Radio is in BIG trouble

[davideduardo]

Re: Rewriting History

Puh-lease. Docket 80/90 happened in the middle '80s - coincidently around the time that computer systems were becoming more common in the real world, computerized music selection was born, and computerized traffic systems became viable. It was born out of an increased demand for FM signals, especially by small markets that had no local FM service. It was also thought to be a way that AM daytimers might be able to offer full-time service to smaller markets. One other effect of Docket 80/90 was a relaxation of studio location rules.

As I said, 80-90 grew out of the aftermath of the very unfair Bonita Springs case; it allowed upgrades of class without a major change application and also changes in city of license, etc. With that came a total redo of the table of allocations, allowing as many stations as the band would hold. Most 80-90 drop ins did not get licensed till the late 80's, and many did not make it on the air until the 90's.

The result, as I mentioned, was to overpopulate the FM band and make community service unviable in many smaller markets.

Separately, computer music scheduling (not "selection"... the computer makes no decisions) began to be used around the very late '70's as technology made computer hardware accessable. Between 1980 and 1982, I had two stations on computer music schedulers in Puerto Rico, so it was not that uncommon. And I had computer traffic and billing in the same US market in 1975, and when I went to Colorado for training, the places was packed with radio computer traffic converts like myself. We ran it off minis, not PCs, but one could lease one form IBM for very reasonable rates considering the improved inventory control, greater accuracy, etc., that such systems gave the station and the client.

And computer music scheduling simply enhanced a programmer's ability to control ugly repetition patterns, have smoother rotations, better artist variety, etc. In the era of Arbitron and TSL, this was rapidly discovered to enhance ratings and gave great benefit to the listener.

What actually happened? How much programming at Docket 80/90s actually came from the COL? What ended up happening was an expansion of FM service to areas that had none, but not an expansion of local programming to areas that had none.

What happened is that small markets got many more stations, and revenues did not increase so stations went to the satellite and cut back on news and such.

Who BOUGHT most of the Docket 80/90 stations?

Most of them were in small markets. The majors did not benefit much except in a few cases of move ins. Yet markets like LA or NY or Cleveland or Miami or San Francisco and such did not change at al, to pick a few examples.

Who created the concept of LMAs to get around ownership caps, and pushed the FCC to ultimately expand ownership caps?

Different issue, a decade later. You speak of the mid-80's and then mix it with mid-90's stuff.

Who fueled the buying frenzy of the '90s through 2006?

It wasn't 80-90. That was done by the time 1996 rolled around. However, the economic harm done by 80-90 in some markets due to move ins and new signals sure increased and enhanced the argument that most stations were losing money.

Who threw millions at local guys who applied for Docket 80/90 CPs - didn't even build the stations - and turned around to sell the licenses to the consolidators when the FCC opened the flood gates? Not to mention the ones who cobbled together a station, sat-casted for a couple of years, then sold at a huge profit when the consolidators finally got the go-ahead. It sure wasn't the small market operators.

Very few new 80-90 allocations became the subject of interes by Chancellor, EZ, AM/FM, Jacor, Clear, Cox, etc. Most were in places like Thermal, CA or Lake City, FL. Places that did not need more stations.

Docket 80/90 wasn't "long before consolidation". The limit change from 7-7-7 was virtually concurrent with Docket 80/90, allowing radio companies to own up to 40 stations.

That was nothing compared to the 1996 change in ownership rules. 40 stations in 1985 was a much lower percentage of stations that 14 in 1950. That adjustment could be said to have not even kept parity with past limits.

That - along with the relaxation of the COL origination rules - was the beginning of the concept of "regional synergies". Add the rise of big consulting companies pitching tighter formats the de-emphasized (and thus devalued) live and local input in favor of the "magical music mix", and you have the seeds of the homogenized, souless radio that we hear too often today.

Consulting started in the 60's... Bill Drake was a consultant before joining KHJ in '65. Ron Jacobs was a consultant before joining Drake in '65, and that's just a couple of examples. By the late 60's to early 70's, you had Abrams with SuperStars, the format syndicators, and everybody was consulting, from Rick Sklar to the CHR gurus from Shannon to the now-venerable Drake.

