Rock in New York City

[davideduardo]

I remember, last winter, having a 20-page long discussion with a certain other NYC-based poster who insisted that the Alternative format was dead, and would not work in Atlanta

Now, look what's happened... ;D

We still don't know if the format will work, sales wise. And since radio is a business, that's the only kind of "work" that matters. That determination will be known somewhere after the start of 2014.

 

[atlantaboy]

Lol really? Clear Channel in Atlanta is losing money for a year? - Sun Radio in Ft. Myers?

Clear Channel has little to lose in Atlanta. The format was billing about $2 million, and likely not profitable even with the lowest possible expenses. But even then, they gave up the existing revenue and will not get many significant buys until they have a 6 to 9 month period of salable ratings.

In Ft Myers, the situation was even easier to analyze: the alternative / active hybrid in the market changed format (gee, they must have loved the format) and another station, suffering from declining sales and sales-demo ratings and, snapped up the format. In other words, they move one rung up from the bottom on the food chain.

Now 92.3 is in the same situation - it isn't Top 5 in any demo, there's a musical hole in the market, and CBS is making money simply because the station happens to be in a large metro - they are at the absolute bottom of the NYC "food chain", failing miserably to Z100 and WKTU - the only difference is that CBS, directly or indirectly, seems to send a lot of posters onto this message board to defend them

 

[atlantaboy]

I remember, last winter, having a 20-page long discussion with a certain other NYC-based poster who insisted that the Alternative format was dead, and would not work in Atlanta

Now, look what's happened... ;D

We still don't know if the format will work, sales wise. And since radio is a business, that's the only kind of "work" that matters. That determination will be known somewhere after the start of 2014.

There is no guarantee that any format will "work" sales-wise - stations have flipped to Sports, Talk, Hot AC, Rhythmic-Leaning CHR, among other formats, this year, in major markets, and failed miserably

The prospects of Alternative in Atlanta certainly look financially better than any of those other "risky" format flips

 

[atlantaboy]

I am familiar with the fact that it is likely the most unpredictable format for new launches. Therefore, the riskiest.

David, why don't you tell us about some of those unsuccessful "new launches" that have occurred in the last couple years

Look nationally at any of the more recent changes to Alternative... starting with the low, low billings at WRFF. More established alternatives like KROQ and WWDC do much better.

David, you stated that Alternative "is likely the most unpredictable format for new launches", implying that there have been unsuccessful attemps at launching Alternative stations in the last couple years

I'm not going to go into the WRFF situation again - it is the most successful Alternative station in the country, #1 18-34 and #3 25-54 - billings are not profit, the figures you have are estimates that do not figure in expenses, and your BIA/Kelsey information source is both outdated politically connected to CBS

 

[fybush]

Alternative has a niche audience, which is a "fit" for some advertisers, but not for others - the same would be true for Urban, and for Country in non-Southern markets

Country may have been a niche format outside the South a generation ago, but it's as mainstream as it gets these days. WBEE-FM is consistently at or near #1 here in Rochester book after book, just like WYRK down the road in Buffalo.

When I was working in radio in Boston in the early 1990s, the conventional wisdom said country was, at best, a small niche. It had burned out on WBOS and was only being heard at the top of the AM dial (WDLW 1330 and later WKKU 1510). And then Greater Media launched WKLB and moved it around until it ended up on the best FM signal in the market, where it's now consistently a top ratings and revenue player. Times change.

Alternative stations can build up advertising if their station has decent ratings, but at a certain point, the advertising money maxes out, since some advertisers want to reach a broader demographic

With you so far...

That would explain why extremely high rated Alternative stations have low power ratios, and why moderately rated stations have high power ratios - it would also explain why the Urban and Country formats (according to you) do not have high power ratios either

I think the hang-up here may be on the importance of power ratio. By itself, there's nothing especially good or bad about a high power ratio, or a low one for that matter. Plenty of examples have been presented here of stations that are successful (in terms of revenue/profitability) both with high power ratios and low ones.

If I own a commercial radio station, the number that I care most about starts with a dollar sign. Ratings matter only to the extent that I can use them to drive revenue, whether by selling national advertisers on a big mass audience or by pushing more targeted buys to a valuable demographic niche.

Consider: when a commercial radio station is sold, how is its value calculated? Not by ratings, and not by power ratio (which is ratings-dependent). Station brokers determine a radio station's price tag by a multiple of its cash flow. You could have a relatively low-rated station with good cash flow (and thus a high power ratio), or a relatively high-rated station with a similar cash flow (and thus a lower power ratio), and, all else being equal, they should sell for a similar amount. And that second station should sell for considerably more than a third station with both lower ratings and lower cash flow, even though that third station would show a higher power ratio on paper.

