riddle me this...non-coms

[Talktalk]

ok, so let me see if I have this right: Non-coms say that they are in the business of serving the community...and the do. But at the same time, they focus on ratings AND they alter their programming to please "advertisers" (which also include donors).

yet, because they are subsidized, and because the donations are tax deductable, they are never in a true competition. Their survival is never actually in question.

It sounds to me like commercial radio on a micro level with a government run aspect.

no wonder those non-commies want to repeal the telcom act, it would, essentially, bring current stations DOWN to your level...Here is a thought, improve your signal WHEN YOU CAN. Better your programming (not that garage sale listings aren't commercially viable) and provide a product that people WANT to listen to.

Am I wrong?

 

[Robert Bass]

Non-comms are not all funded the same way. Some do listener donations (beg-a-thons is my favorite word) and underwriting. In the case of KEOM, neither is done. Funding is subsidized from leased space on the Mesquite Communications tower by clients such as pager and cell phone companies.

In the case of ratings, KEOM uses them more for checking to make sure the programming is attracting the desired demos. Major declines in 25 – 54 would indicate changes in music are in order.

I don't know that the MISD has any desire to see the Telecom Act abolished.

The reason "I" want to see it abolished, is because it will make commercial radio competitive again, just like it was in the pre-consolidated era. I don't see that as bringing comms down to non-comm levels, I see it as restoring competitive programming. For example, in the pre-dereg era, you might have two stations owned by two different companies, programming a similar format. Let's take KEGL and KTKS in Dallas. Both ran similar formats, as both were more or less CHR stations. The fact they were battling it out against each other for the best ratings, required them both to come up with creative and compelling ideas.

That type of competition is gone today, because of deregulation. That's what I, and others want to see restored. What we have now is company X owning a handful of stations in a market, with no real reason to compete against similar stations by different owners. Instead we have the company trying to remain competitive, by offering a variety of formats on each station they own.

With that model, they can do it cheaply, and there's no motive for them to concentrate on quality.

R

 

[davideduardo]

The reason "I" want to see it abolished, is because it will make commercial radio competitive again, just like it was in the pre-consolidated era. I don't see that as bringing comms down to non-comm levels, I see it as restoring competitive programming. For example, in the pre-dereg era, you might have two stations owned by two different companies, programming a similar format. Let's take KEGL and KTKS in Dallas. Both ran similar formats, as both were more or less CHR stations. The fact they were battling it out against each other for the best ratings, required them both to come up with creative and compelling ideas.

What I saw for nearly 40 years was every owner going for the top position in the major formats, not creating new ones. Everybody thought they could win the Top 40 war, or the AOR war, or the Beautiful music war. In the early 60's I saw one top 20 market with 4 CHRs, 2 MORs and two R&B stations. Then, a decade later, we saw three and four beautiful music stations in many markets. And then 5 AC's of different types.

This did not make the market better, it just made the market have too many of the main format types.

That type of competition is gone today, because of deregulation.

Yeah, thankfully. We now have classic rock, modern rock, smooth jazz, urban AC, urban, CHR, hot AC, soft AC, gospel, oldies, classic hits, Jack-like adult hits, CHR, Churban, rhythmic, multiple Hispanic formats, AAA, etc., etc. across the nation. Operators are using cluster strategies where they can have 4 or 5 FMs that don't have to be #1 but can make a nice package by combo selling so they can afford to look at smaller formats positively as they build one on another.

Being #1 is not as important if you can combine several stations. So not everyone goes for the top, which creates variety.

 

[klifhanger]

With no competition , no matter how you put it in a "warring blender" and spin it. Quality is down, people flock to ONE station with a particular format instead of having a TRUE choice. If the ywant oldie and only one station plays it,where are they headed? Duh Homer.

 

[Talktalk]

robert, DE makes a strong point. take smooth jazz for example...does great in some markets, can't make it in Dallas. People keep trying to bring it back and if it did come back, it would falter like it did before. I think the spin on the telcom act is misguided. You have more choices NOW than when The Eagle was battling TKS.

 

[Robert Bass]

Smooth Jazz is out, because the demo is older than what the advertisers want, or so I've heard many times on the board.

DE is ignoring or forgetting the non-musical aspects of competition.