Computer music scheduling began to be used around the very late '70's as technology made computer hardware accessable. Between 1980 and 1982, I had two stations on computer music schedulers in Puerto Rico, so it was not that uncommon. And I had computer traffic and billing in the same US market in 1975, and when I went to Colorado for training, the places was packed with radio computer traffic converts like myself.

 

[gr8oldies]

Rox, I worked at a very successful AM/FM combo and we held our own against WOWO, but certainly did not "kick their ass". You were doing exceptionally well if you could hold your own against WOWO in your home county. Based on your statement that "small town peopel don't like big city radio, I have to discount people in my small town who listened to stations like WPTH in Ft. WAyne who aired, gasp, automated top 40, and assume no one likes any radio format except one that talks about city council meetings, has swap shop and has grain reports.

80/90 had nothing to do with consolodators. It placed radio stations in COLs that couldn't possibly support them, unless the station targeted the next bigger town. You think there's a retail base in Royal Center or Battle Ground, IN? No one built out the CP in St. Marys, OH until CC (or maybe Jacor) did, because as overradioed as the area was, no one would be able to make a profit there as a standalone.

I can spend hours on reelradio listening to old airchecks. Maybe your right, bring the 70s jocks back and have them do their 70s act, maybe with a few jokes about Watergate and the ITT paper shredder, and we'll be in fat city again.

 

[TheBigA]

Re: Rewriting History

What actually happened? How much programming at Docket 80/90s actually came from the COL? What ended up happening was an expansion of FM service to areas that had none, but not an expansion of local programming to areas that had none.

And yet ten years before Docket 80-90, I gave you examples of two radio stations not licensed to Syracuse that programmed exclusively to the city, ignoring their cities of license. Ask the folks in Oswego or Fulton how much local programming they got from KFM. To you, it's one big corporate conspiracy. But this is just how radio's been done.

WJZ was originally licensed to Newark NJ in the 1920s, but they programmed to New York City. As soon as the money started pouring in, they applied to move the station to New York, and were the first move-in that I'm aware of. Similar story with WOR, which began on the 6th floor of the Bambergers in Newark. Almost all of the radio stations licensed to Newark left the city over the years.

Who BOUGHT most of the Docket 80/90 stations?

You're ignoring the point...mainly because it isn't part of your agenda. The point is that the government, in its own greed and motivated by its own agenda, over licensed the spectrum. What happened afterwards is simply the industry adapting to the changed marketplace. But it was all caused by the federal government blowing up a stable and profitable industry. None of it was motivated by owners or the NAB. They were the losers, and had to change the way they did business in order to survive. Stations were forced to cut back power, and make way for new competitors. That is what caused the need for ownership caps to be lifted. Had the government not doubled the number of stations, the industry would have been content with 7-7-7. Everyone screams about 1996. But the real story is what happened in the 15 years before.

 

[SirRoxalot]

Executive Summary

How computerization, automation, consultation, etc. rolled out varied from market to market. Major market operators rented time on big iron a lot earlier than medium market people bought PCs, and small market people waited even longer.

You can argue about when consolidation began from a number of different viewpoints, depending on how you define "consolidation", but the fact is that the corporatization of radio expanded greatly from the '70s on, with the biggest media corporations pushing for the increased ownership caps of the middle '80s and finally the Communications Act of 1996. It accelerated greatly from 1997-2006, which leads us to today.

The bottom line is still that a number of the consolidators are over-leveraged, station values and revenues are dropping like a stone, and they can't cut their way out of their problems. When the first of the consolidators goes bankrupt, its very likely that several others will follow relatively quickly. The stockholders will get nothing, the assets will be sold for 5x cash flow or less, and new companies will be in the broadcasting business that won't have a debt gorilla riding their back.

What's the first thing that they're likely to do? With much lower debt, they have much lower operating expenses, so they'll likely cut rates to bring advertisers back to the medium. What will that do to the "survivors"? Reduce revenue even more, with a very real possibility of driving them into bankruptcy. They'll just be a year or two behind the first guys that fall.

