More Consolidation is Not the Answer to Poor Business Decisions

[davideduardo]

The problem is simple: radio failed to adapt to the times,

There is no way for a one to many medium to adapt to a one on one world.

hitched itself to the wrong wagon with HD Radio,

Most stations, particularly in smaller market FMS and AMs in general did not push HD. It was mostly major stations in larger markets.

and found itself left behind by streaming devices and the smartphone while at the same time failing to ditch AM behind entirely under the idyllic definition of it being "the place to go to in the event of an emergency".

A large percentage of AMs are kept because they allow for an FM translator. In smaller markets and many large ones where the translator has a tall HAAT, a translator is highly viable. And lots of sports, ethnic and religious AMs are quite profitable.

The Radioplayer app should already be here and made standard in all cars, but neither of those will happen, and it'll be further self-sabotage.

That still does not address the need for one-on-one capability, which radio does not have.

Further consolidation in radio wasn't going to happen anyway and that the NAB is still continuing to push that idea just shows how out of touch they are. It's amazing.

The idea behind further consolidation is an answer to the way advertising is bought: it is really hard for agencies to buy radio as they have to make hundreds of separate buys across the country, and then do all the processing and confirmation of invoices and payments. The NAB focus is on how radio can make more revenue come into radio-

 

[Theater of My Mind]

The idea behind further consolidation is an answer to the way advertising is bought: it is really hard for agencies to buy radio as they have to make hundreds of separate buys across the country, and then do all the processing and confirmation of invoices and payments.

So what? Radio isn't supposed to exist for the convenience of advertising agencies.

 

[davideduardo]

So what? Radio isn't supposed to exist for the convenience of advertising agencies.

Actually, advertisers are responsible for most of the existence of radio. Starting in the 1920's when newspapers, insurance companies, car dealers and radio manufacturers started stations to today when few stations would exist without them; even educational stations that take "supported" money and give more subtle ads fit in this model.

Radio gives entertainment and news and sports to listeners, but it only can do that with advertising.

 

[Theater of My Mind]

Actually, advertisers are responsible for most of the existence of radio. Starting in the 1920's when newspapers, insurance companies, car dealers and radio manufacturers started stations to today when few stations would exist without them; even educational stations that take "supported" money and give more subtle ads fit in this model.

Radio gives entertainment and news and sports to listeners, but it only can do that with advertising.

We all know that, we're not idiots. But arguing more consolidation is needed so that advertising agencies don't have to work too hard is ridiculous.

 

[Delete My Account]

But there was a lot of interest on the part of radio companies in the 90s to find other platforms beyond broadcasting.

(then) Clear Channel, Radio One, Salem and Worldspace (foreign satellite broadcaster) all were part of the early years of XM. So obviously, those companies were diversifying. And pre-streaming, having one's niche music taste curated by some of the best in the business was a rational idea.

There were other interesting experiments pre-iPhone. For example, when WOXY 97X was struggling as a webcaster, with actual DJs, an investor who owned one of the early streaming music experiments bought the "station" to tie into his playlist and streaming service. Later, it was bought by Apple.

Lala (website) - Wikipedia

en.wikipedia.org

I think part of what harmed radio's advancement into new tech was the lopsided streaming royalties. All based on a very dubious idea that people would "stream rip" en masse. Now some did, but they were either hardcore cheapskates with time and bandwidth, or people trying to "time shift" to play back radio on their MP3 players. It was the same idea as "home taping is killing music" and given that a large swath of our elected officials thought streaming was = to a "digital copy" that would sound every bit as good and acceptable to consumers, radio was set back in their adoption of streaming.

The RIAA fleeced radio with the help of a lot of ignorant (or paid for) politicians. Remember, when Cuban started Broadcast.com, anyone could pop online and start streaming if they had the knowledge. A few of those pure play webcasters, like Radio Paradise and Soma FM managed to build an audience and pull through, but it derailed a lot of interesting experiments.

 

[davideduardo]

We all know that, we're not idiots. But arguing more consolidation is needed so that advertising agencies don't have to work too hard is ridiculous.

This is not about "working too hard". It is about the fact that many agencies just don't include local market radio because the amount of labor involved is too costly and too complex compared to other options like streaming and podcasts.

 

[davideduardo]

(then) Clear Channel, Radio One, Salem and Worldspace (foreign satellite broadcaster) all were part of the early years of XM. So obviously, those companies were diversifying. And pre-streaming, having one's niche music taste curated by some of the best in the business was a rational idea.

Hispanic Broadcasting had 5 channels on XM at the start, too. I was the program manager for them.

The RIAA fleeced radio with the help of a lot of ignorant (or paid for) politicians. Remember, when Cuban started Broadcast.com, anyone could pop online and start streaming if they had the knowledge. A few of those pure play webcasters, like Radio Paradise and Soma FM managed to build an audience and pull through, but it derailed a lot of interesting experiments.

And Cuban obviously saw the future and sold what became a worthless company for billions.

 

[Theater of My Mind]

This is not about "working too hard". It is about the fact that many agencies just don't include local market radio because the amount of labor involved is too costly and too complex compared to other options like streaming and podcasts.

