Sadly....Radio Is in Trouble

[SaltyDog]

Dog, you're the one that said:

the imposition of ownership caps from the past would cause more pain with no benefit

Yes, that's what I said but you manufactured this thought for me:

"You've been told by "corporate" that companies like Clear Channel "saved" radio so many times that you now believe it. That's a prime example of "the Big Lie"."

I'll tell you what I believe and you don't have to do it for me thank you very much.

It has been amply demonstrated that the "economies of scale", "regional synergies", attempts to create virtual monopolies in local broadcasting, and all the other ideas that Clear Channel (and others) rolled out to try an justify their overspending on radio stations have failed miserably.

Again, your trying to refute things that I didn't say. I'm saying that technology changed the media landscape (as it's changed just about every other business) and you can't recreate 1970's radio by reimposing government regulation. It's gone and it would be gone if Clear Channel had never existed and if the FCC had kept ownership caps in place.

If the Internet was regulated the way radio spectrum is, you would only be able to own a set number of websites and those websites would be available on Macs or PC's but not both. I am well aware of the analogy between radio spectrum and scarce real estate but it is a flawed analogy created by the adoption of hardware standards way back when. That prevented the kind of transmitter and receiver innovation that would have made spectrum usage available to a lot more people.

 

[jackandcoke]

Restoring ownership caps and anti-traffiking rules would solve many of radio's problems, and media reform organizations need to be educated on these issues. They're the ones putting the heat on the FCC, but their focus is on prohibiting further relaxation of ownership caps--not that Kevin Martin is paying any attention.

The activists are obsessed with the 5 companies controlling Big Media; the only notion relating to radio currently on their radar screen is the idea that an LPFM station on every block would be cool--not that they listen to radio anymore. And since all existing radio licensees are ogres (Clear Channel), interference be damned. Let's just give everybody an LPFM station of their own.

Radio needs re-regulation.

We've suffered a 30-year deregulation movement which has created chaos in so many industries--airlines, telephone, broadcasting, banking, housing, insurance, health, education--radio's problems get lost in the shuffle. We're small potatoes.

But would it restore the competitive balance that Sirroxalot remembers? Yeah, it would. Would it create thousands of new (or "restored") jobs for GMs, PDs, receptionists & bookkeepers? Yeah, it would.

Would it bring back some of the jock jobs that have been blown up in the past decade? Yeah... some of them.

Would it bring back the two jock shifts (7P-Midnight & Midnight-6A) that have virtually disappeared from the industry? No, it won't. Digital automation and bartered (free) network programs have replaced those two shifts--most likely forever.

Would it bring back the primary daytime jock shift (10AM-3PM) that has also disappeared? No, probably not. Blame that one directly on digital automation--"voicetracking," as such.

That leaves two jock shifts out of the five considered universal just 15 years ago. That's 60 percent of the jock jobs in America that won't be coming back, no matter who owns what.

 

[smedge2006]

Would it bring back some of the jock jobs that have been blown up in the past decade? Yeah... some of them.

Would it bring back the two jock shifts (7P-Midnight & Midnight-6A) that have virtually disappeared from the industry? No, it won't. Digital automation and bartered (free) network programs have replaced those two shifts--most likely forever.

Why wouldn't it -- especially if stations fall into the hand of some outlaw nutcase who didn't go to Harvard Business School and tries it just to see if it would work?

 

[SaltyDog]

Hi, Jackncoke. We have found some common ground. You wrote: “Would it create thousands of new (or "restored") jobs for GMs, PDs, receptionists & bookkeepers? Yeah, it would.”

If the goal is job creation, increased regulation will indeed do that. Not that the GM or PD jobs will pay like they did in the old days or like they do now. Reduced profitability will see to that.

