Sisyph.us - Erik's personal blogs

Foneshow is featured in an article in BusinessWeek today focusing on competitors to Sirius.

Another option: Foneshow lets any phone with text messaging capabilities to catch custom talk radio programming, like Bill Press and Thom Hartmann. Whenever a new show segment becomes available, your phone receives a short text message with a link. You hit "Send," and your phone starts streaming audio, which you can pause, skip or forward to a friend. Foneshow sells advertising, unlike Sirius.

We're honored to be included with other great companies like Pandora, Stitcher and Slacker.

Satellite radio is in deep trouble. XM Sirius, after finally merging, has just filed for bankruptcy protection.

I'm here at the Radio Ink Convergence conference, the response to the news was a cheer.

A few thoughts...

Debt is what killed XM. Anything that involves spaceships to get up and running has some serious capital expenses.

But debt is what's killing terrestrial radio too, so terrestrial shouldn't get too smug.

Both of them have decent cash flow.

Audio media in trouble is bad for all audio media.

These are just my first thoughts. I'll write more later.

Foneshow got a pretty big mention in Scott Kirsner's article today on the changing media space and how entrepreneurs are trying to find new ways to create and monetize an audience.

I suppose I should go find a hard copy of the paper.

Google is giving up their newspaper and magazine print ad sales business. Will google be abandoning their terrestrial radio ad sales experiment next?

When I spoke at Radio Ink Forecast last year one of the mantras of the executive leadership of the industry was "well at least we're not as bad off as the newspapers". Truly, as bad as things are for radio, (Clear Channel fired 10% of their work force yesterday) the newspaper industry is in worse shape. The question really boils down to whether radio in on a different road than newspapers or the same road, just not quite as far along.

Newspapers and radio have very similar problems, neither on of them have any real accountability of the efficacy of the ads they run for their advertisers. This is the fundamental mismatch between google and both the newspaper and radio industries. The reason people advertise using google adwords is because you know precisely how effective your campaign is. I wrote about this nearly two years ago.

Both newspapers and radio have another similar problem. Both are distribution channels that are fundamentally becoming obsolete (the newspaper guys understand this better than the radio guys, there are a lot of tower huggers in the radio business). Both are in process of switching to new distribution channels (newspapers faster than radio). Both have a big mismatch between the cost structures and business models of the old channel compared to the new. Both have been hurt by an abysmal understanding of their traffic (or in their parlance, their cume/circulation). Both have been hurt by expanded expectations of both their audience and their advertisers.

The newspaper industry understands that the "dead tree" distribution channel is coming to an end. They have done a good job of leveraging their core competence (writing and photography) to the web. They have lots of web traffic. Their problem is monetization.

To understand newspaper's monetization problem we have to look at why print newspaper ads are seen and online newspaper display ads seem invisible. The answers are mainly templates and search. How do you find something interesting to read in a print newspaper? You turn pages and scan headlines, when one catches your eye, you stop and read it. Interspersed in an irregular pattern are advertisements. Your eye is forced to see those ads because of the page layout. Since they're not always in the same location you scan the whole page because you can't predict where the ads will be and it becomes harder to train yourself to ignore them. The behavior is very different reading an online newspaper. First of all, you tend to use search to find what you're looking for. You're not leafing through pages and scanning headlines. But the real problem comes from the templated nature of web design. If the ad units is always in the same places on the page it becomes easy for your eye to ignore them. This is the problem that the newspaper industry needs to solve to become viable online.

The lesson there is monetization techniques do not always transfer from one channel to another. It's easy to end up with a meatball sundae.

In many ways the radio industry is not learning the lessons of the newspaper industry. They are far behind the newspapers in leveraging their core competence to a new distribution channel. Sadly many people in radio see their industry in a temporary downturn rather than a fundamental paradigm shift (kind of like the newspaper execs myopia 5-10 years ago). It is not merely an issue of radio moving to a narrowcast model but how to monetize the audience once they get there. Listeners are moving online and to mobile, but the types of ad units that are effective in a linear broadcasting environment are not effective in an interactive narrowcast world.

These are the challenges that radio must solve or they will end up hanging out with newsreels, town criers, and print newspapers in the dustbin of obsolete media.

Text messaging is a core part of the Foneshow experience. Text message notification of new programming and leveraging that as a menuing system is key to how Foneshow works and is better than our competitors (it's also where we have our patents). To use the short code system in the US the cellular carriers insist that you have to adhere to some very specific rules about sending messages as far as verifying users and not sending unsolicited texts. We spend a lot of time and energy jumping through hoops that the cellular carriers put up to protect their subscribers from SMS spam.

So yesterday when I read that AT&T sent unsolicited text messages to a "significant number" of it's 75 million mobile subscribers reminding them that American Idol (a show that AT&T sponsors) I was pretty surprised. The previous Idol voters who got texts I understand, I'm sure that in the fine print of Idol voting you opted in for those. But AT&T also sent Idol texts to "heavy texters" who had never participated in American Idol. That is simply spam.

