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October 6, 2014:
The DASH Issue
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NAB's FM Chip Push Is Disturbing And Wrong

I read the Radio Ink article regarding negotiations taking place between a handful of group heads led by Jeff Smulyan and key people from the mobile phone industry. One of the proposals being floated to gain the interest of the mobile industry is tied to providing compensation in return for asking the mobile industry to activate FM chips. The article indicated the money radio would pay to the mobile companies might come from sharing coupon revenue. Any proposal tying compensation to radio chip activation in mobile phones is a mistake.  

Why anyone would willingly

create a new SoundExchange-like hurdle for our industry defies explanation, except if driven by the blinder-like fear that we can only survive as an industry if cell phones become radio receivers too.  Never mind that radio already can stream to phones. I recognize that paying the cell phone industry with coupon revenue may be preferable to paying SoundExchange to stream to the same phones, and I recognize that being able to tune radio for free gives radio some advantage -- if the cell phone also has an integrated antenna. However, this activation-at-all-cost vision of radios future is wrong.

Our industry exists because we go to clients every day and convince them we have the ability to develop campaigns that convert our listeners into buyers of their product. Radio deserves to be taunted by the mobile phone industry for our failure to create consumer demand to turn cell phones into radio receivers. We havent tried in a meaningful way.  And to anyone who argues we have, I say, If you call that trying, you should be ashamed of the result.  Kodak and Canon didnt beg mobile phone companies to put camera lenses in the phones. Consumers demanded that. Kodak and Canon messed up by not creating applications to leverage those lenses. Radio didnt miss that boat, but SoundExchange makes it painful.

Attempting to buy FM chip activation with mobile phone companies by sharing any revenue, effectively trades away our financial future on the mobile platform in the same way former industry leaders failed to understand the future implications of DMCA legislation that ultimately gave us SoundExchange. Once we open that door, the fees will never go down.

Its time to step back. Walk away for now. FM chips are in the phones thats the biggest hurdle, and its been crossed. My HTC Evo 4G Android phone has an activated FM chip. The last thing I want to do to make it work is walk around with a set of earbuds in my pocket so I can have an antenna for the chip. And Im sure not going jogging with my cell phone to listen to FM because its about five times as big as my Nano which has an FM tuner in it (and also requires earbuds for the antenna). Even if all the mobile chips get activated, how many cell phones have integrated antennas built into the phone? Most need user hardware intervention to make the radio work in the phone. How clunky is that?

Ive seen the future of couponing, and there is no reason to share that revenue with anyone. Hybrid radio will change way we coupon and contest. There are several radio station streaming apps that already have coupon features, including the Quu Interactive application, among others. And frankly, the last thing any independent radio operator wants to do is print another useage report so they can pay a new fee to another entity. What a ridiculous idea. If we have to "pay" to activate a chip (and I dont think we should), lets give the mobile phone industry airtime instead.

I believe that if Mr. Smulyan and other owners could see what is coming for hybrid radio and couponing, they would change their disturbing focus on what they perceive to be radios last mile and instead turn to advancing hybrid radio in the car -- something that will allow the carriers to charge for data, and that will deliver all the interactivity you could ever want for radio. Its unlikely Mr. Smulyan and others have seen the couponing technology that I have seen, and its a shame. When consumers realize what is possible in their cars, (and coming to their phones without activated chips), we can then transfer that demand to activating phone chips at a time when we have leverage.

Activating FM chips is not the Holy Grail, and its a huge distraction for the NAB behind addressing SoundExchange, the Performance Tax, the future of the AM band, and music video licensing for our websites (our websites can be music video channels today with skip, shuffle, and discovery functionality under a different, and likely better, performance rights paradigm). I wonder who listened to Gordon Smith when he came to the NAB and said that stopping legislation is easier than passing it. Mr. Smith is seemingly moving with the will of a few strong owners in working for a mandate from the FCC or seeking legislative opportunities, but those owners do not speak for me as an NAB member on this issue. In my opinion, Mr. Smiths time is being completely wasted on FM chip activation.

Consumers are smart. They want to use their phone the way it is convenient for them. They like and use applications to stream their favorite content, and right now, the content is not always ours. Any station or group that streams and has an app is on equal footing with Pandora when it comes to the phone (and actually were still advantaged because we can promote locally). An activated FM chip wont let consumers easily sample radio if the phone doesnt have an integrated antenna (AM reception may never be possible in a meaningful way, even digitally). And forcing FM chip activation wont make consumers want our product more. Instead of activating chips, we need to activate our listeners.  If we make our content better, and we craft a more concise, coordinated message, we can win the activation war (if its worth winning) without having to pay anyone a dime.

Andy Skotdal is a former chairman and current board member of the Washington State Association of Broadcasters, a former NAB Radio board member, and currently operates KRKO and KKXA in the Seattle market. He can be reached at Andrew Skotdal andrew.skotdal@krko.com




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