Ultimately, radio may make a comeback, depending on how successful it is in redefining itself as a medium that appeals to LISTENERS. It still has the advantages of being ubiquitous, easily portable, requiring little technical knowledge or programming input, and free.

 

[TheBigA]

Re: Executive Summary

You can argue about when consolidation began from a number of different viewpoints, depending on how you define "consolidation", but the fact is that the corporatization of radio expanded greatly from the '70s on,

Sorry. You're wrong again. It began with the Marconi Wireless Company in 1897, followed by Westinghouse and General Electric. In fact, the entire foundation of radio as an industry is based on corporations. Marconi's company led to the BBC and RCA. RCA started NBC in 1926. NBC syndicated programming to radio stations around the country. One could trace consolidation and LMAs to 1926.

The bottom line is still that a number of the consolidators are over-leveraged, station values and revenues are dropping like a stone, and they can't cut their way out of their problems. When the first of the consolidators goes bankrupt, its very likely that several others will follow relatively quickly. The stockholders will get nothing, the assets will be sold for 5x cash flow or less, and new companies will be in the broadcasting business that won't have a debt gorilla riding their back.

And they'll be owned by banks and corporations that will have even less interest in running them than they do now. Those are the only companies that don't have debt. The new companies will fire more people, and centralize more operations. This is not a future that you want to encourage. I have no reason to believe your doomsday vision will come true.

 

[SirRoxalot]

Re: Executive Summary

You can argue about when consolidation began from a number of different viewpoints, depending on how you define "consolidation", but the fact is that the corporatization of radio expanded greatly from the '70s on,

Sorry. You're wrong again. It began with the Marconi Wireless Company in 1897, followed by Westinghouse and General Electric. In fact, the entire foundation of radio as an industry is based on corporations. Marconi's company led to the BBC and RCA. RCA started NBC in 1926. NBC syndicated programming to radio stations around the country. One could trace consolidation and LMAs to 1926.

The Communications Act of 1934 empowered the FCC with the muscle to institute the 7-7-7 rule and others that limited network broadcasting, forced NBC to sell off the Blue network in 1943. Prior to that, the feds told AT&T to get out of the radio business or risk losing their monopoly status. The limitations on ownership kept major corporations from having anywhere near the effect on the broadcasting industry as a whole that the consolidators have now.

The bottom line is still that a number of the consolidators are over-leveraged, station values and revenues are dropping like a stone, and they can't cut their way out of their problems. When the first of the consolidators goes bankrupt, its very likely that several others will follow relatively quickly. The stockholders will get nothing, the assets will be sold for 5x cash flow or less, and new companies will be in the broadcasting business that won't have a debt gorilla riding their back.

And they'll be owned by banks and corporations that will have even less interest in running them than they do now. Those are the only companies that don't have debt. The new companies will fire more people, and centralize more operations. This is not a future that you want to encourage. I have no reason to believe your doomsday vision will come true.

The banks won't own them. The banks will write off the debt (thanks to the influx of federal bail-out funds), and sell the stations to people with money for a lot less than what was owed. How the new companies operate will be determined by the competition in the market. What's for sure is that they'll have a lot less debt than the current owners.

 

[davideduardo]

Re: Executive Summary

The Communications Act of 1934 empowered the FCC with the muscle to institute the 7-7-7 rule

Stop there. There was no 7/7/7 rule because in 1934 there was no TV and no FM. And there were numerous duopolies, including the two AMs of Arne Bulova in NY and the KFI / KECA one in LA. 7/7/5 was an early 50's thing, moving to 7/7/7 much later, with the two last TVs having to be U's. Nobody even remembered 1934 when the 7/7/7 guide went into effect.

The limitations on ownership kept major corporations from having anywhere near the effect on the broadcasting industry as a whole that the consolidators have now.

Radio was the only electronic medium in 1934. There was AM, and AM, and AM, and about 500 stations.

See http://www.davidgleason.com/Archive-Radex/Radex January 1934 No 75.pdf starting on page 66 for a complete listing of stations.

Today, there are thousands and thosands of voices from radio, TV, cable and the web. There is nothing close to having a dominant share of voice today.

