Chris Byrnes – ByrnesMedia
After more than two decades, Blockbuster Canada is no more. At its peak it operated 400 stores and employed about 4,000 people. The company was pushed into receivership in May because its U.S. parent company had racked up over $70 million in debt, which was secured against the Canadian operation. While the American chain was losing money as consumers opted for alternatives, such as mail-order DVDs, mall kiosks and internet services such as Netflix, the Canadian operations had $117-million in assets and $15-million in cash when pushed into receivership. Like most Canadian radio stations, Blockbuster Canada made a healthy profit last year.
Blockbuster was a well recognized brand. People understood what they did and they had lots of locations, so they were easy to access and easy to do business with. They could have easily expanded into offering movies online and used their brick and mortar locations to promote this benefit, but it seems they failed to see that the landscape was changing rapidly and it cost them their business. I am sure this failure to read the future and see the shift in consumers’ habits will be taught in business schools for many years to come. Frankly, it is hard to fathom that Blockbuster did not see this coming, but they failed to adapt to the changing environment and keep up with the times.
There are some who feel that radio may be making some of the same mistakes as Blockbuster by failing to adapt to consumer needs. However, there are a number of things that Blockbuster could have done differently and there are some valuable lessons I believe we can learn from Blockbuster’s failure.
Be Ready For Change
One of the primary mistakes made by Blockbuster was not recognizing the changing landscape in which they existed. Blockbuster was successful because it made it easier for the average consumer to bring the theatre experience home. Video rental was booming and Blockbuster ran the mom and pop stores out of business and cornered the market in the communities they served. But what was valuable to their customers in 1990 became almost irrelevant in 2011. The world moved forward, and Blockbuster tried to hold on to the past. Radio has been around for a lot longer than Blockbuster and is still listened to by over 90% of Canadians in any given week. Radio is the number one choice for entertainment and information despite CD’s, satellite radio and iPods. 85% of all drivers and passengers are tuning in while on the road. A recent research study finds digital options are becoming more popular in the USA, ordinary radio, first widely installed in cars in the 1930’s, still dominates the dashboard. The question remains, how long will this continue? Ford, for example, is indicating that their car in-dash entertainment systems may not have AM or FM radio buttons. Instead, consumers will be able to program their own preferences that may include Wi-Fi services. Our industry needs to be mindful of consumer trends and adapt as required.
Adapt To New Technology
What Blockbuster failed to do was look at the future of technology and how it was going to affect the very market they had once controlled. It started with the shift from VHS to DVD. Suddenly customers had an option to own a movie for a little more than Blockbuster charged to rent it. At the same time, a little known start-up company realized that a DVD (without its case) could be sent via the mail for the cost of a first class stamp and Netflix was born. By the time Blockbuster tried to react with their mail service, it was already too late. Netflix had cornered the DVD-By-Mail market, built on the ashes of now-closed Blockbuster stores.
FM radio is still a very effective way of getting information out to large numbers of people within a geographic area. The recent storms in the States and the fires in Alberta are just two examples where terrestrial AM and FM signals saved lives and helped communities. But radio needs to adapt and ensure they have a presence on smart phones. As an industry we need to pressure the cell phone companies to include an FM receiver in every cell phone, and we need to come together on the digital question.
Make Sure Your Website Is Relevant
Blockbuster had a website that was largely a marketing brochure. Chances are you have never bothered to visit it. But success on the web requires the same research, effort, and attention as your physical location, something that many brick and mortar businesses overlook. While Blockbuster’s website became more than just a static presentation, it was at least for a while, neglected and difficult to navigate. Blockbuster took several years to actually integrate their online offerings with their physical storefront and then discovered the costs were much higher than they had anticipated. So take a close look at your radio station website and check it for relevancy. Do you know who actually comes to your website, how long do they stay, what are the most popular pages and why? More importantly, do you know what else they are looking for? If your radio station website is static and more of a brochure than a portal where your listeners can interact, then at the very least you are missing an opportunity, and in time you may be in trouble. There may already be local websites that are providing more relevant and timely local information than yours does. Some radio stations look at their impressive web traffic and view that as success. However, they may be forgetting they have something that most other websites do not have; a powerful transmitter with announcers and imaging constantly driving traffic to their site. Today, you need a website to be competitive, but a radio station’s ability to make its website relevant, bring people back frequently and drive tuning to the radio station may determine your ultimate success.
