Analyst Proposes Killing Radio In The Name Of Higher Profits

A BusinessWeek piece on the efforts to collect performance royalties from terrestrial radio had the following quote:

In a study published earlier this year, University of Texas at Dallas economics professor Stan Liebowitz argues that radio acts as a substitute for music sales. “I am not disputing that radio is very good in picking which songs are going to become very popular,” says Liebowitz, the director of Center for the Analysis of Property Rights & Innovation at the university. “But if radio didn’t exist, we could see a 50% to 60% increase in record sales.” How so? Instead of listening to the radio in their cars, Americans might buy more CDs or digital recordings, he says.

“Oh, haha!” we thought. “Killing radio to spur record sales? That’s kind of funny, especially considering that digital track sales aren’t doing so badly!” But then we realized he might have a point, or at least half of one:

Radio stations that place new music into their mix, for the most part, have super-tight playlists that probably play songs more than any sane person wishes to hear them–thereby sidestepping the need to buy those tracks. This phenomenon isn’t just limited to Top 40, either. What other explanation is there for that Linkin Park song being No. 1 on the Modern Rock chart for the past 13 weeks?

The number of radio stations devoted to playing only old music–your Jacks, your Freds, your Freshes, even your Lites–seems to be ever-expanding. Perhaps it’s because of the Idolator flophouse’s location in radio-deficient New York City, but more often than not, flipping around the dial presents the listener with a playlist of music that’s not dissimilar to that played at a bad Sweet 16 party. In 1993. And not to quote Grandma, but the old maxim about cows that you can buy and ones that you can get for free does, in fact, come to mind upon hearing”My Sharona” on the radio for the 800th time.

But while both of these are true, a maxim more important, and one that is even more key to the current cause for panic, is what made Leibowitz’s quote seem so counterintuitive on first read:

Don’t be so sure that people will magically start seeking out new music on their own. Ask yourself: If radio were to go away, would the masses really be seized with the urge to buy new records? Doubtful; they’d probably just be content with the CDs they currently have in their car–you know, the ones that they’re probably listening to instead of the radio right now.

Traditional Radio to Pay for Play? [Business Week]