FM Radio’s Staying Power
Amid all the doom and gloom surrounding the future of the newspaper, magazine and television industries, it’s fascinating to see how the commercial radio market continues to thrive in Canada. According to the CRTC, revenue hit a record $1.4-billion in 2006 (with $1.1-billion flowing to FM stations), while profit margins remained healthy at 20%. This explains why there has been so much M&A activity in the market.
The question that begs to be asked is how radio has continued to thrive while many of its mainstream media peers have suffered. It could be because radio is a very local medium so it’s been able to fend off the online hordes. After all, if you want to know what’s happened to the local sports team or at city hall or the traffic, radio is a default for many people. Given how well this focus has worked for radio, it’s interested to see how long it has taken newspapers to embrace the same approach. The Toronto Star, for example, recently decided it was going to emphasize local coverage, highlighted by a concerted effort to have a big Toronto-focused story on the front page every day.
It has also been interesting to see commercial radio in Canada do well despite the launch of satellite radio, which increasingly look to be a niche service for road warriors and cottage owners looking for more than just than the CBC (Canada’s version of NPR) and local rock station during their weekend getaways. For all the talk about satellite radio being such a great experience, it doesn’t do local well, if at all. And with more people using their iPods to get commercial-free music, satellite-radio’s appeal is pretty limited.
For more thoughts on Canada’s radio market, check out Inside the CBC.
May 17th, 2007 at 11:33 am
Mark, consider four things:
1. The usage scenarios for radio vis-a-vis other mainstream peers: radio is principally incidental - its background while driving, white noise in a waiting room, or alleviates boredom on a job site. It also requires next to no overhead to enjoy: i.e.: you don’t have to set up a playlist or whathaveyou - just turn it on and go.
2. Given the informal usage scenarios, the radio pricing model (free, adsupported) fits - “good enough” & free together weighs in radio’s favour.
3. Availability: radio is free & ubiquitous, the equipment to access it is more or less free.
4. Familiarity: everyone knows how radio works.
In summary, its incumbent and the marginal cost of switching to an online or satellite alternative doesn’t outweight the marginal value of that switch b/c radio is essentially an incidental, low value add in most situations.
Just my 2.0 cents…
May 18th, 2007 at 3:55 am
Hey Mark,
Nice to see some can-con in the blog-o-sphere… Thought you might be interested in this battle in Northern BC between Standard Radio, soon to be Astral (owner of 2 FM’s, 1 AM, and a TV station in the market) against the little guys, a commercial, low power, 50 watt station Moose FM - that has just applied to the CRTC for 20,000 watts - Should be interesting to see what happens, and I thought you might be interested in following the battle.
Great blog - read it everyday
May 20th, 2007 at 8:33 am
Rod,
You make a good point about the cost of switching. You could make the same argument about books (paper) vs. eBooks.