Radio’s Precarious Financial Position: Are We at the Tipping Point?

| August 15, 2014

By Bill Brady
Futures & Options, Inc.
President/CEO

JUPITER, FL — The recent Wall Street quarterly earnings calls for radio’s publicly traded companies were pretty alarming.  In three quarters radio has gone from slow growth to no growth to negative growth in an astoundingly short period of time.

Those in denial will try to explain it away by blaming it on the Olympics or the World Cup — or because radio is a “mature industry.”

The real worry here is that 15 years of post-consolidation chickens are finally coming home to roost.  Homogenized programming, time-spent listening declines and the decimation of sales departments are now taking their toll.

Corporate radio apologists have been heard to say, “Stop talking about the good old days, get used to the industry as it exists today.”  Well, the truth is, there’s a lot wrong with how radio operates today.

Let’s start with the sales department.  I’ll skip past the issue of multi-station “cluster selling” which is an abomination that turns all stations into commodities and diminishes the sale-ability of lower-rated stations.  Let’s start with the “brain drain” of veteran sales-people driven out by compensation and commission cutbacks and “one size fits all” management.  Add the “get share at any cost mentality” which drives down the rate structure, and the sales force cutbacks which leave far fewer feet on the street.  There you have it: a sure-fire, never miss recipe for rate deflation.

It would be wonderful if this was the extent of radio’s problem.  You can fix this problem.  But, you’ll have to spend some money to do it.  You won’t be able to cheap your way out of it.

A more ominous possibility exists: major account flight amidst radio’s horrendous image problem.  The big players should come clean about where the year-over-year losses occurred.  Where was the churn?  Where specifically was the problem?

Radio’s image in the current media environment may also be taking a toll on revenue.  At some point, the never ending barrage of social media hype—and the “old school media is dying” stories have a cumulative effect.

Against this backdrop, is it that hard to imagine agency execs and account people moving money from radio to digital?  How likely is it they would recommend radio as a primary medium in a new major national or regional ad campaign?  Why would they?  What has radio given them to be excited about lately?  Radio’s last game changing personalities, Howard Stern and Rush Limbaugh, both came on the scene in the 80s!

Radio apologists in denial will puff out their chest and say with much bluster, “C’mon.  Radio’s been around for 75years.  It’ll be around for another 75.”

Well, this time is different.   This time it’s about technology, and consumers have shown an amazing ability to acclimate themselves to new devices.  The mobile phone is today’s transistor radio.  Except they’re not listening to broadcast radio, or even broadcast streams—they’re listening to their own collections or the pure-plays.  In their world all broadcast radio is like AM radio in the 70s during the FM ascension: It just ain’t cool.

Can radio survive this?  Broadcast TV survived cable, after-all.  Kinda.  They’ve lost considerable audience share, but major broadcast TV signals are “must carry” on cable systems.  Broadcast radio isn’t “must carry” on anybody’s Android or iPhone.  Broadcast TV stations also get substantial network compensation and receive ever increasing re-transmission fees from the cable companies.  Can cable survive Netflix, Hulu and digital TV?    Cable sells subscriptions, TV and online ads and now high speed internet, local and long distance telephone, and even burglar alarms!  (And digital TV runs over cable’s pipe). While there is some “cord cutting, Time magazine reports, “Broadband is Comcast’s fastest growing sector, with margins that are,” says industry analyst Craig Moffett, “comically profitable.”  (Check out Time’s August 4, 2014 edition for Haley Sweetland Edwards’ excellent profile of Comcast CEO Brian Roberts).

So, what’s in radio’s display case:  Ads.  Just ads.  That’s our business model.  So, we better make “ads” work.  Or, we’re dead.  The solution is simple.  Radio has to reverse 15 years of self-destructive shortsightedness and stupidity.  We cannot cut our way to prosperity.  Platform is not product.  To survive, radio must produce “product” people get jazzed about—and advertisers want to pay to be around.

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Bill Brady is President/CEO of Futures & Options, Inc., a media investment, ownership and consulting firm based in South Florida.  His background includes management positions with Clear Channel, Citadel, Comcast and the Miami Herald.   He can be reached at 561-529-2598 or at wjbrady1@aol.com.

 

 

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Category: Business