AT&T claims the fact that they don't charge for the text and that you can then opt out means it's not spam. That's bullshit.

If we we started sending unsolicited texts to users who had not opted in they'd shut us down so fast it would make your head spin.

I was on a really terrific panel at Forecast 09 in New York last week (I snarfed the picture from Eric Rhodes' Radio Ink site). My fellow panelists and I had a spirited conversation about how new media fits in with the radio industry.

Thanks to Eric Rhodes for organizing the conference and my fellow panelists; Gerrit Meier (COO, Clear Channel Online Music & Radio), Deborah Esayian (Co-President, Emmis Interactive), Bruce Falck (Director, Google Audio Ads), and John Rosso (Senior VP/Digital Media, Citadel Broadcasting).

More pics here

I'll tell you what's in the Daily News...

Foneshow is in the New York Daily News. Read all about it here.

I talked with David Hinkley a few weeks back about the state of the radio business. Here's a quote:

But in the bigger picture, says Erik Schwartz, radio is moving too slowly and too often in the wrong direction.
Specifically, he says, "Radio has to stop thinking it is in the broadcasting business and realize it's the content business."
That's not a small distinction. He means that despite the fact companies often paid hundreds of millions of dollars for transmitters, those transmitters "are getting less valuable by the day."
Because every day, more of the audience gets radio info some way - the Internet, cell phones, whatever - that doesn't require a broadcast signal.
But, he adds, that's also the good news. "People still want audio content, which means there will always be an audience for a good radio station," he says. "That may mean more talk and sports because those are unique to your station. If you play music, you can't just play songs. An iPod does that. You need personality."

PS: Apologies for the slightly obscure Guys and Dolls reference, I played Nathan Detroit back in high school and never quite got over it.

I'll be speaking on the Radio's Battle for Relevance in a New Media World panel at Radio Ink's Forecast Summit in New York City on December 2nd. The attendance is quite limited (it's at the Harvard Club) so if you want to go, sign up soon.

Yesterday Verizon Wireless said they were going to charge .03 "tax" on content providers sending messages.

Today they realized that by charging 3 cents a message to content providers they would be losing 15 cents per message they charge the subscriber.

So they hedged and seem to have walked it back a bit.

As bad as the broadcast side of radio is (ignoring the naivete and pandering of some) it could be worse.

Just look at the land line phone business (from the New York Times today).

"The young, hip, cool people have cellphones only, and that is bad news for traditional phone providers. In a survey of Internet users, JupiterResearch found that 12 percent “do not subscribe to fixed voice service, and nearly two-thirds of them are ages 18 to 34.”"

But the future looks worse

“12 percent of online users indicate their intent to replace home phone service with exclusive cellphone use during the next 12 months,”

Of course this could never happen to radio broadcasting. Ha, sure it couldn't. An industry must be driven by its customers. Media consumption habits and needs are changing, radio must change to meet those needs.

My pre-NAB posting has elicited a tremendous response and a whole inbox of really positive feedback. It has also been picked up by the radio trades here, here, here, and here. There are a few questions I've received a number of times so I thought I'd do a follow up post to clarify a few things.

36 months. -- I'm not saying radio will be gone in 36 months. I'm saying there is a window in which to leverage the current radio audience onto a new platform which better fits their changing consumption habits. It will take far longer for that for radio to go away. 36 months is the window for the tipping point.

Radio has survived everything, it will never lose popularity. -- Right, because people still watch newsreels.

FM radios in cell phones. -- Everyone who you're trying to reach by putting an FM radio in a cell phone already own multiple radios. They are not listening not because they can't access the programming but because they expect different things from the listening experience than they used to. The NAB would be doing much more for the radio industry by insisting radio manufacturers put 8.0211 chips, RJ-45 jacks and a TCP-IP stack in radios than cell phone manufacturers put FM radios in phones.

Michael Harrison of Talkers Magazine put it very well today; The real problem is the NAB is not a trade organization for the radio industry, the NAB is a trade organization for the owners of FCC licenses. The true value in the radio industry is people who make programming, not corporations that overpaid for spectrum.

Pandering to the status quo will in the long run be counterproductive.

The radio industry will gather in Austin, Texas this week for the annual NAB radio conference. The radio business is in deep weeds right now. Listenership is down. Revenues are off. The audience is trending older and young people aren't listening. The future's looking grim.

What's broken? It's not that people don't like audio programming anymore. It's that the audience has changed in ways that radio does not understand. People don't consume media the way they did 5 years ago. Want to see the future of media consumption? Look at your TiVo. Look at YouTube. People want a user-controllable experience. They want media to be on-demand, in discrete single microchunks, sharable and re-usable as they wish. They need fresh content. They find out about new programming from their friends. They're quick to try something new, but quick to drop it if it doesn't fit their needs.

