The Sinking Economy And It's Impact On Radio

[Mark Giardina]

Anyone have any comments on what impact the decline on Wall Street will have on radio?

Some major media company stocks are taking a big hit; and in the meantime some of these organizations are trying to divest themselves of radio properties. All I can say is "Good Luck." With credit tighter than a drum, I doubt many investors will be interested in buying radio stations right now.

Even Public Radio is going to feel the impact. Most people are concerned about keeping their jobs, holding on to what's left of their retirement funds, and buying groceries.
I sure hope during upcoming pledge drives some public stations don't start in with "remember us in your will." I always found that to be very tacky.

 

[SirRoxalot]

Leading the Way

It seems to me that radio is undergoing the same process as the real estate market. Overvalued properties whose prices were driven up by veritable credit scams are be revalued to reflect today's realities.

The bubble has burst. The idea of paying 10-15 times the annual cash flow seems ludicrous today. "Cash Flow" was the mantra of big corporate, not "profit". You could lose money as long as you churned cash flow through the company, and a corporate raider would buy your station because they "knew" that they could costs. If they were wrong, they'd simply sell the company again and make a profit. If they were right, they'd sell to a bigger company and make a bigger profit.

We're all suffering from the hangover. With stations selling for less than 5x cash flow, more investment firms are becoming operators. They're looking at short-term results, with little care about long-term results. A few players who have been on the sidelines and are liquid have been quietly buying stations at fire-sale prices. CBS is showing some of the other players how to program for long-term results - with formats that rely on personality to augment evolutionary, if not revolutionary music formats.

Radio has not yet hit bottom. The challenges from the Internet and cell-phone providers, which are essentially evolving into Internet Service Providers, will greatly impact the business. It may provide more outlets for talent, but dilute the audience to such a point that it will be harder to reap rewards.

 

[rdcuffpa1]

Re: Leading the Way

Radio has not yet hit bottom. The challenges from the Internet and cell-phone providers, which are essentially evolving into Internet Service Providers, will greatly impact the business. It may provide more outlets for talent, but dilute the audience to such a point that it will be harder to reap rewards.

However, one of the interesting attributes of Internet- and cellphone-delivered audio is that it can easily be measured eight ways to Sunday. You can check the IP addresses of your listeners and trace them to their locations; you are no longer guesstimating listenership using statistical principles. You can easily check "time spent listening" based on how long a stream-IP address combination is active. You can count podcast downloads.

It is certainly a different world, and a much more fragmented world, but this, too, provides opportunities for advertisers who can navigate through the fragmentation.

Richard in Allentown, PA (ex-East Aurora, NY)

 

[aaronread]

Even Public Radio is going to feel the impact. Most people are concerned about keeping their jobs, holding on to what's left of their retirement funds, and buying groceries. I sure hope during upcoming pledge drives some public stations don't start in with "remember us in your will." I always found that to be very tacky.

Tacky? Yes. But effective, too. Sometimes you just have to ask, even if the topic is a little unpleasant.

Anyways, so far the research I've heard about is that stations holding pledge drives right now are not seeing significant drops in donations due to the economy. Instead, it seems to vary more based on the approach the station takes in pitching. If a station sticks with a reminder of the value of the station in the given listener's life, usually their pledge drives still do well. This is especially true for news/talk stations thanks to the election.

I'll grant you, after November 4th...or really more after mid- to late-February (after the new prez has settled in) whether or not the election bump stays in effect while the economy (most likely) continues to tank? That's a tough call.

This could be an interesting time of opportunity for public radio, though...as commercial radio licenses' values plummet on the open market, you could see some savvy pubradio outlets snap up solid Class A, or rimshot Class B, signals in the FM band.

 

[Mark Giardina]

This could be an interesting time of opportunity for public radio, though...as commercial radio licenses' values plummet on the open market, you could see some savvy pubradio outlets snap up solid Class A, or rimshot Class B, signals in the FM band.

While your idea has merit, I have reservations as how some pubradio outlets could afford to purchase more broadcasting properties during this shakey econony.

