Why digital and why now?

Flux Media, LLC comes from a background in radio. While many digital and production services are provided, let’s look at how digital pertains to the radio world.

According to the Pew Research Center, traditional radio is still king as of today. However, 38% of Americans are said to listen to audio on digital devices each week, with that number expected to double by 2015 while interest in traditional radio is on the decline.

Digital media is still uncharted territory to many companies, but as technology continues to evolve, it is becoming less of a luxury and more of a necessity to have a solid digital service. Now is the time to get in on the ground floor while digital strategies are still being devised by traditional media sources. As a digital first organization, we already have the traits and qualities that products will require in the very near future.

Arbitron, the source for traditional radio ratings, conducted a survey of Americans over the age of 12 and asked how they consumed their media. While Television continues to remain near the top, Radio has seen a decline from 96% use in 2001 to 90% use today. While this is a small decline, there have been tremendous increases in other forms, including: cellphone media usage up from 54% in 2001 to 84%, internet radio listenership up from 28% in 2001 to 56% – with these numbers growing every year.

There is also evidence in the data that people listen to AM/FM out convenience rather than out of deeper appreciation for the content. Less than a quarter of adults, 22%, said in a 2011 survey by Arbitron that they “love” local AM/FM radio. This is far less than those who reported “loving” the media on their other audio devices, including the iPhone (66%), Android smartphone (49%), digital video recorders (48%), iPod (46%), broadband internet (46%) and satellite radio (39%).

As the convenience continues to slowly shift from traditional media methods such as TV, radio, and newspaper to digital mediums such as cellphones, computers, and tablets, now is the time to switch over to providing content as digital first, traditional second – not the other way around.

There are multiple signs that point to this. Data aside, examples such as many newspapers dropping from seven times a week to only once or twice a week while continuing to provide 24/7 online coverage proves the point that digital needs to be the focus, while traditional mediums still exist, but in a secondary capacity.

What about advertising?

The economics of audio still tilt in the direction of traditional radio broadcasting. The problem is the same with audio as it is with other media sectors, they don’t invest in new technology when they are used to the old technology generating the most money.

In 2011, total radio revenue grew, but more slowly than the year before. And traditional spot advertising, which dominates radio revenue, was flat, a condition that is expected to continue in the future. Meanwhile, digital platform spending, the smallest piece of the pie, is projected to have the steepest upward growth trend. Just as we see in audience trends, the challenge will be who will capture that digital market share.

9-RadioRevenueSourcesIn20111

Most of this revenue came from broadcast radio, but that is the sector that is not expanding. Revenues from traditional spot advertising shrank by 1 percentage point in 2011, to $14.1 billion. That followed 6% growth in 2010.

At the same time, digital revenues grew by 15% but provided less income, with $709 million for the year. While actual dollars from digital revenues were the fewest by far, the rate of growth was the largest seen among all radio revenue streams.

By 2014, total radio revenues are expected to return to the 6% annual growth rate seen in 2010, Veronis Suhler Stevenson predicts. Broadcast stations will still dominate, but most of that growth will come from new technology in online and mobile services.