MONTREAL – Without an updated, more flexible regulatory regime, a drop in ad sales among private conventional radio stations will mirror that of conventional television, Canadian Association of Broadcasters president and CEO Glenn O’Farrell said in a speech today.
As specialty TV services gained in acceptance and popularity, their ad sales grew dramatically (and are still growing), costing traditional over-the-air broadcasters any kind of growth and for some, ad sales fell dramatically. While conventional TV broadcasters draw a larger audience, specialty services have much more targeted demographics, which ad buyers are often more eager to reach.
O’Farrell told the Canadian Club of Montreal on Monday that conventional private radio faces similar peril today from satellite radio, Internet radio and downloading – but does not have the 20-year window of time TV had in which to adapt.
"We are heading for a universe where we will access media – all being offered in an extraordinary range of media choices – anytime and anywhere. And that will be thanks to the proliferation of wireless networks and portable units," he said. "(And) one of the characteristics of this coming universe is its duality. On the one hand, there are the media that are regulated – and often rigorously so. It’s a situation they have lived with for decades. I refer, of course, to radio and TV operators," O’Farrell continued.
"Then, on the other hand, we have those new businesses that know little or no regulation whatsoever: satellite radio, web radio and video on demand over the Internet. In a just a matter of years, we have gone from a broadcasting system that was closed in on itself – and in which every player was subject to the same rules – to a new system that is open, multi-faceted, and where some players have to work within the restraints of a regulated framework whereas others are constrained only by the relevance of their content or the creativity of their marketing plans," he explained.
Since the CRTC’s Radio Review is under way, O’Farrell pounded home the CAB’s message on that front.
"The regulations that govern commercial radio today were drawn up more than thirty years ago in the early seventies," he said. But, with young audiophiles downloading millions and millions of MP3 files, listening to Internet streams and sharing those files with their friends, the youth of today are tuning out conventional radio. Between 1998 and 2004, the time spent listening to commercial radio for kids aged 12 to 17 dropped by 25%, said O’Farrell.
"They no longer tolerate the imposition of limits on how much music they can download on their iPods or cell phones; or which Internet radio stations they may or may not listen to… This new music consumer is – without having to give it a second thought – all in favour of the unprecedented diversity of radio content that is subject to little regulation or none whatsoever," said O’Farrell.
"As we know, the diversification of television options has had the effect of reducing conventional television viewing and advertising revenue share – to the benefit of specialty and pay TV services accessible by cable and satellite. We hear a lot nowadays about the effect that this has on the ability of conventional broadcasters to finance the production of drama programming.
"But, in French-language television, this process has been gradual and spread across more than 20 years. Think back: pay TV first appeared in 1982; specialty television in 1988; pay-per-view in 1996; video-on-demand in 2002; and totally digital channels in 2004," he continued.
"The same process is likely to show up in the world of radio in as little as a few years time – if not sooner."
He then cited new audio entrants like Sirius Canada, XM Canada, radiolibre.ca, and wireless media as lightly- or un-regulated threats to conventional radio.
All these new platforms offering access to radio content are spreading quickly – and at the same time as each other – because they will meet the expectations and acquired habits of the new consumer. And they will very probably have the same impact (as on television): fragmentation," said O’Farrell.
"One telling difference, however, does stand out. Conventional radio has only a few years in which to measure up to this competition; whereas conventional television has had all of two decades."
So, to meet the challenge, the regs must be altered – and the demands on the system are already high.
When it comes to French-language radio stations, "(t)hey are required to broadcast a high percentage of popular Canadian music and French vocal music: 35% in the case of the former and 65% in that of the latter. On the other hand, they are required to make financial contributions to the private commercial music industry; to meet the information needs of local groups; to promote Canadian artists; to contribute to the diversity of editorial voices; to reflect the cultural diversity of Quebec and Canadian society; and so on and so forth.," he explained.
Between 1998 and 2005, the private commercial radio’s contribution to the main organizations supporting the development of the Canadian music industry increased by 1170%, from $1.4 million to $16.1 million.
These are positives, however, O’Farrell said.
"However, the regulatory requirements and the financial obligations imposed upon private commercial radio also have negative effects. First, one has to recognize the growing disparity between the profits of French-language radio and that of its English-language counterpart. In 2005, French-language radio profitability was 50% less than those of its English (brethren). And over seven years, its profits before interest and tax had grown by only 9%: namely, at a rate of barely more than 1% per annum," he explained.
"This rigid regulation also has another effect: it restricts the diversity of music formats for French-language radio, just as it restricts the range of musical works that could be broadcast."
The CAB clearly is demanding change in the radio review – not abolishing the system – and is vehemently opposed to increasing regulation, saying that would be "illogical and unreasonable."
O’Farrell said he hopes the Commission takes its cues from the recent Telecom Policy Review report which said "economic and technological convergence of the telecommunications and broadcasting sectors creates a new media economy to which the regulatory regime must inevitably adjust through the acceleration of deregulation," he outlined.
"What we need right now is not more regulation but a regulation that is relevant and pertinent to what is going on right now. A regulation that offers a better balance between restrictive obligations and measures that act as incentives."
