Everyone knows the old story of how the the railroad business faltered because they thought they were in the railroad business rather than the transportation business.  Yet the lesson of that story is lost on many broadcasters today.

In fact, the lesson is worse than lost.  Because many broadcasters see themselves not even as being in the radio business.  Instead, they think they are in the “making money” business.

The problem is that there is no “making money” business.  You don’t attract clients because you want to make money.  You don’t attract consumers because you want to make money.

As TuneGenie’s Jeff Specter said to me recently, “If you want to follow the money you had better start with the content.  Money follows people, and people follow content.”

Money follows people, and people follow content.

Yet I constantly see broadcasters tackle digital tactics without a strategy to guide them.  And I constantly see broadcasters under-invest in those tactics, both because there’s no broader strategy and because if you’re in the “making money” business then every tactic must be monetized in order to be realized rather than vice versa.

Indeed, this is why so many digital efforts fall short.  They are short on strategy, short on funding, short on execution, short on talent, and thus naturally short on success.

So what business IS radio in?

Radio is, broadly speaking, in the media business.  But the problem is that every brand and every consumer is in that business, too (which is why your client has more YouTube views than you do and many of your listeners have more Facebook friends).

I have argued that radio is in the business of connecting consumers and advertisers across all platforms for the benefit of both in the local markets they serve so well.  This means your job is to create content that attracts and enchants consumers (note I did not say “listeners”) as well as content that attracts and enchants clients who value those consumers and benefit directly from their actions.

If you tell me this is too much “trouble” or it’s too expensive or you aren’t staffed for it or you need to monetize it first, then I will tell you you are not in the radio business – you are in the “making money” business, and good luck to you.  Because others will eat your lunch.

And then they’ll make your money.

Instead, reconfigure your structure.  Hire folks who thrive on this kind of “trouble.”  Invest for your future before somebody else does.  Think strategically, not historically.

For one hundred years radio has largely meant one thing to everyone – good-enough content that all can agree on pumped out from one to many in a world of finite choice where all the control was in the hands of Federal licensees.

That world is rapidly transforming to a new one.

The new world is about infinite choice where only quality, value-laden content captures fickle consumer attention (not just usage, Mr. PPM device, but the far more valuable attention).  Here, control is in consumers’ hands.  The new world is a place where your digital platform is a sandbox and where consumers play together in that sandbox in the presence of your brand.

But from broadcasters today, what I mostly see are lots of web brochures, lots of repurposed over-the-air content, lots of me-too widgets, lots of “for their own sake” blog posts, and especially lots of banner ads.

It’s a sandbox with no toys.

No friends.

And no sand.

Recently some shocking research on actual Arbitron PPM panelists was revealed in this blog and elsewhere.  The research was from Broadcast Architecture, and the video I recorded about it with BA President Allen Kepler shocked a whole lot of broadcasters (see it if you haven’t already).

While I didn’t receive any response from Arbitron, I did get one from Canada’s equivalent of Arbitron, BBM. The response is posted at Steve Kowch’s blog, and I welcome you to review it.  The response is from BBM Canada President Jim MacLeod.

This is my attempt to analyze that response in the context of Allen’s research.

Mr. MacLeod comments:

These panelists signed a confidentiality agreement (as do BBM’s) so the fact they would even respond to Broadcast Architecture might say something about them. I would say they are far from typical of the people who take part in PPM.

Mr. MacLeod seems obsessed by the breach of confidentiality as if keeping a secret is more important than the integrity of the process itself.

The implication here is that Arbitron’s dirty laundry should be Arbitron’s alone – that the clients who pay vast sums of money to Arbitron are, somehow, not entitled to a comprehensive understanding of PPM dynamics unfiltered by Arbitron’s own point of view.  The implication is, further, that PPM panelists who violate a confidentiality agreement that, I’m guessing, nobody even remembers signing somehow makes these folks both bad people and bad respondents.

Mr. MacLeod probably hasn’t seen the actual panelist interviews.  If he had I think he would conclude that these are not bad people.  These are people playing the game Arbitron has placed before them according to their best sense of the rules.  They are doing their best, and they don’t deserve to have their integrity questioned by a stranger.

Meanwhile, if they’re such bad respondents, then perhaps they never should have been recruited for Arbitron’s sample in the first place.

Mr. MacLeod continues:

Thirteen people and seven homes is hardly a representative sample of the 70,000 or so in the Arbitron system and the fact that is all they could find in a major market might say something about the average panelist.

