Over-the-Air Radio Promoting FM Chips in Hopes Carriers Will Activate

Radio executives acknowledged carriers don’t seem poised to expand the availability of FM chips, and CEA executives said wireless subscriber demand for such listening is being met. By publicizing that radio can be listened to on-air on mobile devices and not just by apps and online streaming direct from stations’ and other websites, executives hope to stimulate demand for such chip-enabled devices. The FCC held a meeting last month with the major carriers, device makers and associations representing broadcasters, makers of consumer electronics and wireless services where the CE and wireless industries remained far apart from broadcasters on FM chip activation (CD July 27 p4). The sides told us they don’t believe any regulation or legislation is needed, but broadcasters said they think too few chips are activated.

Look for more on-air ads promoting devices that have chips, and other educational efforts by broadcasters so wireless subscribers learn of the capability, executives say. Cromwell Group is the only radio station owner airing such ads, but Educational Media Foundation is working on them and companies including Entravision would consider running such promotions, our survey found. The NAB, seeking to step up the pressure on carriers and mobile device makers, in recent months told its members of association-produced ads they could air, spokesmen said.

CEA continues to hope more stations will air such ads (CD July 6 p9), because such promotions are a recognition that the chips are a business and not a regulatory or legislative issue. “Good for them, if they can help stimulate demand, and cause a pull-through in the market,” Senior Vice President Brian Markwalter said. “The growth in streaming just kind of reinforces the case that the carriers are responding to what consumers want,” because broadcasts can be streamed on phones, he said.

The radio industry needs to do a better job promoting that its content can be listened to on mobile devices without streaming, broadcast executives said. They said many of the listening apps downloaded for radio stations are by consumers who live in the outlet’s coverage area, and so could get it if their phone had that capability activated. Terrestrial listening means streaming royalties don’t need to be paid by stations, because there’s no on-air performance royalty, said executives. They identified those streaming costs as one of their bigger expenses and said listening via apps and the Internet is popular. Cromwell is running on all of its 22 stations in Indiana, Illinois, Kentucky and Tennessee spots encouraging listeners to buy for their next smartphone one that has an FM chip, said President Bud Walters, an NAB radio board member. Fourteen of those stations stream online, the rest will soon and a smartphone app for WBUZ(FM) Nashville, Tenn., was downloaded about 70,000 times, he said.

"We need to increase the momentum on the end-users requesting for there to be a tunable dial on these phones as they come out,” said Chief Operating Officer Jeff Liberman of Entravision, which has almost all of its 49 radio stations streamed online and via app. “I would consider putting on a campaign such as that.” The company could run announcements on its stations that are mostly Spanish-language and which include 51 TV outlets, Liberman said. “We have the airways to promote the fact that these chips should be included in these mobile devices.” NAB has 20 English-language and four Spanish spots available to members to air (http://xrl.us/bnjm7s). “When the weather’s bad, the power’s out, cell circuits are busy, and the Internet is down, radio can still connect you with critical information,” one spot says. It directs listeners to www.radiorocksmyphone.com.

'Public Doesn’t Know’ About Chips

"The public doesn’t know they have FM chips in their phones, and yet they are using radio station apps to listen to radio on their cellphones, so it follows it they knew they could listen to radio and get a good signal and have no hassle doing it,” they would, said Walters. “Our radio stations should be available to the listeners wherever they might want to hear us, and we are endeavoring to do that through apps, through streaming, anyplace, and so it seems logical it should also be through iPods and iPads and iPhones.” Apple’s products don’t have FM chips, Walters said. Apple had no comment. “When there’s an emergency, wireless in cellphones don’t work, thus the app won’t work,” said one of the ads airing on Cromwell stations. “Over-the-air radio continues to work in all emergencies,” said the announcer, so listeners should “ask for a smartphone with a radio in it."

The CEA’s not hearing of unmet consumer demand for devices with FM chips, executives said. “For the minority of consumers who want that feature, there are plenty of phones so equipped,” said Senior Vice President Michael Petricone. “To the extent broadcasters are running ads encouraging listeners to buy phones with FM chips -- that is exactly what they should be doing. They should also consider paying handset makers to include the feature, and offer to barter spectrum with carriers. That’s how the free market works.” There are “a fair number” of FM chips “designed into cellphones” with FM tuner capability, said Markwalter. Those chips must be connected to the device with software written and the chip activated, he said. “Even for phones where it’s present and enabled, and consumers can use it, they get low utilization.”

AM reception, meanwhile, is not practical on mobile devices because that needs “an antenna of some length, whereas FM doesn’t,” said President Frank Foti of Omnia Audio, a maker of audio equipment for radio stations. “Size matters, and none of these cellphones have the ability to accommodate an AM antenna.” The four top U.S. carriers have 29 total models with working FM chips, said a list NAB maintains (http://xrl.us/bnjm7b). A resolution proposed and then killed by its sponsor before a vote at NARUC’s meeting last month would have recommended against carriers blocking the FM chip from being activated (CD July 24 p18).

The move by the top two wireless carriers away from unlimited broadband and toward packages whose price is based on the amount of data used each month may be another factor prompting subscribers to seek mobile devices that can get over-the-air FM, radio executives said. Not activating the chips that are in most U.S. mobile devices is “a business decision made by the carriers that they would prefer to sell streaming applications rather than sell a service that is free to the end-user,” said an NAB spokesman. “We've made a little bit of progress, not maybe as quickly as we'd like” getting the chips turned on, he continued. “Carriers from a public safety perspective should want to provide this service.” AT&T, Verizon Wireless, Sprint Nextel and T-Mobile had no comment.

