JUNE 2005 IN

A Future for Broadcasting?

Broadcasting in the 20th century mainly meant commercial television and radio, but both segments are in trouble now and face an uncertain future.

What If Clear Channel Goes Bankrupt?

Could Clear Channel drag a twelfth of the United States’ radio stations into bankruptcy? The radio giant was flying high just four years ago, but the broadcasting world has changed more than anyone expected.

The first sign of trouble at Clear Channel was the political boycott of the Dixie Chicks, who were then and remain now the most broadly popular country music act. Observers have said the boycott had its start at a marketing committee meeting at Clear Channel headquarters. Clear Channel has consistently denied this, but it was radio stations they owned that spearheaded the boycott.

Whether it was the nasty political talk on the usually nonpolitical country radio, the absence of Dixie Chicks records on the boycotting stations, or too much of the same old thing coming out of Nashville, it took barely a year for country radio to lose a third of its listeners.

This was followed by a decline in music radio generally. Listeners complained that the mechanically-programmed music stations had become unlistenable. The advertising loads, sometimes over 18 minutes an hour, didn’t help, especially at a time when technology was offering music listeners more options than ever. Music fans can now hear music on personal music players, television cable services, satellite radio, and podcasts. Radio stations have tried to improve their offerings, but listener numbers continue to decline.

Clear Channel’s already sullied reputation suffered further recently when they posted a fictional blog to promote a format change for one of their stations and real bloggers pointed out the ruse.

In an interview, Clear Channel executives said they were considering selling off the non-radio divisions of the company. They have since announced the spinoff of the live entertainment division. The purpose of this kind of spinoff is to protect each division from the possible bankruptcy of the other, but some observers think both divisions could be in bankruptcy within a few years. The live entertainment business is suffering from high ticket prices, now approaching $100 for rock concerts. The synergy Clear Channel expected between its music radio and concert businesses seems to be working in reverse.

Wall Street has continued to back Clear Channel in spite of its financial troubles; as their profits have vanished, their stock value has fallen by only a third. The company last year reported $8 billion in debt compared to $9 billion in revenue. That would be no problem for a company making a profit, but Clear Channel posted a $4 billion loss for the year, and trends seem to be working against them. When everyone who wants an iPod finally buys one, what will become of radio?

If Clear Channel does go under, it would be the largest broadcasting bankruptcy in U.S. history, and it is not clear what would happen to their stations. Many might simply shut down.

Clear Channel’s spectacular losses have drawn headlines, but the entire corporate radio segment is experiencing similar difficulties. The commercial radio business model that worked so well for decades seems to have failed them.

Can Broadcast Television Survive?

While radio is having troubles, surely television is doing fine. It is, for now, but broadcast television is another question.

When you think of a local television station, you tend to think of all the viewers of the station, but in fact, most of those viewers are watching on cable. Fewer and fewer people are watching television stations’ broadcast signals.

It pays to remember that broadcast television was never very good. In my home, I get only two broadcast channels, and barely — simply because my house is on the wrong side of a hill.

The total television audience is declining slightly as people spend more time on the Internet, but it is the television stations that are losing viewers fastest; cable channels are nearly holding their own.

So broadcast television is being hit twice: first in the decline of the broadcast stations share of the audience, then in the decline of the broadcast signals share of the station’s audience.

In an effort to keep broadcast television relevant, and perhaps also to prop up the television hardware makers, the Federal Communications Commission (FCC) is pushing television broadcasters to switch to all-digital broadcasts, with a deadline mere years away. The switch, however could do more harm than good.

Early adopters trying to tune in the digital broadcasts say they are having trouble. It is much harder, they say, to receive a working digital broadcast than it is to get the current analog broadcasts. An analog television signal that runs into interference might give you snow, hiss, ghosting, and poor color separation. A digital signal with only a little trouble degenerates into pixelated gibberish.

The new digital standard was supposed to deliver a clear, high-resolution picture in the city and a tolerable picture in the near part of the countryside. It appears this was overly optimistic, as problems are reported even in the middle of New York City.

Perhaps the digital standard could be salvaged by some technological fixes and an increase in power, but this would not be an easy or happy result. There are enormous technical barriers in going from a 100,000 watt broadcast to 1,000,000 watts. At the same time, the increased power drastically increases the tendency of the television signal to interfere with other electronic equipment, potentially including airplanes. And the increased power costs would be enormous and would come at a time when the country is struggling to find a measure of energy independence. It is hard to imagine that all these compromises could be made at a time when the audience for broadcast television is smaller than ever.

I believe the FCC will have to scrap the current digital broadcast standard and find one that works better, probably by adopting a lower picture resolution. That could take years, and then what? Those of us who bought “digital-ready” televisions would find that our televisions are not ready after all. Everyone would need a new digital television receiver to tune in the new digital broadcasts. But I believe the high-tech segment of the television audience, the people who watch on cable, would not bother getting the new tuners. They would not need them, and they would not be impressed with the lower picture resolution. At the same time, the low-tech segment of the audience, the people watching television sets built in the 1980s, might also not make the switch. Many of them would have trouble finding the money. People who hate to program a VCR would have just as much reluctance to program a digital tuner. I can picture television viewers watching right up through the very last analog television broadcast that the FCC allows, then angrily voting against their representatives in Washington in the next election.

All this trouble, remember, is meant to salvage the smallest and fastest-shrinking segment of the television market. Perhaps it is too soon to ask if there is any need for local broadcast television, but in five or ten years, this could be the question we will need to answer.

Already, millions of people who do not own televisions use the Internet to watch video and even television programs. I believe this approach will appeal to more and more people as technology improves and cable bills continue to increase.

The wheels of bureaucracy turn slowly. By the time the FCC comes back with their revised digital television broadcast standard, there might not be much left of the industry the new standard is is intended to save.

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