I think I’m speaking for every broadcaster when I applaud Mr. MacLeod for concluding that thirteen panelists are hardly representative of the total. Indeed, we will all remember that when we see critical Arbitron outcomes based on volatile swings caused by one or two PPM panelists.  If thirteen are not representative, then how representative are the one or two listening to your station right now? Beware going down the sample size path, Mr. MacLeod.  The sharp point of that argument will cut you.

And more:

They of course found the panelists most likely to respond to incentives … they paid $50 to each panelist!

This is an incredibly disingenuous argument from a research professional who should know better.

Every form of research across the globe that requires respondents to leave their homes to meet an interviewer in another place incentivizes respondents for this process.  That’s true of your music tests and in every category of research under the sun.  Not surprisingly, folks don’t show up for free.  This is a generally accepted practice in all professional research circles – period.

Years ago, I did a project similar to BA’s – this one among diarykeepers.  Like Allen, I invited diarykeepers to a central location, paid them to attend, and recorded the interviews.  I asked them specifically whether the money they received along with their diary had any influence on their completion of the diary task.  Most laughed at the question – because the diary incentive was $1.00.

There’s a big difference between incentivizing research respondents – and hiring them.

If Mr. MacLeod is arguing that paying the respondents produces a non-representative sample of radio listeners then he should take up that objection with Arbitron, who pays every PPM panelist and pays them a lot more than BA did.

Says Mr. MacLeod:

A Canadian panelist can earn a maximum of $10 a month from carrying a PPM.

That’s apparently a lot less than panelists in the U.S. are paid, and that alone could alter the U.S.-based conclusions from what one might find to be true among panelists in Canada.

Mr. MacLeod had a lot more to say, especially about differences between the Canadian and U.S. systems, so it’s worth a read.

Shocking!

Some radio shows evidently use voice actors instead of authentic callers! The entertainment programs (and we are talking almost exclusively about entertainment programs, not talk shows) who use such techniques should be ashamed of themselves!

How dare they swap authenticity for entertainment!  Give me boring authenticity any day, that’s why I listen to the radio, to be bored out of my skull!

The rest of the world is real, why not the radio?

Next you’re going to tell me that supermodels are airbrushed, politicians tell half-truths, and the reality TV stars chatting over lunch are just going about their day when surrounded by a producer, two camera operators, an audio guy, and a Teamster with a boom.

Give us bland and authentic every time!  Otherwise we’ll have to wait weeks for someone genuinely crazy and entertaining like Charlie Sheen.

And while you’re at it, don’t tell me producers pre-interview guests on the Leno show, and promise me that the White House reporter doing the outdoor standup isn’t wearing a suit and tie on top and Bermuda shorts and flip-flops on the bottom.

Make sure that Donald Trump is picking his Apprentice without any help from the show’s producers, and don’t try and tell me that the winning plaintiff on Judge Judy is paid by the producers, not the defendant.

Next you will try to argue that Presidents get dogs because First Families always get dogs, not because winning a Presidential campaign is evidently easier than selecting a pet.

Assure me that Joan Rivers is naturally wrinkle-free and that the New York Times really does provide “all the news that’s fit to print.”

And when GE “brings good things to life,” I expect to be able to see all those good things myself, okay?

Promise me that Fox News is “fair and balanced” and that I will be cooler if I smoke your cigarettes and look younger if I use your cosmetics.

Because the rest of the world is so real, why not radio?

Now it’s time for me to watch my favorite TV comedy.

Listen to that audience laugh!

Guy Kawasaki is one of the most widely read and respected voices on the digital frontier.  He’s an entrepreneur, marketing guru, one-time Apple chief evangelist, and author of ten books (most of which I have read), including his newest, Enchantment: The Art of Changing Hearts, Minds, and Actions.

Watch the video of our conversation here.  An abbreviated transcript is below, but the video is richer and funnier, too.

Prefer audio?  Try this:

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What got you interested in the topic of Enchantment?

Since 1979 or so I’ve been trying to enchant people.  I worked in the jewelry business and then for Apple, evangelizing Macintosh.  I started companies.  I went back to Apple and venture capital, and in all of these things I’ve been trying to enchant people with products and services, and so I became a student of persuasion and influence.  I read all the works of Robert Cialdini.  I have a bookshelf full of books about this kind of thing and I wanted to put my spin on it.  I’m an admirer of Dale Carnegie’s book, so I wanted to bring that up-to-date into the digital world and help people kick butt.

What’s the difference then between the idea of enchantment and giving people what they want?

Sometimes giving people what they want is not good for them.  I can think of some parenting practices that fit in that category, for example.  But having said that, I don’t think I could build a case that you will enchant people by not giving them what they want.  You may have to educate them on what they should want.  A stellar example of this is Apple. Apple’s idea of a focus group is Steve Jobs’ left hemisphere connected to the right hemisphere, that’s two focus groups right there.  So it’s not always about listening to your customers; sometimes you have to anticipate what your customers will want and need before they can even articulate it.