 

[davideduardo]

Re: Executive Summary

How computerization, automation, consultation, etc. rolled out varied from market to market. Major market operators rented time on big iron a lot earlier than medium market people bought PCs, and small market people waited even longer.

In 1975 when I put an IBM System 33 in WQII, San Juan, running Columbine software, we were selling $12 spots in an unranked SRDS market. Within a few years, all the other significant stations had computer systems. There was no big iron, no major market operator (the owner was a grocer). Just a minicomputer and the knowledge that we would achieve credibility in the market with exact time invoices, precisely scheduled spots and a forward looking attitude to client service.

We also used automation. We were #1 in a 30 station market in 18-49 women, the only demo that mattered (#2 overall, after the CHR which was also automated). We had 7 jocks and two newspersons on staff, too.

 

[SirRoxalot]

Re: Executive Summary

The Communications Act of 1934 empowered the FCC with the muscle to institute the 7-7-7 rule

Stop there. There was no 7/7/7 rule because in 1934 there was no TV and no FM. And there were numerous duopolies, including the two AMs of Arne Bulova in NY and the KFI / KECA one in LA. 7/7/5 was an early 50's thing, moving to 7/7/7 much later, with the two last TVs having to be U's. Nobody even remembered 1934 when the 7/7/7 guide went into effect.

Stop there. I didn't say that the 7/7/7 rule was instituted in 1934. I said that the Communications Act of 1934 gave them the muscle to institute the 7/7/7 rule - and all other caps prior to the Communications Act of 1996. The first cap was enacted in 1941 as the FCC enacted rules regarding chain broadcasting, specifically aimed at breaking up NBC's ownership of two national networks - the Red and Blue networks.

The limitations on ownership kept major corporations from having anywhere near the effect on the broadcasting industry as a whole that the consolidators have now.

Radio was the only electronic medium in 1934. There was AM, and AM, and AM, and about 500 stations.

See http://www.davidgleason.com/Archive-Radex/Radex January 1934 No 75.pdf starting on page 66 for a complete listing of stations.

Today, there are thousands and thosands of voices from radio, TV, cable and the web. There is nothing close to having a dominant share of voice today.

There's a lot of difference between 1934, 1974, and 2009. Concentration of ownership in radio hasn't been this high in over 50 years.

 

[TheBigA]

Re: Executive Summary

I said that the Communications Act of 1934 gave them the muscle to institute the 7/7/7 rule - and all other caps prior to the Communications Act of 1996.

This may come as a shock to you, but there are ownership caps in the 96 Act too. There are concentration limits. There are financial limits. And there were additional limits put in place in 2002. Clear Channel was forced to divest itself of stations in San Diego and other places.

The first cap was enacted in 1941 as the FCC enacted rules regarding chain broadcasting, specifically aimed at breaking up NBC's ownership of two national networks - the Red and Blue networks.

ABC was able to get a waiver to this rule in 1968 to create the 4 ABC demographic networks. A few years later, NBC created two additional networks: TalkNet and The Source. CBS created The Source. Today, companies like Dial-Global operate about a dozen radio networks.

Concentration of ownership in radio hasn't been this high in over 50 years.

The Justice Department, in approving the merger of XM and Sirius last year, stated that media concentration must be viewed in the context of the entire media marketplace, not restricted to any one platform.

 

[davideduardo]

Re: Executive Summary

The first cap was enacted in 1941 as the FCC enacted rules regarding chain broadcasting, specifically aimed at breaking up NBC's ownership of two national networks - the Red and Blue networks.

And guess who lobbied or put pressure on the DC powers to get this done. Would you believe CBS? Nah, William Paley would not have done that...

The network rule was made to benefit the Platinum Network, not the people of America.

 

[SirRoxalot]

Re: Executive Summary

The first cap was enacted in 1941 as the FCC enacted rules regarding chain broadcasting, specifically aimed at breaking up NBC's ownership of two national networks - the Red and Blue networks.

And guess who lobbied or put pressure on the DC powers to get this done. Would you believe CBS? Nah, William Paley would not have done that...

The network rule was made to benefit the Platinum Network, not the people of America.