R

 

[klifhanger]

DE only see things DE agrees with not the whole picture. The telecom act has not increased variety only severely limited it,and caused many jobs to be lost ,when it "supposedly" was to create them. Account execs it created, CONsultants bred like cockroaches, "IT" diminshed talent,choices among listeners diminished ( one classicrock station, no 24 hour news station,one oldies station, no smooth jazz station) plus the quality of sound has crashed and burned. Its a boardrooms dream, a listeners loathing.Quality,REAL competiton.,TRUE variety were placed in a coma.

 

[newsmark]

Wow. This whole topic's fascinating. I hope DE or Robert Bass will answer a question from a non-radio type.

When you say 11.9 (or 4.6) noncommercial shares, what does that mean? Is that the total average rating for all of those stations, put together?

 

[davideduardo]

Wow. This whole topic's fascinating. I hope DE or Robert Bass will answer a question from a non-radio type.

When you say 11.9 (or 4.6) noncommercial shares, what does that mean? Is that the total average rating for all of those stations, put together?

A share is one percent of the persons listening to radio on average in a time period... generally on these boards we are talking about 6 am to midnight, monday to friday.

A rating point is one percent of all persons, whether listening to radio or not. On the aveage, a 6 to midnight rating point is about 4.5 to 5 shares.

The two numbers are the same, just expressed as a percent of people with radios on or of all people.

 

[davideduardo]

DE only see things DE agrees with not the whole picture. The telecom act has not increased variety only severely limited it,and caused many jobs to be lost ,when it "supposedly" was to create them.

I never got that memo. I though consolidation had more to do with the fact that half of US radio stations were not profitable, and somthing had to be done to make the business more viable.

Account execs it created, CONsultants bred like cockroaches,

Consolidation reduced consultants, as larger companies could now afford in house programming departments to assist the stations in most of what consultants did. Sales departments have beefed up all over America... it's not a radio thing alone.

"IT" diminshed talent,

In many cases, talent diminished itself... the 70's and 80's jock that talked to hear his or her own voice, the stoner on the progressive station, the relaxing of formatics. Many listeners came to hate jocks and any interruption of the music. I hear "stupid dj's" as a major objection more than beefs about commercials and as much as I do for bad music.

choices among listeners diminished ( one classicrock station, no 24 hour news station,one oldies station, no smooth jazz station)

The available formats are based on what can make money. All news is a very expensive format, and not neessaarily viable in most places... because it skews so old.. and because it has limited appeal in many cities with large Hispanic and ethnic communities. Most markets only have one classic rocker, as there are not enough shares for two; oldies the same with the additional problem of old demos agencies don't want.

The audience determines the formats... if a format can attract salable listeners and get a decent share, it will exist.

plus the quality of sound has crashed and burned.

Yeah. Let's bring back the Audimax and Volumax, or the 80's favorite, the Audio Prison... er, Prizm.

 

[grantchester]

Dave Eduardo wrote: the fact that half of US radio stations were not profitable, and somthing had to be done to make the business more viable.

You cite this factoid quite often David. Do you mean that half of all stations, pre 1996 had negative cash flow, or were they losing money because they couldn't meet their debt payment?

I can understand how in the 50's and 60's, FM stations didn't make money. In the '70s, the shift of listening to FM probably had an impact on AM's. In the early 80's, when ownership regulations were lifted, license values doubled and tripled, then they crashed, as more regulations were lifted, allowing small market stations to move to major cities. But the negative cash flow that led Steve Hicks to hand KEY-103 over to GE Capital was a result of his not being able to make the payments on the over-inflated price he paid for it, more than the station's inability to generate cash flow (even in the depressed Texas economy of the era.).

So, what I'm saying is, the bill of goods Lowry Mays sold Congress (when he was prez of the NAB combined boards) was misleading at best, and devious at worst. It did not result in better radio. It did result in taking the profit generated by radio from the people who created the value, and giving it to the bankers, brokers, corporate executives and speculators.

The whole idea was to beat down costs (wages), and to make 'Talent' cheap. That was the one area where dereg succeeded as designed.

 

[little1]

The reason "I" want to see it abolished, is because it will make commercial radio competitive again,

Define competitive.

I don't have the latest trend in front of me, but if I remember correctly there's a couple of stations in the low 4's, a handful of stations in the mid 3's, and another dozen or so that ranging from 2.1 to 2.9.

If you've got something like 15 stations within a ratings point or 2 of each other, isn't that real competition?

To use a sports analogy, it seems like some of you are missing the old US Olympic Basketball teams -that beat Zambia and Lithiuania by 50 points...