Remember there are critics of pubradio who will claim that these stations cry proverty during fundraising drives, they can then afford to buy more radio stations.

Personally I wouldn't mind seeing that happen, but under new owners and management. In other words let pubradio have not one, but two "seperately owned" operations in one city; like Buffalo. I don't want to see pubradio buying up a slew of stations in a region and have it operated under one owner.

 

[Element9]

It's stunning, really, the sinking value of shares of publicly held broadcast companies. Although most of us can take credit for posts months and years ago that warned if not predicted this mess, there's no reason for any of us to take delight in it. This debacle is bound to affect all phases of broadcasting, commercial and public. Still, hard to criticize any of the regulars here if they write "told you so." Take a look at how some of the operators of stations in Buffalo have performed. Note their high-low marks for the last 52 weeks:

Entercom

Regent

Citadel

Lin Television

Granite Broadcasting

Gannett Company

Some economists suggest the market is oversold and undervalued as a result of this week's massive sell offs and panic derived as a result of the sub-prime mortgage fiasco and tightening credit-lending policies. Two very knowledgeable local financial advisors have said there's more to come and it will be a long climb back to levels that the market enjoyed as little as three weeks ago.

This is not pretty stuff for sales people, jocks, programmers, market managers, regional VPs and even CEOs who may or may not continue to have their platinum parachute options intact. There could be more than a few shareholder revolts brewing in more than a few companies. The people who are prone to be most affected are the men and women who work in the front lines. For these radio professionals, the last quarter of 2008 may be "the good old days" when compared to the first quarter of 2009. IIRC, November is a dark month for employees at Entercom Buffalo. As the saying there goes, "make it past November and you're good for another year."

As to Public Radio affiliates suggesting that listeners remember W*** in their wills and estates, messages suggesting this have aired (in a relatively tasteful and subtle manner) on WBFO-FM and even WNED-FM. It may appear goulish, but not much different than some of the advertisements that can be heard on commercial stations suggesting that listeners pre-plan their funerals. There's gold in them there wills.

Hmmm. Strange isn't it that I've come to this point in the post, writing about pre-planning funerals.

-9-

 

[Steven21]

November is a dark month for employees at Entercom Buffalo. As the saying there goes, "make it past November and you're good for another year."

All of these companies seemed to have trimmed the "fat" in recent years. How much more trimming can they really do before they degrade their product to a dangerous level?

 

[Mike Sheridan]

November is a dark month for employees at Entercom Buffalo. As the saying there goes, "make it past November and you're good for another year."

All of these companies seemed to have trimmed the "fat" in recent years. How much more trimming can they really do before they degrade their product to a dangerous level?

I always thought you had to make it past February to be in the clear. First quarter advertising can be really slim since business shoots most of their ad money in the 4th quarter. Even in TV I see more PSA's and station promos in January and February, a sure sign of unsold inventory.

Radio has already been degraded to a dangerous level and TV is right behind. In USA Today there is an article about sure fire hit series before the writers strike are now struggling. Viewers are fed up with all the moving around and networks that pull the show just as you start getting interested in it. The strike caused lots of people to drift away from the story lines and the networks haven't done enough to get viewers back.

I have friends who buy enough shows on DVD that I can borrow. That keeps me busy! No commercials!

 

[Mark Giardina]

As to Public Radio affiliates suggesting that listeners remember W*** in their wills and estates, messages suggesting this have aired (in a relatively tasteful and subtle manner) on WBFO-FM and even WNED-FM. It may appear goulish, but not much different than some of the advertisements that can be heard on commercial stations suggesting that listeners pre-plan their funerals. There's gold in them there wills.
Hmmm. Strange isn't it that I've come to this point in the post, writing about pre-planning funerals.
-9-

I've often wondered how many pubradio executives include the stations they work for in their wills ???

 

[SirRoxalot]

Where There's a Will...

I've often wondered how many pubradio executives include the stations they work for in their wills ???

About the same number as televangelists who included their churches in their wills...

