Though I haven’t seen this mentioned anywhere as of yet, it occurred to me the other day that with the state of the economy and the recent developments in the automotive industry, there are several parallels to be drawn between the Auto industry and the Radio Industry. But first, let’s get up to speed (no pun intended) on the current state of the American Auto Industry.
At present, and for the last few years, as sales have slumped and costs have increased, the Big 3 have begun selling off pieces of their operations in the hopes of raising cash. For instance, Ford cashed in their chips on Aston Martin in 2007, they let go of Jaguar and Land Rover just last year, and as recently as last November they parted with their controlling stake in Mazda.
Similarly, Chrysler finds itself portioning out control of the company to a triumvirate of investors, including Fiat and the UAW .
And, finally, the big daddy of them all, General Motors. The General had been acquiring/creating brands the way some people collect baseball cards for decades. As such, their corporate operation has become entirely too massive to maintain. And so the sell-off began. While they attempted mightily to hold out longer than their Big 3 comrades, GM has had to find all sorts of ways to raise cash in recent years. First up, GM parted ways with their partial claim to Subaru all the way back in 2005, when the need for cash became more urgent. Then, last November, GM sold their 3% stake in Suzuki in order to hopefully free up some additional funds to maintain stock price.
But the last few months have seen a flurry of activity from the General, first parting with the predominantly testosterone-fueled, genital-compensating brand that is Hummer to a Chinese industrial manufacturer. Next to slide into the hands of investors was the auto group’s Allison Transmission unit, primarily handling commercial and military transmission manufacturing . And finally, in the last couple of weeks, news has come of pending sales for both Saab and Saturn brands – Saab to a Swedish supercar manufacturer, and Saturn to former race car driver and dealership group owner Roger Penske. And this, of course, is all in addition to the cancellation of Oldsmobile a few years back, and the end of Pontiac coming in 2010.
What’s initially most striking about this list of developments is the staggering number of brands being sold. Without knowing any better, you might assume that a sell-off this large would in essence mean there was nothing left of General Motors.
But General Motors is, or at least was, an enormous operation.
The point of all the above information is to demonstrate how deregulation, subsidies and other financial maneuvers (along with decades of do-nothingness from American legislators in terms of forcing progress or change) allowed US auto manufacturers to grow well beyond their reasonable capacity for management and profitability. And while the auto industry’s size, scale and speed of growth are all significantly different from the Radio industry, the end result is approximately the same.
Beginning in the 1990s, the FCC reduced or eliminated restrictions on media ownership, opening the door for what would become the great consolidation boom in all media, and in radio in particular. One needs only look back 10-15 years to see the birth or explosive growth of large radio corporations including Clear Channel, Emmis, Entercom, Cumulus, Infinity (now CBS Radio Inc.), Citadel, Saga, etc. (Clear Channel serves as the clear example of the effect of consolidation courtesy of deregulation, as they, at least as of 2006, were in control of 1160 radio stations across the country. Thusly, they are usually the first and largest target of scorn and disdain.)
But, in recent months and years, as the economy has tanked and radio listenership has gradually slipped lower, even behemoths like Clear Channel have decided to sell. Unexpectedly, at least to me, Clear Channel’s given up the ghost and sold everything, as mentioned in the link above. And this comes after they decided, in 2006, to sell off over 400 stations in smaller (outside the top 100) markets .
Other ownership groups, though smaller, will likely be following suit soon as the strained economy puts a serious damper on potential advertising revenue, the lifeblood of any radio operation.
But what are the parallels, other than the fact that there are examples in both industries of operations that have grown “too big for their britches”?
The most poignant correlation between the two is this – consolidation has led to homogenization, or the death of individuality/uniqueness, which has decreased the value of all products/pieces.
Consider the auto industry first. Through the consolidation of brands under one umbrella corporation, auto manufacturers like GM were able to create one basic chassis (constructed on the cheap, I might add) and clothe it in virtually identical sheet metal, then slap a different badge on it depending on the brand it would be sold under. Thus, you have cars like the Chevy Malibu/Oldsmobile Cutlass, which were identical for many years (particularly those awful “fleet vehicle” years towards the end of Oldsmobile).
Now, this “blandification” and blurring of brands/products is not unique to GM. In fact, my Pontiac Vibe GT is a combination of parts, with the chassis and suspension coming from the Toyota Corrolla/Matrix, while the engine and transmission are pulled from the Toyota Celica GT-S/Corolla XRS/Matrix XRS. And this process of sharing basic chassis designs or components has gone on in the Auto Industry since the demise of the great Coachbuilders (and even they only designed the body, fit and finish, not the underpinnings of the automobiles).
The problem comes in when the bean counters get a stranglehold on the process, and all uniqueness and style are lost. Just a few years ago Ford was criticized for their use of Taurus bits and pieces (with their accompanying low-quality, low-rent appearance) in the cabin of the Jaguar Sedan.
This kind of “parts bin” approach to completing an automobile, thereby sacrificing design quality, is exactly what kills consumer interest. If this car looks and feels every bit as cheap or mediocre as that car, why would I pay $7k more for this one? If two cars share essentially the same nuts and bolts, literally from the ground up, why would you bother to purchase the more expensive one?
