More Consolidation is Not the Answer to Poor Business Decisions

[AMRadioGuy]

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?

I'm confused because you were just arguing that buying a radio station is a bad business decision, period, and that the reason people don't want to buy them is that buying a station would just be a way to lose money.

Why is it beneficial for a big company to buy a station that's only going to lose them (more) money?

I mean, if buying stations is a bad investment period, the answer to your "what then?" logically would be to just pull the plug on the transmitter, no?

 

[TheBigA]

I mean, if buying stations is a bad investment period, the answer to your "what then?" logically would be to just pull the plug on the transmitter, no?

I think that's exactly what some companies are doing in places where there is no other option. Cumulus appears to be shrinking its ownership footprint in some markets. It turned in the license of WFAS, and appears ready to turn in one of its 4 AMs in San Francisco. I pointed out there are several AMs for sale in the NYC areas with no prospective buyers. I also think there's an ongoing process to transition the broadcast audience online. So yes, that's the direction radio companies appear to be going.

Your post gives me the opportunity to clarify my view. When you look at the radio clusters in the Top 10 markets, they're all very profitable. I think it would not be a bad business decision for iHeart to buy another FM in either NY or LA. But they can't because of the outdated ownership rules. But I don't see any of the major owners looking to expand their footprints outside of major markets. And as I said, I don't see this FCC doing anything that benefits the NAB or mainstream media.

 

[exdjted]

Have the following not occurred to you:

1) Salem preferred KLove Inc. to purchase its contemporary Christian outlets in order to keep those stations broadcasting contemporary Christian music.

That is the most asinine statement I've heard so far. Really? Salem was AND IS STILL willing to sell to anyone with a pulse and a checkbook. Unless you know someone at Salem who espouses that sentiment, don't make an assumption that they prefer a religious broadcaster over anyone else. They're still business people at the end of the day.

2) Large commercial broadcasters might be more open to selling their stations to religious broadcasters precisely because they know these broadcasters are not going to attract much, if any, of their current audiences.

Yeah, because the first thing a broadcaster tells a broker is "Don't sell to anyone who might compete with me!". Wrong. All they care about is getting the best deal possible to finance the next deal. Like I'm going to turn down selling a station because Fred might put on a competing Country format to go after my audience.

Everyone is so convinced that if the caps were relaxed, or God forbid, eliminated, that iHeart or Cumulus or Audacy would buy everything in sight. Sorry to burst your bubble, but Audacy is a bit preoccupied at the moment with Carr taking another look at their bankruptcy. Does anyone really think that a Cumulus-Audacy merger wouldn't be so scrutinized that both sides would be forced to back off? Between the DOJ and the FCC, not to mention Congress, a merger between the two wouldn't stand a snowball's chance in Hell of being approved. iHeart might add a station or 2, but they're not going on a spending spree anytime soon.

Where the cap hurts are the small markets. Where I live. There are hundreds of owners who are aging, or are hurting financially, who would LOVE to sell today and get out. In a lot of cases, their in-market competitors are the ones who want to, and could, buy them and keep the stations going. Unfortunately, if you have an AM with a huge signal that precludes you from buying them out to add to your portfolio because it puts you over caps that were outdated 30 years ago, you're going to continue to see broadcasters going out of business or turning stations off and canceling the licenses.

Spend some time one day looking at the FCC daily activity and look at the license cancellations and click on the details. Read the statements about death of station owner, economic issues or inability to afford repairs and tell me the status quo is working for broadcasters.

Oh, for those of you who care, I'm in contact daily with station owners, engineers, brokers, lawyers, etc. So I know what we're really facing out here. I'm not just sitting reading comments on a discussion forum, or listening to the radio and thinking to myself what I'd do differently. So, when I say that Salem would sell to anyone who can write a check, it's because I've talked to someone at Salem. And Alpha. And Cumulus. And iHeart. And, Fred, Joe, Hank, Bill, you name it.

Yeah, buying a radio station today may not be the best move financially, but those of us that love it and have done it for over 40 years didn't do it for the money. We did it, and still do, because it's WHO WE ARE. That's why I care so much.

 

[davideduardo]

2) Large commercial broadcasters might be more open to selling their stations to religious broadcasters precisely because they know these broadcasters are not going to attract much, if any, of their current audiences.

Great point!

And in most cases, those stations are not commercial, making the ad pie divide into larger slices. And even those few commercial religious stations generally don't attract the same advertisers that non-religious formats do.

