Lost in Transmission

The future of radio -- An in-depth look at what's wrong with the airwaves and the new innovations that might make radio better than ever by Michael Endelman

Wanna see radio execs turn all pale and sweaty? Introduce them to Mark Wallace. The 23-year-old graphic designer from Quinby, Va., loves music, but he couldn't be less interested in what's available on the airwaves these days. ''I can't even remember the last time I listened to FM radio,'' he says. His complaints? ''The annoying ads and those constant repeats. And if you change the channel, you just hear the same song on another station.''

Two years ago, Wallace invested in an XM satellite receiver, and radio has never been the same. ''I don't think I could ever get rid of it,'' he says. In the past four years, more than 7 million Mark Wallaces have abandoned broadcast radio for the joys of satellite, and when Howard Stern debuts on Sirius satellite radio in January, that number is expected to explode, with several million Stern fans likely to sign up, according to a recent study by Bridge Ratings. Which is no surprise to Joseph Turow, professor of communication at the University of Pennsylvania's Annenberg School. ''The radio industry had its collective head in the sand for years when it came to younger listeners,'' he says. ''They lost the opportunity to guide the musical choices of an upcoming generation.''

But listener flight isn't the only thing bringing big problems and bigger changes to the radio industry. Serious payola investigations by the New York State attorney general and the FCC could hit stations and labels with large fines, and might even cost some stations their broadcast licenses. In addition, there is an exciting array of new ways to tune in (more on this later) that could forever change the way people listen to the radio. In other words, things are about to get interesting. For the corporate behemoths that run commercial radio, the outlook is downbeat. But for music lovers, the uncertainty and change of the next year just might be the best thing that's ever happened to the radio biz.

Two hundred million people tune in to commercial radio each week, and that adds up to a $21 billion-a-year industry. Sounds pretty healthy, until you realize radio's audience has decreased by 13 percent in the last decade according to Arbitron. Radio execs like to point out that such losses are plaguing all media, as their Hollywood brethren discovered this summer. ''Sure, listening levels are down,'' says Sean Compton, VP of programming for Clear Channel Radio, which owns nearly 1,200 stations. ''But so are newspaper circulations, so is television watching.''

Okay, but that still leaves a record number of Wallaces tuning out broadcast radio for very quantifiable reasons. Today's stations actually do play more minutes of rage-inspiring beer ads per hour than in past decades. And Mariah Carey's ''We Belong Together,'' say, doesn't just seemto come on the air more than a dozen times a day — it does. A typical Top 40 station has a total playlist of fewer than 200 songs — less than halfof what it was a decade ago. That means big hits get played more often than ever, leaving less and less space for new artists and unexpected choices. And for that you can blame the 1996 Telecommunications Act, which led to a huge consolidation of radio holdings. ''Consolidation has led to increased homogenization of what gets played,'' says FCC commissioner Jonathan Adelstein. ''It's harder for local and new artists to get on the air. Today I wonder: Will the next Elvis throw down his guitar in disgust because he can't get on the radio?''

Broadcast radio's biggest nightmare might be New York State attorney general Eliot Spitzer. Thanks to his very public investigation, audiences are learning how the modern radio industry really works, and the truth is pretty grim. According to Spitzer, labels are bribing stations to get records on the radio. This is nothing new — payola has been a known problem since the '50s — but many music fans were surprised to learn how much corruption still exists. In order to get new Jennifer Lopez and Celine Dion songs added to playlists, Spitzer's office found, labels offered up bribes of free stuff: a laptop, an iPod, a trip to Las Vegas. ''WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!?'' one Epic Records employee e-mailed a radio programmer. ''Whatever you can dream up, I can make it happen.'' ''This is a violation of the commercial bribery statute of New York penal law,'' says assistant deputy attorney general Terryl Brown Clemons, the lead investigator in the case. ''It creates an environment where the label that can pay the most determines what you are going to hear.'' Confronted by Spitzer, Sony BMG (parent company of Epic) paid a $10 million settlement and agreed to reform its practices. Spitzer's office is still investigating Warner Bros., EMI, and Universal.

But that won't be the end of it. In August, the FCC opened its own investigation into stations (whose licenses are granted — and can be revoked — by the FCC). ''I think we can put the fear of God in people,'' says Adelstein. ''The fish rots from the head, and these [radio]companies need to take corporate stands against this. The existence of some of these stations could be put at risk.''

Pleasing the audience was just an afterthought,'' says industry veteran Gregg Steele, describing his experience working for a Clear Channel station in the '90s. ''The priority was moving the stock price.'' After years of working for mainstream stations from Miami to L.A., Steele finally quit in 2002. ''The fun part just evaporated. I was over radio.''

Then, two years ago, Steele was lured back, this time as a programmer at Sirius. On the 36th floor of a prestigious building in midtown Manhattan, past a banner that reads ''The Future Home of Howard Stern,'' beyond 35 glassed-in broadcast studios, there's a cramped, messy room in which Steele now spends most of his waking life. He's never been happier. ''Radio chewed a lot of people up,'' he says, ''but I had to jump at this. Now we're in a completely different world.'' Today, like most days, Steele is crammed into his office, eagerly putting together 24 hours of programming for The Vault, a channel that spins less-familiar songs by dad-rock favorites like Eric Clapton and the Kinks. Listening to Steele's show is like listening to a mixtape created by your hippie uncle with a dusty vinyl collection the size of a VW microbus. It's different from anything you'd hear on terrestrial radio, which is exactly the idea. Sirius and XM each offer a ton of channels (more than 120 and 150, respectively), many with obscure formats and most with adventurous playlists. Oh, and there are zero ads on any of the music channels.