The Apple example is obviously the ideal.  Everybody wants to emulate Apple.  But there’s this “magic gap” between what Apple does and the way it plays, and in that gap is enchantment.  But I wonder, is that something anybody can really capture?  Can anybody do that?

If I could enable anyone to become the next Apple, trust me, I would charge a lot more for the book.  Each copy would be roughly $24 million instead of $24.  However, having said that, I think that you should look at enchantment as you would look at fitness.

There are people who are super fit, Lance Armstrong, his resting heartbeat is, I don’t know, 10 or whatever it is.  And then there are people whose resting heartbeat is 200.  So, there’s a continuum of fitness and no matter where you start on that continuum, almost everybody (maybe except Lance Armstrong) could be more fit.  And I think the same thing is true of enchantment.

There are people who are like Richard Branson – off the scale enchanting people – but everybody can get more enchanting and you do that by doing some of these practices and tips in the book.

Let’s talk about those practices and tips.  What can broadcasters do to enhance their enchantment to their audiences and fans?

I’ll give a great example in my area.  There’s a guy named Greg Kihn, a former rock musician and now a morning drive-time DJ, and I find him very enchanting.  There are two reasons.  One is because he’s authentic.  He really was a musician.  He’s not a wannabe DJ who’s criticizing musicians; he was a musician. He really knows his stuff.  When he tells stories about meeting the Beatles, it’s firsthand knowledge.

Second, he’s a “wysiwyg” kind of guy – what you see is what you get.  He’s totally transparent.  You can see that it’s not a façade, it’s not his people are telling him how to behave.  He is what he is.

I find those two things very enchanting, so he’s a good example.

It’s interesting that you humanized enchantment that way, because when I talk about radio, I could talk about any form of radio, but you specifically focused on the enchantment of a real person, not a format or station, for example.  How important is that to the formula of enchantment regardless of what kind of radio we’re talking about?

I think it’s crucial.  I mean, I don’t see how you can be enchanting using some logarithm picking songs or something.  Don’t get me wrong, I mean you can do an adequate job.

So you’re saying that a radio station with human beings has the potential to be more enchanting than, say, Pandora?

I would hope so.  My company is a Pandora shareholder, so I have nothing against Pandora; but one would think that a DJ or a morning talk show host who’s interviewing legends in Rock because they were on the road together and they were opening acts for each other would have to be more enchanting than someone using a computer algorithm.

Now having said that, the fact that Pandora can figure out this music genome – this DNA of music that you like – is pretty cool.  That company is enchanting, but I would not say that you could be enchanting just by coming up with a computer algorithm.

Based on your own listening to radio, what is it that broadcasters don’t understand about enchantment?

I don’t know if I’m a typical user.  When I’m in the car I listen almost 100% to NPR.

What does NPR not understand about enchantment?

I think NPR pretty much understands enchantment.

I love shows like Fresh Air, TechNation, Wait, Wait Don’t Tell Me.  I think Moira Gunn and Terry Gross and Peter Sagal all understand enchantment.  They are what they are.  They’re very competent, they’re very knowledgeable, they let it rip on the air; and so I love them.

The only time I find something on NPR not enchanting is of course when they do the pledge drive.  Even that I understand because they have to have a revenue source. I absolutely give money, but I must admit that during the pledge drive, I switch from KQED to XM radio which is running NPR without the fundraiser.

You advise on the best ways to use “push” and “pull” technology.  Can you define what those are?

“Push” marketing is when you are controlling the mechanism, the timing, and the quantity of what you’re sending to people.  You push out email; you push out your tweets.

“Pull” marketing is when you have to convince people to return to your website, return to your Facebook page, and so you have to attract them continuously.

Both have a place in enchantment.  Twitter is a very useful tool for enchanting people as is a great Facebook fan page.

Let’s talk about each of them.  In terms of “push,” you mentioned Twitter.  What are a couple of great Twitter “push” tactics to promote enchantment?

With Twitter, I think the key is that you tweet out interesting links and that you are seen as the source of stories and pictures and video that other people would not have found in your particular area of expertise.

So, if you’re an expert in radio, you should be tweeting out the great interview about the future of radio and what it means in a world with Pandora, for example.

The second thing is something many people do not agree with.  I think you need to repeat your tweets to make them effective.  You’re in radio.  You can’t assume that the person who listens to your station at 7 a.m. is also going to be listening at 7 p.m.  So if you push out something interesting at 7 p.m. through Twitter it’s unlikely that the same the person who uses Twitter at 7 a.m. will see it.