Think of power ratio as something like the gas-mileage figure when you buy a car. It's not a useless number - you want to know how much you'll spend on gas - but it tells you nothing at all about how fast you'll get from point A to point B, or how comfortable you'll be getting there.

 

[atlantaboy]

I think the hang-up here may be on the importance of power ratio. By itself, there's nothing especially good or bad about a high power ratio, or a low one for that matter. Plenty of examples have been presented here of stations that are successful (in terms of revenue/profitability) both with high power ratios and low ones.

If I own a commercial radio station, the number that I care most about starts with a dollar sign. Ratings matter only to the extent that I can use them to drive revenue, whether by selling national advertisers on a big mass audience or by pushing more targeted buys to a valuable demographic niche.

Consider: when a commercial radio station is sold, how is its value calculated? Not by ratings, and not by power ratio (which is ratings-dependent). Station brokers determine a radio station's price tag by a multiple of its cash flow. You could have a relatively low-rated station with good cash flow (and thus a high power ratio), or a relatively high-rated station with a similar cash flow (and thus a lower power ratio), and, all else being equal, they should sell for a similar amount. And that second station should sell for considerably more than a third station with both lower ratings and lower cash flow, even though that third station would show a higher power ratio on paper.

Think of power ratio as something like the gas-mileage figure when you buy a car. It's not a useless number - you want to know how much you'll spend on gas - but it tells you nothing at all about how fast you'll get from point A to point B, or how comfortable you'll be getting there.

Thank you!! (I've been trying to express this for about a week now) ;D

 

[fybush]

I'm not going to go into the WRFF situation again - it is the most successful Alternative station in the country, #1 18-34 and #3 25-54 - billings are not profit, the figures you have are estimates that do not figure in expenses

Especially in a cluster situation, where expenses are shared among four or more stations that all have a common sales, engineering and business infrastructure, "expenses" are a red herring. Running jockless saves less than you'd think off the expense side of the ledger, especially when a typical Clear Channel top-40 like WRFF's sister station WIOQ may have only one or two locally-hosted shifts. The only formats that involve significantly higher expenses are spoken-word, especially all-news but also talk and sports to a lesser extent. Everything else amounts to a rounding error against the kind of revenues a station in a top-10 market pulls in.

, and your BIA/Kelsey information source is both outdated politically connected to CBS

You'll need a better citation to back that up. You're embarrassing yourself by making that claim based only on the fact that someone from CBS spoke at a BIA/Kelsey seminar. As others on this thread have observed, everyone speaks at BIA/Kelsey seminars. That same conference that featured Dan Mason as a speaker also had representatives from the Boston Globe, Washington Post, Google, Foursquare, NPR Digital, Patch.com, and on and on.

http://www.biakelsey.com/LeadinginLocalBoston/speakers.asp

The last time BIA did a Digital Strategies for Broadcast event, the top execs present included the heads of Emmis, Fisher, Schurz, Gray, GAP West and several other broadcast groups.

http://www.kelseygroup.com/dsb2010/speakers.asp

That's not "politically connected." It's "respected." There's a difference.

Whether it's convenient to your argument or not, BIA is the gold standard for this data - so much so that even the FCC and Justice Department use BIA's data when making determinations on market concentration and definitions.

 

[davideduardo]

I'm not going to go into the WRFF situation again - it is the most successful Alternative station in the country, #1 18-34 and #3 25-54 - billings are not profit, the figures you have are estimates that do not figure in expenses, and your BIA/Kelsey information source is both outdated politically connected to CBS

You are getting a very good additional perspective from Scott Fybush.

And he has just more succinctly something I have been emphasizing: Power Ratio is a metric. If you get a good rating, like WRFF does, you want to get good billing, like WRFF does not. Power ratio helps management determine if they are maximizing revenue... and it helps to put format expectations in perspective.

More important, Scott adds some important points about cost of operation. Save a very expensive morning show, music stations will have fairly comparable core fixed costs.

So it comes down to trying to maximize ratings in a salable demo and doing a good job of converting ratings to revenue. Then attention is focused on running a station efficiently so as to not piss away the potential for profits.

One thing I did not mention, since you don't seem interested or aware of sales issues: the Power Ratio is definitely used as a metric in-house to evaluate general managers and sales managers. The manager's job is to get some salable ratings and guide sales to monetizing it. The sales manager needs to convert ratings to revenue as well as possible.

