dying AM radio

[davideduardo]

The AM band seems to me to be pretty busy, but then these boards have been predicting for years the death of radio and every other medium of communication, except of course the latest technology, which somehow goes out of vogue in a few months. Good ol' libraries are also still pretty busy.

The posts I take issue with are those that say AM is already dead or will be dead by next Wednesday. AM is in decline, as it has been for over 4 decades. But the end is not very near and we can not predict an exact date; as long as some profitable stations survive, we will have AM radio.

...and how long have we been saying that other countries this, other countries that and other countries the other thing, so we should be imitators instead of innovators and originals in our uniqueness and greatness?

Most other countries did not license the number of AM stations that the US has done. That statement is true whether based on stations "per person" or stations per city or market. So there are often plenty of FM channels for AM stations to migrate to. This is the case in Mexico and in Canada and many places around the world.

I do not think that there is an AM operator who would not want an FM with a comparable facility. But the FM band is already packed under current rules, and that is part of the problem.

 

[MickeyD]

That is an exaggeration. Smaller AMs can have costs similar to an AM. The expensive ones are those that require many acres of land and complex directionals. A station on 1240 or another of the local channels is not going to be significantly more costly to run than a typical Class A with its own tower.

In small markets, local AMs with localized services can do very well. And in larger cities, ethnic and religious station get small but respectable listening and are profitable.

As long as an AM can make money, it will survive. There are about 4700 AM stations, yet any given month may only see one or two going away permanently.

In many large markets, some of the top billers are AMs... think stations like WGN and KCBS and WBBM and WINS and so on.



The returned or canceled licenses number in the dozens... often very poor technical facilities that don't cover their markets or stations that never should have been licensed to begin with due to bad facilities or location in towns not capable of supporting a station.

I am involved with a couple of major market AM stations and they are doing so well that you can make them an offer and they will probably snap it up. All it will take to put a local AM under is a well run LPFM station. High cost vs almost no cost. I know a market where this is happening. If you really believe that AM has a future buy one. Disney paid around 40 million for 50KW WQEW and sold it for almost 13 Million. This is a NYC 50 KW AM signal. There aren't even any bites on their other stations. Look at the business side of radio not programming it. I wouldn't take an AM station as a gift.

 

[Avid Listener]

The AM band seems to me to be pretty busy, but then these boards have been predicting for years the death of radio and every other medium of communication, except of course the latest technology, which somehow goes out of vogue in a few months.

It has also been noted, many, many times, that referring to the "death" of any media is merely hyperbole. It's an exaggerated reference to "diminishing to the point of irrelevancy".

 

[TheBigA]

I wouldn't take an AM station as a gift.

Funny you should say that.

Clear Channel has been donating a few of its AMs to the Minority Telecom Council, with the hope of inspiring more minority ownership of broadcasting. It's a pretty tough go, even when they get the frequency for free.

 

[MarioMania]

Don't you mean IfartMedia

Anyhoo, If the FCC takes it finger out of there a****es fix the AM problem

Get rid of IBOC on AM, Keep it on FM..AM Stereo sounds better them IBOC

 

[MickeyD]

You don't know whether there are sales being negotiated for the Disney stations. In all likelihood, there are quite a few deals in various stages of development and everyone is under an NDA, which is usual.

As to your LPFM statement, LPFMs are non-commercial and cover neighborhoods, not whole markets. They don't compete with commercial stations.

As to pricing, there is simply a new model for all media pricing that is mostly the product of the recession... just like happened with real estate. Even the most profitable station today goes for 5 to 6 times cash flow, not the 16 to 18 times that were common during the consolidation era.

What I have written is based upon present personal experience not the way I think radio should be. There is a reason that many AM stations don;t have a local sales staff and that is because of listenership. Most local sales happen when an advertiser calls the station looking to advertiose.

LPFM stations do indeed compete with commercial stations again based upon personal experience. Big cost vs almost no cost. Radio station sales during the over-inflated price days were never based upon cash flow and we all knew that they would never see that money again. The sale of the Disney stations will set a new benchmark in he pricing of AM radio stations and many will be turned in to the FCC. When the FCC's solution to save AM is to move it to FM this should answer all questions on the death of AM radio. What I think will kill off AM radio besides interference, loss of listeners, is the cost of electric power that is expected to sharply increase within the next couple of years.

