The NAB exhibit floor was anemic. Vendors that have been radio-industry leaders for decades are pulling out of radio or going out of business altogether. It appears there soon may come a day when broadcasters are offered only a single choice in some product categories and no choice at all in others. Lack of competition increases prices and makes broadcasters vulnerable to lower-quality products and dismal service. When competitors disappear, bad things happen.
Competitors are disappearing because no one is buying anything. Budgets have been tight for too long.
When vibrant and innovative vendors are inventing new tools that allow stations to improve their quality, radio is on an upswing. When broadcasters try to outdo one another, everyone wins. The station wins. The listener wins. The advertiser wins. The vendor wins.
Right now, nobody is winning. What went wrong? Why is there so little innovation within radio’s vendor community today?
The answer is simple: Innovation is stimulated by incentives and competition. When incentives go away, innovation disappears. Wall Street’s pressure on broadcasters to perform financially has triggered a near-decade of relentless corporate cost-cutting. The result is radio with a look and feel reminiscent of Russian technology near the end of the Cold War.
Managers have been told to “make do, make it last,” until the average station is sending its signal from an exhausted, old studio to an antique transmitter held together with shoestring, baling wire and chewing gum. Traffic and billing are generated from a tired, old software system that sends a monthly invoice that whispers, “We’re out of touch — nothing new happening here. If you want innovation and change, you must look somewhere else.”
Exacerbating the problem is the fact that most big groups have standardized to one supplier in each product category, making group-wide purchases at prices that barely allow the vendor to survive. As a result, suppliers are forced to cut quality and completely ignore research and development. Sadly, they have no choice.
One vendor recently confessed to me that he was selling below his cost because he needed the cash flow to survive. I’m betting the big group that maneuvered him into the deal will soon be calling the company’s tech-support number only to be greeted by a recording that says, “We’re sorry, but you have reached a number that has been disconnected or is no longer in service.”
Hey, I know you have to “hit your numbers.” And I know you’ve been told “maybe next quarter” for the last 27 quarters. Even so, I encourage you — no, I beg you for the sake of our industry — to seriously consider making one or two long-overdue purchases NOW. If possible, spread the purchases to multiple companies to help keep them alive and competing. Increase your budget for capital expenditures in 2005.
If radio’s vendors don’t see an immediate increase in sales opportunities, you and I have seen the last better mousetrap in our industry.
10/18/04 Radio Ink Magazine. , B. Eric Rhoads
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