Radio is "not a viable business"

[davideduardo]

Radio and the radio business keep evolving. At the beginning of broadcast radio, people wondered how it could make money. Then stations started reading advertisements.

Actually, at the pre-1925 "beginning" many, many early radio stations were opened by companies who thought having a station was good for promotion and enhanced their brand prestige. So insurance companies, radio manufacturers, newspapers, car dealers, farm supply / seed dealers and even a chiropractic school put stations on the air.

Soon, companies began to sponsor radio shows.

That was nearly a decade later when in the 1928 period RCA (started to own stations to sell radios) and a cigar company from Philly put together networks of stations to "share" programs and sell to big advertisers who could not easily use radio prior to the arrival of NBC and CBS.

Now radio is available more places than ever, thanks to the Internet. Can get all sorts of stations on my Internet radio, and these stations can carry broad-based advertising. Some don't, like one Hawaiian oldies station I sometimes listen to. Neat to hear the local ads, gives you a window as to how life is there. The more things change, the more they stay the same. New opportunities will keep coming up, and so will new opportunities to make money in radio.

Now, how is that local station in Hawai'i making money off those "new opportunities"? To me, it looks like you are costing that station money by listening and they will never get it back!

 

[PTBoardOp93]

This is a very interesting announcement, where Bell Media in Canada states very directly: "It's not a viable business anymore."

I think it is accurate, especially in Canada. Advertising has always been harder in Canada because of the low population density outside a handful of cities. There are only 6 metro areas over 1 million population, and 11 over 500,000.

It looks like the largest market Bell is divesting is St. Catharine's, Ontario (near Buffalo, NY).
Divested markets appear to be market #13, #20, #32, #41, #67, #84, #85, #92. A fair number appear to be outside the top 100 cities.

Market #13 in Canada is a similar population to market #133 (Palm Springs) in the US, so these are all small markets by our standards.

And some of them are *really* small: The entire population of the 84th largest Canadian city (Brockville, Ont.) would fit comfortably in the Toronto SkyDome with several thousand seats to spare.

 

[Skivvy9er]

Actually, at the pre-1925 "beginning" many, many early radio stations were opened by companies who thought having a station was good for promotion and enhanced their brand prestige. So insurance companies, radio manufacturers, newspapers, car dealers, farm supply / seed dealers and even a chiropractic school put stations on the air.

That was nearly a decade later when in the 1928 period RCA (started to own stations to sell radios) and a cigar company from Philly put together networks of stations to "share" programs and sell to big advertisers who could not easily use radio prior to the arrival of NBC and CBS.

Now, how is that local station in Hawai'i making money off those "new opportunities"? To me, it looks like you are costing that station money by listening and they will never get it back!

My guess...the stations have some sort of arrangement with Skytunes, who provides the programming on my Ocean Pacific Internet radio. Skytunes is free to the OP radio user. These days listen more to stations online via the laptop.

 

[Theater of My Mind]

This is a very interesting announcement, where Bell Media in Canada states very directly: "It's not a viable business anymore."

It's a bunch of hyperbole from a company that hates radio.

For those who didn't see this article in the Buffalo-Niagara thread on this topic -- with credit to @ckg279 for posting it there -- here's perspective from someone who worked in Canadian radio for many years, including as longtime morning host on CFNY-FM in Toronto.

Of course, they blamed the government...

Traditional Media (Radio, TV, and Print) have lost 50-70% of their revenue over the past 10 years and it's getting worse

crier.co

 

[davideduardo]

It's a bunch of hyperbole from a company that hates radio.

No, it is a company that knows that its business model does not work any more in radio so they are exiting by selling to groups that think they can apply a different management philosopy. It is like a team getting a new coach.

For those who didn't see this article in the Buffalo-Niagara thread on this topic -- with credit to @ckg279 for posting it there -- here's perspective from someone who worked in Canadian radio for many years, including as longtime morning host on CFNY-FM in Toronto.

