In a posting on Radio Business Report on Monday, May 24^th, Glenda Shrader Bos and Richard Harker extolled Jeff Smulyan’s speech at our Digital Strategies for Broadcasting Conference as one that “cautioned broadcasters about pursuing technologies that are ‘very cool,’ but not likely to be profitable.” That speech by Jeff and his subsequent question and answer interview with BIA/Kelsey’s CEO, Tom Buono, was candid about the present state of radio and its operators’ best opportunities for competitive defense in the new digital age. Jeff posed and answered the question, “Are digital technologies a hobby or a business?” In today’s world, they better be a business broadcasters are willing to invest in so they grow their market presence and ability to compete better in the future.

Yes, making money on a “very cool” digital application, like streaming radio, is very challenging. Jeff Smulyan cautioned that the cost structure around streaming is very different from broadcasting over-the-air and will require a longer ROI period. However, he noted that his stations are still streaming and not limiting their thinking to current revenues but to tomorrow’s possibilities.

Streaming programming is not all that Emmis Broadcasting and other radio broadcasters must do to make money in this new digital age. At DSB2010, attendees heard story after story about broadcasters, both radio and television, who are extending their brand with digital lines of business. If the authors of the article had been in attendance, they would have heard from Tom Davis of Davis Media who has started an online only daily newspaper (WYDaily.com) and is generating 24% of his total revenues in just a few years. Erik Hellum of GapWest also shared how he raised the percentage of his revenues from 2.1% to 8.7% in just two years (and expects that to continue to grow) from initiatives such as rewards programs, automotive and community portals.  Colleen Brown also discussed how Fisher Communications has profitably launched over 120 hyper-local websites that are generating significant revenues.

Many other panelists and attendees have recognized that the growth for radio (and television) broadcasters must include digital elements in order to extend their brand in today’s multiplatform environment. The secret to making these digital efforts work is not to neglect the over-the-air assets, but to utilize those assets – their local band name, local content, local marketing ability, and local sales staffs – to enter into these new areas. As Tom Davis put it in his presentation, “We define successful as increasing market share and revenues by leveraging, not cannibalizing, our primary medium.”

What’s the alternative? What can radio (and television) stations do without moving into these areas? Of course, good operators will see their revenues increase with the recovering economy, but for how long? We have been at too many newspaper conferences where the mantra was that to succeed they just needed to do the print business better. And, look where the newspaper industry is now, and their future is not promising.

Other radio and television operators who see these opportunities will take advantage of their local assets and enter into new areas. Yes, some will fail. But we are beginning to see more broadcasters become very successful with very different approaches. As David Kennedy of Flycast (and a long time radio broadcaster) said at DSB2010, “Enough talking about it. Let’s just start implementing these activities. Let’s start just doing it!”

Lisa Bishop at Gray Television took a few contrarian views when discussing mobile strategies, during an afternoon DSB session on “New Ad Revenues for New Times.” Taking issue with the app craze we’ve seen dominating the media world over the past two years, she’s seeing better engagement and returns with SMS and WAP strategies.

“WAP is more widely available to a larger consumer base,” she said. “The iPhone makes up 2 [percent] to 4 percent of devices and our developers were spending 80 [percent] to 90 percent of time reaching this smaller share of end users.”

This flies in the face of News Over Wireless’ Sam Matheny’s point yesterday about greater growth and rich media capabilities of iPhone apps. There is also the argument that what the iPhone lacks in device share, it makes up for in engagement share, holding the vast majority of mobile Web traffic in the U.S.

The mobile products and features that Gray has focused on include WAP sites for each of its stations and SMS alert service for weather, news and sports alerts (monetized with sponsored messages). Next up are coupons, local search functionality (working with Local.com) and social sharing features.

Also somewhat of a contrarian take from Gray was its recent decision to go it alone when it came to building and managing its WAP product. This was a risk at first because it lost on-deck traffic it previously enjoyed by virtue of the carrier relationships held by the vendors it worked with.

But given more smartphones in the market, Bishop argues there are more users going off deck to search the mobile Web, thus mitigating this lost traffic. Bringing the platform in-house has also allowed Gray to have better control over the dynamic nature of its content, site design, ad serving and perhaps most of all, cost.

“Selling mobile [advertising] was difficult because costs were so high,” said Bishop. “We were selling $20 to $25 CPMs for our WAP sites. But we’ve been able to lower that and see greater returns.”

The results speak for themselves: Gray has cut mobile costs by $0.5 million and increased revenues by 90 percent over the past year. With SMS, it has seen a 20 percent increase in sponsored alerts and has run 130 SMS campaigns in the past month alone — more than it did all of last year.

Broadcasters looking to partner with new channels to get new customers and dollars might do well to consider cellphone carriers as they expand to speedy 4G networks, according to Schurz Communications’ Kerry Oslund, VP of Digital Media.

