What follows is a repost of an article published yesterday in The Drum by Oxford Road’s CEO/Founder Dan Granger. We are pleased to share the article with you in its entirety for this week’s edition of The Influencer.
I left the radio business in 2013. I was working at iHeart, at the time bogged down by the regime change as it transitioned from Clear Channel, run by the Mays Family, then rebranded as iHeart under the new stewardship of Bob Pittman and friends. The world was changing and I felt the dominant radio groups were falling too far behind. I just didn’t have the patience to wait around and see if it would catch back up, given the rate at which new technology was redefining the landscape. Programming on-air was stuck in its ways, on a constant chase for Top 40 content, while the podcast ecosystem was catering to vigilant tribes, starving for someone to speak to them. Only them. Tall towers in big fields, the multi-million dollar sticks that gave radio value, were losing value at an alarming rate, barely worth the price that their broadcasting licenses were printed on. As the internet became ubiquitous, the value of a terrestrial signal diminished proportionately.
When all I could see was decline, I mistook it for a death spiral. A wise friend told me, “This thing ain’t over. The major players will not go quietly into the night.” I wasn’t so sure.
When we launched Oxford Road, we took a strategic position as one of the first agencies to lead with Podcast and radio as a Phase 2 offering. This worked well and fueled our aggressive ascent, even landing us on the Inc 500 and solidifying us as a go-to agency for any D2C performance brand looking to launch into “Offline media” for the first time, starting with the core strength of podcast, and goals that were previously only been achieved through digital.
Meanwhile, the path radio was on in 2013 truly was untenable. Radio’s sex appeal in the marketing community was waning. Tremendous debt loads were crippling the behemoths that had previously ruled the earth. They were slow on the uptake, podcastically speaking, with terrestrial broadcasters gating their content, most of which were simply radio broadcasts chopped up and pushed onto iTunes. Or worse, they would wall off new content and force listeners to only access them through their particular platform, afraid of losing control over distribution. It was a hot mess. They were missing the renaissance with only Public Radio groups seeming to capitalize in a not-for-profit sort of way.
Today, things have changed.
In the last year, we’ve seen a seismic shift in the industry. CBS Radio was against the ropes until it was acquired by Entercom late last year, now the number two broadcaster in the industry. Westwood One filed for bankruptcy earlier in 2018. Then iHeartRadio, the last great hope for radio also declared bankruptcy in August, finally buckling under the tremendous weight of an 11-Figure pile of debt.
To the untrained eye, it would seem that the industry has entered a tailspin.
That’s where we need to widen our lens to truly see what’s really going on in front of us.
I am a native son of Metro Detroit. For a full decade, everyone I grew up with told me how hopeless the city was and that the only good thing for a Detroiter to do was move. The city filed for Chapter 9 in the largest Municipal Bankruptcy in our nation’s history. But you should see it today. Walking through downtown Detroit, through the good work of folks like Dan Gilbert, the Illich family, and many, many others, it’s easy to see this is a city on the come. Places you wouldn’t dare to tread 5 years ago are now clean, safe, and bustling. There’s renewed hope and business is happening. That’s the thing about bottoming out. Everyone points at the stumble and assumes that the fallen will never rise again. But as most major cities that suffer disasters can attest, from Houston to Nashville, or New Orleans, this type of misfortune allows the things that weren’t working to die, and for hope and a real resurgence toward a fruitful future to take root and blossom.
Radio is Detroit. And if you don’t believe me, take a look at Entercom’s 45% interest in Cadence 13. Hubbard Media’s investment in PodcastOne, Scripps purchase of Midroll. At the IAB Upfronts, Westwood One, who represents the likes of Mark Levin, Jason Stapleton, The Daily Wire, among many others, announces the launch of an all-female Podcast network. At the same event, iHeart casually announces the purchase of HowStuffWorksNetwork for $55 Million. They aren’t even out of bankruptcy yet. Let me say that again, so you appreciate the gravity of it . . . iHeart just purchased the HowStuffWorks network for $55M and THEY AREN’T EVEN OUT OF BANKRUPTCY YET. Stuff was the fifth largest podcast network by downloads. SiriusXM has now purchased Pandora outright as I am editing this article. That’s how fast things are changing.
The demand is palpable. Everyone can see that Podcast has legs and is rocketing headlong into becoming a multi-billion dollar industry in the next 5-10 years.
The radio giants did not go quietly into the night. Quite the contrary. In the last two weeks, I’ve spoken directly with executives at Entercom, Westwood One, and iHeart. They are now in an arms race for on-demand audio content, and do not care if it comes from existing radio talent, launching new podcast talent, or acquiring existing Podcast talent that has already achieved leadership on the charts. Westwood One has emerged from bankruptcy. Entercom is newly empowered as a major player with an appetite to scale into the future. Then there’s iHeart. The Industry leader is chomping at the bit, soon to emerge from their Chapter 11 bankruptcy and bucking the gates, poised to go on a content tear. Meanwhile, Panoply shuts down its programming arm, in favor of focusing on their tech platform, while BuzzFeed and Audible both close down their podcast creation efforts.
In case you have any lingering doubt that radio now dominates the Podcast ecosystem and will for the imaginable future, see the chart below from podcast audience measurement company, Podtrac:
With the acquisition of Stuff Media by iHeart, this means that six of the top seven Publishers of Podcasts by streams and downloads are radio companies. Of course, we can’t include New York Times as a radio company, but can we at least acknowledge that the only exception is a newspaper company founded in 1851?
The point here is that the major players have reorganized and are capitalized to take much larger bites out of the podcast industry than most people expected. As the Podcast industry matures, it’s riddled with former radio talent (like myself and much of my staff), who are helping this savvy, nascent community grow up into a multi-billion dollar powerhouse.