 

[davideduardo]

What I have written is based upon present personal experience not the way I think radio should be. There is a reason that many AM stations don;t have a local sales staff and that is because of listenership. Most local sales happen when an advertiser calls the station looking to advertiose.

I think I can count on the fingers of my right hand the number of times I have made a sale from a call-in in the 30 years I owned, managed or handled sales for radio stations.

In many clusters, there is no dedicated sales staff for a specific station as the sellers work all the stations. In the worst case, the AM is used as a bonus to make a sale.

If a station has no sales staff, then there is the question of why it is on the air.

LPFM stations do indeed compete with commercial stations again based upon personal experience. Big cost vs almost no cost.

This is like saying a 7-11 competes with Walmart. And even there, I am comparing two commercial for-profit organizations. A 100 watt at 100 feet LPFM does not even truly compete with a Class A FM for audience and it can't compete for revenue.

Radio station sales during the over-inflated price days were never based upon cash flow and we all knew that they would never see that money again.

Sure they were... they were just based on high multiples. At the time, the big companies thought there would be a) no recession b) no new competition and c) larger economies of scale than in reality materialized.

Of course, some station sales were based on stick value and some were based on what it took to get a particular station to fill up a cluster, but the three factors still came into play.

The prices in 1996 made sense based on the economy, the growth of radio and the lack of new media competition.

The sale of the Disney stations will set a new benchmark in he pricing of AM radio stations and many will be turned in to the FCC.

There is no difference between the lower prices for AMs today and the lower prices for FMs. For example, in Los Angeles SBS paid $250 million for an FM stick in 2000. Recently, GRC paid $85 million for a much better stick in the same market... a 65% reduction in value for a superior technical facility.

I just sold a home in AZ with a comparable hit in value. This is not just a radio issue, although radio has been hit harder due to the profusion of new media competition.

When the FCC's solution to save AM is to move it to FM this should answer all questions on the death of AM radio. What I think will kill off AM radio besides interference, loss of listeners, is the cost of electric power that is expected to sharply increase within the next couple of years.

A few hundred dollars a month in the electric bill is not going to be the deciding factor in deciding whether to keep an AM on the air. I doubt CBS worries a split second about the WINS and WBBM and KCBS electric bills.

If a few hundred dollars is a deciding factor, it is likely the station was either never viable (a perennial loser), very marginal (a bad technical facility that never found a real niche in the market) or badly run.

Yes, the solution for many AMs is to move to FM. There are more listeners there and more opportunities. But until we see licenses being turned in in the hundreds, we can't say that AM is dead. It is declining, for sure, but definitely not dead.

 

[Unregistered]

David, I have read so many of your posts and you are always spot on. In fact on the LPFM stations, in more than 99 in 100 cases you are spot on.

You are wrong on the LPFM opinion in just a few isolated cases. Here's what happens:

You have a radio guy assemble a board and start a LPFM that serves the small market the fulltime station does. It's in an isolated county and the town the LPFM serves is basically it in the county. The LPFM programs itself to be a reflection of life in the community. The LPFM folks are known and established in the community.

When the LPFM sells Underwriting, they find that merchants mostly just want some good PR styled advertising that bonds the business to the town or they want to sponsor a devotional or such. Few are actual price and item advertisers. Few of these businesses have actual sales and few have the competition that makes them need to tell the audience why their business is better. In other words, Underwriting is the advertising they want and is pretty much what they buy on the full power station. When I ran an AM station in a town of 4,000 almost every advertiser wanted to support the school/youth or just keep their name out there. I'd say 90% of the ads could have been easily revised to be underwriting (ie: the number is versus call).

Rather quickly, in the right market, I can see an LPFM being a very viable competitor for a full power and the big IF is whether the operators know the radio business. This is especially true with out-of-town owned stations that might not do a great job. And do not forget the 'new' factor. New is huge in small townss and there is an underlying thinking it is important to support your fellow business because we can't all make it without each other.

There are very few markets where this happens. One hand might count all of them, but a well run LPFM can truly challenge and rarely (if what I was told is true) eclipse the billing out an out-of-town owned FM. I have read where Payson, Arizona is such a market and I have been in contact with an LPFM operator there a few years back.

 

[davideduardo]

The only people that will accept a donated AM are people that know absolutely nothing about radio.