If you are an investor, power ratio is interesting only if you are an analyst or a mutual fund manager... a company with lots of low ratio stations may not be adequately managed. As a buyer of a station, you would look at the power ratio to see if maybe a better management and sales team would make the station perform better.

But as Scott says, station values are based on cash flow, the facility itself and the old supply and demand situation. But station performance, particularly internally, is very keyed to power ratio.

Back to square one: alternative stations may or may not get significant ratings. Latecomers to the format don't convert whatever ratings they get to revenue as easily as a number of other formats. So for an owner with a very profitable station in New York City, that's a double doubt factor. However you measure it, alternative is risky for a station that is currently profitable.

 

[davideduardo]

There is no guarantee that any format will "work" sales-wise - stations have flipped to Sports, Talk, Hot AC, Rhythmic-Leaning CHR, among other formats, this year, in major markets, and failed miserably

No format flip made this year can be judged after just 5 months of measurement of audience.

You do know that stations, when they launch often play non-stop music for many weeks or even a month or so? The reason is that they are sacrificing essentially no revenue opportunities. Of course, other stations... in cash strapped companies (like Clear Channel, perhaps)... will do "pioneer rates" or somesuch where they sell tons of spots at a few bucks each. Oh, look, Mr. Car Dealer, we have Giant Ford on already! Of course, Giant is paying nearly nothing for the spots... but it does fill up the stopsets with a little (very little) revenue. It creates, at the local level, an image of success... it fooled you, fer' sure.

It takes about a year to figure out how a station will do in the long haul... both ratings and revenue wise.

 

[atlantaboy]

David, let's look at his post again:

Plenty of examples have been presented here of stations that are successful (in terms of revenue/profitability) both with high power ratios and low ones.

You claimed that Alternative was a risky format flip for a new station, and cited as your reasoning that KROQ and DC101 have high billing/higher power ratio, while WRFF has low billing/low power ratio, so therefore Clear Channel's flip to WRFF was financially unsuccessful

Scott has verified that using power ratios to measure a station's profitability is inaccurate

You implied that there had been recent, unsuccessful attempts at starting up new Alternative stations, when in fact this statement is completely untrue - and, according to your own post, you wouldn't even be able to tell if a flip to Alternative was successful or not until a year later when the BIA/Kelsey data came out, since, according to you, PPM share is irrelevant - what we do know is that, during the past year, there have been unsuccessful, or underachieving, format flips to Hot AC (Chicago), Sports (Atlanta), News/Talk (NYC), and Rhythmic-leaning CHR (San Diego, Atlanta)

If it is true, as you claim, that a station can have high ratings but low profitability, cite one example, in the past 5 years, of a high-rated station, #1 in its target demo, that has flipped formats because of a low power ratio, and low billing information

 

[atlantaboy]

If you get a good rating, like WRFF does, you want to get good billing, like WRFF does not.

: That is the exact opposite of what he posted

According to his post, stations can be financially successful and have low power ratios - power ratios are a good metric measurement of progress, but what matters is the final financial figures

The misinformation you keep posting, implying that a low power ratio makes a station less financially successful than a high power ratio, is both misleading and incorrect

 

[atlantaboy]

And, again, let's look at what Scott said in reference to the financial situation of WRFF - keeping in mind that your reasoning behind the claim that Alternative was a risky choice for new format flips was that WRFF has a lower power ratio, caused by low billing vs. high share, while the more established stations KROQ and DC101 have higher power ratios

I'm not going to go into the WRFF situation again - it is the most successful Alternative station in the country, #1 18-34 and #3 25-54 - billings are not profit, the figures you have are estimates that do not figure in expenses

Especially in a cluster situation, where expenses are shared among four or more stations that all have a common sales, engineering and business infrastructure, "expenses" are a red herring. Running jockless saves less than you'd think off the expense side of the ledger, especially when a typical Clear Channel top-40 like WRFF's sister station WIOQ may have only one or two locally-hosted shifts. The only formats that involve significantly higher expenses are spoken-word, especially all-news but also talk and sports to a lesser extent. Everything else amounts to a rounding error against the kind of revenues a station in a top-10 market pulls in.

 

[atlantaboy]

(Edit)

 

[atlantaboy]

(Edit)

 

[davideduardo]

The misinformation you keep posting, implying that a low power ratio makes a station less financially successful than a high power ratio, is both misleading and incorrect

No, a low power ratio indicates sales underperformance vs. theoretical potential. A high ratio indicates a station that is very successful in converting ratings to revenue.