You need to repeat it.

Very often the radio station with the most repeats is among those with the highest ratings.

Yeah, I rest my case.

What about great tactics for “pull”?

For “pull” marketing, it’s all about generating great content that you have a real reason for people to come back for – there’s new stuff available all the time.

There’s value, there’s information, and the common thread of “push” and “pull” is that “content is king.” it really is.

And new content is king.  It could be photos, it could be video, or it could be the interaction of the community.  It’s not necessarily true that you have to provide all the content; because you can have very, very interesting forums, but ultimately “content is king.”

Last week I wrote that Pandora is, without any doubt, a radio substitute in the ears of the audience who might consume both.

In one sense a “substitute” or suitable alternative to radio is what the audience says it is, not what the broadcasters say it is.  But in another even more critical sense a radio “substitute” is what your advertisers say it is.

Let me explain.

Let’s say the advertiser has a dollar to spend.  She wants to spend that dollar to connect her product or service with more potential customers.  She doesn’t really care how she spends that dollar – she cares only that it produces a suitable outcome that makes the investment worthwhile.

The value of radio to this advertiser is that it reaches lots of people and can mediate lots of connections.  This is the same value the advertiser places in other media (indeed, this is pretty much what the word “media” means to advertisers) such as outdoor and television and print and now digital.

Historically, this is why radio broadcasters were often under the same ownership roof as outdoor and television and print.  Because the corporate owners recognized that ad dollars are not about vertical media channels, they are about marketing outcomes mediated across those channels.  If you own more channels, you own more of the ad pie.

So where should the advertiser spend her dollar today?  She will spend it wherever it can mediate the most efficient connections.  Indeed, this accounts for the rise of the digital marketplace as the key growth category in advertising.

So what is a “substitute” for radio?  The answer is any destination for ad dollars which can achieve the same or better results for that dollar spent.

So any ad medium is a substitute for any other.  That’s why there is no such thing as “radio” per se, there is only “media.”  You are all of it – unless you choose to narrow your expansive horizons deliberately and foolishly.

So from an advertiser’s perspective, is Pandora a radio substitute?  You bet it is.  But that’s only scratching the surface of the competitive field.

It would be smart for all broadcasters to quit arguing over who is and isn’t the competition and do something altogether more strategic:

Follow the money.

From Radio-Info, reporting on research at the Country Radio Seminar:

From a country station website, the most loyal (P1) listeners want attributes such as concert schedules for their favorite acts and the ability to listen online. What they don’t particularly want (as primary content) is DJ bios, photos and blogs.

Why would anybody want a DJ bio?

Yet most stations seem to have them on their websites.  And that’s because stations tend to view websites as digital brochures rather than connection points for fans of the brand and its content.

As for photos, doesn’t it depend on what the photos are of?

And the same goes for blogs.  The idea of a DJ blog sounds like the most boring thing in the world.  But the idea of a DJ blog post that addresses the DJ’s off-air conversation with Charlie Sheen is quite another matter, isn’t it?

The bottom line is this:  We should spend less time asking people if they don’t want what we have and more time asking ourselves why we have it in the first place.

We should spend less time adding and subtracting shiny widgets to our site and more time providing content that is so magnetic it doesn’t matter what form it comes in, people want it.

That’s the difference between a “DJ blog” and a post about something that fascinates and enchants the audience.

From Inside Radio:

Is Pandora a substitute for radio… or for stored music collections? What impact is the personalized internet radio service having on terrestrial radio usage? To date, no published research survey has asked consumers whether they use Pandora as a substitute for listening to radio or whether it serves as a replacement for listening to music stored on iPods, CDs and other physical media. Not surprisingly, Pandora chief strategy officer Tim Westergren is among those who see the top-rated webcaster as a replacement for terrestrial radio usage. “Fundamentally, we’re all chasing after the listener hour,” he says. “Radio is the biggest share with more than 90% of the listening hour, so it’s safe to say our growth will come from that particular bucket, because that’s where listeners are now.” But Coleman Insights VP Sam Milkman believes Pandora serves primarily as a substitute for stored music. Much like iPod users, Pandora listeners want to control what they hear to create a fundamentally different experience from traditional radio, he reasons. “The curated world is bigger than the total control world — more consumers want somebody else to do the work than having to do the work themselves,” Milkman says. “When Pandora eats something, it will eat iPod usage, not radio.”

This ranks as today’s most ridiculous argument.

The consumption of entertainment content is about time and place and value, not about black and white buckets of distribution channels trading off against each other.

