHeart's financial weaknesses is “the kind of thing we’d like to think we’re good at,” says Maffei, who has a track record of buying troubled music-business companies and turning them around. The broadcast-radio business is “obviously not without its challenges,” but has “really interesting potential,” he says.

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