 

[davideduardo]

None of your points address what I'm saying, which is that there are no new commercial radio companies looking to buy radio stations. So retaining the 30 year old ownership limits for no other reason than to attract new radio companies only results in more religion on the radio dial.

And that makes the declining radio dollars by "real" advertisers become divided by fewer commercial stations, improving their chance of survival.

It doesn't help format diversity, it doesn't improve the quality of radio programming, and it doesn't mean more jobs for radio people.

When radio revenue is off around 60% or more, in inflation adjusted dollars, since Y2K, we are not going to get improved programming unless the herd is thinned. And the combination of new technology and consolidation makes the K-Love model the future choice for many owners and that lessens the number of jobs.

If the intent is to promote more religion on the radio, then by all means, hold on to those ownership limits. I fully expect this FCC to do just that. In fact I expect them to find ways to make it harder for existing stations to stay in business.

There is no need to make it harder. It already is. Even the most profitable group, TownSquare, is scaling back its radio involvement in favor of new media local clusters across the country.

One of the top radio operators was just merged with Televisa, Latin America's largest broadcaster and program producer. They got out of radio nearly 25 years ago, deciding it was not worth the large amount of management time devoted to it. As the merger progressed, Univision radio sold off nearly 20 stations including entire market clusters in Top 100 markets.

 

[davideduardo]

That is the most asinine statement I've heard so far. Really? Salem was AND IS STILL willing to sell to anyone with a pulse and a checkbook. Unless you know someone at Salem who espouses that sentiment, don't make an assumption that they prefer a religious broadcaster over anyone else. They're still business people at the end of the day.

The Salem founding principles, expressed to shareholders in their IPO over 25 years ago, was based on "the message" and that included faith based stations and opinion based ones. All the Salem management was deeply involved in areas of religion,, and they sold the stations so they could both cancel debt and expand their new media activities that are all faith-based.

Yeah, because the first thing a broadcaster tells a broker is "Don't sell to anyone who might compete with me!". Wrong. All they care about is getting the best deal possible to finance the next deal. Like I'm going to turn down selling a station because Fred might put on a competing Country format to go after my audience.

Any group having to sell a local station due to inability to "make it work" or FCC requirements wants it go go to someone who will not compete with them, meaning, generally, ethnic or religious broadcasters.

Where the cap hurts are the small markets. Where I live. There are hundreds of owners who are aging, or are hurting financially, who would LOVE to sell today and get out. In a lot of cases, their in-market competitors are the ones who want to, and could, buy them and keep the stations going. Unfortunately, if you have an AM with a huge signal that precludes you from buying them out to add to your portfolio because it puts you over caps that were outdated 30 years ago, you're going to continue to see broadcasters going out of business or turning stations off and canceling the licenses.

There are few of those overlap cases and they are all AMs. The only reason to keep most AMs is to sustain a translator.

Spend some time one day looking at the FCC daily activity and look at the license cancellations and click on the details. Read the statements about death of station owner, economic issues or inability to afford repairs and tell me the status quo is working for broadcasters.

No, what is not working is AM. Unless it has a translator or is one of a very few big market stations that have niche or traditional formats or ethnic ones.

Yeah, buying a radio station today may not be the best move financially, but those of us that love it and have done it for over 40 years didn't do it for the money. We did it, and still do, because it's WHO WE ARE. That's why I care so much.

I owned my first station at age 18 in a million-plus market. I loved radio and had for my prior 6 years of life. But within a few months of going on the air and having zero revenue, I learned that my first love had to be sales, not just programming for fun. The radio gods favored me with absolute #1 ratings 6 months later and I was able to save the station and build a dozen more... but I based every decision on "can I sell it to advertisers?"

I love radio enough to have spent over a decade and a lot of my retirement income on a radio history website as a tribute to the story of the business. But the keyword everywhere is "business".

 

[TheBigA]

Here's an article that should revive this discussion. The NAB is starting a campaign for the FCC to update ownership rules. The NAB's LeGeyt met with Carr to discuss the NAB's agenda. My view is that Carr is more interested in helping small broadcasters than the big owners:

NAB Ad Campaign Calls For An Update To Broadcast Ownership Rules.

The broadcast industry has used its airwaves to help rally the public behind issues like keeping AM radio in vehicles and fighting proposals to charge a performance royalty for on-air

www.insideradio.com

The article has a link to a 2023 article quoting Carr and Simington. Here's what Simington said in 2023:

“Broadcast assets have been devalued by several recent Commission decisions,” Simington said. “And that posture, incidentally, hits small and minority-owned broadcasters looking to exit much more than it does corporate radio. The family-owned broadcaster running a handful of stations has broadcast concerns as their largest assets, whereas larger outfits can redirect capital out of broadcast and into higher return verticals much more readily. When we slow the dynamism in the broadcast market, we hurt those we seek to help.”

