Good News, Bad News

[davideduardo]

We used to wish that "radio people"ould buy our stations in the "good old days" too. What programming people have the money to buy them now, and fully staff them 24/7? Doubt many if any.

Here is a question I can not answer: How many programmers (people who actually did day to day PD funcitons) have bought stations and how have they done?

 

[kinetic]

We used to wish that "radio people"ould buy our stations in the "good old days" too. What programming people have the money to buy them now, and fully staff them 24/7? Doubt many if any.

Here is a question I can not answer: How many programmers (people who actually did day to day PD funcitons) have bought stations and how have they done?

Might be unanswerable, no? Has anyone even bothered to aseemble enough aggregate data to draw conclusions? And that's beside the more cynical question: What radio programmer ever made enough money or had access to enough capital to buy a station? Third question: Could it even be done today? Maybe in the 80s and early 90s, you could afford to buy a smaller stick and then make some money in the frenzied acquisition period that followed. Radio's no longer a get-rich-quick scheme corporate owners turned it into and now, it's not only not attractive, it's out of reach. You're in a better position to evaluate that, but it does lead to a question from your previous post: If "radio's role is just not what it was," what will its future be, particularly when it's no longer fiscally feasable for some to operate? Who will run those radio stations?

 

[TheBigA]

From the beginning I've felt strongly that the process that brought us Clear Channel and ultimately its rape of radio was strictly for the benefit of the greediest slime in our society and to the detriment of radio practitioners--those of us who work every day creating radio.

The fact is, and there have been many books on this subject, that radio wasn't the only industry they invested in. Certainly Tom Hicks made a lot more money in other fields. Same with the Bass Brothers. Same with Ted Forstmann. Robert Sillerman had been buying and selling radio stations for 25 years, originally with former WABC DJ Cousin Bruce Morrow as his partner, and using former WMCA Good Guy Gary Stevens as his agent. Even in the 40s, a radio station can be an expensive thing to own. Lots of companies made deals with the devil to keep their staff paid. There was a good reason why a lot of insurance companies bought radio stations, and it wasn't for programming or community service. So I think you need to look at what happened in the 90s in the context of what was happening in the 80s. If you do, you'll come to the same conclusion I did, which is the current situation was inevitable. The main mistake was thinking that radio-only companies could weather the ups and downs of the advertising market without another source of income to fall back on. And no one was thinking about that in the 90s.

 

[gr8oldies]

As much as I read on these boards how "real radio people" arfe going to buy these stations, hire all of the DJs back, and we'll all be jocking 7 to midnight until we retire or kick the bucket, I don't see it happening. I'm aware of a few programming folks who bought stations...one who bought one of my locals, promptly became one of Transtar's first affiliates, leveraged it to buy an AM/FM combo about 20 miles from a top 125 market, automated it and then moved it in to the market. This station did have a live staff, but a very tight. liner card format,, and was consulted by none other than Randy Michaels. (Is there anyone who is was more of a programming person than Randy Michaels? The guy who modernized and tuirned around WKRC and WLW with creative programming? Who of course is universally villified as the architect of voice tracking and hub and spoke?)

So who exactly is out there to buy these stations and bring us back to radio in the 70s? Even if five jocks mortgage their houses to come up with a down payment on a medium market station, someone is going to have to do the rest of the financing..and that bank, or investors, isn't going to want that property to operate as a hobby or the "old broadcaster's home". Are insurance companies going to buy these stations? Maybe AFLAC? "106.9, The Duck". Don't see it.

 

[nolaradiobuff]

Hasn't worked for Jerry Clifton.

 

[SirRoxalot]

The consolidators are SO much smarter than we are, and what they're doing now is working SO well that radio as an industry is on the verge of collapse.

Nobody's advocating a return to 45s spinning on turntables, nightime screamers, or wah-wah jingle packages. People are advocating a return to RELATABLE radio, which is in ever-shorter supply. The people still listening to radio are primarily the people that grew up on it, and built that relationship when radio WAS relatable. Many of them feel alienated from music radio BECAUSE it's nothing more than "somebody else's iPod". There's no "added value", no introduction to new and different in-the-genre music on even a limited basis.

Go ahead. Put syndication on 24/7/365. The sooner you drive yourselves out of business, the sooner radio will become affordable for people who recognize that good, local talent is an indespensible part of radio.

PS - Even Stern got his ass kicked in most large and mid-sized markets by local guys.

 

[TheBigA]

The sooner you drive yourselves out of business, the sooner radio will become affordable for people who recognize that good, local talent is an indespensible part of radio.

Keep wishing and hoping and dreaming and pleading. Some day your prince will come. But even if they get a station at 4 times cash flow, it will take millions to hire and support the kind of staff you want. That money will still come from lenders who will want immediate return on their investment. And you can't do that by wishing, hoping, and dreaming.

 

[SirRoxalot]

Keep wishing and hoping and dreaming and pleading. Some day your prince will come. But even if they get a station at 4 times cash flow, it will take millions to hire and support the kind of staff you want. That money will still come from lenders who will want immediate return on their investment. And you can't do that by wishing, hoping, and dreaming.

Millions? Puh-lease. Not even in NYC. Certainly not in the majority of rated markets in the U.S.

Lenders have a much better chance of getting a return on their investment if there's programming that actually attracts listeners. There's a much better chance of a getting a return on your investment if there are enough sales people on the street to sell the product. Outside of the largest stations in major markets, there's more to selling radio than just tinkering with CPP. Radio revenues are down, and they're continuing to decline. The economy is part of the problem, but the biggest issue is that the consolidators continue to cut programming and sales, making the decline in revenue even worse. They're suffocating in their own debt.

