Avid Listener seems to think that after the masses are served by the dog pile of stations fighting for those listeners that a niche format can work nicely. I gather Avid Listener has never been in radio and has no clue about the business of running a station.
Once you reach the masses, the niche formats are so numerous and defined that the numbers in each niche group are so minute, there is not any way to pay the bills, much less turn a profit. There’s not two or three niches but likely a hundred if not hundreds.
If you are in a market where the average FM station goes for $5 Million, the seller is not going to sell it to you for less than the fair market price, $5 Million, no matter the format you will put on the station. In other words, the cost of entry is $5 Million no matter if you will go for the masses or a niche. So, the group buying the radio station wants the most promising option for a return for their money, a mass appeal format.
Radio is either commercial and advertising based or non-commercial and listener and underwriting based.
In commercial radio everyone thinks sales happen by being a good radio sales person. This is true, but a good radio sales person knows they have to fit the sales box. In other words, you cannot control the client and you cannot control the recipient of the messenger. The radio sales person does not change thinking or habits but persuades the client by demonstrating their product can help them build awareness and make more money. A good radio sales person knows his audience and what needs to be done to reach that listener with the message carefully crafted to get them to hear it.
In rated markets any business of the size that can afford to advertise in radio has an advertising agency that makes buying decisions. Those agencies have to justify their decisions, so they use the ratings to document they made the wise choice of buying the right top rated stations. There is never any cash for a niche station. I’ve been in that position and on a first name basis with many media buyers who never once said yes.
So, from a note payment based on the fair market value of the radio station and the way advertising is purchased, the niche format is not an option. In fact, it is simply off the table.
I can tell you that not many listeners pay up for their non-commercial radio station. It has been said about 1 in 10 will be a ‘member’. That means of 1,000 listeners maybe 100 will donate, usually around $60 a year. Most all stations need grants and Underwriting as well. So to get grants and Underwriting there is some level of pressure to serve a sizable audience, especially Underwriting because regardless of FCC rules, the underlying reason for the business to Underwrite is based on the results they will receive from their ‘advertising’, so the number of people you reach is crucial. A niche format simply is not much of an option. If your market is 1,000,000 and your niche can gather 0.5% of that audience, that’s 5,000 listeners. That means about 500 members and no interest among Underwriters and likely from many that offer grants. If you paid just $1 Million for the station, those 500 will never pay the monthly note. That leaves you scrambling for non-radio or not on the air revenue raising. You might be able to do that but I can almost guarantee your on air product will suffer to the point it is ineffective because you won’t have the help or dollars to make sure everything is done right. If you do a less than perfect job, your results on income will suffer pretty much equally.
The numbers never work because the bigger the population, the more expensive the operation is. Land and rent is more expensive, etc.
This is where Low Power FMs tend to suffer. Those that are not religious are frequently niche programmed. They wind up reaching perhaps 1% of a tiny fraction of the market. If you get 1% of 50,000, that’s not much. Such stations might bring in $1,000 to $5,000 a year in income. Most fold up after a few years because the board is tired of digging in their wallet each month to pay the bills the revenue doesn’t cover. I know a good number of LPFM operators.
Obviously, the niche formats are better suited for internet streams. While I haven’t a plan to develop an awareness for an internet station, the tiny fraction that is a specific niche is technically substantial considering you have the world as your audience potential. Still the cost of bandwidth and licensing costs far outweigh the revenue potential even for the mass appeal format.
I personally know a fair number of non-commercial FM broadcasters and a great many, especially smaller market operators. In virtually every instance, they mirror the typical business: they struggle to bring in the cash they need and wish they could get more so they could offer more to their listeners.
This reality is fairly common: in a remote market, the only radio station in a county had 78 of the 80 businesses in town advertising on the station. Everybody listened. They did as well if not a little better than the local county newspaper. They were still satellite delivered country because their income only allowed for the husband and wife plus a couple of high school part time employees. They were doing everything right but people tend to think radio is a cash cow. It almost never is and reality is far less than you might suspect. The owner of this station dreamed of having live jocks and doing radio the way he remembered growing up, taking requests and being the social hub of the county. He never saw that happen. He’s computer driven now and has a guy voice track a morning show. It isn’t because people are listening to Sirius/XM or streaming a distant station. The locals really do listen to him and you hear his station everywhere you go from the Sonic to the City Office or Insurance Agency and Grocery Store. It is not that his ad dollars go elsewhere. It’s just reality in most cases. Simply put, fewer dollars roll in than many imagine, even when you do everything right. Imagine if he programmed a niche format.