If that were true then radio would need to find a better business model than relying on agency buys. But of course it's not true, and this ridiculous argument in the pursuit of even more media concentration being put into the hands of fewer broadcasters is simply not believable.

 

[TheBigA]

I think part of what harmed radio's advancement into new tech was the lopsided streaming royalties.

The Digital Millennium Copyright Act of 1997 was basically written by the RIAA and other music organizations. They originally wanted to include the broadcast royalty as part of that act, but were told it would hold up passage. The digital companies at that time really didn't consider how difficult the rules were going to be to carry out, and that the costs would continually increase every three years. They really weren't in a position to lobby congress about the rules at the time. They were in their infancy. As you say, the rules were based around the idea that listeners would record music from the radio rather than buy it. They put in lots of rules that radio couldn't play more than three songs from an artist in a three hour period for that reason. Broadcast radio thought those rules were crazy.

The early streaming companies were mainly music distribution companies. Tim Westergren of Pandora was a musician who wanted a way to get new music to people. The music industry loved him. He was one of them, he paid whatever royalties they demanded, and always said the right things, even though the costs were killing his company. He sort of dug a hole for himself, and it took selling the company to bring a little sanity into the way the company was being run.

 

[davideduardo]

If that were true then radio would need to find a better business model than relying on agency buys.

I've been in large markets where a top rated station did over 90% of its business with agencies. But, as internet media has developed, many accounts are bought for national coverage with just a few widely listened to stream and podcast buys... and they leave local radio behind.

But of course it's not true, and this ridiculous argument in the pursuit of even more media concentration being put into the hands of fewer broadcasters is simply not believable.

Have you ever sold to an agency? I made my first agency sale in 1964 and have called on agencies in a half-dozen countries since then.

The point about agencies making fewer local radio buys than ever is an absolute truth. And with the predominance of national chains in everything from retail to fast foods to dental services which all use agencies and the reduction of local independent merchants that can afford mass media, radio revenue in inflation adjusted dollars is off around 60% or more since 2000.

 

[Delete My Account]

Hispanic Broadcasting had 5 channels on XM at the start, too. I was the program manager for them.

And Cuban obviously saw the future and sold what became a worthless company for billions.

Were you involved with Luna and Vibra? I really enjoyed those channels, so kudos if that was your team.

BigA mentions Pandora - I truly enjoyed the original Pandora, the genome idea. I thought that was pretty revolutionary but they tossed that aside too, and now it's just another service that honestly doesn't sound that much different or better than others. I was surprised that his original concept didn't survive in some form, not so much the business as the DNA of it.

 

[TheBigA]

BigA mentions Pandora - I truly enjoyed the original Pandora, the genome idea. I thought that was pretty revolutionary but they tossed that aside too, and now it's just another service that honestly doesn't sound that much different or better than others. I was surprised that his original concept didn't survive in some form, not so much the business as the DNA of it.

The Spotify folks say their users can find new music without using a genome. The genome was pretty advanced in 2000, but that was 25 years ago.

 

[TheBigA]

If that were true then radio would need to find a better business model than relying on agency buys. But of course it's not true, and this ridiculous argument in the pursuit of even more media concentration being put into the hands of fewer broadcasters is simply not believable.

The number of owners doesn't make radio better if they're all religious companies. That's where we're going if things don't change.

For the most part, the only radio stations that DON'T have to appeal to ad agencies are the non-coms, and they're under assault by the FCC.

 

[Kent]

So what? Radio isn't supposed to exist for the convenience of advertising agencies.

That's exactly what it exists for. It's a convenient way for advertisers to reach their customers. Those of us on the programming side don’t like it, but every broadcasting company is a marketing operation. Some are more dedicated to or otherwise focused on programming than others, but there's a reason we don’t have many great adult standards and classical stations on commercial radio.

If that were true then radio would need to find a better business model than relying on agency buys.

If you could find that better business model, I'm sure every broadcaster in the country would like to know about it. They'd likely pay you quite handsomely.

But of course it's not true, and this ridiculous argument in the pursuit of even more media concentration being put into the hands of fewer broadcasters is simply not believable.

This might surprise you, but I tend to agree with you here. I suppose one could argue that what radio is doing hasn’t worked when it comes to getting those larger accounts. So, logic would say doing something different would be required. Having said that, reach isn’t the challenge. This summer will mark 25 years since the Clear Channel/AMFM merger closed, which put Clear Channel into all but four of the Top-100 markets. It has since swapped out of one more. If the company and the agencies can’t figure out a working arrangement after 25 years with reach like that, I don’t see how further consolidation in existing markets is going to help that. I realize some smaller markets might need cap relief to make a few standalones viable again, but that's not what we're talking about here.

 

[davideduardo]

Were you involved with Luna and Vibra? I really enjoyed those channels, so kudos if that was your team.

All 5 channels in Spanish on XM during the first couple of years were under my supervision. After that, XM wanted all music channels to be non-commercial (originally there were 6 minutes of ads an hour, 3 ours and 3 for XM) so we ended the deal.

 

[Miss Tuned]

This is not about "working too hard". It is about the fact that many agencies just don't include local market radio because the amount of labor involved is too costly and too complex compared to other options like streaming and podcasts.

