AM/FM/XM – Dead Man Walking!

If you saw Tom Hanks in “The Green Mile” you know what that phrase means. It’s the condemned killer walking down the long corridor in chains, directly to the waiting room where he will surely be facing his execution.  In the book and in the movie you’d hear a guard exclaim “Dead man walking!” in order to prepare everyone for the process and reality about to occur.

People who understand the various “wireless” technologies would probably agree with the analogy. AM/FM, in its current state, is surely a “Dead Man Walking” to the gallows.  The death of traditional AM/FM/XM radio is as obvious to predict as the coming sunset.  There are folks who don’t see it because they are not as familiar with the basic physics of radio – so hopefully this article will overcome that and offer hope and opportunity for AM/FM stations world-wide.  Uh oh.. I’m hearing a question:  “Wait a minute, is he lumping in (Sirius)XM?”  Answer: “Yep”.  Whoa!  That’s apples and oranges, right?   Answer: “nope”. Granted, Sirius has more time to respond, much more time. Let’s just focus on AM/FM for the moment.

To start out, I’m proposing two over-arching reasons for the rapid and upcoming demise of AM/FM radio:

  • Consumer choice
  • Supplier cost (or Consumer price)

That’s it! I would like to offer the AM/FM industry hope though. First we have to get through this first article. The hope for the industry is in the next few installments.  Be sure to leave a comment during the making of the series and if it adds to the message I will definitely put it in.

Let’s tackle consumer choice first.

It’s no surprise that the demographics of AM/FM stations are changing quickly.  The people who are either technically savvy, or have expendable income are choosing either satellite broadcast or internet streaming services.  So, why are we saying AM/FM is just a “dead man walking?”    Let’s ask this question, be honest:  If you have a choice between listening to half an hour of uninterrupted music instead of 15 minutes of music and 15 minutes of car commercials which would you pick?

Ok, so we’ve just established that if you HAVE a choice we know what the answer is. What then stops the complete dismantling of AM/FM today? Nothing, it’s happening – more and more media budgets are moving to new media wireless and streaming services.

Now let’s talk about supplier cost, which normally translates to the price consumers pay.  How much does it cost to build an AM radio station?  A lot.  How many simultaneous “channels” does an AM radio station transmit?

Am&FMisDead

All of these AM/FM radio towers have a defined area to broadcast. The center tower specializes in country music, and their revenue comes from the commercials, and they can only reach the houses and cars within the “sphere”. It’s just physics.  The tower to the upper right offers political talk and can only reach the houses and cars within its sphere, etc.  I think we would all agree that at minimum, it would be far better that the tower simply transmit whatever people want, right?

Let’s get back to the consumer. If he could push the streaming button as easily as the AM radio button, and considering the earlier question, which button will he pick?  The button with the most choices of course!  So if there is a gap to fill, and there still is, it’s the “simplicity” of making the button available to each consumer at a cost he will pay.

What if he doesn’t want to pay for commercial free programming?  Commercials then? Of course – well, then let’s now compare the cost of providing the stream of content that includes commercials versus the cost of AM broadcast.  We’ve already established AM broadcast is much more expensive to deliver one feed of content than an internet based system with any stream of content you desire.  In other words, if the cost to him is the same (free) then would he still not pick the “radio button” that can provide any type of programming he wants?

Now, here’s the part that will probably be a little tough to swallow. I think Sirius/XM is also in for a big hurt. They are no different from AM/FM in that they have extremely high capital expenses and operational expenses. Their business model is the transmission medium AND the content.  They need to pick one and do that, but not both.  They have a relatively short-term opportunity to convert their infrastructure to on-demand streaming content.  Their “channels” need to be adjusted to deliver whatever is asked.  How can it be done?  Easy, the 4G wireless network could communicate instructions to Sirius/XM as far as WHAT to stream, which means that satellite does not have to be two way to get the competitive streaming. Of course the technical protocol would have to change on the satellite to multiple internet download channels.

The purpose of this first part was to simply establish this fact: It has to be intuitive that AM/FM can’t survive in the same playing field that it does now. The alternative to that medium has incredible velocity and will one day supplant them as fast as Kodak lost its cash cow in film.

In the next installment I’d like to offer-up an idea that the FCC could help promote and allow the current AM/FM broadcast industry a fighting chance to survive.

Patrick Bouldin

http://www.RunThisProject.com

 

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