the format with nine lives

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Hey! It’s great to be back. I hope you kicked off the year strong. I hope you have the same energy as Katt Williams on Club Shay Shay. In 2024, let’s all strive to be the Phantom, not the Chrysler 300.

This week’s episode and memo is a deep dive into why radio still matters. The long-standing audio format is still a massive, multibillion-dollar industry. Despite the slow decline, today’s industry can learn a lot from the legacy business. To break it down, I was joined by Tati Cirisano from MIDiA Research.

You can listen to the episode here or read a few highlights below.

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the nine lives of terrestrial radio

Radio is the least sexy medium in entertainment. By far. It’s your uncle’s grey 1994 Honda Accord EX with over 250,000 miles. Will it last another 250,000 miles? Unlikely, but you know your uncle. He wants to run that thing into the ground. His car can’t connect to a smartphone, and the power windows take way too long to wind up. That stain on the right backseat is there for good. But the reliable no-frills vehicle can live on with regular maintenance.

The decline of radio is real though. Ad revenue and listenership continue to shrink. But radio’s decay is not as steep as other mediums. CNBC recently shared Pew Research data on the percentage of Americans who listened to radio, which fell 10% from 2009 to 2022. Meanwhile, broadcast TV primetime viewership dropped 20% from 2014 to 2019 alone. That decline is even steeper for cable and satellite TV.

The format lives on for two reasons: radio’s low-cost structure, and its quality compared to newer alternatives. First, radio is cheap to produce. If the revenue from advertisers offsets the cost to run the station, then there’s profit. That revenue is declining, but many stations use the station as a loss leader for more lucrative concerts and events. A station like New York’s Z100 still generated over $30 million in 2022.

Second, radio is still an audio product that can match the quality of newer alternatives. NPR’s This American Life has set a quality benchmark that most well-funded storytelling podcasts still aspire to. The audio quality gap is much smaller than it is in video, where an HBO Sunday night drama is often better quality than a primetime series on ABC.

And despite radio’s perception of passive listening, the format can tell us a lot about nurturing superfans. Radio engages its active listeners through free concert ticket giveaways for its station-run concerts like Jingle Ball and Summer Jam. The radio DJs and personalities have established a parasocial relationship with listeners. Voices like Delilah, Funkmaster Flex, Angie Martinez, and Rickey Smiley have made their impact. Every locale has its voice. As iHeartMedia CEO Bob Pittman often says, Radio is in the business of selling companionship.

You can listen to the episode here or read below for more highlights.

the compensation debate

The U.S. is the only country that doesn’t pay recording artists or performers for songs that get played on the radio. The songwriters and publishers get paid through PROs, but not the singers. This has been an ongoing debate for decades. Lobbyists from the National Association of Broadcasters want to maintain the status quo. They often base their argument on the Copyright Act of 1909. 1909!

Back then, the music was monetized by selling sheet music. There was no “music industry.” Even a Copyright Act of 2009 would be outdated by now, let alone 1909. The Copyright Act of 1909 was signed into power by President Teddy Roosevelt. These “speak softly and carry a big stick” laws have to get with the times.

U.S. Senators Alex Padilla (D - CA) and Marsha Blackburn (R - TN) are pushing new legislation to get recording artists paid from radio station revenue. Their proposals are modest, but it’s an argument that may fall on deaf ears (literally) given layoffs at iHeartMedia, Audacy’s Chapter 11 bankruptcy filing, and the continued decline in ad revenue.

Both streaming and internet radio taught us a lot about the court of public opinion and its influence on music legislation. The brand-new sexy toy that doesn’t pay its fair share can easily be painted as the enemy of the people. Pandora and Spotify know that all too well. But painting that ‘1994 Honda Accord’ as the enemy of the people is tougher, even if it’s warranted.

It’s easier to rally public support against a pre-IPO unicorn than a radio industry that relies on laws that were put in place when Harriet Tubman was still alive.

the nine lives of payola

Payola is an illegal practice that has been outlawed since 1960, but the act of paying for radio airplay without disclosing the payment has lived on in different ways.

In the 1990s, when Roc-a-Fella Records built its relationship with Hot 97, there was no reported money exchanged. But there were gifts of Cristal bottles, Summer Jam performances, and exclusive interviews. All those instances can influence favorable airplay to Jay Z and the entire Roc family. That impact can last for decades too. When Jay Z and Kanye West released “Otis” in 2011, Hot 97’s Funkmaster Flex premiered the song by going off for 22 minutes straight. Is that the result of payola? Or smart relationship building?

When Mariah Carey was signed to Columbia Records in the '90s, the label reportedly discounted her late '90s single CDs to drive them up the charts, force the radio stations to play the single, and build further demand to achieve another Billboard #1 song on the Hot 100. Is that payola? Or arbitrage?

Payola to music is like performance-enhancing drugs to baseball. Yes, it was frowned upon, but it was table stakes to compete at the highest levels. Plus, if an artist doesn’t have hits, payola can only go so far. If a baseball player isn’t already great, the PED impact is hard to sustain.

Brady Anderson’s 50 home runs in 1996 was a flash in the pan. It’s very, very different than Barry Bonds, a three-time MVP before the PED allegations, who eventually became MLB’s all-time homerun leader. Similarly, the influence of ‘pay for play’ for an artist like Iggy Azalea and her hit song, “Fancy,” is very, very different than an artist like Mariah Carey, who has been a hitmaker decade after decade.

If you liked these highlights, check out the full episode. We also covered:

• how radio still holds back popular hip-hop and R&B songs
• why radio wins on convenience
• The Breakfast Club, Hot 97, Z100, and more

Listen to the episode here.

We have a new mini-series we’re launching: the Chartmetric stat of the episode.

As of January 7, 2024, there are two artists who are in the top 10 for global radio airplay but not in the top 20 for Spotify monthly listeners. That’s Tate McRae, who is currently 39th on Spotify monthly listeners, and Luke Combs, who is 345th on Spotify!

It’s a fascinating stat that says a lot about country music’s popularity on Spotify compared to other platforms. Similarly, Morgan Wallen is 13th on radio airplay and 255th on Spotify.

Hope you enjoyed this memo. If so, please share. Forward this email to someone who should read it. Text it to a friend. Drop the link in the group chat.

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money moves

• SoundCloud considers $1B+ exit or investment​
• ByteDance shuts down its Resso music streaming service in India​
• MSG Entertainment scraps plans for The Sphere in London​
• Warner Music CEO Robert Kyncl’s 10-year plan​
• Universal’s Lucian Grainge’s annual memo​

coming soon from Trapital

We have a few exciting episodes coming up in the next few weeks and months: the business behind the Grammys, the rise of Las Vegas, K-pop, and more.

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