I don't see anything here that leads me to believe either of them want to help the big radio owners.

 

[TheBigA]

The NAB campaign for loosening ownership rules continues. LeGeyt wrote a column for The Hill:

NAB’s LeGeyt: Local Radio, TV ‘At A Dangerous Juncture.’

Ongoing government restrictions on radio and TV station ownership have limited their ability to fairly compete with digital media competitors, which have no such restrictions, and the time is now

www.insideradio.com

 

[Theater of My Mind]

I just read Lance's latest article. Some salient points:

Cumulus, which had a significant round of layoffs last fall, is about to take a number of stations off-the-air over the next couple of weeks. Cumulus stock dropped to a 52-week-low today at 63 cents per share following a poor year-end earnings report last week.

Audacy (which still gets flagged as un unrecognizable nonsense word by my spell checker) is on the verge of a round of significant staff cuts with many in the company expecting the layoffs later this week on Thursday.

While not specifically called out in this article, the three largest, most consolidated broadcasters have all gone through bankruptcy in recent years, and still face crushing debt and/or financial and regulatory scrutiny.

The NAB may tell a rosy tale about media consolidation but the facts speak for themselves. These giant radio corporations are proven failures and further consolidation won't help. The only thing it will do is further reduce the diversity of content providers on the radio.

 

[TheBigA]

The only thing it will do is further reduce the diversity of content providers on the radio.

Only because there's no interest from new buyers. Just religious broadcasters.

The reason Cumulus is turning in licenses is because they can't sell them. No buyers.

 

[Theater of My Mind]

Only because there's no interest from new buyers. Just religious broadcasters.

The reason Cumulus is turning in licenses is because they can't sell them. No buyers.

I mean, the damage has already been done. This is the situation because the enormity of media concentration has squeezed everyone else out. Does that justify doubling down on it? I hope not.

 

[TheBigA]

I mean, the damage has already been done. This is the situation because the enormity of media concentration has squeezed everyone else out.

So the fact that listenership isn't growing and the fact that advertising continues to decline has nothing to do with the lack of buyers?

As I said much earlier in this thread: Buying radio is a poor business decision. The ONLY reason to do it is for personal passion. Not to make money.

 

[Theater of My Mind]

So the fact that listenership isn't growing and the fact that advertising continues to decline has nothing to do with the lack of buyers?

As I said much earlier in this thread: Buying radio is a poor business decision. The ONLY reason to do it is for personal passion. Not to make money.

Well, for some reason the NAB seems to think it's a good enough business decision that the giant companies should get even bigger. Obviously, if that happens there won't be a station left for the one who would want to buy it for personal passion...or for anyone else to may want to buy it to bring some innovation to it.

 

[TheBigA]

Well, for some reason the NAB seems to think it's a good enough business decision that the giant companies should get even bigger.

They're living in their own bubble. I explained that in post #11. Brendan Carr is NOT Ajit Pai.

 

[TheBigA]

FCC Commissioner Nathan Simington did a Q&A with the NAB. He said broadcasters can expect more deregulation from this FCC:

FCC's Simington Says Days of Deregulation Are Ahead For Radio - Radio Ink

Broadcasters may see long-awaited regulatory relief as FCC Commissioner Simington promises a fresh approach under Chairman Brendan Carr.

radioink.com

Simington doesn't always agree with Brendan Carr. He also didn't appear to address any of the Carr investigations.

 

[TexasTom]

To me, this feels rather like a "damned if they do, damned if they don't" situation.

Scenario one: More consolidation is allowed, and radio companies that are already doing poorly double down on what they're currently doing. Radio descends further into mediocrity and continues its decline.

Scenario two: Radio groups are prevented from further consolidation, and more and more stations end up being sold to religious satellator networks. The result is less and less mass-appeal programming and radio continues its decline.

Neither scenario is particularly attractive. I think that the scenario that many of us would like to see is one where consolidation is stopped and we see strong signals ending up in the hands of new and innovative operators, resulting in a radio renaissance -- or at least stability in place of decline. I'd like to see that happen. The problem is that the economics of radio don't really seem to allow for such would-be operators to be able to outbid the religious networks.