Sorry, I'm not missing the days when KVIL was far and away the dominant station in the market....I much prefer a competitive market where my station has a realistic chance of showing up at the top of the ratings- and not just being a distant 2nd to a Ron Chapman...

 

[davideduardo]

You cite this factoid quite often David. Do you mean that half of all stations, pre 1996 had negative cash flow, or were they losing money because they couldn't meet their debt payment?

They were not profitable. They might break even, they might lose money, but half were not profitable. Since, back then, radio was a small business, not too many station groups had financing beyond the cost of a few stations. So there was no big debt service... but keep in mind, your "personal" P&L may include debt service, too, on a home, car loan,, credit cards, personal debt, etc.

Back when the FCC required financial reports, it issued annual summaries. Stations submitted the same kind of data they had on their income tax return, income less costs equalled profit or loss. Interest is a cost of doing business, and applies to the owner of the Class A in Newton, MS as well as to the owner of a station in NY.

I can understand how in the 50's and 60's, FM stations didn't make money. In the '70s, the shift of listening to FM probably had an impact on AM's. In the early 80's, when ownership regulations were lifted, license values doubled and tripled, then they crashed, as more regulations were lifted, allowing small market stations to move to major cities.

Except for a few dramatic examples (KHFI in Austin is a classic... $17 for an A just before a bunch of Cs came to town) very few stations lost value ever, and multiples, except for the brief excursion to 16 to 18 times BCF, were always in the 10 to 14 times BCF range.

But the negative cash flow that led Steve Hicks to hand KEY-103 over to GE Capital was a result of his not being able to make the payments on the over-inflated price he paid for it, more than the station's inability to generate cash flow (even in the depressed Texas economy of the era.).

The 60's were filled with people who thought they could make money in radio, and this is part of what kept values increasing. In the 70's, everyone wanted an FM. Many lost money... a certain loser in SA was the basis for Lowry and Red getting into radio, soon followed by a money losing 1 A clear channel AM... someone always has a bigger line of credit than knowledge of radio.

So, what I'm saying is, the bill of goods Lowry Mays sold Congress (when he was prez of the NAB combined boards) was misleading at best, and devious at worst. It did not result in better radio. It did result in taking the profit generated by radio from the people who created the value, and giving it to the bankers, brokers, corporate executives and speculators.

Radio was small business, to the extent that something like 80% of owners could not even afford to give group insurance as they were so small they could not qualify; banks seldom leant money to radio, so the GEs and CITs got very high rates instead. Most employees did not even have a retirement plan, either.

The whole idea was to beat down costs (wages), and to make 'Talent' cheap. That was the one area where dereg succeeded as designed.

hat is what is usual when a business is losing money. If they could have exported it to India, they would have. It is still not a very good business for most.

 

[grantchester]

Yes, you say half were not profitable, but the reasons you give are a little cloudy, David. Back before 1982, there were FCC rules for showing the financial resources to operate a station. That changed, and allowed speculators to get into the business.
They bet on the ever-increasing value of radio, counting on a limited supply.
Then the FCC changed the rules, increasing the supply of licenses. Many, like Mr. Hicks, lost their bet. It wasn't because the staff didn't do their jobs; they succeeded. The financing failed. Hicks paid 16 million, GE flipped it to Van H. Archer III for 3 million.
And I recall KHFI K-98 sold for 23 million, then, after bankrupcy, went for about 2 million, but I digress.
Lowry picked up KEEZ (hi ray) for a song, just before FM became commercially viable. The previous owner lost his bet. Lowry won his. Likewise the WOAI deal; AVCO had a high cost structure, which CC (hi J. Barger) dismantled.
Yes, you are correct, businesses always look to trim expenses, but to use the Government and the leverage of consolidation against the value of the work provided by employees was unfair, especially since it was based on a false premise.
And you cite outsourcing... instead of India, it's voicetracking from another town...
like having a Houston announcer do the news for a San Antonio news/talk station.
The bottom line is that clusters don't compete. One station may be the one given the resources, while the others are 'boutique' stations, designed to operate on a bare-bones budget, to capture some splinter of a demographic... since there will always be a 2 share for a classic rock station, or a regional hispanic station, or a smooth jazz station, regardless of how well it serves the listener. The winner won't be the best, just the one with the cheapest overhead.

 

[Robert Bass]

So where has deregulation ever worked? We saw the crises with California's deregulated electricity system, then Enron... Now Texas has brushed the issue with TXU...