What's radio's answer to this? Mostly denial. David Rehr, head of the NAB, will inevitably give another one of his "it's not so bad" speeches in Austin this week. Enormous sums of money have been spent on the awkwardly-named "HD Radio" initiative (HD stands for "Hybrid Digital," not High Definition). HD Radio is a way of cramming more stations into the existing radio spectrum. More stations don't address the problem of the changing consumption habits of the audience. NAB is trying to get cell phone manufacturers to put FM radios into cell phones. As if the problem is a lack of radios.

So is radio going the way of the dinosaurs? Not yet. The industry need to realize that they're in the content business, not the broadcasting business. They need to understand that their primary competitive asset is the people who use their voices and minds to influence, entertain, and educate -- not the transmitters, towers and FCC licenses for which they paid so dearly. They need to embrace their local footprint and knowledge as a competitive advantage over internet radio and other sources of audience fragmentation.

Fundamentally, the distribution channel must change from a centrally-controlled broadcast model to a narrowcast model, where the consumer has more control. Radio can embrace new technologies. They need to understand how listeners consume the media.

Programming will change. Talk, news, and sports will become more dominant. Music radio can't just be music; iPods do that just fine. Music radio will need personality. They're in the audio content business -- it should not matter how that audio is distributed.

Revenue models will change. Advertisers too have a different set of expectations in the internet age. New technologies like podcasting, internet streaming, and cell-phone narrowcasting must be embraced as equal distribution channels to the broadcast channel.

The radio industry has a brief window of time standing open right now. I estimate it's about 36 months. They will either embrace change and understand what they are, or they will settle into the dustbin of industries that have failed to adapt to the changing needs of the audience. The time is now.

I'm on a panel on Saturday at the ONA conference in Washington D.C. On the Mobile Platforms panel we'll be talking about using mobile to create and distribute news content.

I'll be taking the minimalist and (probably) contrarian view that simple is better for mass adoption.

A blog post about use of technology at the political conventions.

The National Football League will be offering programming to Sprint customers this fall. It's unclear who is paying who here. My guess is Sprint is paying the NFL in order to try to stem the flow of customers off their network. That said, the revenue the NFL might be generating from Sprint is surely de minimis given the scale of advertising dollars spent around football. - How big a deal is this? We don't know anything about the money side, but let's look at it from a user perspective. Let's do some math and figure it out.

Data Points:

There are ~300 million people in the US.

There are roughly 265 million of them with cell phones.

Sprint has roughly a 20% market share.

The NFL program requires a data plan. Let's say Sprint sells a data plan to 20% of their customers.

The NFL program requires users to install a handset application.

So now let's do the math...

20% of 265 million is 53 million Sprint subscribers. The 20% of Sprint subs with data are ~ 10 million users. So under the best of circumstances the maximum audience for the Sprint/NFL program is 3.8% of the cellular market.

Now when you start to add in the handset install... Maybe you can reach 2% of the market. Is 2% a big deal? Nope, if you're talking about a mainstream application like American Football, 2% is a niche app.

The NFL would be far better off doing a distribution deal with a carrier agnostic platform such as Foneshow. We can reach better than 95% of US cellular users. We don't require a data plan. We don't require a handset install.

Foneshow raised a venture capital round last summer. We're starting to think about our next round.

It feels kind of like this:

You want to be going as fast as you can, but you need to make sure you don't run out of runway.

You're trying to avoid this:

Gartner predicts 1.28 billion cell phones will be sold in 2008 (not that analyst predictions turn out to be all that accurate).

I've had a great week out in Silicon Valley. My panel at Digital Hollywood went quite well. Met some terrific folks. Made some great connections that can help us going forward. I also had some interesting meetings with some former colleagues who really helped with some product positioning issues.

When I was at the Radio Conclave a while back I met Jerry Del Colliano. He understands where radio is broken and he's got some interesting ideas about how to fix it.

Here's a quote:

"Look, how can I say this? If radio has to rely on its transmitters and towers, it's all over. The next generation is not growing up with radio. Getting into the digital future involves investing money. And that's after you know how to invest it by learning about the next generation."

The whole thing is here.

I'm flying east today.

"All warfare is based on deception."

-Sun Tzu

Some people think we're in the podcasting business.

I'm going to be in the Bay Area the week of August 4th. I'm on a panel entitled "Personalized Mobile Experience – Social Networking: Breakthroughs in Search, Messaging, Entertainment, Video Capabilities & Advertising" at the Digital Hollywood Building Blocks conference in San Jose. My panel is Wednesday the 6th from 3:50-5PM. If you're there, say hello.

I'm also setting some meetings with partners, friends and VC's.