Wednesday, January 21, 2009

WiFi Radio: The Death of Broadcasting, Part II

The following article appeared in this morning's National Post. It uses the term "WiFi radio" to refer to the "internet radio" that I used in my blog on the "The death of broadcast radio":

Radio in tune for digital revolution: Deloitte

'It's The Future'

Grant Surridge, Financial Post Published: Wednesday, January 21, 2009

While the vast majority of radio listeners in Canada still tune in to old-fashioned analogue signals, some observers say the medium may finally be on the verge of a digital revolution. And radios that connect to the Internet will push such change forward.

"Radio is really the last medium to go from analogue to digital," John Ruffolo, Deloitte's senior technology leader, said yesterday.
The accounting firm predicted the widespread adoption of so-called WiFi radios as part of an annual list of predictions for media and technology trends.

The devices in question look like normal radios, with digital displays, speakers and tuning knobs. But they pick up thousands upon thousands of Internet radio stations from around the world free of charge.

"It's the future of radio," said Alex Bowden, a salesman at Bay and Bloor Radio in downtown Toronto. He said the store has seen an uptick in sales of the devices, especially over Christmas, as prices have gone down.

The cheapest units retail for about $200. They connect to the Internet on their own or through an existing wireless router.

Analogue radio has stood down the advent of television, satellite radio and various digital incarnations. But Mr. Ruffolo contends WiFi devices will present a solution to consumers who are unwilling to pay for satellite radio, but tired of a limited selection of analogue signals.

Jacques Parisien heads the radio business at Astral Media Inc., the country's largest radio broadcaster.

He said WiFi radios present an opportunity for broadcasters to expand their analogue audience.

However, for the time being, Astral remains focused on analogue radio, where the vast majority of advertising and listeners are still situated.

In the first three quarters of last year, the U. S. Radio Advertising Bureau said online ad revenues accounted for about 9% of total radio income.

Mr. Parisien said that figure is likely even smaller in Canada.
David Bray, a radio industry analyst based in Toronto, called the idea that WiFi radios would herald a widespread shift in the way people listen to radio "wildly improbable."

He said he expects that there will eventually be a digital shift in the radio business, but it is far too early to tell if consumers will spend several hundred dollars to buy new radios.

He said that where there is no WiFi coverage -- such as outside of large cities -- such portable devices would be useless. "You're limiting yourself to urban locations where WiFi coverage is in place," he said.

According to data from the Canadian Radio-television Telecommunications Commission, about two-thirds of Canadian households subscribe to high-speed Internet connections.

There are still issues to be resolved over tariffs broadcasters must pay to musicians to compensate them for playing their music over the Internet, Mr. Bray said.

The challenge for radio broadcasters who want to compete in a cyber universe filled with thousands of stations will be to organize themselves so that consumers can find them.

"They'll have to be categorized in an easily searchable format. Absolutely," he said.

Of course, I fully agree with Mr. John Ruffalo, the Deloitte analyst who wrote the report and predicts that WiFi radio will replace today's analogue radios. Although the cost of WiFi radio is relatively expensive when compared to analogue radios, the cost will come down as production ramps up. Remember when LCD TVs cost over $4,000? The same TV can now be purchased for less than $1,000.

Mr. David Bray missed the point entirely, however, when he states that WiFi (or Internet) radios will be useless in areas outside the Metropolitan regions where WiFi coverage is not available. WiFi radios will, I expect, be only used in conjunction with WiFi transmission from your own in-house wireless router, not with commercial WiFi services. And, although the penetration of wireless routers may not be that high yet, I expect that soon every household that has broadband internet will soon have a wireless router in the home. When every child in the house, not to mention adult, has their own laptop, it will become impractical to connect to the internet through wires - hence the widespread deployment of wireless, and wireless routers. WiFi radio will just ride this trend.

The other point not mentioned in the article, and the point that I was trying to make in my previous blog entry, was that WiFi radio (or internet radio, as I called it) will mean the death of broadcasting. A broadcast radio station could not, for example, play U2 exclusively since the audience within broadcast range would be too limited, and the resulting advertising revenue too small. However, if you can reach U2 fans world-wide, then you can tailor your advertising to that segment of the population which are also U2 fans, and who are in the target market segment for your product. This is, of course, the dream for every advertiser. So, with the emergence of WiFi radio, I expect that radio stations will move to the internet, expand their reach, narrow their focus and consequently be able to target their advertising more precisely. Thus the advent of narrowcasting, as opposed to broadcasting.

What has this to do with CBC Radio Two? Well, as you can see, CBC Radio Two has moved in precisely the opposite direction - becoming a 'broader' broadcaster, attempting to reach an even wider audience with its mish-mash of every conceivable musical genre available in Canada, in the end satisfying no one. CBC Radio Two is not evolving, rather, it is accelerating its own devolution into a dinosaur.

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