Don’t Just Follow the Crowd
Blockbuster wasn’t just slow to enter the world of online video rental space; they also failed to capitalize on their unique selling proposition once they did arrive. With a large and loyal customer base, Blockbuster should have entered the online arena and crushed Netflix by selling the clear advantages they had. Two that come to mind were ‘renting it online and returning it to the store’, and the staff they had to provide customer service at each nearby location. Yet, Blockbuster didn’t play to their advantage and instead tried to copy what Netflix had already done, but Netflix was doing it better and cheaper. By the time Blockbuster tried to distinguish themselves from the competition, Netflix had gained so much market share and so many of Blockbuster’s customers, that it was simply too late for them to sustain their operation. As radio operators, perhaps what we can learn from Blockbuster is the importance of continuing to improve our products, be aware of our competition, and keep looking for ways to provide even better service to our listeners and advertisers. When was the last time someone higher up the food chain than the sales rep communicated with your top 25 advertisers to thank them for their business, for example?
A Leader Can Be Toppled
Blockbuster tried to rely on their past success and was not agile enough to react when a competitor showed up. For years, Blockbuster was top of mind and #1 in video rentals and some insiders felt they could not be touched. This looks to have affected their ability to see the potential threat that Netflix posed. Customers are looking for easier, more effective ways to get things done and technology has been happy to oblige. As a result, companies from every industry are having to rethink their marketing approach, and consider that their biggest rival may not be the competitor down the street, but an internet-only operation with lower overhead and a clear understanding of how that technology and its users work. Any radio station who dominates their market needs to think and act like they are #2; because when you are on top there is only one place to go.
It’s Important to Innovate
If you were managing a mature business prior to the arrival of the web, you had to manage your existing business and integrate web-based capabilities into your operation. While the internet appears to be an exciting place to generate revenue, the reality is very few radio stations are making any money from this space. I know of several companies who have poured thousands of dollars into the web and have nothing to show for their efforts on the profit side of the ledger. Most radio stations still generate a high percentage of their revenue from selling radio advertising and that is unlikely to change anytime soon. Perhaps having a separate sales team who understands how to sell the web could be a worthwhile investment today, provided you get it right. More and more businesses are looking for partners to solve all their marketing challenges, and radio stations have deep and wide relationships with the business community in which they serve. This means they are well positioned to help retailers grow their presence via the web.
Be Nimble
It’s sometimes difficult for large businesses to change, and there are many examples in radio of a small operator outflanking a big corporate-owned station. Often, this is because the branch office management has little or no decision-making power at the local level and those that do at the head office can be slow to act. A small business is more likely to have a flat management structure, and is therefore better positioned to define and implement change more decisively and quickly. Netflix, coming from nowhere, was able to outperform Blockbuster. Radio stations need to examine their market and look for ways to fine tune their strategy to take advantage of local opportunities at the local level. Some radio companies are innovating. Clear Channel has launched iHeartRadio and incorporated lots of “Pandora like” features into their smart-phone app to give listeners what they want. They also ran a huge music festival in Las Vegas in late September which was promoted and supported by all their radio stations. The goal of this festival was to create lots if visibility and hopefully adoption of iHeartRadio as a competitor to Pandora.
See the Business Field Clearly
Sometimes businesses get too comfortable and lose their edge. While almost no one was ready for the business tsunami of the Internet, leaders had two choices – analyze the impact and manage accordingly or not. Some fundamental rules changed and Blockbuster didn’t ‘get it’ fast enough. Whatever performance yardstick Blockbuster was using to measure business success and guide strategic planning underestimated the impact of the change. The business field is more level than it has been in a while because of the Internet. Seeing the field clearly can allow smaller businesses to take on the giants. Ask your sales team if they are running into more and more reps calling on their customers looking for advertising dollars. Two examples they may have encountered are Yellow Pages, who have rebranded and now promise a 360 degree solution, and Google who are doing a better job of attracting local advertising revenue. Everyone wants a piece of radio, and there are loads of big, well funded companies seeking to steal your audiences.
Conclusion
Radio is still a very successful business model and many other industries would be over the moon to have our consistent, double-digit profit margins. Radio listening levels have not changed appreciably in 40+ years. Lew Dickey, the CEO of one of America’s largest broadcasting companies said recently “The medium is extremely relevant – it’s local, it’s digital, it’s mobile, it’s social – it really provides all of the great things that people are looking for in push content today on a local basis.” Our advantage is not playing the most music or 30 minutes of nonstop music in a row. It is our ability to be local, to inform and to ensure our personalities have a real bond with their audience. I believe that radio still does have the upper hand at this point, but that could change rapidly if we do not become proactive and also realize the competition is no longer just other radio stations, but other audio services as well. So learn from Blockbuster’s mistakes and continue to grow and be successful.