The article is well written by a person whose personal ox was gored. The fact is that regulations in Canada make it a lot harder to run communications businesses. The point Bell made about the government not allowing them to recover required upgrade costs before demanding they allow low-cost subcontractors to sell services cheaper is well made and reasonable.

 

[Theater of My Mind]

No, it is a company that knows that its business model does not work any more in radio so they are exiting by selling to groups that think they can apply a different management philosopy. It is like a team getting a new coach.

I think that's a fair assessment, actually. I think most of the affected stations were in markets too small or challenging for Bell to care about maintaining, and for the most part I believe they were minimally staffed and fairly neglected.

I guess we will see whether it's really not a viable business anymore when operated by smaller companies that will likely take a more hands-on approach. With so many of them, we should also get to see which management philosophies work better than others. It may just end up being a good case study of de-consolidation and diversification of radio ownership.

 

[Tibbs4]

I am not on here to try too save one's soul, help with salvation or even suggest it. Nor argue or worry if we are in Canada or not. I am here to timely note our friendly FCC. I may also well be here to suggest the FCC could hypothectically kiss all our transmitters for things like not allowing a tiny radio station in Alabama to broadcast on their tiny FM signal after idiots stole their AM tower. But, that can of worms about how the FCC has hurt radio is a can of worms that we could never end or close on here. That's above my intelect (spelling). So let's talk radio's salvation. EMF and the religious broadcasters are having their field day now. It's only a matter of time before that changes. Conventional broadcasters have ALL of the arrows pointed at them (aka "us.") Consumers have far more choices at ease with less stress to their ears, than radio. The tarnish cannot be rubbed of as quickly as before. The audience will eventually be razor thin from top and bottom demographics escaping. Costs, like electricity and insurance and I am sure soon enough more licensing, will continue to increase, along with music costs. Equipment has been neglected for years and many of the big corps have sold off their real estate to quick fake fix the fake bottom lines to the point of no more returns. Yes, "they" paid way too much back when things were better. We all have talked for what, a decade plus, on here about all of this? We saw it and still see it as not real optimistic out there. They didn't or don't see that? If you really look at the fact that bankruptcies and fuzzy accounting have been going on for multiple ownership decades+ now, I don't see how anyone investing in radio could not see past their own radio dial that it wasn't suddenly going to turn around and their not be 100,000 online music copycats, tougher competition in the cars that would make accessing the AM/FM bands virtually the last resort, or that, like the typewriter and AM radio, there would be a day when the allure of the mechanical operation would be rendered semi-DOA. Yet - That being said, yes, major companies have blown buh-billions, layed off mega-thousands and really NOT gotten above an average performance grade of D-. Yet... the cycle continues. Now, the odd thing I see is that once again, thanks to the REALITY that is, just a normal guy CAN buy just a normal local station for less than an overpriced American house and create something "old school" that is, in it's own way, fresh and new again with a reasonable expectation of happiness, community pride and even make a few bucks. And the remaining local businesses that have also survived the corporate prostitution of Main St, will be able to buy a few ads and radio can still be some piece of what it was originally intended to before the "powers" that be mega-botched a piece of true Americana. And for what IT is worth, some people in this industry ARE making more money than EVER and building and growing even while corporate radio can't field a local sales team to sell an ad because it's too little to save the executives pensions and payouts before they move on to their next disaster or run for office. So maybe, somehow the EMFs of the world and the little guys will fix the utter disasters the "know it alls" that friggin have NOT progressed past 12-minute stop sets, scam agency buys and questionable radio "ratings" for decades now can't afford to contend with. Here's a fun question for a few of you....what will WCBS-FM be worth in eighteen months? Cause I know a few people who might be interested.... Ok, now I KNOW I am crazy. WE all know that. Time to kill the messenger with "pre-approved" cut and pastes and retorts.

 

[kwthom]

Wow...

Can we get an editor to have a go at that??

 

[CTListener]

Wow...

Can we get an editor to have a go at that??

Sorry, I've retired.

 

[radiofan2023]

I will never understand why people get so mad at companies who were buyers of stations, rather than the people who sold them. Did Iheart/Cumulus/etc. twist their arms and force them to sell their stations to them? The answer is no.