Speaking at BIA/Kelsey’s Digital Strategies for Broadcasting conference in Jersey City, NJ, Oslund said that four services being launched by Sprint, for instance, will be affordable and provide an excellent alternative to cable. Best of all, in a joint venture, “the subscriber belongs to both partners. It reduces the cost of customer acquisition,” he adds.

Ultimately, Oslund envisions an environment in which the 4G network could be used to provide reduced prices for a wide variety of services, including online newspapers. It could also bring in a new generation of product placement in programming.

This panel, moderated by Mark Fratrik, Vice President, BIA/Kelsey, included:

-Pierre Bouvard, Executive VP, Cross-Platform Services, Arbitron Inc.
-Lynda Clarizio, CEO, Invision
-Bill Livek, CEO, Rentrak

The panel started with presentations by the two data “suppliers,” Arbitron and Rentrak. Bill Livek, Rentrak CEO, said that Rentrak’s objective is to measure consumer behavior using a huge database (indeed, it polls 70 million cable top boxes, and 15 million set-top boxes nightly). Advertisers then use segmentation systems to analyze this data, and allocate ad spend by media. (A key to using a database is that it needs to be economical to fill — and nothing is more economical than server-collected data.)

Pierre Bouvard talked about measuring audiences across platforms (radio, TV, Internet). He said Arbitron is using PPM as the “tissue” for cross-media measurement.

Lynda Clarizio of Invision has a background is in digital media (including the heyday of AOL). Based on Invision’s work with numerous cable and broadcasters system, Clarizio agreed that “convergence is becoming a reality” and, posited that the strongest brands exist across multiple media platforms. She also said that the end game really isn’t about “slicing and dicing” audiences, but in aggregating them.

There was a good deal of discussion about using a “common currency” for analyzing/purchasing media. Panelists agreed that “Our challenge is to address the need to measure across media,” using common metrics. Livek maintained that in actuality, we’ll be using a “basket of currencies” and will look at data from multiple screens with somewhat different metrics. He pointed out that the measurement needs to be appropriate to the medium that’s being measured.

An audience member asked if increased targeting might actually have a downward influence on CPMs. Clarizio responded by saying that pricing of digital media has declined largely due to the huge increase in inventory, and the concomitant shift to auction-based pricing for much of this inventory. Livek  added that segmentation is healthy, and ad exchanges are healthy (because they bring in new advertisers that otherwise wouldn’t be online).

Bouvard summarized the key trends he sees in measurement/metrics, which include greater granularity, improved targeting, proof of ROI and cross-platform measurement.

In the final moments of the panel, Livek emphasized the need to target a bigger ad revenue pie — including spending that is now going to direct marketing. He said: “You can participate in the larger pie if you have a database and can communicate using the basket of currencies.”

Emmis Communications CEO Jeff Smulyan says that radio broadcasters have done relatively well in the current climate and are better positioned in the long run than comparable local media, such as newspapers and TV, because radio is less fragmented. There has also been major growth overseas. But layman analysts have jumped to conclusions that radio is over because of the concurrent popularity of streaming, satellite and iPods — channels that arguably add to radio’s overall appeal.

Speaking at BIA/Kelsey’s Digital Strategies for Broadcasting conference in Jersey City, NJ, Smulyan said that radio needs to improve its “perception problem,” but it also needs to explore the new opportunities that the other channels provide.

Streaming, for instance, represents significant opportunities for broadcasters, but also has real costs. “I have been streaming for 15 years,” he said. “There are wonderful things you can do, but there is a real cost. Every time I stream to a new listener, it costs me money. “

Smulyan also lobbied for turning the Emergency Alert System into a new cellphone-based radio channel that can be used for transactions, such as song downloads. “It is a tremendous opportunity for the terrestrial business,” he says, adding that the marriage of radio and cellphones is also ideal from a public safety point of view since airwaves don’t get overloaded during emergencies such as hurricanes.

Looking at more immediate opportunities, Smulyan says he is really focused on leveraging all the new technologies to enhance traditional radio station promotional strengths. “Eighty-thousand people are coming to The Summer Jam in the Meadowlands next month. We want to build on that relationship, but in a profitable way.”

This panel, moderated by Steve Passwaiter, VP Business Development, BIA/Kelsey, focused on initiatives (major and minor) that local TV broadcasters can take, to help reinvent themselves in the era of online media.

Panelists included:
Fred Fourcher, President and CEO, Bitcentral, Inc.
Sam Matheny, GM, News Over Wireless (from CBC New Media Group)
Mark Benscheidt, VP of Broadcaster Business Development, Sezmi

Fred Fourcher emphasized the importance of further leveraging TV news, the key driver of local TV revenues. He dissected TV news, identifying reasons that news doesn’t achieve its full audience potential — a key reason being that the news isn’t aired in the time or place consumers want to watch it.