CTIA still thinks “consumer demand, not government fiat,” should prompt the decision to include FM capability in mobile devices, Vice President Jot Carpenter said. “The market provides a range of mobile devices for consumers who value FM capability, while also providing many options for consumers who don’t value or wish to pay for FM capability they don’t want and won’t use. To the extent that certain broadcasters want to see more FM capable devices in the marketplace, they should either seek to partner with carriers and manufacturers or advertise in support of FM capable handsets. Commercial activity, not lobbying, should be their focus."

More wireless subscribers will seek devices with FM chips if they learn about wireless and broadband service shortcomings during disasters that cut power as stations remain on-air, radio executives told us. “Every time you get into a situation where the system is taxed, it quits,” said CEO Mike Novak of Educational Media Foundation, with almost 700 U.S. noncommercial FMs airing Christian music from two EMF networks. To CEA, “broadcasters’ claim that FM chips are uniquely useful in emergency situations is dubious,” CEA’s Petricone said. “In order to get the information you must be listening to the radio at the exact moment the information is broadcast.” EMF “will be trying to come up with something” to air on its stations to encourage listeners to buy devices with FM chips, Novak said. The noncommercial stations can’t air ads, but “we can educate people,” said the member of NAB’s radio board: “We couldn’t drive them to buy a certain kind of phone, but we could say ‘did you know'” that not all mobile devices have FM chips.

Radio executives view activation of FM chips as a top business issue, said respondents to our informal survey of about 20 major broadcasters. “We want to be on as many platforms as possible, and certainly having radio on mobile devices like cellphones is critically important to our members -- probably the No. 1 priority,” said an NAB spokesman. “We're hopeful that we can sort of work with the carriers to get them to voluntarily activate the chips that are in the phones.”

An estimated 76 million U.S. consumers listen to radio online, for an average of 9 hours and 46 minutes a week, vs. 242.1 million who listen on-air (http://xrl.us/bnjnhu), Arbitron estimates. “For the most part, online listening is a complement to AM/FM radio as opposed to a replacement; 87 percent of those who have listened to online radio in the last week also listened to traditional over-the-air radio stations in the last week,” the radio ratings firm said. Online radio ad sales will rise 35 percent this year to $409.9 million, a small percentage of the value of annual commercials on radio overall and well behind the portion for TV stations, newspapers and other media, Borrell Associates has forecast for Arbitron. Total 2011 radio commercial revenue was $17.4 billion, the Radio Advertising Bureau said (http://xrl.us/bnjniv).

Top Radio Issue

Beasley Broadcast Group, which sees the issue as a top one for radio, thinks carriers have a “responsibility” to turn on the chip because polls commissioned by NAB show most wireless subscribers want to listen to radio on their devices, said Chief Financial Officer Caroline Beasley. What carriers charge “for streaming radio stations” would “be lost if the chip is activated,” said the member of NAB’s executive committee. Radio has been “asking carriers to voluntarily activate the chip for a number of years,” Beasley said. “The importance of doing this is shown each time a natural disaster occurs.” Almost all of the company’s 44 stations are streamed, and Beasley has an app for iPhones and devices running on Google’s Android system, a spokeswoman said.

CBS Radio thinks “the discussion regarding the chip should continue, and we hope a solution can be found that works for all parties involved,” said a spokeswoman. “Having an FM chip available in mobile devices would provide many benefits to the consumer, including the timely delivery of critical information in an emergency.” All of the company’s 127 stations are streamed online, and the company has apps, the representative said. “We receive a significant amount of traffic on these applications.” CBS Radio wants “listeners to have as many options as possible” to get the broadcasts, she said.

Univision thinks “activating FM chips in mobile devices is a win-win-win for telecom, the radio industry and consumers,” a spokeswoman said: It’s “another way to super-serve radio and mobile audiences and builds on what we have done via our radio apps and streaming of radio content across platforms.” Forty-five of the company’s 69 stations are streamed, she said. All of Cox Media Group’s 86 radio stations have streams, a spokeswoman said. “We believe in being available on every platform, and every device applies” to also being available for over-the-air listening on mobile devices, Executive Vice President Bill Hoffman said. “Plus, the broadcasting model is a much more efficient use of spectrum and broadcasting is more dependable."

"The consumer demand will increase as we promote or push the fact that phone manufacturers should include the FM chip in their phone,” Liberman said. “Providing an FM chip into all mobile devices is critical.” Cellphone users “should have the ability not only to stream on the mobile device, which uses the data plan, which costs money, but also be able to tune in to FM stations,” he said. To increase consumer awareness, “it is going to take an industry campaign,” Walters said: “More and more smartphones are going to have radios in them, and they are now becoming a bigger share of the market” and “will be a valuable tool to people.” Carriers “are in a losing battle” saying there’s little demand, Walters said. “The reality is consumers want anything they can get."

Most who listen to EMF’s K-Love and Air 1 networks via stream live where there’s a station carrying that content, so they could get it with an FM chip and the foundation wouldn’t have to pay a royalty for that person’s stream, Novak said. Those royalties, paid at a lower non-commercial rate than for-profit radio, are “exorbitant, to say the least,” he said. “This is a direct pass it-on-cost to the consumer, when you're listener supported,” Novak said. “Streaming unlike any other entity in this world is not a volume-driven business,” since royalties are paid on a per-stream basis, Novak said. “The users are demanding it, so we have to be there, so it puts an extremely heavy burden on our revenue stream.”