When deregulation of the broadcast airwaves first became public, one of the things I vividly recall, was some programmer or consultant stating to the effect of, "We want you to have the ability to hear your favorite station, wherever you go".

Geeeee, if listeners really wanted that, they could just make their own compilation recordings.

R

 

[davideduardo]

Yes, you say half were not profitable, but the reasons you give are a little cloudy, David. Back before 1982, there were FCC rules for showing the financial resources to operate a station. That changed, and allowed speculators to get into the business.

I don't recall when the FCC first started requiring annual financial reports (essentially a P&L) but it goes bact to the 50's, per the Broadcasting Yearbooks from the era.

The only resources one had to show to get a CP or get a transfer were funds to build and operate for a year or to continue operating. It was a minimal requirements.

What changed things a bit was the relaxation of the three-year rule on holding a license or to be accused of trafficing. But the operators in the 70's and 80's were, in their vast majority, very small. 7&7 in radio did not allow for much synergy, for a much of a career path for emplyees and there was no significant investment capital.

They bet on the ever-increasing value of radio, counting on a limited supply.

I don't agree with that. Multiples, except for the "buy it or lose it" period from '96 to about '99, station prices, like all other businesses, were based on multiples that had more to do with the cost of money at the time than with the value of the radio station. In peridods of higher interest, lower multiples applied. In periods of low interest rates, multiples increased as they were the basis for ROI calculations on the investment.

[/quote]Then the FCC changed the rules, increasing the supply of licenses. Many, like Mr. Hicks, lost their bet. It wasn't because the staff didn't do their jobs; they succeeded. The financing failed. Hicks paid 16 million, GE flipped it to Van H. Archer III for 3 million.[/quote]

As I said, there were very few cases like that. Most stations consitently increased in value, with any variation pegged more to the economy and interest rates.

Lowry picked up KEEZ (hi ray) for a song, just before FM became commercially viable.

He bought it in about '75, right? In that year, FM had over 45% of all listening, and was extremely viable. I worked briefly for Art Keller in '69 and he had several viable FMs then.... three years prior, I had a viable, profitable FM in Ecuador. there were many, many profitable FMs by '75. Lowry picked up one of the badly run ones.

The previous owner lost his bet. Lowry won his. Likewise the WOAI deal; AVCO had a high cost structure, which CC (hi J. Barger) dismantled.

Looking at Duncan's first editions back then, WOAI had little in the way of ratings... high cost, nobody listening. I would have dismantled it, too.

Yes, you are correct, businesses always look to trim expenses, but to use the Government and the leverage of consolidation against the value of the work provided by employees was unfair, especially since it was based on a false premise.

There were many reasons for consolidation, including the fact that alternate media choices were multiplying with the financing of companies like Time Warner and Viacom and such. And most of the rest of the world had allowed multi-station ownership in each market for decades, while the US was treating radio as a cottage industry; the only government supported programs were from the SBA!

Radio station owners with just a few stations had to compete with cable networks, the already-announced arrival of Satellite radio, etc. It was time to let radio be a competitive business on a larger scale.

like having a Houston announcer do the news for a San Antonio news/talk station.

Most of the world, including the G8 nations of Europe, have had national networked radio for decades. The idea of a station being voice tracked does not seem particularly alarming compared to Germany or France or Spain where 95% of the radio audience goes to stations with one studio and a hundred or so repeaters all over the nation.

The bottom line is that clusters don't compete.

The good ones do, and you can see that in the sharing tables of Arbitron. Small clusters of two or three stations may not, but the larger ones copete and overlap all over the place.

 

[grantchester]

We're looking out different windows on this one, Mr. Gleason.
The KEEZ deal went down in 1972, after the station failed in 1971. FM was not viable in S.A. at that time, but by 1975, when the WOAI deal went through, the worm had turned, and FM was taking over.
(I remember visiting with former PD Bill Traphagen, and asking what happened:
"I took a successful Middle of the Road station, turned it Top 40, and ran it straight into the ground!" he told me.)
I still don't agree with the blanket statement that half of the stations were not making money... Probably a fifth are non-coms or religious, which aren't supposed to make money. As for the rest, if things were that bad, license values would not have been increasing, as you say they did. Consolidation was designed for the investment bankers, the brokers, and most of all, Lester Lowry Mays, Tom Hicks, and the rest of the wheelers and dealers who took the value, and stiffed the workers.
That's the view from my window. How do things look from yours?
g

