When Stations Fare Poorly in the Ratings

promotion the process of scheduling publicity appearances for a recording artist, with the goal of generating excitement about the artist, and thereby sales of his or her album

When stations have fared poorly in the ratings, managers may institute immediate changes. Sometimes managers blame internal factors such as a poor choice of recorded music. They may also blame factors outside the station's control. For example, many music-intensive stations have poorer ratings during severe winters because listeners flock to competing news/talk stations for updates on school closings and icy roadways. In that case, a program director of a Top 40 station, for example, will recognize that the ratings fluctuation was due to unusual circumstances and may decide to make no changes in the hope that listeners will return to their normal habits with the approach of milder spring weather.

Often, however, poor ratings lead to personnel changes. A careful analysis of Arbitron data may indicate that a particular time slot is not performing as well as the program director and station manager expected. In this case, the on-air personality during that period is likely to be replaced.

When stations have a history of poor ratings and revenue performance, station owners will frequently decide to try a new station format in an effort to grab a larger target audience and more advertisers. Overnight, a station that is known for playing classical music may start playing country tunes.

With these wholesale makeovers, it is not unusual for all employees associated with the station's old format to lose their jobs.

Although management may consider it deadly to stick with an unprofitable format, instituting a new format on a radio station also has risks. Listeners to the old format are likely to feel abandoned and angry, and it may be tough to get the new target audience to find the station. Attempts to attract new listeners through publicity stunts and advertisements on billboards, on TV, and in newspapers can be quite expensive. And if the new format doesn't work, management may be in a worse situation than it was in before the change. Nevertheless, the formats of certain stations do change fairly frequently; their managers believe that the benefits of responding to the shifting interests of audiences and advertisers outweigh the costs and risks of change.

Radio and the New Digital World

Radio executives today find themselves in a world that goes far beyond problems with new format trends. The most obvious change is that, after decades of revenue growth, the financial strength of the terrestrial radio industry has plummeted. Whereas broadcast radio revenues were $20.2 billion in 2005, in 2007 they were $19.6 billion, and the number dropped to $17.7 billion in 2008 and $16 billion in 2009.6 Part of the decline undoubtedly relates to the economic downturn of the late 2000s, in which key local companies substantially reduced their overall spending on media. But radio executives recognize that the drop in revenues also reflects the realization by advertisers that the time audiences—especially young audiences—spend with radio is decreasing. Recall from Table 11.1 that listeners to an average quarter hour of FM radio stations declined from 22.4 million in 2005 to 21.3 million people in 2008.

These people didn't disappear from the United States—they were simply lost to terrestrial radio. Some—a relative few—have switched to satellite radio. But many people have shifted toward listening to digital sources of music—downloading songs from certain internet sites, listening to streaming songs from others, and sharing their favorites with friends. Their laptops, iPods, MP3 devices, and smartphones are becoming their replacements for portable radio, as they decide what to play in what order. To traditional radio executives, these scenarios are truly scary. They realize the change in music-listening habits is only beginning, and they must find a way to join it rather than fight it.

Satellite radio has so far proven to be only a minor annoyance to the industry, but some industry insiders have great hopes for it. Most observers agree that internet developments threaten to cause the radio industry great damage in the long term if it doesn't adapt. Let's look at each.