In other words, the notion that Pandora usage – “like iPod usage” – will come from non-radio time is utterly ridiculous and completely without merit.  There is no such thing as “non-radio time” – there is only entertainment time.  Pandora is clearly a radio substitute just as iPods are a radio substitute, and all the evidence indicates that consumers are spending less time with radio not for any one reason but because there are many more ways to be entertained today than there used to be.  It’s not just iPods or Pandora, it’s video games and everything Internet and Apple TV and so on.

The issue, therefore, is what radio substitutes are present in the same time and place as radio, and what radio substitutes solve the same problem as radio for consumers in that time and place.  Further, the issue is how well that substitute solves that problem and whether or not that substitute adds value to the user experience that can’t be gotten from radio itself.

The idea that folks would simply trade listenership one to the other is too simplistic.  I have X number of hours for entertainment in the day.  If Pandora consumes some of those hours then it is very likely some of those hours are coming from radio, assuming I don’t expand my entertainment hours.

This is why time spent with radio is declining over time, particularly among the tech-endowed.

So, in other words, while Westegren isn’t completely right, Milkman is completely wrong.

Unless one wants to imagine “denial” is a river….you know.

Or unless one wants to view reality the way Arbitron views it:  100 shares of listening only to the thing called “radio.”

Seth Godin is a regular guest on this blog, and for good reason.  He’s the author of many outstanding books including Tribes: We Need You to Lead Us, Linchpin: Are You Indispensable?, Purple Cow: Transform Your Business by Being Remarkable, and many others.  He is the author of the world’s most popular marketing blog.  He is a speaker, an innovator, a starter, and a shipper.  And his terrific new book is called Poke the Box.

I have talked with Seth several times, and this is one of our most important conversations about radio.  Although I have boiled down our conversation in the transcript below, I strongly recommend you watch the video and share it with your peers.  Your future may depend on it.

Prefer audio?  Try this:

(You can subscribe to all the MRM video and audio via iTunes and get the goodies before everybody else.  You can also get advance notice of this content if you “like” MRM on Facebook or follow me on Twitter).

Seth, Poke the Box is all about starting things.  It argues that you should start more things more often despite potential failures.  Why is starting things so important here and now?

Here’s the thing, Mark; the industrial age is over.  I think we can all agree that in the last few years we’ve seen this mindset of average products for average people – assembly lines, cogs doing what they’re told, all of that has crumbled.  And all of that was supported by people who did what they were told – compliant cogs in the system who were good at following instructions and doing the same work over and over again where failure was a bad thing.

Well, the world is shifting, things are changing, and the old system – whatever the system was – isn’t as bulletproof as we thought.  So what will take its place?

Well, it turns out the asset that can’t be outsourced, the asset that every organization needs is the ability to initiate.  The idea of starting, of pushing things forward, of failing often on the path to success, and I found that no one was talking about that.  No one had written a book that said you will do better if you will start and ship and finish things.

And so what I’m trying to do is give people a permission slip.  If you were waiting for someone to say, go, go, go; here you go.

Go, go, go.

Is there a difference between starting things and copying things?  Because people are always asking, “Mark, give me an example of a broadcaster who’s doing a really good job of [blank].”  They want to see what somebody else is doing and adapt that or copy it wholesale.

By the time someone writes a case study for the thing you want, it will be too late.

There used to be this idea that you could be a fast follower.  There used to be this idea that you would wait for someone to invent the digital watch and then you would make digital watches better; that you would wait for someone to come up with a new kind of music and then you would go do that music better.

The thing is the Internet makes it so easy for these ideas to spread, that it doesn’t go “one guy” and then “one guy copy,” it goes “one guy” and then 80 guys copy it.

Apple has the iPad and now there are 90 tablets being produced – 90 – just six months later.  In that maelstrom of noise, there’s only one that people will remember, which is the first one.  And we’ve seen the same thing in other arenas.

You can say, “I’m the next Justin Bieber.”  But you just said his name. It turns out that being “the one” the world of Google is the one you have to be, because that’s the one that people are looking for.

It’s not about copying this and getting it into a new market or copying this and getting a little more shelf space; it’s about figuring how to go first in the right way.

But isn’t that the hard part?  After all, broadcasters are not incentivized by their bosses to try new things.  They’re not incentivized to try or fail, and they’re certainly not incentivized to take risks.  They’re not incentivized to innovate at all, for the most part.  How do you get around the raw lack of incentive to do the right thing?

You’re bringing up a good point, except the really hard part is the failing part, not the inventing.