 

[Mediafrog+]

Wow...

Can we get an editor to have a go at that??

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[Kent]

I will never understand why people get so mad at companies who were buyers of stations, rather than the people who sold them. Did Iheart/Cumulus/etc. twist their arms and force them to sell their stations to them? The answer is no.

The other side of that is that you can't blame someone for selling when they essentially made their lives owning those properties. When my stations were sold to Cumulus 20 years ago, I didn't have a problem with the owners selling. They were getting up in age, wanted to scale back their business footprint, and saw Cumulus offering them almost $40 million. Pulling back and not being involved in as many operations that required daily effort seemed pretty reasonable to me. I, of course, wish they had found a better buyer, but, knowing them, I don't think they sold to Cumulus thinking it would gut the properties (and it didn't until about 4 1/2 years later when the economy crashed). The two original owners had a great deal of pride in having built one of the stations from the ground up and having assembled the group painstakingly and carefully, and I don't think they would've sold to someone they thought would dismantle their lives' work. The Cumulus regional VP's told us a great story when they made the announcement they were taking over, and I'm sure they heard the same story from the people they dealt with when discussing a deal. They could've done more research on Cumulus, but the company's reputation then wasn't what it is today. Plus, human nature is that you want to believe the good things people are telling you.

Also, looking back, they got out at the right time. They got nearly $40 million for a cluster that's not worth a penny more than $15 million today, and Cumulus would be lucky to get that. I'd have to think it would be more likely to fetch around $10 million if it were to be put on the market.

 

[gr8oldies]

Wow...

Can we get an editor to have a go at that??

Saaay what?

 

[michael hagerty]

Wow...

Can we get an editor to have a go at that??

Paragraph breaks are your friend.

There may be more to it than that, but my eyes glazed over too quickly.

 

[Plate Blocker]

Now, as far as the premise above ---- "Radio - It's not a viable business anymore." It's not viable using any form of the old school methods. But, in America, business generally finds ways to evolve and make a profit. I wouldn't count radio out yet. But, I do think "we" need to look at the reality that the most profitable models are NOT stock owned, top heavy run dinosaurs. Sadly, EMF and similar models are healthy. Corp radio is more worried about shaving off and killing it's already reduced audience.

Tibbs said this more elegantly than I have ever read or heard before. Bravo!

Many.....perhaps most.....stations are operating in a manner that has not changed significantly in many years. They play some music, news, sports talk, etc., and run advertisements that are often irrelevant to the listeners. If they do so too much, those listeners tune out.

I have a 33 year old niece who does not listen to terrestrial radio (other than short road trips in the car) and who is busy making babies. Those children will be raised in a home where audio entertainment is only present via streaming or perhaps in-home recordings of some type. News is read on the internet, per political preference choosing the source. The kids won't know what radio is.

As I've said elsewhere during my short tenure here, I've made my money over 45 years in the broadcast industry, but rarely listen to terrestrial radio anymore. Annoying spots, poor music selections, limited playlists, and generic voice tracked announcers from distant locations are the cause. When I do, it's usually just experimentation when I'm driving through a new city, or my bride getting tired of my stream choices. When she's driving, it's just background noise. She will listen to any station that plays music she recognizes.

I will stream a local station from Wisconsin to hear local play-by-play of my beloved Packers.....I stream a local kilowatt AM in the mornings because they run a call-in "for sale" show called Tradio and I love it. Beyond that, Spotify and YouTube Music does a far better job of determining what I like and playing the music that I like. If I'm interactive with their choices, it just keeps getting better and better.

Most of us are in the business and the overall state of things goes down hard. The buggy whip people probably held on to the same hopes as cars were becoming more prevalent. I saw a post in Buzzstream here where a paid researcher determined that 13 year olds get 33% of their music from terrestrial radio. That is a stretch; most of those are likely not tuning in themselves but rather riding in a car with Mom. What is overlooked in the same article is that those same 13 year old's YouTube / Spotify / Pandora use exceeds that 33%.....and THEY are making those selections. The study was likely paid for by the broadcast industry, and results skewed to what they wanted to hear.