For decades... and still in many markets... urban formats and Spanish language formats achieved lower than 1.0 power ratios. The reasons covered a broad range, but, unfortunately, included an element of prejudice against the formats and the "type" of listener such stations attracted. This was deemed so pernicious that the FCC, in 2011, issued an order that stations must require all ad contracts to contain wording to the effect that buys are not made with any bias and do not contain "no buy" dictates that are discriminatory.

In this case, power ratio indicated a fundamental issue in advertising that reflected attitudes against the listeners of specific stations based on race or ethnicity. It did not, however, indicate that such stations were not profitable, which they were for the most part. It simply indicated that they were not getting a proportional share of revenue.

The FCC's source for billing data and power ratios was BIA.

And that is an example of the use of power ratios and billing data (both of which, mathematically, mean the same thing, just as share, rating and AQH Persons are "the same thing") by the FCC to formulate administrative policy based on revenue information.

Here is a sample of the printed BIA Market Report printed edition, issued quarterly. The computerized version, updated daily, has far, far more information on markets, billing, stations, facilities, coverage maps, etc.

http://www.biakelsey.com/pdf/Radio-Market-Report-Sample.pdf

 

[atlantaboy]

The misinformation you keep posting, implying that a low power ratio makes a station less financially successful than a high power ratio, is both misleading and incorrect

No, a low power ratio indicates sales underperformance vs. theoretical potential.

I agree - but throughout this entire thread, you have repeatedly used WRFF's low power ratio, as well as other low power ratios on Alternative stations such as the one that ranks #3 in the Denver market, to conclude, and post repeatedly, that a flip to the Alternative format would be extremely risky, undependable, and most likely not financially beneficial, to any low-rated station in the New York City market

As has been verified by another poster who is also directly in the radio industry, a low power ratio does not in any way indicate that a station is not profitable, or financially poor

It doesn't make any sense to "theoretically" ponder about whether WRFF would be billing higher if it were another format - a different format would mean a difference audience, a completely different share, and completely different demo rankings - WRFF is making a certain amount of profit, and if, theoretically, it would be making the same amount of profit with lower ratings, its financial situation wouldn't change, regardless of its power ratio

Again, find a station, in the past decade or so, which has been #1 in its target demo, but had a low power ratio, and flipped formats as a result - if you can find a couple examples, your arguments would have merit...

 

[davideduardo]

Scott has verified that using power ratios to measure a station's profitability is inaccurate

Scott has said, essentially, that expenses for different formats are different and cited the extreme cost differences between news and talk stations and most music stations, so profits can not be determined from power ratios.

But he also gave you input on how music formats tend to be fairly similar in cost structure, and within a particular market will be in a compact range. So we can predict the viability of a station under its current format.

Low billing stations don't make money, irrespective of format. And, over decades and decades going back to the 50's, the FCC financial reports revealed that half of all US radio stations did not make a profit.

You implied that there had been recent, unsuccessful attempts at starting up new Alternative stations, when in fact this statement is completely untrue - and, according to your own post, you wouldn't even be able to tell if a flip to Alternative was successful or not until a year later when the BIA/Kelsey data came out, since, according to you, PPM share is irrelevant - what we do know is that, during the past year, there have been unsuccessful, or underachieving, format flips to Hot AC (Chicago), Sports (Atlanta), News/Talk (NYC), and Rhythmic-leaning CHR (San Diego, Atlanta)

What I said is that even the owners of a station will not judge its success in such a short term as a few months, and that the ability to make consistent, sustainable profits will not be known for the better part of a year or more at the earliest.

If it is true, as you claim, that a station can have high ratings but low profitability, cite one example, in the past 5 years, of a high-rated station, #1 in its target demo, that has flipped formats because of a low power ratio, and low billing information

You are oversimplifying.

My point is that alternative stations tend to underperform in converting ratings to revenue. Many are not in the top 5 in their markets in sales demos. Many have revenues that are not in the top 10 in their markets. The most successful tend to be ones that have been in format for many years (KROQ), or have morphed into the format from a heritage rock position (WWDC).

All this indicates that an alternative flip is riskier than the alternative of remaining a second-tier-billing but reasonably profitable station in NYC. And that is why the best prospect for alternative in that market comes from the current dire straits of WBAI, and not Now or Fresh.

In other words, for CBS, it is as simple as "a bird in hand is worth two in the bush".

