The Enthusiastic Skeptic: Disruptive Innovation and Public Radio

1. The Enthusiastic Skeptic:Disruptive Innovation and Public Radio

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

3. Disruptive Technologies • [Technology here means the processes by which an organization transforms labor, capital, materials and information into products and services of greater value.] • Innovations that result in worse product performance, at least in the near term. • Bring to market a very different value proposition (typically cheaper, simpler, smaller and frequently more convenient) • Usually are the cause when leading firms fail – not sustaining innovations From Clayton M. Christensen, The Innovator’s Dilemma

4. Established Vs Disruptive Technologies ESTABLISHED • Photographic film • Wireline telephony • Full-service brokerage • Campus-based instr’n • Medical doctors • MRI/CT scanning • Offset printing • Cardiac bypass surgery DISRUPTIVE • Digital photography • Mobile telephony • Online brokerage • Distance education • Nurse practitioners • Ultrasound • Digital printing • Angioplasty From Clayton M. Christensen, The Innovator’s Dilemma

5. Disruptive Technologies in Radio

6. 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

7. Environmental Scan

8. Electronic Media Today • Conglomerates dominate ownership and control diverse distribution outlets, with both “horizontal” and “vertical” operations and pricing advantages • Users are beginning to take control of when they access programming • Subscriber-based economic models (e.g., HBO) are competing with ad-supported ones

9. 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

10. Pubcasting’s Diverging Fortunes • Terrestrial digital transition is market-driven for radio; mandatory and market-driven for TV • National content producers in public radio is strong mix of licensees, independents and NPR; licensees or licensee gatekeepers dominate in public television • Public radio listening and members have increased, while PTV viewing and members are steadily declining; revenues generally following the same vectors • Public radio players have explored alternative distribution platforms to a greater degree than have PTV’s

11. Public Broadcasting Today • “Everyone is baking their own cookies” • “Hail Mary” method of funding depreciation • Usage strong compared to other public service providers (11.8B person contact hours annually for public radio, 5.8B hh contact hours for PTV) • Policy support of public broadcasting less assured

12. 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

13. Our Urgencies • “To be or not to be” for public television • “To be all we can be” for public radio

14. Strategic Investment Scenarios Investments may be individual or collective

15. 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

16. 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”

17. 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”

18. 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.

19. 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

20. 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?

21. Contact Information • Dennis 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