 

[ThatManDan]

A good friend who has all together 25 to 30 years in the broadcasting business was let go the other day.
So what? Happens all the time, right? The remaining staffers will perform more tasks, probably at no increase in salary and be glad, because they still have a job in a profession they love. There's no question that you have to spend money to make money, but I'll bet that bit of logic is illogical right now to some sponsors. Even when the economy improves, it's not going to happen in time for the 4th quarter. Then there's the first quarter which is always "quiet." I'm thinking it's going to be dead quiet this time around. Jeeze, I hope I'm wrong.

 

[Bob1370]

"All of these companies seemed to have trimmed the "fat" in recent years. How much more trimming can they really do before they degrade their product to a dangerous level?"

A very good argument can be made that many, or most, of these companies have already reached or passed that point. Ironically, this has been a major contributing cause of the overall financial malaise of our business as it drives away listeners, and with lost listeners comes lost advertising revenue. Many of these companies hit their highs in share price in the late 1990s, before the drive to consolidate, automate and emasculate programming schedules began to hit full steam. As they drove harder to take cost out of their operations, they lost sight of the fact that the value-added of quality programming with live human voices represents just that...higher revenue, and higher resulting bottom line profit.

I know times now are tough all over. But there's no question that in the past, radio rode out recessions fairly well, because it represented a relative bargain in cost per thousand people reached compared to other media, and picked up some business from TV and print. That isn't going to happen this time.

 

[Radknowski]

I know times now are tough all over. But there's no question that in the past, radio rode out recessions fairly well, because it represented a relative bargain in cost per thousand people reached compared to other media, and picked up some business from TV and print. That isn't going to happen this time.

Welcome to the Grave New World of 2008-2009. All bets are off, except in the Casinos of NYSE and NASDAQ. There the house always wins. CEO's land safely while the average mug on Main street gets bent over. Think these companies can't cut any further? Check the ratings of your local Jack, Mike, Bob or whatever station runs off a hard drive and Audio Vault. Even NPR stations voice track nights and over nights. We're radio geeks here. John and Jill Public don't see and hear things the way we do. Sad. But true.

 

[aaronread]

While your idea has merit, I have reservations as how some pubradio outlets could afford to purchase more broadcasting properties during this shakey econony.

A valid point - the Public Radio Capital group has been a godsend to pubradio outlets, providing loans of (up to) several million dollars at reasonable rates to purchase radio licenses. But I imagine the PRC will eventually be affected by the credit crunch just like every other lender. Without the PRC, it's incredibly hard for a pubradio outlet to get the upfront capital to buy a new station.

Remember there are critics of pubradio who will claim that these stations cry proverty during fundraising drives, they can then afford to buy more radio stations.

Most pubradio outlets have moved away from "crying poverty" because they know it doesn't work as a fundraising tactic. Selling the idea of the station having value in the listeners' eyes has proven, over and over again in the last ten years, to work much better. This strategy also dovetails nicely for capital improvement projects...like buying a new license...because it's a simple and obvious improvement that directly benefits the listener.

Even NPR stations voice track nights and over nights.

Actually NPR stations have been voicetracking longer than a lot of commercial stations. The upfront nature of NPR stations' affiliation with national content providers has ultimately served them well, as listeners know full well it's not a "local" show but they don't care; they just like that someone in their area is carrying the program.

While on this topic, I remarked to my wife last night that this massive credit crunch is supposedly killing off car dealerships left and right, as nobody can get a car loan (even at really lousy interest rates)...and it occurred to me that car ads make up a huge proportion of the ads on TV and local commercial radio. As those disappear, I would think it'd be a huge revenue loss for those broadcast outlets. :-[

 

[The Voice of Reason]

I remarked to my wife last night that this massive credit crunch is supposedly killing off car dealerships left and right, as nobody can get a car loan (even at really lousy interest rates)...and it occurred to me that car ads make up a huge proportion of the ads on TV and local commercial radio. As those disappear, I would think it'd be a huge revenue loss for those broadcast outlets. :-[

Oh no does that mean that Mr. Huge-JA might have to scale back his obnoxious commercials
Heaven forbid!
/ sarcasm/

 

[Goat Rodeo Cowboy]

We're radio geeks here. John and Jill Public don't see and hear things the way we do. Sad. But true.