Everyone has an idea.  Everyone at some time in their life has committed an act of genius.  The hard part is overcoming kindergarten through high school base training of not failing, and we reinforce that by telling our employees:  Don’t fail.  We reinforce that by looking for hints from our bosses that we shouldn’t fail.

So part of my message here is to the boss:  If you’re going to punish the failures don’t expect any successes.  If you’re going to punish the failures, don’t expect anybody to raise their hand.  Why should they?

So part of the deal or part of the contract is that the boss has to say, “You know what, that failed, congratulations.  Here’s a bonus.”  “That failed, congratulations. You get the parking spot for employee of the month.”

Because if we don’t start failing, we’re toast.

You have a line in your book:  “The market is obsessed with novelty.”  And you mean that in the most positive of ways.  But Seth, I don’t think the broadcasting industry recognizes that at all.  Instead what you hear from broadcasters is “we’re listened to by almost everybody, almost every place, almost all the time. Why don’t we get credit for that?  Why doesn’t Wall Street reward us for that?  Why doesn’t the New York Times write that up?”

Let’s talk about broadcast a little bit.

Clearly anyone who has looked at pop music knows that novelty is as important as ever, if not more important, that radio is a merchant of musical novelty, that classical music stations tend not to do very well, and one reason is that there is not a lot of new classical music to listen to.

One of the reasons we listen to music is to hear something new, and yet radio stations seem stuck when it comes to ideas of format, connection to listeners, creating social movements, creating all these other forms of novelty.  And so the Internet says “we’ll do that instead. You don’t have to do it, we’ll take care of it.”  And broadcasters are leaving attention on the floor.  They’re leaving behind all of these ways that they could get people to engage, and what the best people in radio are doing is saying, “You know what, I’ll just start my own radio station.”  That’s what the Internet is. It’s a free radio station for people with the guts to go find listeners.

Leo Laporte started this way not with music but with nonfiction, and Leo takes home millions of dollars a year personally by running what is basically a radio station on the Internet about technology, and it’s going to be repeating again and again.

If you want to talk to people for a living, if you want to use this connection, you can’t rely on the handout of Herbert Hoover in 1928 when he gave frequencies to all these people for nothing, because those frequencies are getting less valuable every single day.

Instead, people are focusing their attention in a different place.  Sure, the radio might be on, but there’s a difference between being on and you having attention.

And the simple example is if you go on the radio and said “please call me right now,” how many times will the phone ring?  Because I guarantee you, if I went on my blog and say here’s Mark’s phone number, please call him, his phone would ring.

Here’s the psychology inside the average broadcaster’s mind.  They recognize that what you’re saying is true.  The revenue that can be derived from those activities is what I call “expensive dollars” compared to the revenue that can be derived because I have this federally licensed frequency and the ability to extract dollars from ad agencies who are waiting in line to hand it over to me for nameless, faceless, anonymous ears who are listening or at least hearing, if not engaging.  That’s the problem – expensive money vs. inexpensive money.  What do you say to those people?

I would say quit whining.  If it’s working so great, what are you listening to Mark and me for?  You should go to the bank and count how much money you have.

You’re not really saying that.  What you’re really saying is you would like the new money to be as brainlessly easy to get as the old money, and it’s not.  And because it’s not and because you’re lazy, you’re not getting any of the new money are you?

If you had listened to me and Mark when we first talked six or eight years ago and said:  “We’re going to start collecting permission by zip code of people who want to hear from us,” by today you’d have maybe half a million people getting your daily newsletter.  You know what that’s called?  That’s called Groupon.  And you know what Groupon’s worth? I don’t know, $8 billion!?

Tell me why Groupon wasn’t started by your radio network?  I don’t know why it wasn’t started by your radio network.  You had everything you needed to start Groupon, except guts.

Seth, between the lines of all our conversations is the central idea that this thing we think of as radio, with the tower and the audience, functioning in the traditional way with the ad agencies, really isn’t what we are at all.  What we are is this permission asset with a community of fans and community of advertisers who connect with each other, and our job is to leverage that community so as to monetize it in natural, organic ways, no matter how:  Off the air, on the air, in the community, online, everywhere.  Why is it so difficult for broadcasters to get their heads around this?

I’ll tell you why.  It’s a little bit like being in a country that has a lot of oil.  Countries that have a lot of oil almost never innovate in almost any way.  There’s a long history of this.  Because if the stuff is coming out of the ground, it’s hard to go to school and do your work, because you can just go outside and get more stuff, but when the natural resource disappears you’re in trouble.