Sure, there are those who still have the disposable income available to purchase a Lincoln, in spite of the fact that it’s just a rebadged Ford Fusion or Five Hundred. But the numbers of consumers willing to do that are dwindling, while the number of consumers willing to investigate the cost-benefit on their auto purchase is rising. (Thank you, Internet.)
So what you have is a homogenized collection of brands offering essentially the same car with slight variation.
In radio, consolidation has led to exactly the same problem. With a handful of companies in charge of so many stations, and operating those stations based on the same corporate philosophy/mandate/directive, everything begins to sound alike, from coast to coast.
Flip on a Hot AC station in Austin, Texas, and it will sound almost exactly like a Hot AC station in Tulsa, Oklahoma, or Fargo, North Dakota, etc. Same songs, same music news, and, if you’re unlucky, the same dearth of local content that is in any way relevant to your life.
In radio, the equivalent of digging in to the “parts bin” to outfit a car’s interior is to have multiple radio stations in multiple markets “voicetracked” by a handful of radio personalities operating out of one central studio somewhere. This is not to be confused with a syndicated radio show, which is often aired in as many markets as possible because of listener demand (think Stern before satellite, Rush, Air America, etc.). (NPR operates more closely to a syndicated series of shows, since it consists of syndicated content, which is broadcast by local affiliate stations, and the gaps are filled with local content/shows/public interest programming.)
The difference is that with 3-4 people voicetracking shifts for stations across the country, there is no local content, and oftentimes no content to speak of at all. You’ll get a little bit of music/pop culture news, a smidgen of artist info (“so and so is on tour this summer, blah blah blah”), etc. But that’s about it. And it will be the same on dozens of stations across the country, from the personality (or lack thereof) to the playlist.
With radio, like the automotive industry, the homogenization started years back. In the case of radio, the birth of the format, and the strict guidelines (all self-imposed and arbitrary, of course) that govern them, led to a severe restriction over time on playlist flexibility. I won’t go into great detail about how the music labels and industry encouraged and influenced this creation of a nationwide range of vanilla radio stations, but there’s plenty of reading to be done on the subject both in print and on the internet. Suffice it to say, by restricting playlists to a finite number and type of songs, radio programmers and owners began the slow murder of the industry as a whole.
Like the auto industry, music fans nowadays are significantly more savvy, and have access to more choices and more information than ever before. Additionally, music lovers have more methods by which to conveniently enjoy their music, which only serves to make radio that much more irrelevant. That is, unless there is something other than music to interest them.
Going back to our parallel between the two industries, just as automakers are selling off brands to investment groups and private firms, and just as that may lead to new ideas and unique automobiles that can once again compete on the global market for consumer interest, the sale of radio stations back to smaller local and regional owners could potentially be exactly what the industry needs. Local ownership and management (in theory, anyway) would have a much better grasp on what matters to their listeners, since the listener base will be comprised of their neighbors, friends, coworkers and colleagues. And if that’s the case, and management actually listens to their friends and family, they may make the necessary adjustments to keep the community listening.
Also, local ownership makes it easier to sell to local advertisers, since the business owners can actually have a relationship with radio owners and managers, and may even get to speak to an actual human being about their goals and needs for their business, making it more likely that they will continue to spend money on advertising.
In both cases, what appears to some to be the end of an industry may in fact be just the type of readjustment and refocus that was has been so desperately needed for many years now.
And, in both cases, I’m probably stepping out on a limb here with the optimism. If there’s one thing that both industries have in common, it’s short-sighted management that lacks willingness to make hard choices, and that would much rather maintain the status quo than launch a new idea.
The Big 3 have had the opportunity for years to revamp their operations and work on the next generation of cars and trucks for consumers. Better fuel economy, better safety and new forms of fuel were all within reach as far back as 1996, and perhaps even further depending on which development you want to look at/investigate. The Clinton Administration even had an initiative underway with several federal agencies and automakers, working in collaboration to bring fuel economy to the 80 mpg range. Not shockingly, that project/program was eighty-sixed by none other than President George W. Bush.
Look back to the oil crisis of 1973 and you see that the auto industry received a major wake-up call – One that they too refused to heed. Frankly, to be 36 years later touting a pickup truck that gets 20 miles per gallon as an “advancement” is a notion so absurd it is difficult to contain the rage.
Similarly, the radio industry has seen the storm on the horizon for years, and certainly since I last attended a radio conference in 2000-2001. Nearly a decade ago it was obvious that change was coming in the way that people got their music (at the time it was internet radio as the potential grim reaper of terrestrial radio, being pre-iPod), and that radio would need to undergo a significant sea change in the way that it operated as an industry. Now, with the advent of mp3 players, digital distribution and more, it is painfully obvious that a change has come, but no one seems to be doing anything about it.
Whether neatly or not, the evolution of two industries, both long overdue for change, continues to roll on. As for what the result of that evolution will be, no one can say. The optimists will no doubt welcome this time of change as an opportunity to revitalize each industry, to regain interest in their respective products and services, and to put the economy back on track. The cynics, however, will likely look at the government involvement (at least in the automakers’ case) as tacit approval of returning to “business as usual”, without the swift and significant change that is needed. And the realists among us will look upon this as an opportunity that, being fragile in this violent economic climate, could easily be squandered and sunk.
In all cases, time will tell. Keep your fingers crossed for now, and keep your money out of media and domestic auto stocks too. At least until the dust settles.