Or they are groups that wish to serve a constituency too small or too specialized for a large group to program for. Take 1310 in Dearborn (Detroit MSA) which could not compete in the general market. It is going to be a Spanish language station serving many of the 200 thousand Hispanics in the Detroit area and has a good chance of being, albeit on a smaller scale, both profitable and a valuable community asset.

The same is true for anyone that will buy an AM and think that "with the right programming they can turn it around".

OK, please address the $12.5 million dollar purchase of WSNR in the New York MSA just two months ago by Davidzon. They LMAed the station and saw that they could make a nice profit serving the growing Russian-speaking community in the area. They found "the right programming" and are making a significant profit from it.

Or look at Arthur Liu's Multicultural: a collection of often limited signals used to target ethnic and special interest groups that they cover nicely. The stations have, mostly, a brokered business model and they appear to be nicely profitable. A good use for stations that were, for the most part, losing money before the transfer. And there are hundreds of other examples, both for-profit and religious, from Salem to Immaculate Heart Radio.

 

[MarioMania]

Are we still talking about AM?

Seems like you guys rialed off topic & talking about Canada, French and what not

 

[MickeyD]

It depends. The people who know the most about radio consider the licenses to be overpriced. Sometimes you need someone who doesn't know anything about the business to enter it in order for real change to take place. That's the thinking behind minority ownership. A smart experienced minority broadcaster like Oprah would never spend any of her money on buying a radio station. Imagine if she did. Instead, these stations get donated to people with little broadcasting experience, but lots of community experience. It might be an interesting experiment in the use of a public resource like AM radio.

LPFM's start off with a high level of Ra-Ra! and fizzle out to nothing. An LPFM is much easier to operate than an AM and the power bill is lower. Rather than doing a litte research on actually operating a station, they find out what it costs to put one together and operate it and hey are either not built or they pull the plug. I know of a half dozen LPFMs that turned the CPs in immediately after getting them. The people that get into radio without knowing what they are doing will find out the hard way. It is not like any other business and if you get your hands on an AM you will watch it decline.

 

[TheBigA]

The people that get into radio without knowing what they are doing will find out the hard way. It is not like any other business and if you get your hands on an AM you will watch it decline.

I agree with all that, except that not everyone gets into radio for the purpose of making money. There are those for whom radio is an extension of missionary work. That can be religious, political, or cultural. For those people, the difficulties in running the station are unimportant. They are driven by something else. Those will be the people who will own radio stations in the future, because we all know there are cheaper ways to reach people than OTA radio.

 

[MickeyD]

I think I can count on the fingers of my right hand the number of times I have made a sale from a call-in in the 30 years I owned, managed or handled sales for radio stations.

In many clusters, there is no dedicated sales staff for a specific station as the sellers work all the stations. In the worst case, the AM is used as a bonus to make a sale.

If a station has no sales staff, then there is the question of why it is on the air.



This is like saying a 7-11 competes with Walmart. And even there, I am comparing two commercial for-profit organizations. A 100 watt at 100 feet LPFM does not even truly compete with a Class A FM for audience and it can't compete for revenue.



Sure they were... they were just based on high multiples. At the time, the big companies thought there would be a) no recession b) no new competition and c) larger economies of scale than in reality materialized.

Of course, some station sales were based on stick value and some were based on what it took to get a particular station to fill up a cluster, but the three factors still came into play.

The prices in 1996 made sense based on the economy, the growth of radio and the lack of new media competition.



There is no difference between the lower prices for AMs today and the lower prices for FMs. For example, in Los Angeles SBS paid $250 million for an FM stick in 2000. Recently, GRC paid $85 million for a much better stick in the same market... a 65% reduction in value for a superior technical facility.

I just sold a home in AZ with a comparable hit in value. This is not just a radio issue, although radio has been hit harder due to the profusion of new media competition.



A few hundred dollars a month in the electric bill is not going to be the deciding factor in deciding whether to keep an AM on the air. I doubt CBS worries a split second about the WINS and WBBM and KCBS electric bills.

If a few hundred dollars is a deciding factor, it is likely the station was either never viable (a perennial loser), very marginal (a bad technical facility that never found a real niche in the market) or badly run.

Yes, the solution for many AMs is to move to FM. There are more listeners there and more opportunities. But until we see licenses being turned in in the hundreds, we can't say that AM is dead. It is declining, for sure, but definitely not dead.