In this case, the resolution is to make the news available at more times (including on demand) on more platforms (e.g., mobile, profiled newscast, etc.). Fourcher identified a host of other challenges, as well, some of which require internal process re-engineering.

He closed by exhorting the audience to “think of your asset as a local media brand, not a local TV station.”

Sam Matheny discussed several products/platforms that he said hold great promise for broadcasters in entering new media.

First among these are mobile apps in general (and iPhone apps in particular). Matheny pointed out that “apps have the ability to let the end user work for you (i.e., the broadcaster).” He cited examples of citizen journalism, whereby members of the public take and submit newsworthy photos or video to the local broadcaster.

Next, he talked about the opportunity in DTV widgets, which will be increasingly important as more Internet-capable TVs are sold. Finally, he discussed DTV itself on mobile, and the market expansion opportunities this will create (although it may be several years away).

Mark Benscheidt opened Sezmi by describing it as “the first personal TV system” (currently launching in Los Angeles). He stated that Sezmi actually helps broadcasters adapt their business models to the new media world, and thus is a friend, not an enemy, of traditional broadcasters.

He closed by depicting the fundamental misalignment between TV’s original business model and the emerging viewing/usage habits of consumers. In particular, he drew parallels to the music industry, where digitization has given consumers the ability to buy only what they want, when they want it.

Talking about how digital and mobile have changed broadcast, Dave Kennedy, CEO of Flycast, put things in perspective when he said, “the ship has already sailed on digital usage and acceptance and we need to get on board and figure out how to leverage our assets.”

While many would like to see the core broadcast model remain intact, the reality is that online and mobile have forever changed the business model. As Skip Pizzi, technology editor of Radio Ink Magazine, pointed out, “transmitters are no longer the only delivery method, and we are no longer broadcaster but producers and distributors of content for our local markets.”

Asked to discuss how broadcast has changed and how to manage the change, panelists were of one voice expressing that online and mobile simply offer more opportunities to extend your content and information in more locations where people want to interact with the content and your brand. Rey Mena, co-president of Emmis Interactive, mentioned that, “Pandora is a good example of going beyond music to providing compelling editorial, local information and ways of engaging the audience beyond the music.” The reality is one of local media’s greatest assets is its local content and connection to the cities where the stations serve. By wrapping local content with the delivery of music is a significant competitive differentiator.

The advent of more defined tracking is also making a difference for broadcasters. Mena pointed out that, “it’s no longer about pushing out content but learning from who is using the content, where they are accessing the content and what devices they are using that makes what we do more valuable to advertisers.”

Pizzi added, “radio now has a screen that opens up more opportunities and offers us more ways of tracking behaviors and delivering even more content than ever.”

While the new technology is creating opportunities, these opportunities need to be acted upon by a well-educated sales force. Rob Weisbord, regional group manager of Sinclair Broadcast Group, believes that, “the new salesperson is more of a marketing person rather than a traditional sales or even a person with a technology background. Salespeople need to be able to talk about building campaigns and how to leverage these new media vehicles.”

The final statement, from Kennedy, summed up the core of what broadcasters need to do to adapt to the new digital reality. “We need to seek out and develop disruptive technology or approaches rather than reacting to what other digital companies are forcing us to do. Keep testing, make minor adjustments and figure out how new initiatives support the core but build new revenue opportunities.”

The afternoon session “Reinventing Local Radio” showed that radio stations are doing the transforming themselves. Jeff Haley of RAB; Tom Davis of Davis Media/Tide Radio; and Erik Hellum of GapWest Broadcasting all cited examples of how radio stations are successfully expanding into new lines of business. They are truly transforming their radio stations into local media brands.

Haley reiterated his points from yesterday’s speech that stations have to adapt to the new reality by using as many tools as possible to interact with their listeners. By broadening their brand through video, by publishing on Wikipedia, and by having their on-air talent utilize social media, radio stations can touch their local communities more often and more effectively. Where radio stations previously only had a transmitter, they now have so many more tools to reach and service their local communities.

A great example of just this is with Davis’ media operation in the Williamsburg area. With two radio stations and a completely online newspaper, Davis is delivering audiences for local advertisers and growing that operation’s revenues even in tough times. By being local, and by utilizing all of the benefits of the radio station, this operation is providing more content and more viewers/readers.

Hellum of GapWest Broadcasting also cited specific examples of its radio stations becoming these Local Media Brands. Where only two years ago, 2.1 percent of its revenues were from digital, by 2010 it will be 8.4 percent. This significant increase comes from a commitment to these new ventures and rethinking how they operate these local media operations. For example, Hellum raised the question of whether you should have a program director worried just about what you are airing on the station, or instead, a brand manager overseeing all types of content being provided by the local operation.

Haley summed up the success of these two operators reinventing radio and transforming their operations into local media brands by stating, “We could grow the radio industry by 10 percent if we copied Tide Radio and GapWest Broadcasting activities.”