Here’s a little thought experiment. Say you own a cluster of radio stations in a single market. And say we’ve just restored ownership caps. You can own only 7 AMs and 7 FMs throughout the country. One AM and one FM per market. No grandfather clauses. The Big Guys must divest. What’s the immediate result? The value of the stations just plummeted overnight. They went up because deregulation increased the number of bidders and reduced expenses. Reversing the process will reverse the result. And the Big Guys are flooding the market with excess stations while the deep-pocket buyers withdraw. If you’re a highly leveraged radio owner, you’re insolvent because your loans are not covered by the value of the assets. So maybe the banks take their bath, you sell and another buyer comes along. That can be a good thing for the jock. He doesn’t want an insolvent employer. Yes, the hiring of GM’s, secretary’s, PD’s, receptionists and bookkeepers will be necessary. But the advertising pie will not grow, just the expenses. In fact, ad revenue will likely go down as the leverage that comes with cluster pricing disappears. Sales people will migrate to other more profitable industries from whence some of them came. Consolidation did not give radio salespeople parity with TV and Newspaper reps, but it narrowed the gap. I would buy an AM and FM radio station in this new, or I should say old, world because everything has a value. The price I would offer would make the owner blanche.

You addressed the technology of voice-tracking, but that’s a relatively minor and least revolutionary technical change. Automation preceded computers by decades.

Internet radio, iPods and satellite radio will still be draining TSL. Google, Yahoo and Microsoft will still be draining dollars from the ad pool. Radio PD’s will struggle with even fewer financial resources than they have now as the Mom and Pop owned stations turn out to be as profit-minded as the big publicly traded companies but without the deep pockets.

This must remain a thought experiment because it will not happen.

 

[SirRoxalot]

Technology

First of all, I never advocated going back to 7-7-7. I do advocate greater competition than the current law requires, especially in smaller markets.

Let's talk about the changes in technology:

1. Broadcast hardware is less expensive now than it's ever been in real dollar adjusted for inflation.

2. Less hardware is required thanks to digital systems. Fewer engineers are required since the current generation of equipment is more efficient and requires less maintenance.

3. Office operations are dramatically more efficient thanks to computerization. From accounting to traffic to reception, everyone is more efficient because of information technology, reducing overhead for the company.

4. Sales people have much better access to information, greater ability to track clients. It's much easier and quicker to create, customize, and deliver proposals. Sales reps can service more customers, more efficiently, reducing overhead for the company.

5. Production people are much more efficient, and capable of much more complex production thanks to digital recording software and systems. Cost has again fallen, and overhead reduced.

6. Websites and audio streams offer additional revenue streams for advertising. Non-traditional revenue is the fastest growing revenue component for most broadcasters.

7. The number of middle-management people - programmers, sales managers, etc. - has dropped because technology has allowed fewer people to wear more hats.

I agree that modern broadcasters should embrace technology, and use it to their advantage. One thing that has been lost is the fact that programming is the product, not advertising. Advertising depends on programming, and programming has been diluted to the point where it's no longer interesting for most listeners - let alone compelling. That's directly attributable to the lack of local content, immediacy, and local input. Live talent is often so restricted formatically that the "voice guy" and/or jingles get more breaks in an hour than a live, local jock.

Radio in 2007 isn't like radio in 1975, and never will be. Hopefully, we'll use technology to make radio better, more compelling, and able to offer content that you can't get from your MP3 player, satellite receiver, or Internet stream. If that doesn't happen, radio's future is bleak indeed.

 

[amfmxm]

Re: Technology

First of all, I never advocated going back to 7-7-7. I do advocate greater competition than the current law requires, especially in smaller markets.

And, Salty Dog, this is likey to be how it does, indeed, happen. The largest markets may keep their current LOCAL caps, the mid-range markets may have their LOCAL caps pared down, and the small markets may be most likely to see the AM-FM "combo cap" returned. And national caps will most likely be returned to pre-1996 levels.

So, yeah, the biggest companies would need to divest themselves of tons-o-stations. But look how quickly Clear Channel has managed to chop itself nearly in half. In the 13 months since they announced their plan to sell off the 448 stations (40 percent of the total) that were generating less than 10 percent of its revenues, it has sold 80 percent of them--362 stations, to date. And they are, by far, the biggest.