Eduardo you are ripe for an AM. You will never overcome the technical problems that are enhanced today with AM unless you move to FM. You should get a group of investors together and get yourself a few of these money making AM's. An LPFM can indeed compete with a 1KW AM I am watching it happen. All of the larger groups are dumping AM stations as fast as they can the problem is they can't find buyers. Radio is not a good investment.

 

[davideduardo]

Eduardo you are ripe for an AM. You will never overcome the technical problems that are enhanced today with AM unless you move to FM. You should get a group of investors together and get yourself a few of these money making AM's. An LPFM can indeed compete with a 1KW AM I am watching it happen. All of the larger groups are dumping AM stations as fast as they can the problem is they can't find buyers. Radio is not a good investment.

Radio at the right price is a good investment. Were it not, you would see stations by the hundreds shutting down.

Ask Entercom if the investment in the Lincoln Financial stations was a bad investment. They bought at a good multiple and the group is profitable. They will get their money back and a good ROI way before the stations cease to be viable.

Ask CBS if they are going to shut down WBBM, WINS, WCBS, KCBS, KNX, KRLD or KYW. The AMs with good signals, whether in small or large markets, are viable for some time.

The challenges are with the daytimers, the low power/high dial stations, the very directional ones. They were viable before FM became so, and have not been competitive since then. Some, if the market exists, can go for the religious and ethnic options and be very profitable.

I don't have the money to buy a big signal from CBS. And I have no experience with niche programming on either AM or FM; my background is mostly major markets with ratings based transactional sales models. But I see how operators like Salem and Multicultural and IHR and such can be very successful with AMs and will be for some time... it is just not my area of expertise.

 

[Unregistered]

Avid Listener stated the public airwaves are owned in common. Yes the 'common' might own the airwaves but NOT the licenses. In the same way, Joe might own the shopping mall but does not own the stores. Literally licensees pay for the right for the license.

To say a licensee is to be responsible for education is insane. If you want that, then I want your school taxes you pay on property you own. Radio is not a school or a college and if that was the radio station's intent, it sure would be a lot cheaper and less hassle to build and operate a school and maybe I could turn a better profit.

By the way, earlier, Canadian Content was mentioned. This applies to the music played. A percentage must be by Canadian artists. Canadian Radio Stations also cannot change format at will but seek approval to do so. The CRTC is very heavy handed in their supervision of radio. For example, the entire broadcast day must be recorded by regulation. On the other hand, they don't let 5 of the same format stations exist in the same market unless there is ample market to support that.

 

[MickeyD]

Radio at the right price is a good investment. Were it not, you would see stations by the hundreds shutting down.

Ask Entercom if the investment in the Lincoln Financial stations was a bad investment. They bought at a good multiple and the group is profitable. They will get their money back and a good ROI way before the stations cease to be viable.

Ask CBS if they are going to shut down WBBM, WINS, WCBS, KCBS, KNX, KRLD or KYW. The AMs with good signals, whether in small or large markets, are viable for some time.

The challenges are with the daytimers, the low power/high dial stations, the very directional ones. They were viable before FM became so, and have not been competitive since then. Some, if the market exists, can go for the religious and ethnic options and be very profitable.

I don't have the money to buy a big signal from CBS. And I have no experience with niche programming on either AM or FM; my background is mostly major markets with ratings based transactional sales models. But I see how operators like Salem and Multicultural and IHR and such can be very successful with AMs and will be for some time... it is just not my area of expertise.

It will be very difficult to tell a group of investors that the AM radio station or stations that they are looking at a 5 year life cycle. Every AM radio station in any market will accept an offer to get out and would probably consider throwing in an FM to sweeten the deal. In the 80's I was involved in brokered Chinese and Korean TV and that ship sailed over ten years ago. Why would anyone have to listen to scratchy, crappy AM when hey can stream programming on a smartfone from anywhere? Unless an AM radio station has outstanding property that goe along with it (WBZ AM's transmitter site for example) stay away.

 

[Goat Rodeo Cowboy]

Regardless of why immigrants want to enter the United States, it's our country. All sovereign nations determine their own policies for immigration. Far more important than what individual immigrants might want themselves is what the nation they are entering expects of them.

I am having trouble figuring out whether you want to talk radio, or talk politics.(***) How nations work, and what are the ground rules is very fluid. But you speak of nations, immigration and legal precedent as though the values and concepts are fixed and ageless.

