The Enthusiastic Skeptic:Disruptive Innovation and Public

Radio

Disruptive Technologies

Roadkill Menu: AM Stereo, FMX, RBDS, Betamax, 8-tracks, 5¼” Diskettes, MS-DOS, Local phone operators, mom & pop ownership

Disruptive TechnologiesDisruptive Technologies

[Technology here means the processes by which an [Technology here means the processes by which an organization transforms labor, capital, materials and organization transforms labor, capital, materials and information into products and services of greater value.]information into products and services of greater value.]

Innovations that result in worse product Innovations that result in worse product performance, at least in the near term.performance, at least in the near term.

Bring to market a very different value proposition Bring to market a very different value proposition (typically cheaper, simpler, smaller and frequently (typically cheaper, simpler, smaller and frequently more convenient)more convenient)

Usually are the cause when leading firms fail – Usually are the cause when leading firms fail – notnot sustaining innovationssustaining innovations

From Clayton M. Christensen, The Innovator’s Dilemma

Established Vs Disruptive TechnologiesEstablished Vs Disruptive Technologies

ESTABLISHEDESTABLISHED

Photographic filmPhotographic film

Wireline telephonyWireline telephony

Full-service brokerageFull-service brokerage

Campus-based instr’nCampus-based instr’n

Medical doctorsMedical doctors

MRI/CT scanningMRI/CT scanning

Offset printingOffset printing

Cardiac bypass surgeryCardiac bypass surgery

DISRUPTIVEDISRUPTIVE

Digital photographyDigital photography

Mobile telephonyMobile telephony

Online brokerageOnline brokerage

Distance educationDistance education

Nurse practitionersNurse practitioners

UltrasoundUltrasound

Digital printingDigital printing

AngioplastyAngioplasty

From Clayton M. Christensen, The Innovator’s Dilemma

Disruptive Technologies in Radio

Disruptive Innovation

• “The pace of technological progress generated by established players inevitably outstrips customer’s ability to absorb it, creating opportunity for start-ups to displace incumbents.”

• “There are times at which it is right not to listen to customers, right to invest in developing lower-performance product that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.”

From Clayton M. Christensen, The Innovator’s Dilemma

Environmental Scan

Electronic Media TodayElectronic Media Today

Conglomerates dominate ownership and control Conglomerates dominate ownership and control diverse distribution outlets, with both “horizontal” diverse distribution outlets, with both “horizontal” and “vertical” operations and pricing advantagesand “vertical” operations and pricing advantages

Users are beginning to take control of when they Users are beginning to take control of when they access programmingaccess programming

Subscriber-based economic models (Subscriber-based economic models (e.g.e.g., HBO) , HBO) are competing with ad-supported onesare competing with ad-supported ones

Radio Today

• Terrestrial radio remains strong, but landscape is littered with failed radio technology enhancements

• Ownership consolidation widespread since ‘96; public radio competing with stations with better cost profiles and centralized best practices operations

• Satellite radio and real-time web streaming are emerging as players

• Asynchronous distribution (on demand, peer-to-peer sharing) of audio also gaining foothold; first radio “TiVo’s” appear

• Because of group ownership and general availability of 7x24 program services, national voices are increasingly replacing local ones

Pubcasting’s Diverging FortunesPubcasting’s Diverging Fortunes Terrestrial digital transition is market-driven for Terrestrial digital transition is market-driven for

radio; mandatory radio; mandatory andand market-driven for TV market-driven for TV National content producers in public radio is National content producers in public radio is

strong mix of licensees, independents and NPR; strong mix of licensees, independents and NPR; licensees or licensee gatekeepers dominate in licensees or licensee gatekeepers dominate in public televisionpublic television

Public radio listening and members have Public radio listening and members have increased, while PTV viewing and members are increased, while PTV viewing and members are steadily declining; revenues generally following steadily declining; revenues generally following the same vectorsthe same vectors

Public radio players have explored alternative Public radio players have explored alternative distribution platforms to a greater degree than distribution platforms to a greater degree than have PTV’s have PTV’s

Public Broadcasting TodayPublic Broadcasting Today

““Everyone is baking their own cookies”Everyone is baking their own cookies”

““Hail Mary” method of funding depreciationHail Mary” method of funding depreciation

Usage strong compared to other public service Usage strong compared to other public service providers (11.8B providers (11.8B personperson contact hours annually contact hours annually for public radio, 5.8B for public radio, 5.8B hhhh contact hours for PTV) contact hours for PTV)

Policy support of public broadcasting less Policy support of public broadcasting less assuredassured

Radio In Five Years

• Local ownership of commercial stations will have all but disappeared

• AM/FM digital broadcasting established, but acceptance uncertain

• Lack of spectrum for public radio even more acute

• Use of other platforms and new forms of distribution will grow, but are unlikely in this time frame to displace much listening to terrestrial stations

Our Urgencies

• “To be or not to be” for public television

• “To be all we can be” for public radio

Strategic Investment Scenarios

Investments may be individual or collective

Collective Investment Modalities

• Toolkits – activities or tools stations can use to achieve best practices without need for collaboration

• Service Clouds – stations outsource significant activities created for specialized purposes

• Colonizers – efforts to operate public broadcasting mission elements independently with or without station involvement

Scenario 1 – Sustaining

• Make strategic investments in initiatives that sustain the legacy (broadcasting) business

• Tends to maintain operational independence

• Preserves as much “gross tonnage” of public service as possible, at least in the near term

• High investments in “Toolkits,” somewhat lower investments in “Service Clouds,” little in “Colonizers”

Scenario 2 – Repositioning

• Make strategic investments in initiatives that reposition a station in new directions consistent with historic mission

• Capacity and scale created at collective level

• Emphasis on editorial (programming) rather than operational independence

• Increased investments in “Service Clouds” and “Colonizers”

Diverging Investment Possibilities

• Public radio should be able to make strategic investments in both the sustaining and repositioning directions.

• Public television, because of greater investment costs and a declining economic vector, will likely have to choose between these directions.

Consultant’s Provocations 1

• Form “virtual broadcast groups,” digital distribution companies that operate key functions of current stations within and across markets (include NPR or PRSS as eligible service provider)

• Create public service “digital condominium association” with other state, national and international advanced networks (e.g., Internet2)

• Task a system economics panel with devising strategies to redeploy [insert ambitious amount here] of existing system revenue from “cookies” to capitalization and audience-sensitive priorities

Consultant’s Provocations 2 (IMA)

• Most broadcasters treat the Internet as a sustaining, rather than disruptive, technology innovation. Most indicators, however, point to it being the latter. How do we design services differently in each world?

• If we consider the Internet as a disruptive technology for broadcasters, what investment and service strategies should we follow in delivering IP services?

• How do we exploit the emerging Wi-Fi and other wireless data capacities?

Contact InformationDennis L. Haarsager, DDII Consultant

1019 Border Lane, Moscow, ID 83843-8737

208-892-9445 • e-fax 206-770-6100

haarsager@moscow.com

www.technology360.com

Associate Vice President, Educational Telecommunications & Technology, Washington State University

Box 642530, Pullman WA, 99164-2530

509-335-6530 • e-fax 888-455-1070 • haarsager@wsu.edu