 

[davideduardo]

We're looking out different windows on this one, Mr. Gleason.
The KEEZ deal went down in 1972, after the station failed in 1971. FM was not viable in S.A. at that time, but by 1975, when the WOAI deal went through, the worm had turned, and FM was taking over.
(I remember visiting with former PD Bill Traphagen, and asking what happened:
"I took a successful Middle of the Road station, turned it Top 40, and ran it straight into the ground!" he told me.)
I still don't agree with the blanket statement that half of the stations were not making money... Probably a fifth are non-coms or religious, which aren't supposed to make money. As for the rest, if things were that bad, license values would not have been increasing, as you say they did. Consolidation was designed for the investment bankers, the brokers, and most of all, Lester Lowry Mays, Tom Hicks, and the rest of the wheelers and dealers who took the value, and stiffed the workers.
That's the view from my window. How do things look from yours?
g

Thanks for correcting the date on the first CCU purchase, as a recent magazine report pinned it closer to the 75 mark... but still, many FMs by 71 or 72 were profitable in the larger markets... one of the EZ stations I was going to work with was in Richmond, a similarly sized market, and it made money going back to 1970.

The FCC financial reports were done from back in the 50's for commercial stations. And later, the NAB did them using a survey method rather than every station... but they all showed, consistently, that half of US commoercial stations were unrofitable over all those decades. It's the daytimers, the suburban FMs, the stations in over-radioed markets like Grand Junction and Albuquerque, the rural stations where there is not enough business, the overly directional metro AMs that can't cover their markets that lose consistently.

We notice the high priced stations in major markets. They make money. A dog does not get noticed, yet we see little stations going for $50 k or for assumption of liabilities all the time. And we see prime sticks, like the $250 million purchase of KFSG in LA a few years ago, go for big amounts because in this market, every B makes money. But a full C in Albuquerque is perhaps worth a couple of million at best... because there is no real value to it.

Personally, I started when we had no insurance, no benefits, and I got $1.15 an hour and had to bring my own toilet paper and water. I saw our owner, Richard Eaton, compared with Don Burden, Max Richmond and some of the other crazies who owened stations. It was a horrible industry then... today we give all kinds o9f benefits, we have a 301-k, we have a cafeteria plan, and more. They even give us vacations. Yes, it is more business and less fun, but it loet me put two daughters through good schools... something preconsolidation radio would not have allowed.

 

[grantchester]

It was a horrible industry then...

Yes, I worked for a few "Toilets"... Howard W Davis and Jack Roth were not good operators. I recall racing to the bank on payday. But I also worked for some very good sole proprietors, like Jesse Jones, Bernie Waterman, Roy Butler, even Jack Chapman out in Gallup NM.
We started out at bad operations, because we knew that as we gained experience and polished our chops, someday we could work for an ABC or a CBS o&o, or a network, or one of the big 'uns on the east or west coast. We also knew that if we scored in the ratings, and the management didn't come across with the $$, we could get a job at a competetor. I haven't heard of anyone 'crossing the street' in years. To admit the value of a 'talent' would mean operators would have to pay more. They will not, with a few exceptions, do that. Que lastima.
G

 

[davideduardo]

Yes, I worked for a few "Toilets"... Howard W Davis and Jack Roth were not good operators. I recall racing to the bank on payday. But I also worked for some very good sole proprietors, like Jesse Jones, Bernie Waterman, Roy Butler, even Jack Chapman out in Gallup NM.
We started out at bad operations, because we knew that as we gained experience and polished our chops, someday we could work for an ABC or a CBS o&o, or a network, or one of the big 'uns on the east or west coast. We also knew that if we scored in the ratings, and the management didn't come across with the $$, we could get a job at a competitor. I haven't heard of anyone 'crossing the street' in years. To admit the value of a 'talent' would mean operators would have to pay more. They will not, with a few exceptions, do that. Que lastima.

Sometime if we meet I will tell your a terrific... or terrible, depending on your point of view, Jack Roth story.

You are right about crossing the street, but that is mostly due to our litigious society. We have contracts, and courts uphold them and they grant damage for tortuous interference. It's the same reason a station in Maine can be called "Coast Radio" and because they stream, the service mark can be upheld anywhere in the US. If anything, I blame the lawyers for destroying the future of radio much more than I can blame the investors.