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Traditional Radio Faces a Grim Future, New Study Says

UPDATED: A new study published today by the head of New York University’s Steinhart Music Business Program casts a sobering outlook on the future of terrestrial radio. (Not surprisingly, the National Association of Broadcasters and Nielsen responded to the report; see their responses here.)

In the 30-page report, Larry Miller argues that traditional radio has failed to engage with Generation Z — people born after 1995 — and that its influence and relevance will continue to be subsumed by digital services unless it upgrades. Key points made in the study include:

*Generation Z, which is projected to account for 40% of all consumers in the U.S. by 2020, shows little interest in traditional media, including radio, having grown up in an on-demand digital environment;

*AM/FM radio is in the midst of a massive drop-off as a music-discovery tool by younger generations, with self-reported listening to AM/FM radio among teens aged 13 and up declining by almost 50 percentage points between 2005 and 2016. Music discovery as a whole is moving away from AM/FM radio and toward YouTube, Spotify and Pandora, especially among younger listeners, with 19% of a 2017 study of surveyed listeners citing it as a source for keeping up-to-date with music — down from 28% the previous year. Among 12-24 year olds who find music discovery important, AM/FM radio (50%) becomes even less influential, trailing YouTube (80%), Spotify (59%), and Pandora (53%).

*By 2020, 75% of new cars are expected to be “connected” to digital services, breaking radio’s monopoly on the car dashboard and relegating AM/FM to just one of a series of audio options behind the wheel. According to the U.S. Department of Transportation, the typical car in the U.S. was 11.6 years old in 2016, which explains why radio has not yet faced its disruption event. However, drivers are buying new cars at a faster rate than ever, and new vehicles come with more installed options for digital music services.

*The onset of “smart speakers” such as Amazon Echo, which do not have an AM/FM antenna, are rapidly shaping home entertainment without broadcast radio that does not have a digital option.

*Broadcast stations pay no royalties to record labels for the use of master recordings — the U.S. is the only country with developed intellectual-property laws where this is the case. Digital services do, which makes them more valuable to labels.

*The addition of streaming data to the Billboard Hot 100 chart, still the primary chart in the U.S., means that streaming is now playing an important part in determining which songs are played on radio rather than the other way around, reducing its status as a taste-making tool. In fact, streaming now accounts for 20-30% of the data that comprises the Hot 100, with sales at 35-45% and airplay at 30-40%.

The report makes a global-warming-level case for the terrestrial radio industry to upgrade or face obsolescence.

“AM/FM radio had been able to wait out the digital disruption that has already affected every other form of media. Now radio is the latest industry facing massive disruption from the digital age. To survive, radio must innovate, learn from other media and take control of its path to maintain its unique position with advertisers, audiences and other stakeholders into the third decade of this century and beyond.

“Unless the industry is set to make peace with a long and inevitable decline, radio needs to invest in strong and compelling digital services,” the report concludes. “If it does, radio can look forward to a robust future built on the strong foundation it already has in the marketplace leveraging the medium’s great reach, habitual listenership, local presence and brands. If it doesn’t, radio risks becoming a thing of the past, like the wax cylinder or 78 RPM record – fondly remembered but no longer relevant to an audience that has moved on.”

Read the full report here.

 

 

 

 

 

 

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