So in my hand is a MiFi card.  In two years it won’t cost what it costs now, and it won’t be as big as it is today.  It will cost thirty cents and it will be in my car.  Now when I have this in my car and my radio is no longer terrestrial radio or Sirius radio, but Internet radio, what’s your license worth?  Once I have every radio station available in my car, and not just the ones it currently has, but any one I want to invent on Pandora, what’s you license worth?

What we’ve come down to is this:  You will not be able to retire before this hits.  You were hoping you could, but you can’t.  So given that that’s the case, what are you going to do about it?

You had better find out where the “expensive” money is.  You had better find out what asset you are going to be able to build because your current asset, your FCC license, is about to be worth zero.

Seth Godin, thank you so much for your time today.

It’s always a pleasure.  Thanks for the work you do.  It really matters.

Peter Guber is the former chairman and CEO of Sony Pictures and currently heads the Mandalay Entertainment Group which presents hit films such as The Kids Are All Right and recently partnered in acquiring the NBA’s Golden State Warriors.  Among the award-winning films Guber has produced or executive produced are Midnight Express, Gorillas in the Mist, Batman, and Rain Man.  Peter is the author of a great new best-selling book called Tell to Win: Connect, Persuade, and Triumph with the Hidden Power of Story. As Peter writes: “Move listeners’ hearts and their feet and wallets will follow.”

What follows is an abbreviated transcript of our conversation.  For the full flavor of my conversation with Peter click on the audio link below, sit back, and enjoy.

You can also download the audio here.

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Tell To Win seems like a subtle twist on Sell To Win.  Why swap “sell” for “tell”?

This isn’t storytelling, which we all know about – Once Upon A Time – it’s telling purposeful stories.  And if you can’t tell it, you can’t sell it.

Ultimately, whatever it is, your ideas to your children, your family, your business, your employees, your customers, your clients… anybody.  The ultimate point is that you’re going to have to get in the room, breathe the same air, look in their eyes – one, ten, or twenty people – and let them know what you’re made of and what the product you’re trying to propose is made of.  If you can’t tell it, you’re skunked.  Ultimately, that is the big game changer.

What is the power, what is the secret, of crafting a great story?

The secret is there is no secret.  It’s inside you.  It’s not gift from me to you.  This is the way you’re wired.  For 40,000 years this has been wired in, and it’s only in the last nanosecond that we have electronic media.  My aunt is 105 today, so when she was born there was nothing but the oral narrative or a newspaper.  Even a few generations before that, 300 to 400 years, not even any written words that the public was getting.  So we’re wired to create stories.  That’s the difference-maker that allowed us to socially organize.

LinkedIn and Facebook and Twitter and MySpace didn’t create social cohesion; we did with language.  We created all that because without that organizing principle we couldn’t get people to work with us, follow the rules and values of the tribe and survive.  That’s what allowed us to move from the bottom of the food chain to the top.  So we have it inside of us.

You need to recognize that all the elements of telling the sell, telling the win, telling the tell are the first part, and the second part is the story itself.

The story provides the emotional transportation for your offering.  It emotionalizes everything and therefore the audience metabolizes what you want them to do, not just hears it.

And then the secret is word of mouth.  They pay it forward.  What do they pay forward?  The story as theirs and that’s what moves the meter.

They own the story; that was one of your points.

They own the story.  Right on.

You make the point quite compellingly that we have way too much dependence on statistics, case studies, PowerPoint, that in many ways we’re arguing with data when we should be arguing with story, right?

I think data, facts, and information – analytics – are critical.  They’re important.  They’re absolutely essential.  They’re proof of process.  You have to have that resource to validate everything.  But the resourcefulness, the ability to narrate those artifices, those words, data, facts, statistics, into an offering, and to give it a contextual value, to move the meter, to bond it with emotion, that’s the secret.

Otherwise those things will not be memorable.  You don’t remember those things; you remember the experience, and the story renders the experience – that has always been the case.

Always, always, always, always, always, always.

No gift from me to you, that’s the way you’re wired.

And that’s what makes great movies work, right?

Always, because what are movies?  They are the ultimate emotional transportation business – a suspension of disbelief; you’re swept into the hero’s shoes or the villain’s shoes.  You take that journey.  You’re changed, your point of view changes,  your experience changes, and what do you do?  You don’t tell all the facts and figures of the movie; you talk about your experience of the movie.

It made me laugh… it made me cry… I felt this… I felt that.  And then you say “and it changed my mind about this..” or “it changed my mind about that…” or “it made my mind up about this…” or “it confirmed my view about that…” That’s how you remember it.  That’s how you recall it.  That’s how you use it.  And that’s why the momentum-getter for everything is to be able to emotionalize your offering.

That doesn’t mean trick, manipulate, or even manage; it means honestly, authentically utilize that resource as a power tool.