Slicing the rest--Cumulus, Citadel & the like--will be a snap, relatively speaking. Would there be a crash in station values, say to "pre-stupid" days? Probably not. More likely, buyers will be lined up to bid on many of the properties. There has never been a shortage of moneyed people out there who think they'd love to own a radio station!

Sure, some of those moneyed people will, indeed, lose their pile of money because they will not know what the hell they're doing--just as it has always been.

But, I am curious. SirRoxalot, what do you find distasteful about the old 7-7-7 rule. (BTW, when I began in radio, it was 5-5-5).

 

[TomT]

Actually--

Clear Channel still owns the 187 or so stations that were to be sold to Good Radio/Frequency License. That deal is dead. So they only managed to sell about 40 % of those 448 stations.

The GAP broadcasting deal for Texas and Louisiana, about 50 stations, I believe, closed. GAP also agreed to purchase several more clusters in the mountain west, don't believe that deal has closed, though.

Clear Channel also spun off a number of stations--including some major market FM's such as in Cleveland--to the "Aloha Trust." These were in clusters that were over the limit because of the use of the Arbitron market to define the relevant market for multiple ownership (instead of the previous contour overlap method). The Tuesday activity at the commission would now allow CC to transfer such clusters, providing that the new owner spun off enough stations within 12 months to "qualified small businesses" in order to reduce the cluster to match the market limits.

A bonus for CC, but, unfortunately, there doesn't seem to be the buyers for these clusters even in the smaller markets. Then again, prices are too high, financing too tight.

 

[SirRoxalot]

Rolling 7s

But, I am curious. SirRoxalot, what do you find distasteful about the old 7-7-7 rule. (BTW, when I began in radio, it was 5-5-5).

I don't think that you need to restrict the number of markets that a broadcaster invests in as much as you need to restrict the number of stations in a market that are owned by the same company.

Some of the factors that should come into play when determining ownership caps are:

1. Market size. Nobody should have a monopoly, no matter how small the market. "Leverage" your spot rates upward based on performance, not monopolistic practices.

2. Are they serving the market that they're licensed to, instead of rim-shotting the closest major market?

3. Not all stations are created equal. The licensed service area of the station should play a part in ownership caps. One owner should not have all the primary signals in a market, even if they don't have a majority of signals.

4. The idea of using ratings to determine market penetration makes me uncomfortable. Penalizing someone for being successful seems unfair. That's why I think that other criteria should be considered for limiting ownership.

 

[radionut925]

Re: Technology

Radio in 2007 isn't like radio in 1975, and never will be. Hopefully, we'll use technology to make radio better, more compelling, and able to offer content that you can't get from your MP3 player, satellite receiver, or Internet stream. If that doesn't happen, radio's future is bleak indeed.
[/quote]

Agreed. The best way to do that is to be live, local, and connected to the communities you're serving. And that can't be done as long as the programming is mostly syndicated. Enough said.

 

[smedge2006]

Again, your trying to refute things that I didn't say. I'm saying that technology changed the media landscape (as it's changed just about every other business) and you can't recreate 1970's radio by reimposing government regulation. It's gone and it would be gone if Clear Channel had never existed and if the FCC had kept ownership caps in place

Nobody's trying to reintroduce carts, playing the hits at 48 RPM to get in "more music", puking delivery (as if it ever went away), or shotgun jingles. Just people. If there were more smaller operators around, a few would take chances on going "live" in more dayparts, and if it helped the ratings, might keep it. Without people, the technology can't produce a sound any better than what comes out of someone's IPod.

 

[TomT]

Ratings don't define the market, Arbitron defines the market. For the most part.

For multiple ownership purposes in rated markets the "market" includes all stations licensed to the county or counties in the Arbitron defined market. This includes non-com stations.

In my market there are 5 AM stations and 7 commercial FM's; or 12 stations. There are two group owners, one with 6 stations, one with 5 stations plus an LMA'ed FM. A six station cluster would normally not be permitted for markets with less than 15 stations.

