Speech by Tom Pentefountas, Vice-Chairman, Broadcasting, Canadian Radio-television and Telecommunications Commission

To the International Radio Summit

Toronto, Ontario
March 21, 2013

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Good morning.

Thank you for taking the time to be here today. Given the early hour, and with 295 speakers to choose from this week, I'm particularly flattered that you're interested in hearing what the regulator has to say about your sector!

As this year's International Radio Summit makes clear, there's a lot to be proud of and excited about—both in this country and around the world.

That the Canadian industry is thriving is a tribute to talented people like you.

I suspect it's also because, as your conference theme highlights, more and more of you recognize the necessity of interactivity in today's digital world.

Surviving the storm

Your success is all the more impressive considering the recent challenges you've had to overcome.

You know, better than anyone, that your world has been rocked by a rapidly-changing technology picture.

It started with the arrival of Napster and other file-sharing services.

Soon after, the iPod, YouTube and personalized Internet radio services were launched.

Then, in rapid succession, came smartphones, tablets and other mobile devices that enable listeners to find music and information from around the globe—anywhere, anytime.

And if that wasn't enough, the world was walloped with the 2008 economic collapse.

Yet, despite these setbacks, your business has survived and is once again booming.

The most recent financial results for the Canadian radio industry show that 2011 was a strong year, with total revenues increasing to $1.6 billion. Pre-tax profits crossed the $300-million mark for the first time since 2008. Rumour has it that the 2012 numbers are in the same range.

The good news is that the Canadian radio industry had another strong year. The more worrying news is that the numbers suggest that you're essentially standing still.

So what are you going to do to get more listeners tuning in?

Because, competition for audiences is fierce. And many of Canada's competitors are looking for ways to leap ahead of us as they capitalize on a fast-changing world.

Changing radio world

Thanks to the multitude of online services available, music has become a commodity that can be packaged and delivered in countless ways.

To put this into perspective, public opinion research by the Department of Canadian Heritage in 2012 found that portable technologies are becoming increasingly popular with Canadians.

Sixty percent of us own a portable digital music player, nearly half own a smartphone and just under one in four own a tablet.

Since everyone has access to the same product on the platform of their choice, traditional radio no longer rules the roost. Canadians now create their own playlists, with the added bonus that they can avoid ads.

Young people are craving something different than the golden oldies their parents have been listening to for decades.

They want less talk, more edge. They want something fresh, something new.

To the kids, conventional radio all sounds the same—no matter the time of day or city you're in.

In contrast, there's Internet radio. It's opening the world to all kinds of new music and formats—in all sorts of locations, including the car.

Any of our American colleagues who attended the 2012 Future of Radio Conference will likely tell you they were blown away by presentations about the "Connected Car."

I'm talking about a new generation of vehicles under development with software-driven dashboards and entertainment systems that will soon bring Web-based entertainment to drivers and passengers.

We also saw evidence of this at the latest Consumer Electronics Show.

Dramatic developments like these are changing the rules of the game for traditional broadcasters.

Figures out of the U.S. by Edison Research show weekly usage of Internet radio—online streams of both terrestrial broadcasters and Internet-only services such as Pandora—increased from 22% of Americans in 2011 to 29% in 2012.

That's more than a 30% jump. It's the largest year-over-year increase since tracking began in 1998.

Canada has largely been spared from the likes of Spotify, Slacker and Pandora with their free, personalized radio Internet service.

The CRTC's Communications Monitoring Report shows the average weekly hours tuned per capita for all Canadians are basically unchanged: 17.7 hours in 2011 versus 17.6 hours in 2010.

But compare that with only a few years ago.

Listenership declined by nearly one full hour between 2007 and 2011—from 18.3 to 17.7 hours.

Maybe of greater concern, there's evidence of erosion in time spent listening to radio among younger audiences. There were marked declines among the 18-24 age group as well 25-34 year olds.

Is there a link between these trends and the fact that streaming audio on a cellphone has nearly doubled since the fall of 2011?

Or that 10% of Canadians stream a personalized online radio service?

CRTC research from March 2012 revealed that 49% of anglophones stream YouTube music videos.

And just over 20% of anglophones listen to AM/FM radio online. That's a 10% increase over the previous year.

Is it just a coincidence that, as people consume other forms of media, they are tuning into radio less?

I don't think so.

There's no holding back time—or technology.

The ability to pick songs is now an algorithm. That's a long way from the days when radio broadcasting was one-way.

In the past, radio delivered content, and advertising, from the producer to the consumer. But in the Internet age, it's all about two-way processes.

Anyone with a high-speed connection can produce content or reach audiences. And the consumer who has something to say about the content he or she hears—no matter who produces it—is now the sender, not the receiver.

In today's world, everybody wants to talk, but nobody wants to listen.

Doing business differently

Regulators can't stop this tsunami, especially when the apps driving the music world are everywhere—from the kitchen to the car.

It's impossible, and perhaps not even advisable, to try to protect the radio sector from this reality.

Although there are challenges, these trends represent unprecedented opportunities.