I love the history of radio, and loved working in the industry, but things are not going to get better. For all things there is a season, and radio's season is dramatically changing.

 

[Mark Roberts]

Paragraph breaks are your friend.

There may be more to it than that, but my eyes glazed over too quickly.

It was rather stream-of-consciousness. The writer could have spent a little more time organizing their thoughts. That said, I think the basic point the writer was trying to make was that large group owners are in a downward spiral where cost-cutting just leads to more weakness in business models and operations - with that spiral eventually reaching the point that station values will be so low that small operators with different business models will be able to pick up the pieces and offer more diverse programming, supported by mom-and-pop businesses. I don't agree with all the writer's points, but it's not a totally unreasonable proposition. I will concede that it all seems a bit romantic to me.

(Edit: Of course, in a post about editing, I would make a minor mistake that indicated the need for closer editing!)

 

[Skivvy9er]

Yes, radio is changing, some say dramatically, but it won't be the first time. Look at what happened to the great radio shows and the big radio networks when TV came along. Add in the rise of FM. Radio largely had to reinvent and reorient itself, and it did.

Some may say streaming will kill radio. No, radio will change and adapt. Expect new opportunities to arise, they always do. As a retired signals intelligence officer, radio's always going to be out there for various applications.

 

[michael hagerty]

I think the basic point the writer was trying to make was that large group owners are in a downward spiral where cost-cutting just leads to more weakness in business models and operations - with that spiral eventually reaching the point that station values will be so low that small operators with different business models will be able to pick up the pieces and offer more diverse programming, supported by mom-and-pop businesses. I don't agree with all the writer's points, but it's not a totally unreasonable proposition.

I don't think the basic premise is wrong. When Clear Channel shrunk itself in 2007, divesting smaller markets, a lot of those stations ended up in the hands of small operators.

But there are only so many people with the financial resources, the business acumen and the desire to buy these stations. Beyond that, we've recently discussed how difficult (and expensive) it is to sell and maintain local direct advertising.

There's no blanket model here.

 

[secondchoice]

As an investor the whole radio/streaming business is iffy. Pandora was a train wreck if you were a long-term shareholder. Spotify had a decent EBITA but the latest financial reports has them losing 75 million (euro).

IMHO any broadcasting / streaming business is only worth an amount that gets at least a 20 percent return annual return on the total capital (debt and equity). A huge percentage of the younger folks refuse to pay for their music. The person or organization that figures out what the "tolerable" length a commercial stop set is should well in the future if they are not loaded down debt.

 

[TheBigA]

I think the basic point the writer was trying to make was that large group owners are in a downward spiral where cost-cutting just leads to more weakness in business models and operations - with that spiral eventually reaching the point that station values will be so low that small operators with different business models will be able to pick up the pieces and offer more diverse programming, supported by mom-and-pop businesses.

Maybe not "mom & pop businesses," because FCC regulations have driven out anyone who isn't at least protected by an LLC or some other legal operation. But I agree that trying to operate as a radio-only business, having those stations supported by advertising is becoming harder and harder to do. EMF and small groups can do it by keeping operating costs low. But a company like Bell is based in big cities, where staffing is based on very different economies than in rural areas. That's why it's no longer viable for them, and that's why they're spinning off all of their smaller markets to local operators. I'm sure a lot of big companies here are thinking about doing the same thing. Over the years, Cumulus & iHeart have done a lot of that. Thinning the herd.

Let's focus on the two words in the subject line: viable business. All it's referring to is ad-supported radio. That's how Bell sees it. Exclude the basis on advertising, and you get something a lot of people use. The only thing missing is a dependable way to pay for it. If we're to believe what people say, a lot more people would use it more often if it weren't for all the commercials, and programming aimed at attracting sellable demographics. So those are the main problems. The platform itself isn't deficient, other than the limitations of the signal. As I say many times, radio needs to find another revenue stream besides advertising, because that model doesn't work when radio's slice of the advertising pie gets smaller, which is where we are now.