Yes, there's a $12.95 monthly fee, but as cable TV has proved, people are willing to pay for choice. Satellite's biggest obstacle is getting consumers to invest in (and adapt to) the equipment. But that's changing too. In 2006, satellite radios will come factory-installed in nearly 200 models of new cars — up from just two models four years ago. And new handheld units will bring Walkman-like portability capabilities to the service. Satellite radio may never reach the massive numbers of FM (although Forrester Research predicts that within five years there will be 20 million subscribers), but if it can shave off even a fraction of that audience, satellite can have a huge impact. And like cable TV, satellite attracts those left out by mass media's youth obsession. ''Most radio is aimed at people under 35,'' says Christopher Sterling, professor of media at George Washington University. ''I'm 62 and nobody programs for me.'' Guess what? The prof subscribes to XM.

Here's a radical idea: Maybe the whole concept of radio is as outdated as the 8-track. There are all sorts of new ways for the iPod nation to discover music, and the local Top 40 station isn't high on the list. That doesn't mean radio is dying, though — it's just changing. A lot.

Take Internet radio. A few years ago, it was little more than a high-tech gimmick that few people actually used. But with the dramatic increase in broadband access, now 20 million fans are really listening to Web radio. There are countless options, from mass-appeal sites like AOL and Yahoo (which offer hundreds of original stations) to idiosyncratic outlets like idobi.com (which streams emo and punk). Even old-fashioned stations have caught on: Santa Monica's KCRW and New Jersey's WFMU have gained a global audience broadcasting online.

Tech geeks are latching onto another new development: podcasting. Think of it as a way to subscribe to radio, allowing both amateur and pro broadcasters to distribute programming directly to listeners through the Web. In the past few months, the number of available podcasts has skyrocketed (iTunes alone offers more than 15,000 podcasts). ''I've been dreaming about this my whole life,'' says Adam Curry, the former MTV VJ who now runs the podcasting network PodShow. ''I don't have to worry about the limiting factors of frequency or spectrum. I can set my own time limit. I can say what I want to say.''

If nothing else, the sudden podcasting boom proves the on-demand, whenever-wherever aesthetic is changing the very definition of the medium. ''The word radio has changed,'' says Jack Isquith, an executive at AOL Music and AOL Radio. ''I think that anyone who is broadcasting audio should be considered radio.'' Welcome to the new democracy. Ten years ago, you needed millions of dollars and an FCC license to go into the radio biz. Now all you need is a laptop.

Radio executives might be freaking, but, they're not stupid. And they don't want you to write off standard radio just yet. Last July, Clear Channel began cutting the number of ads on all its stations. ''We need a better listener experience, because you have competition elsewhere,'' says CC's Compton. ''We are taking the ad inventory back to the level it was during the '80s and early '90s.'' Most radio conglomerates are now pouring millions into their own Internet broadcasts. And there are some radical strategies: In the past year, roughly 65 American stations have flipped to a controversial new format called Jack (sometimes known as Bob or Alice, among other names), which they hope will approximate the iPod experience. ''It's an oldies station for someone who grew up in the '70s instead of the '60s,'' explains Sean Ross of Edison Media Research, which tracks radio trends. With virtually no DJs, Jack stations typically mix '80s hitmakers, current pop stars, and oddball one-hit wonders, resulting in one of the most random, eclectic formats since the days of free-form FM. So far, Jack has hit big in some markets (Austin) and fallen flat in others (New York City). But whether Jack is good for radio is a point of debate, and while bigger playlists are great, the loss of localization and distinct personalities destroys much of radio's personality. ''I think Jack is an indication that radio is trying to find its way,'' says EMI Music vice president Phil Quartararo. ''But when you're trying to be all things to all people, you can also become not that much to not that many.''

Mainstream radio's most ambitious plan to save itself is something called HD Radio. In a direct shot at satellite, the largest radio networks are investing in new digital broadcasting technology, which they hope will wow the sort of tech-savvy listeners they're rapidly losing. ''This is the first killer application for broadcasters — multicast channels,'' says Bob Struble, CEO of a company called iBiquity Digital, which created the technology. ''Every FM station wouldn't have just one audio stream — they would have several.'' The result — already broadcasting in all of the country's top 50 markets — allows for many more channels, which means broader playlists and some cool interactive features. ''By giving people more choices, we can adjust,'' says Joel Hollander, chairman and CEO of Infinity Broadcasting, which owns 178 stations. ''We're living in a more personalized media environment, and I think HD Radio can serve the audience.'' It also requires a special receiver, which will likely set you back a few hundred dollars. Nobody said progress was cheap.

Whether traditional radio will transition into something new or ultimately fade out is hard to say, but many experts are thrilled simply by the possibility of change. ''I've been working in radio for almost 23 years and I don't remember a more exciting, exhilarating, and more important time for stations,'' says radio consultant Fred Jacobs. ''Everybody needs to fasten their seat belts and get ready for the bumps ahead.''