What Will You Do When Advertising Disappears?

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(By Eric Rhoads) Dan Kennedy, one of the world’s great marketers and direct response copywriters, often talks about how rapidly businesses can change and the status quo can be disrupted. In his long career, he has watched entire industries disrupted by one swift signature on a contract or the development of a new technology.

Kennedy often talks about how his firm was raking in millions of dollars in the infomercial business, until everything changed dramatically when Congress passed a law that prohibited many things infomercials were doing. Overnight, his cash cow became anorexic, and there was nothing he could do to change it.

Kennedy talks about how, in most industries, revenue is based on a single source of income — he refers to it as “single pillar.” Picture the Parthenon, but instead of multiple pillars, it’s being held up by just one. When that pillar goes away, it all comes crashing down.

Radio, for the most part, is a single-pillar business. It lives or dies based on advertising. Though many stations and companies have alternative revenue streams, none comes close to matching the revenues or the wide margins of advertising.

What if radio’s single pillar were to go away?

“Oh, that will never happen, Eric. Advertising has been around forever and will always be there.”

That’s probably correct. But the reason for my question is to get you to consider the huge vulnerability of your business, and to consider what you would do if everything changed.

In my publishing business, I had two revenue streams: advertising and subscriptions. Then, because of nervousness over radio consolidation, I thought both could dry up, so I added conferences. Now I had three pillars. But how many more could I come up with?

In doing this exercise, I discovered something very important: Your behavior changes when you don’t have all your eggs in a single basket. Your decisions are different, and you’re less likely to take bad deals because you need the money.

What would you do if, one day, advertising disappeared completely, or almost completely? You still have your debt, your costs, your employees to pay. You would have to scramble to find a solution fast. So why not scramble to find a solution now, when there is time?

Though advertising isn’t likely to disappear (I doubt Congress is going to outlaw it any time soon), one never knows what else could happen. For instance, I’m hearing a lot of stories of big and small markets that are seeing significant declines in advertising because clients are enamored with Google and Facebook. At our own Forecast conference last November, a major agency head told us his clients were shifting nearly all of their ad budgets to those mediums. And we’ll find out soon, at this year’s Forecast, what things are looking like for next year. If advertising does dry up, you still have to survive.

Get some beer, bring your staff to a relaxed location, and pose the question: What would we do if we could no longer sell advertising? How would we generate X dollars annually? See where it goes, see what they come up with, and don’t discount any idea. Don’t leave the meeting without 10 solid ideas.

Every business should go through this, if for no other reason than to explore new business opportunities. I guarantee it will be worth a day of your time with your staff.

Eric Rhoads is Chairman of Radio Ink magazine and can be reached at bericrhoads@gmail.com

4 COMMENTS

  1. 30 years ago, when I was a young, dumb and clueless radio station owner, my dad gave me a book written by the teacher/ad executive Joel Barker titled “Paradigms: the Business of Discovering the Future.” It changed my entire thought process about business. A “paradigm shift,” according to Barker, is whenever there is “a change, to a new game, a new set of rules.” Paradigm shifts are what killed passenger train service (paradigm shift: airplanes), put Swiss watch makers out of business (paradigm shift:LCD watches), and blinded a huge computer manufacturer to a golden opportunity (Ken Olsen, Digital Equipment CEO, who famously said, in 1977: “There is no reason for any individual to have a computer in their home.” Paradigm shift: Microsoft/Apple).

    When a paradigm shifts, everybody goes back to square one based on whatever the new rules are. It’s not advertising that’s going away; it’s the method of its distribution, structure and content that’s shifting. If you think of yourself only as a broadcaster, you’re the person who’s still waiting at the station for the next steam train. The radio industry is in the midst of a paradigm shift. New rules are being written on the fly. The new winners will look considerably different than the radio titans of the 20th century. New opportunities are around every corner, if you see them as such, rather than as threats.

  2. I think this is a good idea, and we can see that TV companies have already asked this question. That’s why companies like CBS have gone into the subscription business.

  3. I’ll be buying these pathetically run stations..many in Florida who have not yet figured out that digital media is real…They think Facebook is Digital..duh…More poor leadership in this state than ever before!!

  4. Radio Woodstock WDST, one of the few remaining independent radio stations in the country, has developed a new model for commercial radio. We are local business and listener-supported. We have two listener fund drives per year and raise enough to make significant positive changes to our programming. We have cut our commercials minutes per hour to 10 and have stop sets no longer than 2.5 minutes. This creates a better listening experience for our listeners and a more effective environment for local businesses to get their marketing message across.

    Even though we are in a market where our competition is large radio groups that undercut rates, we maintain high unit rates. We are able to pull this off because we have a deep relationship and emotional bond with our listeners. They trust us and are willing to support us. They listen to commercials and patronize our advertisers. Our format is unique. We have a strong local identity and are connected to the community. Strictly formatted stations have a hard time differentiating themselves from other similar stations so creating that same kind of relationship and emotional bond is difficult for them especially when their minutes per hour is 16+ per hour and stop sets can be 8 minutes or more.

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