That's really not true, and is a very simplistic view of what was taking place during the Depression in America. Big business was not in public favor, and monopolistic big business was even less in favor.

The network rules resulted from several things. Most important was the FCC's four-year, $2-million dollar (in Depression Dollars) study of the effect of monopolies on telecommunications. Network broadcasting was part of that study.

Mutual Network was the biggest proponent of breaking up the Red and Blue networks. They put the matter before the FCC and the Justice Department in the '30s.

The FCC ordered the breakup in 1941, but NBC fought them in court. During the court fight, both the Department of Justice and Mutual filed anti-trust suits against both NBC and CBS. I'm sure that Mr. Paley was not in favor of that.

In 1942, the Supreme Court affirmed the FCC's power to regulate network broadcasting. In 1943, NBC lost their lawsuit against the FCC over regulations that would force them to divest either the Red or Blue network. NBC tried to get the Senate Interstate Commerce Committee to write laws that would overrule the FCC, but the effort failed. NBC sold off the Blue network later in 1943. The anti-trust suits were dropped in late 1943.

Interesting history. It does set a precedent for the FCC to limit "chain broadcasting", and limit "network affiliates" to one station per market. Essentially, it gives the FCC the power to do pretty much anything it wants when it comes to regulating anything it considers to be a network.

 

[davideduardo]

Re: Executive Summary

That's really not true...

The network rules resulted from several things. Most important was the FCC's four-year, $2-million dollar (in Depression Dollars) study of the effect of monopolies on telecommunications. Network broadcasting was part of that study.

You are looking at the purely documented side of this. Paley, rebuffed early on by Aylesworth and the RCA / Westinghouse consortium he represented, was determined to beat NBC. The raids on NBC talent and the off the record influencing of any and all towards the feeling that NBC was a monopoly was what really helped break up the Red, Blue and Orange (the West Coast network) nets.

Obviously, we can't talk with the real players today, but it would not surprise me that Mutual was in some way or another "persuaded" to push for regulation under the powers seemingly granted under the Act and that this plan backfired when Mutual took on CBS as well as the three NBC webs.

Transparency was not exactly the rule of the day then. It wasn't just that the sharks ate the little fish; the big sharks ate the little sharks, too.

 

[SirRoxalot]

All of this is very enlightening, and like most history, viewpoints differ on what really happened.

None of this discussion has anything to do with the topic at hand - Radio is in BIG trouble. You still haven't addressed the basic problems of the industry. Crippling debt, decreasing values, decreasing revenue, and decreasing stock prices scream that the industry is in trouble, and the primary answer from the corporate suite so far is cutting the people that produce the product.

 

[Goat Rodeo Cowboy]

None of this discussion has anything to do with the topic at hand - Radio is in BIG trouble. You still haven't addressed the basic problems of the industry. Crippling debt, decreasing values, decreasing revenue, and decreasing stock prices scream that the industry is in trouble, and the primary answer from the corporate suite so far is cutting the people that produce the product.

We all have minds that work in different ways. We have systems of logic that do not seem to come from the same universe. I would propose to you that radio is in big trouble today because too many players with too many chips on the table either are too young to know all this history, or have no desire to be influenced by what has happened in the past.

Generals often have libraries with books the recount the history of war going back to Rome, the Greeks and even earlier. What can you possibly learn about war in the atomic age by reading about war in the bronze age? Strategy? How might the mind of your opponent be functioning? If you recognize that your opponent is apparently following a war plan from an historic battle in 324 B.C., now you have his script going forward.

In thinking my way through our "battle plan" in a little town in Eastern Arkansas in 1958, it dawned on me the other day how we could deal with balancing out this "localism" issue in today's world. The exmaple doesn't fit this thread so I will save it for another day.

NBC Red and Blue. Bring it on!

 

[TheBigA]

Re: Executive Summary

Essentially, it gives the FCC the power to do pretty much anything it wants when it comes to regulating anything it considers to be a network.

And to the best of my knowledge, they haven't used the authority since. For radio networks, TV networks, cellular networks, or internet networks.

