Roger Lanctot is Associate Director of Strategy Analytics, and a thought leader in the connected-car space. He is an influential voice in the field of automotive infotainment systems, and safety, in cars of the present and future. This guest article was originally posted at Strategy Analytics.
“I will not encourage my listeners to use iPods. Why should I send listeners to iPods when I want them with me on the radio station?” — an unnamed radio program director responding to a promotional campaign from Pepsi proposing to give away iPods to listeners (circa 2004).
Former radio ad sales man and station owner, Barry Drake, shares the above quote and anecdote in his book 40 Years 40,000 Sales Calls. The point of the tale is that broadcasters can’t stick their collective heads in the sand when it comes to emerging technologies.
Drake notes the emergence of turntables, cassette decks, and CD players over the years and the correlated staying power of broadcast radio throughout. “At Backyard (Radio), we understood and acknowledged the existence of this new technology but, by staying close to our customers and remaining focused on their results, we were not affected.”
Life Blood
Advertising sales is the life blood of radio. It supports a location-relevant delivery platform with local news, weather, traffic and sports coverage plus content. With content comes discovery and radio retains its advantage in helping consumers discover new music, new artists, new ideas, and new products and services.
Depending on who you believe 50% or more of radio listening is occurring in cars. A substantial amount of radio advertising is supplied by auto dealers, according to Radio Advertising Bureau data. Much of that dealer advertising is subsidized by the car companies. So, car makers and car dealers play a disproportionate role in the availability of listening options in cars. Car makers make the cars and subsidize the advertising experience in the cars.
Sirius Subsidies
It is perhaps no surprise, then, that satellite broadcaster SiriusXM’s path to market included subsidies to the car makers. SiriusXM’s success is based on a combination of this subsidy and the powerful appeal of high-profile personalities such as live sports and Howard Stern.
SiriusXM continues to subsidize radio listening in the car and that formula has translated to an extraordinary 26M subscribers. No other subscription-based content delivery platform for cars in the world has come anywhere near the success of SiriusXM – and SiriusXM has struggled to drive adoption beyond cars.
Perhaps for that reason SiriusXM has devoted its marketing and distribution efforts obsessively toward the automotive industry. That devotion includes SiriusXM’s Service Lane program for recovering past SiriusXM subscribers – ie. getting lapsed subscribers to restore their dormant in-vehicle devices to active service with the help of offers made by dealers when servicing used cars.
Pandora and the Challenge of Finding Radio
Enter streaming app provider Pandora, which has begun reaching out to dealers for both local advertising and to stimulate and foster the use of Pandora as a tool for demonstrating in-vehicle app connectivity platforms. It is worth noting that the only car maker that has actively advertised Pandora in television spots is Honda. Every other car maker has seen the conflict between promoting Pandora, potentially at the expense of SiriusXM, and opted not to tout the app.
I spoke this week at the National Association of Broadcasters (NAB) convention in Las Vegas about the challenge of finding the radio in some new cars. The emergence of larger and larger displays in cars has created new opportunities for car makers to enable app-based experiences similar to those on smartphones and tablets.
No single car maker has yet decoded precisely how radio in its many forms will manifest in a more predictable manner in cars the way the radio dial appeared more or less unchanged for the previous 70 years in dashboards. But it is clear that the competing sources of content in the car, such as satellite and streaming apps, are pressing their case for a prominent position in the dashboard with subsidies and advertising. It is fair to say that radio lacks this kind of direct dashboard advocacy.
Most broadcasters recognize the importance of car dealer advertising to the future of the radio. The bad news for broadcasters is that SiriusXM and Pandora have caught on to this as well.
What, Where, and When
At last year’s NAB event, NAB executive vice president Kevin Gage was quoted in RadioWorld saying: “We need to offer consumers what they want, where they want it, when they want it.”
One place broadcasters need to be is in the face of the local car dealers. But successfully keeping dealers and car makers writing those advertising checks will require delivering the goods, says Drake. “I remember again the voice of Paul Rothfuss from the 1970s, ‘Make sure something happens in the store when the commercials run on the air.’ It is critical to design the commercial copy to elicit an immediate response from the listeners. The client wants to feel something good the second the commercial campaign starts on the air.”
Radios may be more difficult to find in the car, but the radio is no less relevant and no less powerful. Bringing radio to the Internet and mobile devices will make radio easier, not more difficult to find. Delivering value and customers to local car dealers will be an essential element of this campaign.