Profit for Stations

[5410]

I am very inexperienced but I am learning...

I read that one station billed $30 million in my market. How in the hell can stations say they are not "making money"? Even after you take out expenses, there should be some scratch left over.

Then I read about how much money Limbaugh is making and I wonder. Surely there is money being made in radio, right?

Is the problem of profit a problem with larger companies rather than smaller ones? Or am I off base all together?

I figured the true backbone of the station would be the best place to get info on this topic.

 

[Prais]

You said, "How in the hell can stations say they are not "making money"?

I'm retired after owning 3 fm's and an am. I've also started/sold 3 others.

First question; Where did that money information come from? Did you hear it in the coffee shop? Tell us about all of their competition/how many salespeople?

Expenses; Is that 30 mil gross or net? If they are a music station the ascrap and bmi bill is upwards of 3% of their gross right off the top. Do they have live people or is is satellite? Do they have local news?

Is is owned by a group - or is this a single operation? People ARE in business to make money - but there are stations that are in business to be "loss leaders" for tax purposes. Don't be fooled by a large spot load. I know stations that always pad that, so it "appears" they are successful, when in fact they are in the poo.

You said; "Surely there is money being made in radio, right?" Well, without being a wise guy, the correct answer with the minimal facts you provide is, "maybe, maybe not."

 

[NE Miss Radio]

Let me assure you, every station is not billing 30 million. Hopefully , the station that IS billing 30 million is profitable. If not, then yes, there is a problem there.

 

[tcsnrayp]

The thread brings up an interesting query: just how much DO successful stations bill annually? Anyone care to offer expert guesses? I would be most interested in a market in the 86 to 90 market size range.

 

[Carmine5]

I had a nice conversation with Bill Norman at WNMB a few months ago and he told me that it is not unusual for a small market AM station to bill between 200K-300K yearly with one sales person.

I have a friend who works for a 3-station cluster in Bend, OR (2-FM, 1-AM) and she told me they grossed over 5 million in '07.

And yet I was reading a notice on the FCC site yesterday of an AM station who pleaded to have their $4000.00 late license renewal fine rescinded because they couldn't pay it. Their 3-year average was only about 7,000.00 a year.

So because there are so many factors at work; station management/personnel, market size/location, local economy, etc., what radio stations are capable of generating, revenue-wise, is all over the map.

C5

 

[knoxbob]

A few small market stations I know of usually bill between 100k to 200k. I have heard that a small station in W. NC. was doing about 100k per month. And they are a class IV AM.(graveyard channel)

It really depends alot if you have any competetion in your market and the location and heritage of the station.

 

[FredRichards]

It really depends alot if you have any competetion in your market and the location and heritage of the station.

And if you have something of value to offer the listener.

Also look for revenue ideas outside the normal spot arena. 5-sec sponsorships for weather, sports, etc. Billboards for programs, "ABC News at 6 brought to you by...", and also vignettes of small features where you can sell an intro, :30, and close.

It all adds up.

 

[tcsnrayp]

Key to smaller market sales is making it cost effective and inclusive to the "little guy." Find ways to let the "dollar a holler" clients get on the air. Like what FredRichards is suggesting. NOT with 30 second commercials. Those are for the bigger spenders.

 

[Goat Rodeo Cowboy]

I read that one station billed $30 million in my market. How in the hell can stations say they are not "making money"? Even after you take out expenses, there should be some scratch left over.

Then I read about how much money Limbaugh is making and I wonder. Surely there is money being made in radio, right?

Is the problem of profit a problem with larger companies rather than smaller ones? Or am I off base all together?

I figured the true backbone of the station would be the best place to get info on this topic.

I assume the station billing $30 million is in a major market. I would be surprised to learn that it is one of stations NOT making money. I haven't seen one in several years but the FCC used to release annual reports showing what the Total Billing of all stations combined for a given multi-station market. Then you can usually pick up some gossip at the local level on what each station might be doing.

You will find that in some markets to be competitive you have to take on some major expenses, or at least some managers think you have to have those bells and whistles in order to sell.

Stations that are owned by publicly traded corporations are obligated to follow standardized accounting rules. If you were to get interested in buying a station owned by a publicly owned company, The books they share with your should be somewhat trustworthy.

Now comes the fun part. When you look at privately owned, family owned stations, you better be very, very sharp and have trusted accountants to figure out what is really going on. There was a time a number of years ago when the typical station "broke even". Well, that's what the tax return showed. When you dug deep you found that they were paying large rent for the building to a company owned by the childrens trust fund, etc.

I've looked at stations billing $8,000 per month where the owner claimed to be making x amount of money, or y amount of cash flow. Then it turned out they had no "books".

From tid-bits posted on these boards, I get the idea that WSM in Nashville bills significant amounts of revenue. But they have significant expenses they are unable to shed so they reportedly lose money.

If you are indeed a salesman, and you find that you can sell radio, keep asking questions. If you are not capable of "forensic accounting"..... hire somebody who is, or take one in as a partner.

Bottom line: Some stations make OBSCENE amounts of profit. Some stations will NEVER turn a profit. The ones in between can be a lot of fun for a person like you.

 

[davideduardo]

Let me assure you, every station is not billing 30 million. Hopefully , the station that IS billing 30 million is profitable. If not, then yes, there is a problem there.

Of about 15,800 stations (including non-coms and LPFMs) in the US, less than 40 bill $30 million or over.

Some of these have large expenses, such as multimillion dollar morning shows and such, or are just expensive overall such as the all news stations in the group.

 

[davideduardo]

The thread brings up an interesting query: just how much DO successful stations bill annually? Anyone care to offer expert guesses? I would be most interested in a market in the 86 to 90 market size range.

In the 80 to 90 size market, a few of the metros are in the shadow of larger ones, like Monterrey Salinas or Daytona Beach... there, the better stations do $1 to $2 million. But the stand-alone markets like Little Rock, Syracuse or Baton Rouge will have a station or two in the $4 to $5 million range, and a number in the $1.5 to $3 million range.

 

[SonoSational18]

I agree... stations in markets that are close to (and largely covered by) a larger market will tend to under-bill their market size. I've also noticed that markets that are anchored by a state capital and/or a large university tend to over-bill their market size (e.g., Columbus, Madison, Austin, Nashville, Baton Rouge). It also helps if the market has a historically dominant station which sticks to its rates which generally means better rates for all in the market. Historically, southern markets have done better than northern markets.... all things being equal... although the recent housing problems that have beset markets like Phoenix and Southern Florida have been somewhat of an equalizer. Finally, the number of stations in a market will affect profitability. Stations in under-radio'ed markets like Atlanta, Indianapolis, and Columbus will tend to do better because the jackpot just naturally gets whacked up into less pieces.

 

[Goat Rodeo Cowboy]

Historically, southern markets have done better than northern markets.... all things being equal... although the recent housing problems that have beset markets like Phoenix and Southern Florida have been somewhat of an equalizer.

Can you point me to documentation on this? I am not prepared to support or contest your claim.

In my somewhat dated experience out on the streets, I would have said Northern markets do better. In thinking about that, I am comparing Rustbelt markets, including SMALL markets, against Dixie markets. I guess if you look at Maine and Idaho markets compared to Southern California and Phoenix markets, the "southern" markets win.