 

[davideduardo]

I agree - but throughout this entire thread, you have repeatedly used WRFF's low power ratio, as well as other low power ratios on Alternative stations such as the one that ranks #3 in the Denver market, to conclude, and post repeatedly, that a flip to the Alternative format would be extremely risky, undependable, and most likely not financially beneficial, to any low-rated station in the New York City market

KTCL is 15th in billings, with revenues at about 15% of those for the top biller. At just over three million in gross revenues, it is unlikely that they are making much money... particularly when compared to the many stations with two, three and four times the revenue and similar expenses.

WRFF, at four million, likely makes a little money... but not much. As I said, my belief is that Greater Media outsells them in the rock arena, and that the format is not a tight fit with the rest of the CC cluster.

Again, what we see are reasons why, despite good ratings, that an alternative format has a harder time achieving the revenue level needed to make "good money". Couple that with a year or so of losses during a flip, and you have powerful reasons to stay as-is in NYC.

As has been verified by another poster who is also directly in the radio industry, a low power ratio does not in any way indicate that a station is not profitable, or financially poor

But when a station has revenue close to or near the make-or-break level for a market, we know when it is not profitable or only minimally so.

WRFF is making a certain amount of profit,.

We don't know that. At its 2012 billing level, it probably is... as part of a cluster and depending on how fixed expenses are allocated... it may not be making much. As a stand-alone, outside a cluster, at that billing level, it would be making very little and, importantly, not be making a decent ROI.

 

[fybush]

If you get a good rating, like WRFF does, you want to get good billing, like WRFF does not.

: That is the exact opposite of what he posted

According to his post, stations can be financially successful and have low power ratios - power ratios are a good metric measurement of progress, but what matters is the final financial figures

I don't know if I'm an authority on what I actually posted or not (where's Marshall McLuhan when you need him?) but here's the gist of what I was trying to get across:

It is possible to have a low power ratio but still be financially successful, if your billings and ratings are both quite high. As long as billings are high, this is a very sustainable situation for a lot of radio stations.

It is not possible to have a low power ratio and still be financially successful, if that ratio exists because billings and ratings are both relatively low. As long as billings are low, this is not a sustainable situation for a radio station.

The misinformation you keep posting, implying that a low power ratio makes a station less financially successful than a high power ratio, is both misleading and incorrect

I think David and I are both trying to tell you the same thing: power ratio, by itself, doesn't tell you much about whether a station is financially successful. Billings, however, especially from a source recognized as trustworthy by the entire industry and its regulators, tell you nearly everything you need to know about a station's financial viability.

If I understand David correctly, WRFF has both low-ish billings and low-ish ratings. Those combine to produce a decent-looking power ratio, but they don't combine to make WRFF especially successful, financially. Without having access to any of the internal financials of Clear Channel Philadelphia, I have no reason to believe that WRFF's expenses are notably higher or lower than any comparable top-10-market music station in a big cluster. As a result, I have no reason to believe that there's any kind of "special sauce" financially, if you will, that would make WRFF's low-ish billings translate to anything other than low-ish profitability.

As for Denver, I suspect KTCL survives in large part because it's an easy combo sell with KBCO. I believe (and David can surely confirm) that KBCO bills quite well, and between KBCO and KTCL there's a nice demographic combination that Clear is probably loath to give up in that market. No such combination exists between WRFF and the rest of CC Philly...and no such combination would exist between a hypothetical alternative 92.3 New York and the rest of the CBS NYC cluster.

 

[davideduardo]

If I understand David correctly, WRFF has both low-ish billings and low-ish ratings. Those combine to produce a decent-looking power ratio, but they don't combine to make WRFF especially successful, financially. Without having access to any of the internal financials of Clear Channel Philadelphia, I have no reason to believe that WRFF's expenses are notably higher or lower than any comparable top-10-market music station in a big cluster. As a result, I have no reason to believe that there's any kind of "special sauce" financially, if you will, that would make WRFF's low-ish billings translate to anything other than low-ish profitability.

WRFF has recently moved into very nice positions in 18-34 and 25-54. But the power ratio, of course a product of less recent ratings performance, was a miserable 0.3 last year.

I agree that there is nothing indicating that WRFF is particularly less costly to run than the rest of the cluster's music stations, and there is not any synergy for sales with the rest of the cluster. At the same time, Greater Media "owns" the rock segment of the market.

This is a good place to interject the observation that the BIA billings (and thus ratios) don't always match those of the market level MK reports. That's because when clusters report, they can allocate revenue however they want when buys come in for multiple stations. BIA attempts to put a more realistic perspective on this. As an example, I knew of a station that had two FMs, one with about 50% more core demo ratings; they reported an even 50% split to MK, yet BIA allocated closer to reality.