New owners won't have anywhere near the debt, and will be able to compete more effectively with both other radio stations and other media because more of the cash flow can go to quality programming, promotion, and sales.

 

[TheBigA]

Lenders have a much better chance of getting a return on their investment if there's programming that actually attracts listeners.

Once again, lenders don't care about programming. They really don't care about promises of return on investment. They care about getting paid on time. That's it. If you sign a contract with them, they just care that you can pay them back. How you do it is your problem.

Telling a prospective lender about how you're going to hire lots of staff and spend their money doesn't encourage them to lend it to you.

New owners won't have anywhere near the debt, and will be able to compete more effectively with both other radio stations and other media because more of the cash flow can go to quality programming, promotion, and sales.

If they won't have the debt, that only means more profit for them. Not a bigger expense account. They have no obligation to spend their money on staff or capital equipment. This isn't non-profit radio. They will put the cash flow where most owners put it: In their pockets.

 

[adma]

So who exactly is out there to buy these stations and bring us back to radio in the 70s?

And for that matter, what's so attractive or desirable about the "radio in the 70s" ideal? For younger people, it's a polyester punchline, like low-rent Ron Burgundy. You *seriously* want that back?

 

[SirRoxalot]

Nobody wants "radio from the '70s" per se. A LOT of people want radio that listeners can relate to, not satellite-fed generic pap.

Owners who put the money in their pocket won't be able to compete with the owners that invest in their product, which means that they'll see less money coming in. COMPETITION is what drives improvements in programming, which brings more listeners back to the medium, which brings back more advertisers spending more dollars.

The single worst thing that consolidation has done is to decrease competition in the marketplace.

 

[davideduardo]

. COMPETITION is what drives improvements in programming,

Actually, revenue potential drives improvements.

In 1964 I put on the air a station in a market that already had 41 fulltime, full coverage AM stations. The way to improve programming was to be able to drive rates higher (in my case by lowering commercial load in a market that was not CPP driven), and take a lead position in programming. In this case, the 41 other competitors limited improvements as the revenue was spread so thin that nobdy had enough money to improve programming.

There is such a thing as too much competition. And that causes deterioration of programming.

which brings more listeners back to the medium, which brings back more advertisers spending more dollars.

Too many stations fragmenting too few dollars causes programming to get worse, drives people away from radio and makes advertisers look elsewhere.

The average US market has, today, three times the viable stations it had in 1965.

 

[TheBigA]

Owners who put the money in their pocket won't be able to compete with the owners that invest in their product

Ahhh the idealism of youth. Take that line to a lender and see how much money you get to invest in product.

The fact is that radio operates in the marketplace of popular taste, not quality. So it's possible to invest nothing in your product and attract huge ratings if you offer a product people want. I could invest lots of money in an unpopular format. That won't change the taste of the public. They won't listen to music they don't like if your station has a DJ they like.

Let's look at the New York Times. They invest millions in their content. They have one of the most popular web sites on the internet, and that success is killing their print business. The income they get from their web site is a fraction of the losses they're experiencing from their print edition. Yet it's the print edition that brings in the money that funds the content acquisition. So at some point, the losses in acquiring their content will kill their print business, and in term affect the quality of their internet edition. So much for investing in your product. No amount of investment will cause New Yorkers to revive their interest in print newspapers. That's not what's causing the drop in circulation.

The single worst thing that consolidation has done is to decrease competition in the marketplace.

The government is very interested in preserving competition. But they also want to increase diversity, especially with regards to program offerings. When you had companies that could only own two stations, they put the absolute most popular formats possible on those two stations, even if it duplicated formats already available. That usually doesn't happen in cluster radio. (There are exceptions, as they are with CC in Austin) The problem with diversity is it often fractionalizes the audience, which drives down audience. But that's the choice facing the government: Competition or diversity? Right now, they prefer diversity.

Even in markets where one company owns 6 or 8 stations, it still isn't enough to provide the kind of diversity the audience craves. Only Sirius-XM is able to provide a wide variety of formats and offerings without any competition. And you can see what format diversity has accomplished.

The other problem with radio is there really is no level playing field. Different stations have different signal qualities. Ownerships have different resources. Operating budgets are different. Deals are made by companies that give them exclusive access to certain things, which once again limit competition. So you can have ownership competition, and still not have programming competition. That's how business is done.

 

[kinetic]

Let's look at the New York Times. They invest millions in their content. They have one of the most popular web sites on the internet, and that success is killing their print business. The income they get from their web site is a fraction of the losses they're experiencing from their print edition. Yet it's the print edition that brings in the money that funds the content acquisition. So at some point, the losses in acquiring their content will kill their print business, and in term affect the quality of their internet edition. So much for investing in your product. No amount of investment will cause New Yorkers to revive their interest in print newspapers. That's not what's causing the drop in circulation.

The mistake made was that they --and the industry-- ignored what the internet represented. People are going to have to pay to get their NY Times online --that's what will happen. The fact they didn't do this right from the getgo 10-15 years ago because they thought print would always be there was the mistake made by newspapers. By the time the Times experimented with paid content, it was already too late as listeners accustomed to free content weren't about to pay for it. The newspaper industry's problem is that they let the cat out of the bag and now are faced with having to "re-train" readers into accepting the idea that if you wanna read it online, it won't be free. And they'll have to suck up the loss in hits that comes from their material appearing on aggregates because they are going to have to bar Google and Yahoo, et al, from printing their stuff --unless, of course, an equitable payment system is established.

Is there a parallel error in judgment in the radio industry?