The biggest thing that stood out to me at the IAB Upfronts in NYC this month was the way people dressed. What used to be a pirate radio vibe, with geniuses strutting around in ironic T-Shirts and broadcasting out of garages-turned-studios, has effectively shifted into something eerily familiar. I was at a radio conference. And so it will be going forward. The revolutionaries got it on the map, and now the grown-ups are coming in to learn some new tricks from the kids that got them there, patting them on the head and saying, “Thanks kid. We’ll take it from here”.
Here are my predictions for what you should expect with Podcast under new management:
-Inventory Leverage – Podcast networks have had few if any benefits to buyers, other than fewer points of contact, due to their financial arrangements with talent and severely limited inventory. With radio in the mix, they can support shows that do not deliver expected value by leveraging a mile-wide inventory arsenal.
-Increased investment into programming – The radio groups are far better capitalized and will allow great content creators a longer runway to allow good shows to flourish.
-Increased promotion – Now show talent doesn’t just have to rely on their Twitter feeds to promote their programming. Shows can get real promotional support and cross-promotions to introduce new audiences to programs they will love, but previously would never have discovered.
-Standardization in measurement – We are betting on IAB standards to win the day. In any scenario, expect a Neilson or Neilson-like solution to standardize the metrics by which the industry will measure listenership.
-Less of a Seller’s Market- Ad inventory will increase and buyers will get more leverage and respect than the new money culture that has been running podcast. Radio people know how to sing for their supper and will create a more buyer-friendly environment
The Less Good:
-A season of chaos- Just when you were starting to get used to how podcast works, we are moving into a wild period of readjustment where radio groups start taking over management of sales and programming. Expect mass confusion, new rules, and the right hand not always knowing what the left hand is doing for a while. Note: There is opportunity within the madness for those who know how to navigate it and leverage for better deal structures.
-Diminished ad response- Let’s be serious, podcast listeners are special, but when you run 2 minutes of ad inventory per hour, it allows for a more responsive audience. Radio runs as much as 18 minutes of ads per hour (sometimes several ads in each of those minutes). Even if they meet in the middle, expect increased clutter and less value per impression. The industry has largely been built on the backs of e-commerce brands, filled with promo codes and vanity URLs.
-Performance marketers move to the fringes- Armed with a sales machine, flush with brand buyers, General Interest podcasts, Murder Mysteries, and the like will be the new FM Radio. Rates will go up due to pressure from National Brands, grocery chains, etc. and performance marketers will see steadily diminishing ROI as CPMs go up, not down. This is where the rise of talk radio on podcast will be of increasing value to podcast marketers and explains the success of folks like Ben Shapiro and Jason Stapleton. It’s talk radio for early adopters. As this contingent continues to grow, brands will steer clear as they always have in talk radio, and performance marketers will find a safe haven to make money.
-More Kool-Aid: Podcast has been creeping into the habit of polishing turds and telling you they are doing you a favor by selling them to you. Radio has been afflicted with this illness for generations and will be fast at work building packages and cramming them down the throats of all who will listen. Buyer beware of new shows promising large ratings and network generated “Packages”.
1. Don’t underestimate radio. They have won the war, and podcasts will now serve as an on-demand feature. This will become crystal clear in the coming months. The only question is not if it will happen, but how much share will they actually take, leaving only scraps for the independents. It’s been a mom and pop industry, and now we must make way for the titans.
2. Learn to be ambidextrous in both media types. You have two tracks for listening: Live and On-Demand. It’s always been this way, since records[CB3] and VHS tapes were replaced by YouTube, Netflix, and Hulu. Now in radio, terrestrial signals will continue to decline, with streaming and podcasts picking up the difference. Don’t think about “radio strategy” or “podcast strategy”. Think about “audio strategy”.
3. Embrace the change. This is only natural. When two industries love each other, they make a promise to be together forever. They come together and new life is formed. Expect this new creation to share traits, both good and bad, with both radio and podcast. This is a good thing because together they can survive and thrive. Radio can still learn from Podcast and Podcast has much to learn from the radio industry. It’s important that you gain expertise in both or are aligned with experts if you want to succeed in either one. Because for brands doing marketing at scale, they will need to work together hand-in-hand.
Indeed, the Podcast industry will continue to evolve. We are still waiting to see who will be the commercial-free, subscription-based, “Netflix of Podcast”. We are still waiting for standardized audience measurements to implement a universally accepted gold standard. New experiments in “Theater of the mind” will continue to stretch the demographics and re-imagine the idea of what audio programming really means. Don’t even get me started on smart speakers.
I still support and respect our friends who remain independent or still own the majority of their companies. They remain a healthy counterbalance to the momentum of the industry toward domination by a short list of conglomerates. But let’s be clear: Radio has taken over control and will be running things from here forward. There will always be independents who are fighting the good fight to make great content and this will allow for some degree of balance and accountability with a focus on quality. Let’s accept reality and make friends with it.
When I left radio, my biggest concern was that they weren’t listening, not to the shows, but the needed change they represent. Today, establishment radio professionals have been brought to their knees by the constant chorus of adoration for the burgeoning podcast-first innovators. The old guard is now in a humble place, and are not only listening, they are taking steps to down the path which was beaten by this now matured band of audio rebels. The victories shared by those who started when no one was paying attention, as they cash out one at a time, is very well deserved.
The dark night that fell over radio is now a new dawn. I hope you share my enthusiasm for the changes. Please join me in welcoming radio back to the party. We can do wonderful things together for the audio industry, the advertising community, and most importantly, for the public good.