Let’s talk about the DNA that makes a great story.  You have three central ingredients in the book, and I wonder if you could talk about them briefly – challenge, struggle and resolution.

Let me tell you a story that I think best indicates it.

When I was running Sony, Michael Jackson was doing the music for so many of our critical albums, and suddenly he wanted to be in the movie business.  I had to go to his house for lunch, and I was concerned because I wasn’t convinced he understood what drama is or what story is.  He knew melody and he knew performance but what’s the likelihood that he’d be able to execute?

So at lunch I asked him if he understood how drama works differently from music.

“Do you understand how drama works?” I asked him.

And he looked at me, smiled and said “come up to my room.”

I went upstairs and outside his room he had a big glass terrarium.  Inside the terrarium, he pointed to a huge snake the size of my thigh.  It was just enormous!  I think it was a boa constrictor.  He pointed and he said “Muscles.”

I said “Muscles?”

“Yeah, that’s his name.”

And he pointed to the other end of the terrarium and there’s this little white mouse just shaking and trembling.

I said “oh my gosh.”

He said “you know what’s going to happen?”

I said “yeah, he’s gonna eat him.  So what does that have to do with drama?”

“Aah” he said, “but you don’t know when, you don’t know how.  That’s the drama; not just that he’ll be eaten.”

Michael understood that drama meant challenge, struggle, and resolution – for the mouse and for the snake.  And we as the observer have that experience.

And then you could ask all the other questions:  Why doesn’t the snake strike right away?  Because it pumps the adrenalin to the mouse; the mouse is more tasty, more alive when he eats it, because he has to eat live food… you start learning all the information.

You’d never remember the information if you didn’t have that story!  I wouldn’t even remember to tell you the story.

And there are a lot of tasty mice to be devoured in Hollywood.

Yeah, that’s for sure.  Some rats too.

It seems to me radio is a natural venue for storytelling and it also seems to me that there is not that much storytelling on the radio.  Do you have any observations about that?

I grew up as a very young boy in Boston.  I used to put my head under the covers and listen to “Who knows what evil lurks in the hearts of men? The Shadow knows.”  I used to listen to all these dramas on the radio late at night, and my imagination filled in all the pictures.

The idea is that words are artifices.  Pictures are artifices.  They’re designed to give you that emotional transportation, to suspend disbelief and make you part of the story.

Radio has always been able to do that.  Radio still does that in the news – in reporting narrative.  It just doesn’t do it the same way right now as television and the movies and other visual media – we have eyes, as well as ears.

It has been the same for every technology that has come along.  Every new technology in a sense is a prop.  3D is new technology.  Color was new technology.  All of those things enhance the verisimilitude of exactly this – putting you in the room face to face, making it as close as you can, giving all those tools to the artist so he can render the experience to the audience so they could experience what the artist was telling.  That’s always the way it would be.

The idea is the audio artist had to render the experience with a certain kind of words and texture and tone that didn’t have the visual component.  TV and movies bring that visual component.  So this has always been an inexorable challenge for everybody.  We all like different modes of transportation but ultimately we’ve got to get there, whether it’s the radio, or the movie, or the television or digital media on the internet, it’s only about transporting us and then downloading that information or valued proposition inside the story.  That’s what it’s about.

As the head of Mandalay, as someone at the center of the entertainment industry – someone who has a marketing agenda for your own content – where do you see radio fit relative to digital tools nowadays?

When you look at radio, you recognize that this is a tool that allows people to participate with their imagination as well as their ears.  Radio works phenomenally in the automobile.  It also works on the Internet as online radio.  It is not as disruptive as a movie in terms of capturing all your time, energy and attention.  When you go to a movie, you sit in a darkened theater, there is the pressure of the communal audience to behave in a certain way and for that two hours you sit there and you watch the movie.  There is nothing else going on.  They even ask you to shut the cell phones off.

Just look at the difference of radio – you’re driving in the car, or you’re listening while you’re doing something else, or you’re busy writing something or in conversation.  Radio can be less disruptive and more of an alternative to your lifestyle.  It’s not necessarily preemptive.

It can be preemptive, of course. If you listen to sports radio, for example, oh my God!  What goes on in sports radio and the talk back and forth; either they should do one of two things – find all those people and you can have a perfect sell to them or arrest a lot of them, too.  Their advocacy is incredible and they’re viral – they tell everybody about it.

Radio is a tool that is not going to go away.  There is a great deal of immediacy.  It may morph more and more to audio Internet radio.  That may ultimately be another channel of physical distribution for the medium.

So radio’s going to remain a robust arena for both the artist and the audience.