2. The Enthusiastic Skeptic: Disruptive Innovation and Public Radio Dennis L. Haarsager Digital Distribution Implementation Initiative & Northwest Public Radio

3. Digital Distribution Implementation Initiative CORE WORKING GROUP Ed Caleca, PBS Ed Caleca, PBS Jeff Clarke, KQED Jeff Clarke, KQED Dennis Haarsager, DDII consultant; KWSU/KTNW, NW Public Radio Dennis Haarsager, DDII consultant; KWSU/KTNW, NW Public Radio Byron Knight, Wisconsin Byron Knight, Wisconsin David Liroff, WGBH David Liroff, WGBH Pete Loewenstein, NPR Pete Loewenstein, NPR Jim Paluzzi, Boise State Radio Jim Paluzzi, Boise State Radio A strategic investment initiative funded by the Corporation for Public Broadcasting. JointRadio TelevisionExternal

4. Multidiscipline Experts Group Jon Abbott, WGBH Jon Abbott, WGBH Brenda Barnes, KUSC Brenda Barnes, KUSC Rod Bates, Nebraska Rod Bates, Nebraska Joe Campbell, KAET Joe Campbell, KAET Scott Chaffin, KUED Scott Chaffin, KUED Beth Courtney, Louisiana Beth Courtney, Louisiana Vinnie Curren, WXPN (now CPB) Vinnie Curren, WXPN (now CPB) Tom DuVal, WMRA Tom DuVal, WMRA Tim Emmons, Northern Public Radio Tim Emmons, Northern Public Radio Fred Esplin, Univ of Utah Fred Esplin, Univ of Utah Glenn Fisher, KTCA Glenn Fisher, KTCA Jack Galmiche, Oregon Jack Galmiche, Oregon John King, Vermont John King, Vermont Ted Krichels, WPSX Ted Krichels, WPSX Jon McTaggart, Minn Public Radio Jon McTaggart, Minn Public Radio Paige Meriwether, KUED Paige Meriwether, KUED Steve Meuche, WKAR Steve Meuche, WKAR Peter Morrill, Idaho Peter Morrill, Idaho Meg OHara, WNET Meg OHara, WNET Maynard Orme, Oregon Maynard Orme, Oregon Allan Pizzato, Alabama Allan Pizzato, Alabama Lou Pugliese, onCourse Lou Pugliese, onCourse Don Rinker, Alaska Don Rinker, Alaska Meg Sakellarides, Conn Pub R-TV Meg Sakellarides, Conn Pub R-TV Bert Schmidt, WVPT Bert Schmidt, WVPT Jonathan Taplin, Intertainer Jonathan Taplin, Intertainer Kate Tempelmeyer, Nebraska Kate Tempelmeyer, Nebraska Tom Thomas, SRG Tom Thomas, SRG Mike Tondreau, Oregon Mike Tondreau, Oregon David Wolff, Fathom (now Sunburst) David Wolff, Fathom (now Sunburst) Art Zygielbaum, Nebraska Art Zygielbaum, Nebraska

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

6. Disruptive Technologies [Technology here means the processes by which an organization transforms labor, capital, materials and information into products and services of greater value.] [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. 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) 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 Usually are the cause when leading firms fail – not sustaining innovations From Clayton M. Christensen, The Innovators Dilemma

7. Established Vs Disruptive Technologies ESTABLISHED Photographic film Photographic film Wireline telephony Wireline telephony Full-service brokerage Full-service brokerage Campus-based instrn Campus-based instrn Medical doctors Medical doctors MRI/CT scanning MRI/CT scanning Offset printing Offset printing Cardiac bypass surgery Cardiac bypass surgeryDISRUPTIVE Digital photography Digital photography Mobile telephony Mobile telephony Online brokerage Online brokerage Distance education Distance education Nurse practitioners Nurse practitioners Ultrasound Ultrasound Digital printing Digital printing Angioplasty Angioplasty From Clayton M. Christensen, The Innovators Dilemma

8. Disruptive Technologies in Radio

9. Disruptive Innovation The pace of technological progress generated by established players inevitably outstrips customers ability to absorb it, creating opportunity for start-ups to displace incumbents. The pace of technological progress generated by established players inevitably outstrips customers 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. 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 Innovators Dilemma

10. Environmental Scan

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

12. Radio Today Terrestrial radio remains strong, but landscape is littered with failed radio technology enhancements Terrestrial radio remains strong, but landscape is littered with failed radio technology enhancements Ownership consolidation widespread since 96; pubradio competing with stations with better cost profiles and centralized best practices operations Ownership consolidation widespread since 96; pubradio competing with stations with better cost profiles and centralized best practices operations Satellite radio and real-time web streaming are emerging as players 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 TiVos appear Asynchronous distribution (on demand, peer-to-peer sharing) of audio also gaining foothold; first radio TiVos appear Because of group ownership and general availability of 7x24 program services, national voices are increasingly replacing local ones Because of group ownership and general availability of 7x24 program services, national voices are increasingly replacing local ones

13. Pubcastings Diverging Fortunes Terrestrial digital transition is market-driven for radio; mandatory and market-driven for TV 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 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 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 PTVs Public radio players have explored alternative distribution platforms to a greater degree than have PTVs

14. Public Broadcasting Today Everyone is baking their own cookies Everyone is baking their own cookies Hail Mary method of funding depreciation 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) 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 Policy support of public broadcasting less assured Our esteem is an asset that can be leveraged or squandered Our esteem is an asset that can be leveraged or squandered Other public service entrants entering electronic media, usually using disruptive technologies Other public service entrants entering electronic media, usually using disruptive technologies

15. Radio In Five Years Local ownership of commercial stations will have all but disappeared Local ownership of commercial stations will have all but disappeared AM/FM digital broadcasting established, but acceptance uncertain AM/FM digital broadcasting established, but acceptance uncertain Lack of spectrum for public radio even more acute 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 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

16. Our Urgencies To be or not to be for public television To be or not to be for public television To be all we can be for public radio To be all we can be for public radio

17. Strategic Investment Scenarios Investments may be individual or collective

18. Collective Investment Modalities Toolkits – activities or tools stations can use to achieve best practices without need for collaboration 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 Service Clouds – stations outsource significant activities created for specialized purposes Colonizers – efforts to operate public broadcasting mission elements independently with or without station involvement Colonizers – efforts to operate public broadcasting mission elements independently with or without station involvement

19. Scenario 1 – Sustaining Make strategic investments in initiatives that sustain the legacy (broadcasting) business Make strategic investments in initiatives that sustain the legacy (broadcasting) business Tends to maintain operational independence Tends to maintain operational independence Preserves as much gross tonnage of public service as possible, at least in the near term 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 High investments in Toolkits, somewhat lower investments in Service Clouds, little in Colonizers

20. Scenario 2 – Repositioning Make strategic investments in initiatives that reposition a station in new directions consistent with historic mission Make strategic investments in initiatives that reposition a station in new directions consistent with historic mission Capacity and scale created at collective level Capacity and scale created at collective level Emphasis on editorial (programming) rather than operational independence Emphasis on editorial (programming) rather than operational independence Increased investments in Service Clouds and Colonizers Increased investments in Service Clouds and Colonizers

21. Diverging Investment Possibilities Public radio should be able to make strategic investments in both the sustaining and repositioning directions. 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. Public television, because of greater investment costs and a declining economic vector, will likely have to choose between these directions.

22. Consultants 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) 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) 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 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

23. Consultants 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? 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? 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? How do we exploit the emerging Wi-Fi and other wireless data capacities?

24. 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