I narrate audio books. I am currently "grooming" the script for a book that traces the history of one Native American tribe or nation dating back to the 1400s. I am learning things about the founding of our nation that were NEVER taught in junior high or high school history courses.

We are not the nation we were 200 years ago or 150 years ago or 100 years ago or even 50 years ago. We are a nation that risks tearing itself apart over and over again as we balance what we think of as ageless values of self-government up against what we need to do to survive the political crisis of the current election cycle.

(***) Actually, it is YOU who is having trouble deciding whether you want to talk radio or talk politics.

In the context of this thread, since the AM band is part of the public airwaves, owned collectively by the nation, it is the citizens of the nation, through government they elect, who determines how those airwaves should be used. Any discussion of what the government will do is therefore based on a discussion by the citizens of what the government should do.

The current "want" of the citizens of this nation, through the government they elect, is that radio should be operated within the economic bounds of the (so-called) Free Enterprise System. We don't tell Walmart they should select an inventory of items that will maintain the sanctity of our political system. We tell them: Make a profit or die! There is another thread going that looks at the history and fortunes of Radio Shack. We as a nation don't look at Radio Shack and say: We are a sovereign nation and the political and economic health of our nations depends on you stocking soldering irons and all kinds of discreet electrical parts because it is essential that ALL citizens, native born or immigrant know how to assemble electronic gizmos. Make a profit or die!

If they only thing keeping AM radio alive is pandering to immigrant groups who cannot (or will not) speak English, then the terms of the licenses that already say that the stations must operate in the public interest must spell out what that interest is. A federally licensed AM radio station that narrowcasts to a particular community of immigrants should have a clause in their license that requires a certain amount of programming designed to educate the immigrants on American customs and culture, including the English language.

Who makes the decision, and who gets to change the decision over what is keeping a particular AM station alive. You propose that stations that choose to broadcast non-English language content are suddenly burdened with rules that do not pertain to other programming content.

Why not a rule that tells country music stations they must require a certain amount of programming designed to educate the "red necks" on true American customs and culture, including the English language.

Why not a rule that tells urban content AM stations they must require a certain amount of programming designed to educate our "urban brothers" that the true values of American life involve a free standing residence on a suburban lot with a van, kids playing soccer, and piano lessons.

Why not a rule that tells farm-belt content AM stations that they must require a certain amount of programming disigned to educate our "farming brothers" that they must embrace genetically modified crops to meet the expectations of a sovereign nation that has a right to establish national values.

Yes, I have created some rather crude parallels to your logic. Maybe that is possible because your value system you keep hammering in this thread has it's own elements of crudeness.

 

[TheBigA]

If they only thing keeping AM radio alive is pandering to immigrant groups who cannot (or will not) speak English,

In point of fact, right now one of the few things keeping AM radio alive is conservative talk radio. If we are to use your POV as a guide, perhaps it is in the public interest to require conservative radio stations to offer competing points of view. Federally licensed AM radio stations that narrowcast to a particular ideology should have a clause in their license that requires them to provide other points of view. How would you feel about that?

 

[Goat Rodeo Cowboy]

OK, can somebody declare this thread officially dead?

It may be ill. It may be an "ugly baby". It may be grounded on a sand-bar for now, and it may be frustrating, but dead it is not. It just smells that way.

Since the founding of the American broadcasting industry, we have had this "under-tow current" that is a debate over radio as a social mechanism and radio as a business. My view it is a hybrid and both parts of the debate need each other.

If you want to own and operate a business that is nothing but a business and has no community obligations, buy or start a "house of ill repute".

If you want to focus on social mechanisms without the burden of good business practice, consider a store-front church.

Or, if you all of the above.... get a radio station. And if you want all of the above in living color, get an AM radio station.

And they you can be like the guy in the movie Groundhog.... every day will be all of this chaos over and over and over again.

 

[TheBigA]

Or, if you all of the above.... get a radio station. And if you want all of the above in living color, get an AM radio station.

The other thing I'm reading about is the rise of AM radio ownership by religious organizations. Just today, the Radio Disney station in Orlando is being sold to a religious broadcaster. Should the FCC start imposing content rules on religious broadcasters in the public interest? Doesn't that impinge on the freedom of religion? I think it does. You open a Pandora's box when you start talking about making content rules for radio. Liberty applies to everyone, not just those we like.