The Future of Radio is DM not AM/FM

Finally having the mobile bandwidth to accomplish certain feats of connectedness, I have been thinking a lot about mobile media lately (then again, I am always thinking about mobile media). Mostly because I have been using my xv6600 to connect in many ways that were not feasible before EV-DO.Take for instance my ability to drive all through the Los Angeles and Orange County areas while listening to Soma FM or We Funk or Bassdrive. These, as you might rightly guess, are not standard radio channels — no AM or FM here — these are internet radio stations. Let me say it again, using standard off-the-shelf components I have internet radio streaming in my car! What does this mean? Well apart from the fact that I just made my radio dial nearly infinite, there are many implications for the radio industry at large.

Not AM or FM, DM (Digital Modulation) is the future of radio

Imagine for a moment how traditional radio broadcasters know how many people are listening to their station at any given time. Having a hard time? It’s OK, because traditional radio broadcaster do not know how many people are listening to their broadcast at any given time. They can only guess. This is because a standard radio broadcast, by nature, does not require a mechanism for you to communicate with the broadcaster while listening to their station.

Basically, you tune your radio to a frequency somewhere within the Electromagnetic Spectrum (in the AM or FM band ranges) until you come across a broadcast that sounds clear. Specifically, you find a carrier frequency “carrying” the audio you would like to hear (ie: those annoying talk radio people). No where in this process is it required for you to communicate with the broadcaster. As a result, the broadcaster has no real idea of who is tuning in and when.

Broadcasters rely on companies like Arbitron to define “markets” (such as these market rankings) as well as any internal metrics they can gather (radio promotion call-ins, direct surveys…etc). When a broadcaster occupies a market and captures a certain share of that market, they open themselves up to advertising — after all how does a free service make money when nothing is free? Advertising of course! Advertisers pay for radio reach, which for radio, the reach is a best guess based on the share a broadcaster has in a given market.

Wait, how does Arbitron define a radio stations reach? Arbitron, obtains its market data by asking a small group of people to keep diaries of when they tune in and to what. Diaries?! Yes, diaries. OK to be fair Arbitron does not just use diaries; they are currently engaged in pushing the next big thing in radio listener metrics: The Portable People Meter! The Portable People Meter or PPM will be responsible for increasing ad spend, so says a Forrester Consulting impact study on the PPM:

“We estimate that deploying PPM in the top 50 markets would drive spending increases of $150 million more per year. Our estimate of the net difference in spending with PPM vs. diaries is $696 million when PPM is fully deployed.“

…those are significant numbers, but what is and how does the PPM work?

The Portable People Meter works via a novel principle; at the broadcast level an inaudible unique content ID is inserted into all content broadcasted. This inaudible ID is then “heard” not by people but by the PPM. So throughout the day a person listens to and watches all types of media, a PPM participant carries a device (a meter) on their person that listens for the unique IDs, once it hears one, it logs it. At the end of the day, the PPM carrier plugs their meter into a base-station, the base-station downloads all of the IDs for the day from the meter and then uploads all of the IDs to a central repository controlled by Arbitron. Further, should a user listen to a recorded media (ie from a DVR) the inaudible ID should have been recorded along with the media and should still be heard by the PPM — because of this capability, PPM is labeled “future-proof” by Arbitron.

Contrast PPM with a person keeping a diary and you can see why advertisers and advertising agencies are willing to spend more for PPM and less for diaries. Yet, doesn’t the PPM require people to carry around these listening devices and then upload their stats at the end of the day? This hardly sounds “future-proof” at all…

Now imagine how an internet radio broadcaster determines its reach…log files. Enough said.

Take the capability of the internet radio broadcaster to determine its exact reach into specific regions with the unparalleled availability (a broadcast from some guy’s basement in Germany can be heard equally well around the globe) and the shear volume of category specific broadcasts and you have a recipe for increased ad spend well spent.

There is no question about it, DM is the future of radio

It is true that when “tuning” into internet radio, you are essentially setting your dial to a near-infinite number of broadcasts, yet internet radio has a few miles to cross — mainly in the area of access and quality. Fortunately, the issues that plague internet radio are the very same issues that plague the wireless industry at-large. Therefore, expect to see internet radio on par with FM or better within the next couple of years (much sooner for you early adopters). Until then, internet radio is not the only DM broadcast method…there is of course Satellite Radio and HD Radio (High Definition Radio):