Once you reach the masses, the niche formats are so numerous and defined that the numbers in each niche group are so minute, there is not any way to pay the bills, much less turn a profit. There’s not two or three niches but likely a hundred if not hundreds.
If you are in a market where the average FM station goes for $5 Million, the seller is not going to sell it to you for less than the fair market price, $5 Million, no matter the format you will put on the station. In other words, the cost of entry is $5 Million no matter if you will go for the masses or a niche. So, the group buying the radio station wants the most promising option for a return for their money, a mass appeal format.
Radio is either commercial and advertising based or non-commercial and listener and underwriting based.
In commercial radio everyone thinks sales happen by being a good radio sales person. This is true, but a good radio sales person knows they have to fit the sales box. In other words, you cannot control the client and you cannot control the recipient of the messenger. The radio sales person does not change thinking or habits but persuades the client by demonstrating their product can help them build awareness and make more money. A good radio sales person knows his audience and what needs to be done to reach that listener with the message carefully crafted to get them to hear it.
In rated markets any business of the size that can afford to advertise in radio has an advertising agency that makes buying decisions. Those agencies have to justify their decisions, so they use the ratings to document they made the wise choice of buying the right top rated stations. There is never any cash for a niche station. I’ve been in that position and on a first name basis with many media buyers who never once said yes.
So, from a note payment based on the fair market value of the radio station and the way advertising is purchased, the niche format is not an option. In fact, it is simply off the table.
I can tell you that not many listeners pay up for their non-commercial radio station. It has been said about 1 in 10 will be a ‘member’. That means of 1,000 listeners maybe 100 will donate, usually around $60 a year. Most all stations need grants and Underwriting as well. So to get grants and Underwriting there is some level of pressure to serve a sizable audience, especially Underwriting because regardless of FCC rules, the underlying reason for the business to Underwrite is based on the results they will receive from their ‘advertising’, so the number of people you reach is crucial. A niche format simply is not much of an option. If your market is 1,000,000 and your niche can gather 0.5% of that audience, that’s 5,000 listeners. That means about 500 members and no interest among Underwriters and likely from many that offer grants. If you paid just $1 Million for the station, those 500 will never pay the monthly note. That leaves you scrambling for non-radio or not on the air revenue raising. You might be able to do that but I can almost guarantee your on air product will suffer to the point it is ineffective because you won’t have the help or dollars to make sure everything is done right. If you do a less than perfect job, your results on income will suffer pretty much equally.
The numbers never work because the bigger the population, the more expensive the operation is. Land and rent is more expensive, etc.
This is where Low Power FMs tend to suffer. Those that are not religious are frequently niche programmed. They wind up reaching perhaps 1% of a tiny fraction of the market. If you get 1% of 50,000, that’s not much. Such stations might bring in $1,000 to $5,000 a year in income. Most fold up after a few years because the board is tired of digging in their wallet each month to pay the bills the revenue doesn’t cover. I know a good number of LPFM operators.
Obviously, the niche formats are better suited for internet streams. While I haven’t a plan to develop an awareness for an internet station, the tiny fraction that is a specific niche is technically substantial considering you have the world as your audience potential. Still the cost of bandwidth and licensing costs far outweigh the revenue potential even for the mass appeal format.
I personally know a fair number of non-commercial FM broadcasters and a great many, especially smaller market operators. In virtually every instance, they mirror the typical business: they struggle to bring in the cash they need and wish they could get more so they could offer more to their listeners.
This reality is fairly common: in a remote market, the only radio station in a county had 78 of the 80 businesses in town advertising on the station. Everybody listened. They did as well if not a little better than the local county newspaper. They were still satellite delivered country because their income only allowed for the husband and wife plus a couple of high school part time employees. They were doing everything right but people tend to think radio is a cash cow. It almost never is and reality is far less than you might suspect. The owner of this station dreamed of having live jocks and doing radio the way he remembered growing up, taking requests and being the social hub of the county. He never saw that happen. He’s computer driven now and has a guy voice track a morning show. It isn’t because people are listening to Sirius/XM or streaming a distant station. The locals really do listen to him and you hear his station everywhere you go from the Sonic to the City Office or Insurance Agency and Grocery Store. It is not that his ad dollars go elsewhere. It’s just reality in most cases. Simply put, fewer dollars roll in than many imagine, even when you do everything right. Imagine if he programmed a niche format.