This is one of the reasons the "brands" rolled out in place of local radio in the UK. The agencies were/are mostly based in the London area, and they had no concept of what "Key 103" or "Beacon" or "Pirate FM" sounded like, they didn't know "Rock FM" was a CHR and not a rock station, or that "Galaxy" was a dance station. These were all fine and very highly rated stations, but not on the radar of London agencies other than as names on a ratings list.

They did, however, know what was on their local dial in London - AC on Heart and Magic, CHR on Capital. It's no accident that these are some of the names that have rolled out nationwide in place of these old regional names. (It was, according to those in the know, 50-50 as to whether Galaxy or Capital became the national CHR brand, and Capital was picked as it was a known name to London agencies, while Galaxy was only in places like Manchester, Birmingham and Leeds.) It's also no accident that some of the London-only FMs have been replaced by national brands, like Hot AC Hits Radio in place of Rhythmic CHR Kiss, and Greatest Hits Radio in place of Modern AC Absolute.

The agencies buy what they know, and they know what's on their local dial. I've always wondered if this is the main reason why "Nash" rolled out in New York, even though it was never the obvious format for the market. When they were attempting to roll out a national brand, they had to get it into the ears of media buyers in New York.

 

[TheBigA]

The title of this thread is "More consolidation is not the answer to poor business decisions." My response to that is: Owning radio stations is a poor business decision. Why would anyone spend money for something that will ultimately lead to bankruptcy? Citadel had that option in 2006. They bought ABC Radio, and immediately realized they had overpaid. They renegotiated the price, but it still wasn't enough. It ultimately led to bankruptcy. The pattern has continued through 2024.

The problem facing radio right now is if the current owners can't buy more stations, those stations end up being sold to religious operators. There are no small local broadcasters who want to buy stations because they know it would be a bad business decision. There's a full power FM in NYC right now that nobody wants to buy. It's been on the market for a year and a half. The seller has stated he wants to get out of radio. He can't even find someone to LMA the station. So he's stuck operating it, likely at a loss, to keep it on the air. Some say he should be willing to cut his price. How do we know that he hasn't? Has anyone here made him an offer? I haven't because it would be a bad business decision. I think a lot of other people feel the same way. How much would you pay to end up losing money? The RAB talks about 2% growth, and that's not enough to keep up with inflation. The audience hates commercials, so stations can't increase inventory. The business model is broken. So nobody buys.

Salem just sold off all of its Christian stations to EMF. People wonder why no commercial radio operation stepped up and bought them. The answer is it would be a bad business decision. So the stations went to EMF, and the advertising marketplace gets smaller. That's good for the existing owners, but bad for radio as a destination.

So this is the pattern. Wash, rinse, repeat. Over and over. Status quo has brought us to where we are. Companies have great properties available in major markets, the ownership laws restrict the major owners from stepping in, so the station gets sold to a religious group. That's the way it will continue to go because doing anything else would be a poor business decision.

 

[ted chittenden]

Back in 1981 when I was in a broadcasting training program (yes I considered that at one time), one of my professors said that the reason for all of those caps on radio ownership at the time was primarily because of available space on the dial. This was especially true with AM but it is now becoming largely true with FM as well. The professor went on to state that while especially commercial broadcasters were expected to make money (in fact, if memory serves, the FCC used to investigate potential broadcasters before giving them licenses to make sure they had the potential to, if nothing else, not lose money), the primary purpose of radio and TV broadcasting was to serve as a means for the broad public to receive information (otherwise known as public service requirements) that they couldn't get elsewhere so that that public could make informed decisions on the political issues of the day.

Now we're in 2025, the broadcast industry is asking the FCC to lift even its minimum wavers on broadcasting, most public service requirements have been gutted, and many, possibly most, Americans are turning, with the able assistance of their on-line social sites, to issue-specific groups for public service information, groups that perhaps have a bet in the outcomes that the general public does not know about.

Radio may be dying a slow death, but more importantly, the public information, the glue that kept society together, is dying an even quicker one, and I don't think that the continued consolidation of radio stations among fewer owners is going to help matters.

 

[TheBigA]

I don't think that the continued consolidation of radio stations among fewer owners is going to help matters.

The ownership rules haven't changed in almost 30 years. You see the results. Status quo isn't working, especially for AM.

The only people with money to buy radio stations are religious broadcasters. You think that's better?

If the people who want to buy radio stations can't because of ownership rules, and there are no other buyers, what then?

 

[Theater of My Mind]

There's a full power FM in NYC right now that nobody wants to buy. It's been on the market for a year and a half. The seller has stated he wants to get out of radio. He can't even find someone to LMA the station. So he's stuck operating it, likely at a loss, to keep it on the air. Some say he should be willing to cut his price. How do we know that he hasn't? Has anyone here made him an offer?

This is a terrible example. The radio station would sell if it were priced right. If I put my used phone on eBay at price of $2,000 no one will buy it. If I drop the price to $1,500 it still won't sell. You can't always get what you want, just ask Mick. Check the market value and price it accordingly, it will sell. Duh.