We are living through a transformational time that calls for new ways of doing business.

There are a lot of exciting things happening both on the music scene and in the radio business elsewhere in the world.

But I'm not sure I see people in this country moving as quickly in these new directions.

Have we grown too comfortable with the old business models here?

Are we too risk averse to try things that will excite the marketplace and attract new listenership?

Emerging trends

For example, I read recently about a Tampa radio station that expanded its entire operation to a smartphone and Web-based, crowd-sourced format.

It recognizes that people are no longer passive consumers. They want to take control of what they hear.

I'm not suggesting everybody should copy this format. But it points to the importance of interactivity and innovation.

Niche markets

Being close to your audience and helping listeners to connect to both the content and friends that appeal to their individual tastes and interests is key to niche marketing.

That's another important trend. And that's where advertisers are increasingly heading.

One of the things talked about at the New Media Exposition in Las Vegas this year is that smaller, targeted—and especially, online—audiences may be worth more to advertisers per capita than mass markets.

In the same way, you can tap into technology to reach new, niche markets.

Branding

A further notable trend is the importance of branding.

As business people, you're familiar with the old adage, "first program, then sell." In the 21st century, that's been replaced with "brand first: sales and profit second."

An article in Ad Age Digital recently said that, "Brands are built by being first in a category. Not just first in the marketplace, but first in the mind."

Try it.

Think search engine. What's the first name that comes to mind? Google, right?

Think software—Microsoft.

Social media—Facebook.

Mobile devices—Apple—the mother of all brands.

You get my point.

We know that people listen to radio stations, not radio programs.

Listeners can get music, weather, traffic or sports from anywhere. But how do you get them to want to hear it from you?

You have the advantage that your stations—your brands—are trusted curators of local content.

What belongs to you is the "brand" you've created in your marketplace and the connection you've made with your audience. It's the attachment listeners feel toward your stations.

I'm sure Marshall McLuhan would roll over in his grave if he heard me say this, but it's all about the messenger. The message is simply a commodity that is available to everyone.

Once you have listeners' loyalty, I'm convinced they will follow you anywhere, using any platform or app.

I'm a perfect example. Wherever I am, I still listen to Montreal talk radio.

So, if you want to hedge your bets against encroaching technologies, I'd suggest you focus your energy on building your brand.

Canadian content

Something else we all know is that Canadian music is a highly successful brand. Indeed, I see Canadian content as a prime opportunity to carve out a distinctive brand.

Radio stations, particularly, have a vital role to play in defining Canadian culture and Canadian identity by supporting Canadian content.

Every time you help to launch the careers of new Canadian artists, you help to create a feeling of pride in being Canadian. And pride in Canadians' ability to compete and win on the world stage.

Another fact of import to your business model is that Canadians place a high value on music produced by their fellow Canadians.

Polling by the Department of Canadian Heritage revealed that 92% of Canadians strongly or somewhat agree it's important that Canadians have access to music by Canadian artists.

More than just making us feel good, Canadian music makes money.

So Canadian music is something you ought to cultivate and champion.

To paraphrase the Canadian Independent Music Association's 2011-14 Strategic Plan, we should "celebrate the legacy of Canadian music and promote Canadian music as a creative and economic force both at home and internationally."

And I stress, internationally.

We need to "pursue all domestic and international opportunities to distribute and commercialize Canadian music in all its forms."

CRTC as enabler

We at the CRTC couldn't agree more. We recognize that creative content creates economic opportunity.

That's why we have a long-standing policy of encouraging Canadian broadcasters to support and promote Canadian talent.

In 2011, broadcasters proudly contributed $54 million to organizations and initiatives that help develop Canadian artists, such as FACTOR and the Radio Starmaker Fund.

We also understand that our job at the CRTC is to enable you to create—so you can introduce pioneering programs and business models that ensure your continued individual success and that of the industry.

So we have done things like speed up our internal processes to let you move at the speed of business. And we've made changes to the way we deal with non-compliance.

We realized it was cumbersome and did something about it, understanding that time is money.

We now take a much more flexible approach that factors in the severity of the breach, the corrective measures taken in response, and impose appropriate sanctions accordingly.

Increasingly, we let market forces play out, getting out of the way whenever and wherever we are not needed.

We are also examining our policies. In the next 12 months, we'll conduct targeted reviews of our policy for commercial radio stations.

Our goal is to allow you to focus on being the motor that drives Canadian musical success.

Conclusion

So, now, over to you.

Who are you? What's your brand?

How are you building better connections to your audience—so they "like" you and get their friends to like you too? Because, once you hook them, they're yours!

What new niche markets do you plan to pursue?

How will you capitalize on the extraordinary opportunities presented by emerging technologies?

And the fact that you have commercially popular musical content in your own backyard?

How will you take advantage of Canadian content to gain a competitive edge in the international marketplace and build your brand?

I am confident that you will make a successful transition to the radio world of tomorrow. I'm sure you will find a way to adapt and carry on your tradition of impressive profitability.

I wish you every success as you do. Thank you.

 

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