I wish that I (or anyone) had an answer that would generate a better outcome that what I outlined above, but I really just don't see it at this point.

 

[TheBigA]

I think that the scenario that many of us would like to see is one where consolidation is stopped and we see strong signals ending up in the hands of new and innovative operators, resulting in a radio renaissance -- or at least stability in place of decline. I'd like to see that happen. The problem is that the economics of radio don't really seem to allow for such would-be operators to be able to outbid the religious networks.

I keep hearing the phrase about "new & innovative operators." Why would a new & innovative operator use an old & obsolete distribution system?

What people want is for somebody else to spend somebody else's money and play what I want on the radio.

 

[TexasTom]

I keep hearing the phrase about "new & innovative operators." Why would a new & innovative operator use an old & obsolete distribution system?

What people want is for somebody else to spend somebody else's money and play what I want on the radio.

I would argue that radio is old, but it isn't necessarily obsolete. FM broadcasting does remain a very efficient way of reaching a large number of people. And, no, "new & innovative" doesn't mean playing what I want -- it just means trying things that are different from what is currently on the radio to see what might work.

Unfortunately, the current economics of the business make the risk/reward ratio for doing that unattractive. If I think back to the eighties and nineties, we regularly saw station owners taking a swing -- and most of those swings ended up being misses, but the rewards for a successful swing were enough to justify the risk. Today, unfortunately, that just seems not to be the case.

 

[TheBigA]

I would argue that radio is old, but it isn't necessarily obsolete. FM broadcasting does remain a very efficient way of reaching a large number of people.

Sure, but it's very expensive. People can do the same for less, and that seems to be the approach these. days. How can we do with less. It's the WalMart way of the world and now it's hit the government.

And, no, "new & innovative" doesn't mean playing what I want -- it just means trying things that are different from what is currently on the radio to see what might work.

I didn't mean to aim that at you, but it's the general theme on these boards. Every day a radio station adds a new song by a new artist, it's trying something new and different. Unfortunately new & different isn't the attraction it once was. What gets ratings to day is old & familiar. That's why Top 40 stations are playing more gold. The audiences who want to hear new & different want to discover it on their own. There are places to do that. We seem to be at a point in radio where trying something new & different takes way too long to attract an audience. It's not that radio people don't have ideas. It's just that when they take the risk, they get their asses handed to them as happened in Seattle with KPNW.

You're exactly right about the risk & reward thing. What worries me more is that even the trillion dollar companies that are trying to do radio on the internet aren't taking any risks either.

 

[davideduardo]

I would argue that radio is old, but it isn't necessarily obsolete. FM broadcasting does remain a very efficient way of reaching a large number of people. And, no, "new & innovative" doesn't mean playing what I want -- it just means trying things that are different from what is currently on the radio to see what might work.

The "two of us" were talking about radio on a trip from Palm Springs to LA and back today. My question, part way through the trip to LA, was "have you thought about listening to a traditional radio station instead of our car system's choices of Sirius/XM and Apple CarPlay?"

The answer was "no". The main reason was the 14 minutes or so of ads each hour. We talked about how ads "used to be much more fun" in the era of "sooner or later, you'll own General" or "Double your pleasure, double your fun..." Today's ads for "if you have been disabled or maimed in an auto accident" and other intense hard-sell messages are hard to listen to, back to back, for 7-minute stopsets filled often with 15 to 20 ads that are 30" and even 15" long.

Both of us are lifetime radio people. My partner was on-air in radio from the 70's on, did a TV anchor stint in LA, and became a national PD for Univision / HBC. I have been an owner, PD, CE, GSM, NSM, GM, research director and occasional janitor and owner taxi driver over the years. We both loved radio. Past tense.

There is nothing we want to listen to on the radio that we can not get a better version of elsewhere.

Unfortunately, the current economics of the business make the risk/reward ratio for doing that unattractive. If I think back to the eighties and nineties, we regularly saw station owners taking a swing -- and most of those swings ended up being misses, but the rewards for a successful swing were enough to justify the risk. Today, unfortunately, that just seems not to be the case.

But if you look back to the start of the music radio era of the industry... somewhere around 1961 in Omaha... how many new formats have been created over the last 75 years? And if you consider that commercial radio is not unique to the United States, you have thousands and thousands of owners, managers and programmers who have all been trying to come up with "something new and exciting" and what we have now is what we will get.

There is no lack of creativity and ingenuity. The fact is that, as the world shrinks due to the internet, audiences are fragmented down to the single person level and ad supported commercial radio is just a shrinking stage.