However--there are four non-com stations: one B-1 NPR station, one Class A K-Love station, another religious Class A station carrying BBN, and another B-1 operated by a local college with classical and jazz programming. This makes the market a 16 station market, allowing one operator to own 4 FM's and 2 Fm's.

Ratings can matter, though. If the non-com's were not counted, there would still be 15 stations because of three stations in adjoining non-metro counties have a "significant share" of the audience. In my county there is an ESPN AM, and my B-1 FM. One of the groups recently had their Class B re-licensed to another adjacent non-metro county, in order to allow a sister Class A to be moved into the metro. (The Class A moved to the Class B's tower, the Class B already put a city grade over the Class A's former city of license in that adjoining county from their original site).

I agree with proposition that market concentration should be reduced. Would be better for radio in many ways, besides getting more competitive and innovative owners into the market. We find that many local advertisers don't buy stations, they buy companies. They allocate their budget in this way. We've gotten buys we couldn't touch before because the local CC cluster is a member of the "departing group" of C C stations. Their sales people are in full "woe is me" mode, and are no longer aggressively pursuing buys. One car dealer bought us because he hadn't seen his CC rep for months. And he wasn't going to place all of his radio budget with the other group.

 

[MickJ]

We've gotten buys we couldn't touch before because the local CC cluster is a member of the "departing group" of C C stations. Their sales people are in full "woe is me" mode, and are no longer aggressively pursuing buys. One car dealer bought us because he hadn't seen his CC rep for months. And he wasn't going to place all of his radio budget with the other group.

It's interesting that an advertiser wouldn't buy a station that is being sold by CC or why their salespeople are full of woe. CC is so unpopular with everyone wouldn't that be a plus?

 

[amfmxm]

Actually--

Clear Channel still owns the 187 or so stations that were to be sold to Good Radio/Frequency License. That deal is dead. So they only managed to sell about 40 % of those 448 stations.

The GAP broadcasting deal for Texas and Louisiana, about 50 stations, I believe, closed. GAP also agreed to purchase several more clusters in the mountain west, don't believe that deal has closed, though.

Clear Channel also spun off a number of stations--including some major market FM's such as in Cleveland--to the "Aloha Trust." These were in clusters that were over the limit because of the use of the Arbitron market to define the relevant market for multiple ownership (instead of the previous contour overlap method). The Tuesday activity at the commission would now allow CC to transfer such clusters, providing that the new owner spun off enough stations within 12 months to "qualified small businesses" in order to reduce the cluster to match the market limits.

A bonus for CC, but, unfortunately, there doesn't seem to be the buyers for these clusters even in the smaller markets. Then again, prices are too high, financing too tight.

LOL! Clear Channel certainly wanted to divest themselves of stations the same way they acquired them--in big chunks. And, for a few weeks there, it looked like it was going to be just that easy. Oops!

You're keeping track more closely than I am, apparently. I just went to their latest PR release on the subject for a current count, but I believe they were portraying it as "deals are in place" (or something like that) rather than deals closed.

Back in the old days--before Mays bought the Legislation From Hell--when Clear Channel needed to get rid of a small market in order to acquire a larger market, Lowry would just turn his small-town GM into an "owner" by becoming "the bank." I'm guessing these private equity guys would frown on such shenanigans.

 

[davideduardo]

Re: Technology

But, I am curious. SirRoxalot, what do you find distasteful about the old 7-7-7 rule. (BTW, when I began in radio, it was 5-5-

7 / 7 / 5+2 and 7 / 7 / 7 have been in effect since the 50's until the caps were increased under deregulation.

 

[ruger22com]

The bottom line is this...terrestrial radio is dead....thanks to deregulation, and what the big players (cc, ***, etc.) did to it after the FCC let them run wild.

There no longer is a training ground for talent, and as long as salesmen run the system (unlike when programmers used to run it) it will stay that way.

The only way that can change is if the FCC re-introduces regulation (similar to the old 7-7-7 rules and break up the monopolys...and that ain't gonna happen)

That makes the ONLY future for radio to be in satellite radio. Because, that is the ONLY medium where talent IS still the draw for audience and reason for the sales money.