You still haven't addressed the basic problems of the industry. Crippling debt, decreasing values, decreasing revenue, and decreasing stock prices scream that the industry is in trouble, and the primary answer from the corporate suite so far is cutting the people that produce the product.

Your primary answer apparently is bankruptcy. That leads to the bank running the station and EVERYONE getting fired. Is that what you want?

 

[SirRoxalot]

Bankruptcy

Your primary answer apparently is bankruptcy. That leads to the bank running the station and EVERYONE getting fired. Is that what you want?

No, that's not how bankruptcy works. Neither Chapter 11 nor Chapter 7 puts the assets in the hands of a bank. The assets either end up in the hands of a "debtor in posession", or a trustee who oversees operations. Ultimately, either a plan for restitution is approved by the creditors and the court, or the business may be forced into receivership. Either way, operations continue under auspices of the trustee and the court.

If the business is liquidated, operations usually continue until the assets are sold to a new owner who decides what to do with those assets. Old contracts are voided, and old debts are wiped out. The new owner chooses whether or not to negotiate with existing employees, and whether to continue operations.

The most damage to the business is likely to be done by owners trying to avoid bankruptcy by selling off valuable assets and removing valuable employees in an attempt to pay overwhelming debts. Does that scenario sound familiar to anyone else?

 

[TheBigA]

Re: Bankruptcy

Your primary answer apparently is bankruptcy. That leads to the bank running the station and EVERYONE getting fired. Is that what you want?

The assets either end up in the hands of a "debtor in posession", or a trustee who oversees operations. Ultimately, either a plan for restitution is approved by the creditors and the court, or the business may be forced into receivership. Either way, operations continue under auspices of the trustee and the court.

Uh-huh...do you see a "broadcaster" among the people who are likely to become trustees? These are money people. What do money people do? You know the answer. Firings will continue under trusteeship.

I've worked for companies that were run by court-appointed trustees. They cleaned house as part of their "plan for restitution." The first step is getting the financial house in order. If revenues are decreasing, that means cutting costs. Not focusing on product. You can focus on product AFTER the finances are taken care of. That's usually what the court says. So the trustees cut costs and lay off staff. If at some point costs can be met by revenues (in our case, it took about a year), they can hire back staff.

 

[Goat Rodeo Cowboy]

I was able to peek over somone's shoulder as the cable operator Adelphia was taken over by the Debtor in Possession. The Picture was just a little bit brighter that what you pictured. A cable company has a relatively exclusive franchise to serve an area. The debtors were willing to loosen the strings a bit because the final value of the repaired company was pretty predictable.

The debtors, the courts are going to be doing more guessing about the end value of the repaired company so many of the emotions and judgements you describe will certainly be at work.

Come to think of it... the debtors and court will have no idea if they can find a buyer for the whole bundle for a given corporation or if they will have to auction off stations in small, odd-lots.

 

[Basnya]

The way I see it:

Q: Why is radio is such trouble?

A: Ad Revenues are down forcing major cuts in staff and operations.

Q: Why are revenues down?

A: Because there is too much competition from other media sources and fewer people are listening to the radio. Advertisers don't want to use their ad dollars ineffectively.

Q: Why are fewer people listening?

A: Because radio isn't perceived as being interesting.

Q: How can we make it more interesting, bringing back listeners in the process?

A: Radio needs an image makeover.

Consider if you will the story of Harley-Davidson. Once the very embodiment of 'outlaw' culture they nearly went bankrupt after a series of bad business decisions that included allowing themselves to be bought by a company better known for bowling alleys than motorcycles.

At the same time, competition was heating up from Japanese motorcycles which were better made, more reliable and cheaper.

What did H-D do? Sure, they brought up quality but what REALLY saved them was a complete image makeover. No longer just for outlaws, now they are seen as the ultimate expression of freedom. The intangible benefits of owning a Harley were aggressively marketed with ad campaigns such as 'Own one and you'll understand' Abstract? Sure, but that is what marketing is. You aren't so much selling a product as an image.

Radio needs to project itself not at an antique medium but as a vibrant, superior choice to other media options. The talent is out there, we all know that and some of it is on this board.

Radio needs a new set of clothes. It won't solve all the problems, but it most certainly help.