IPO at SxSW: The Future of Radio

The annual South by Southwest Music Festival, which wrapped up its 20th year this past weekend, brings together hundreds of artists—most unsigned or belonging to independent labels—with thousands of industry insiders and music fans. As such, perhaps it’s only fitting that one of the panel sessions catering to this eclectic and open-midned crowd this year was devoted to the future of radio.

The panel consisted of Tim Westergren, founder for Pandora, a free service that taps into the music genome project to help music listeners discover new music; Elise Nordling, a music director at SomaFM, one of the largest and most popular independent radio stations on the Internet; Celia Hirschman, perhaps most widely recognized as commentator of On The Beat on KCRW, the much respected public radio station broadcasting out of Los Angeles; and Roman Mars, producer of the Third Coast International Audio Festival in Chicago.

It’s no secret that modern radio is at one of its lowest points in history. Ignoring the proliferation of iPods, mainstream radio’s dominance by Clear Channel and Infinity Broadcasting has resulted in countless homogenous stations that follow identical formats and play virtually identical music, typically dictated by what the major record labels want them to play. The end result leaves many listeners frustrated and tired while less recognized artists are completely excluded.

As Mr. Westergren put it, the label business is a big hit business designed to support only a handful of artists. While it makes economic sense, the model is not at all democratic. iPods and digital music may be squeezing radio, but the consensus among the panel is that it doesn’t have to be that way.

Mr. Westergren cited one study that found the average MP3 player is filled only 5% and that the user never refreshes the content after purchasing it. While radio listenership immediately drops among owners of digital music devices, it tends to pick back up three-to-four months laters when users “rediscover that they actually like discovering music.”

And therein lies the problem with radio: the vast majority of stations simply don’t offer listeners an avenue to new music, opting instead to play only what the major labels and other mainstream avenues deem popular at a given time.

Discovery is critical to the equation of branding a radio station, Ms. Hirschman said. “People need trust in your radio station,” which means establishing a reputation in listeners’ minds that they when they tune in to a particular program, they can feel confident that the DJ is delivering quality music independent of how well known it may be, even if not every track suits their tastes. KCRW has enjoyed success with its programs following that approach, which naturally bucks the trend of mainstream radio but which it can afford to employ given its listener-supported public radio status.

SomaFM has enjoyed similar success, serving up commercial free radio programming on the Internet that’s funded entirely by listener donations. The fact that SomaFM’s format has actually worked is a particular testament to the notion that radio is far from over and, beyond that, that countless people will happily pay for what they deem quality programming. At any given moment, upwards of 10,000 people are tuning in to one of SomaFM’s programs at the same time.

“The music business is a $100 billion business in $10 billion clothes,” Mr. Westergren put it, but it’s so hard to find new music that most of the middle-class musicians are not being discovered, and so the money they would generate is being left on the table. He sees the future of radio and the music industry as being far more democratic. Today, an artist that sells a track on iTunes for 99 cents receives a nickel, but in the future Mr. Westergren believes that most artists will have their own Web site and a home studio, enabling them to make music without going in to the debt. The result will be singles that cost 25 cents, with the artist getting 20 cents.

Mr. Westergren also believes that in tandem with better radio programming there should exist a technology that enables a user to purchase the currently playing track from a station with a single click, which would add that track to the user’s music library. “You could develop your own celestial station because you buy as you go and build your library,” he explained.

Mr. Mars echoed Mr. Westergren’s sentiments, also believing the future of radio will favor artists more. Ms. Nordling had a less concrete picture of what the future of radio might be like, offering only that “it would be better if people had more input on what radio is to be.” For Ms. Hirschman, the future will consists of an amplification of current trends: flexibility, portability, and time-shifting.

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