So. How do we define the challenge of radio?

1. We geeks know what is best, and we as an industry have done a poor job of introducing John and Jill to what real radio should be like so they can enjoy it with us.

2. Sad but true. John and Jill Public deserve to be served. We geeks need to take off our geek colored glasses and learn to produced sound that John and Jill will get excited about.

 

[landtuna]

OK GRC, please define "produce sound". Exactly what does radio need to become to regain its popularity?

Phase one of the golden days of radio were the 30's and 40's. Then came TV and radio fell into a decline until reinventing itself in the mid-50's with the dawn of music radio. Since the early 90's there has been a technical explosion of alternative sources of news, traffic, talk and music and radio is now facing yet another challenging period. Not helping is the consolidation of stations which has removed a lot of the originality and personality from what was still a popular source of entertainment.

Radio has lost the younger generation and my daughter is a perfect 20-something example. She never listens to her AM/FM at home or in the car. It is either an iPod or CD player. She might grow into listening to angry old men spew on talk radio but I really doubt it. She might want to hear traffic reports but her nav system now gives her both audio and video so that seems a step back as well. She can name only one radio station in my area and that only because it is an infrequently used fallback should she forget her CD's. Her friends seem to be the same.

My three slightly older sons are almost the same as my daughter. Two of the three never listen to radio and the other only infrequently. I have been known to flip on the FM in the car only to revert back to MP3 or CD as soon as the obnoxious stream of auto ads begin to air. My total listening is less than 15 minutes per day and that only after my alarm clock goes off each morning. I've completely lost interest in radio because it doesn't contain the content that entertains/informs me and because it is loaded with too many interruptions in the form of DJ blabber, PSA's and endless irritating commercials. Until those are addressed I'll get my news, opinion and music elsewhere and I'm assuming many others will as well.

So, I'll ask again. What would you do to reinvigorate radio?

 

[Goat Rodeo Cowboy]

OK GRC, please define "produce sound". Exactly what does radio need to become to regain its popularity?

Our conversations get a little crazy because some of us posting here are FANS of radio, and some of us are (or were) actually in the business. Sometimes we become polarized around those distinctions.

As citizens of the U.S., some of us have lived our lives in a nation that we think of as NUMBER ONE. What kind of mindset do people have to live is smaller, less prominent nations of the world. WE don't have any other concept in broadcasting except struggling to be NUMBER ONE, to be as POPULAR as the industry was in its previous hay-days.

Though I worked in a couple of metro markets, my heart has always been in small market radio. Set me up with a county seat station in Iowa or rural Wisconsin or middle Tennessee and I will write for you a book on how to "produce sound". It will be a popular station. And it will generate reasonable revenues.

If you can convince the powers that be to sort out the spectrum and create limited geography stations that have a mandate to serve a "neighborhood" within a city, or an ethnic group, and make the rules and economics such that these allocations are totally off-limits to the aggregators who want to fight over who gets to be king of the whole city, I can write that book that will work there also.

For those who are drawn to traditional city-wide mass media metro market stations, I'm not sure you have a future. For all the reasons already listed in this thread and others, what we have done in the past is now about to be owned by podcasts, streaming, mobile phone gimmicks, etc.

By the way, my (adult) children were all home last week. Two of the three are avid radio listeners.

Radio needs to splinter and meet the "wants" of it's niche audience.

That can't happen as long as congress and the FCC are owned by those who still cling (very profitably in some cases) to the old monster audience form of radio.

I understand this message has not spelled out content. Let's do that in another message.

.

 

[landtuna]

Did I detect a hint of "localization" in your response? I remember being castigated on this board for advocating that several months ago. While some listeners surely enjoy the national syndicated programs I tend to think that most listeners still feel a sense of family to their favorite station and localization is an important selling point in gathering an audience. Maybe not for all formats but definitely for some.

 

[Mike Sheridan]

Getting back to the NPR stations, don't most of them run the BBC overnight? Some people love it but I have never been a big fan of the BBC, since I don't care about the cricket scores. Maybe I should give them another chance.