But how long can that last? 10 - 20 years? as the training ground for "over the air" performers (am & fm radio) continues to die, the breeding ground for satellite talent also will dry up.

 

[Goat Rodeo Cowboy]

But how long can that last? 10 - 20 years? as the training ground for "over the air" performers (am & fm radio) continues to die, the breeding ground for satellite talent also will dry up.

Ruger, back in the '50s people were pronouncing radio dead because of television. As the "hot dogs" abandoned radio as a sinking ship to seek their fortune in TV, those left poking around in what were thought to be the ashes reinvented radio. It had a pretty glorious ride.

There are days when I want to sing the same song you are belting out. DEREGULATION did it! Break up the big companies and everything will be fine again. And then I look around at the rest of civilization and realize radio is not alone in facing tumult and tribulation.

Read a few books on what is happening to our world economy and politics. Try Thomas Friedman's "The World is Flat." Read Robert Reisch's "$upercapitalism". Take a look at retailing. (Can you say WalMart?) Take a look at banking. Who makes the car you drive? Will GM and Ford survive the next 10 years?

Go find 100 friends in your place of worship or your P.T.A. or your Legion Hall or your local Chamber of Commerce. See how many of them work in industries where they are still doing business the way they did 50 years ago. Go look at downtown of where ever you live.... village or major city. Has it changed in the last 50 years?

As unpleasant as it is.... if you are going to do radio 10 years from now, you may have to abandon what we knew 20, 30, 50 years ago and invent something that works in the times in which we live, the times in which we WILL be living in. Welcome to tomorrow. The programmers and the salesmen are going to have to start getting to know each other if the business is going to survive.

 

[MickJ]

Go find 100 friends in your place of worship or your P.T.A. or your Legion Hall or your local Chamber of Commerce. See how many of them work in industries where they are still doing business the way they did 50 years ago. Go look at downtown of where ever you live.... village or major city. Has it changed in the last 50 years?

I can't say it any better than that.

 

[firepoint525]

As unpleasant as it is.... if you are going to do radio 10 years from now, you may have to abandon what we knew 20, 30, 50 years ago and invent something that works in the times in which we live, the times in which we WILL be living in. Welcome to tomorrow. The programmers and the salesmen are going to have to start getting to know each other if the business is going to survive.

We will all have to reinvent ourselves. I am not sure I could find another job in radio (without moving, and I live near Nashville!) even if I wanted to.

 

[davideduardo]

There no longer is a training ground for talent, and as long as salesmen run the system (unlike when programmers used to run it) it will stay that way.

I must have missed that period. As far as I can remember, sales was the motivation for programming, and we were in business to make a buck.

That makes the ONLY future for radio to be in satellite radio. Because, that is the ONLY medium where talent IS still the draw for audience and reason for the sales money.

Half of all satellite factory installs are not actrivated, and the churn rate is 18% a year. Satellite radio is a tiny sliver of radio listening. Once Sprint figures out how to roll out WiMAx, satellite will be pretty much dead or have to move to WiMax distribution.

 

[dbdigital]

There no longer is a training ground for talent, and as long as salesmen run the system (unlike when programmers used to run it) it will stay that way.

Half of all satellite factory installs are not actrivated, and the churn rate is 18% a year. Satellite radio is a tiny sliver of radio listening. Once Sprint figures out how to roll out WiMAx, satellite will be pretty much dead or have to move to WiMax distribution.


[/quote]

This is probably the only time I'll ever agree with you on anything. The NAB went on this no holds barred campaign against satellite radio's merger when, in reality, satellite radio's days are numbered (or at least its current business model's days are). Internet radio stands poised to overtake it.

If anything, I can envision the satcasters influencing Congress to do nothing about the pending legislation on internet radio's royalty rates. Apparently the current rate scheme is having a negative impact on web radio's growth.

Hopefully, an equitable solution can be hammered out for, if not, radio's future really will be in trouble. At least, CBS and Clear Channel seem to believe in web radio's future.

db