SpectatorBytes

Nowadays, it seems that radio is one of the most unattractive media businesses. Radio stations are facing a significant slowdown in local advertising. The drama surrounding the recent financial difficulties of the merged Sirius and XM highlight the challenges satellite radio faces. However, in recent months, I have found myself listening to more radio than ever before. I have been listening to 1010 WINS (one of the leading news stations in New York), NPR, my favorite radio stations in Colombia, and Bloomberg news.

The reason for my new love of radio is my iPod Touch. Using applications such as AOL Radio, NPR, Pandora, Last Fm and Wunderkind, I am able to access a broad variety of radio content, including music, at all times. You need 3G or WiFi access to be able to experience these applications.

The radio experience via the iPod Touch or iPhone has several compelling benefits over the traditional radio experience:
-    Great sound quality. Anyone who has tried to listen to AM news stations in New York knows that it is very hard to get a crisp signal
-    No geographic constraints. I am able to access radio content available from most places around the world.
-    Reduced interruptions.  Music stations insert only a limited number of ads. I primarily use AOL radio
-    Offer music customized to my individual taste. I recommend Pandora or Last FM for this
-    Touch screen provides an ability to navigate to selections much easier than traditional radio devices

We have already seen the growth of online radio on PCs over the past few years.  Online radio unique visitors grew from 50 million in 2007 to 65 million in 2008. According to research firm American Media Services, 38 percent of adults surveyed six months ago said they expected to listen to radio on the Internet at some point in the future; more recently, the figure was 48 percent. As smartphone and small computer devices like the iPod Touch increase in popularity, consumption of audio content will grow exponentially from current PC levels.  Radio will be reinvigorated once again. This should be good news for embattled radio players.

However, embracing this opportunity will require radio players to rethink their current content production models and overall programming practices.  Similar to other media categories, it is unclear how much advertising share can be captured by online radio. The good news is that this next-generation radio can be built around a lower cost model given that it requires less spending on distribution infrastructure, content can be amortized across larger audiences and produced more cheaply, and marketing spend can be streamlined by using recommendation technologies. Moreover, radio companies could explore extending their ad-supported model to unlock value from other types of audio content such as audio books and educational courses.

Traditional radio companies enjoy significant competitive advantages today given their control over relationships with local and national advertisers, and their ability to promote their brands and content using their antenna radio stations. They should leverage these to become the leading programmers of digital audio content.

CBS has led the way with their partnership with AOL radio and their acquisition of Last.FM. The other players would benefit from following this lead. I promise I will be listening.

Do you listen to online radio? What is your take?