Can the Radio Station Overcome Smothering Debt and Become a Viable Business Again? | TALKERS magazine : TALKERS magazine – “The bible of talk media.”

Can the Radio Station Overcome Smothering Debt and Become
a Viable Business Again?

| May 2, 2013

Mike Kinosian, Managing Editor
RadioInfo and Talkers

LOS ANGELES — Chalk it up to misreading the economic tealeaves or perhaps to good old-fashioned avarice, but several radio groups have fallen victim to the, “(S)he who has the most toys, wins” hypothesis.

Debt #1Monopoly Board“Winners” managing to run the board in today’s all too real game of Radio Monopoly are rewarded by becoming further ensconced in deeper, darker, debt.

Administer sodium pentothal to a cross-section of radio managers and the overwhelming majority will vociferously state that, owing to its cookie-cutter nature and mounting pressure to deliver grossly unrealistic percentages to the bottom line, the business is no longer fun. Countless executives at high-billing, strong ratings performing outlets have been unduly placed in the gut-wrenching position of laying off personnel and making other vital cutbacks – forced to share the load of paying for what could be considered out-of-control acquisition sins at the corporate level.

Capitalism has functioned exceptionally well for years, so to be clear, this is not a condemnation of mammoth radio groups, nor a suggestion that they are run by evil, incompetents.

There can however be hiccups such as the painful one we are witnessing with revenue survival.

Those who did not overly-consolidate or did not allow themselves to be enthralled with the “biggest is best” notion seem to be in a better position to thrive.

Absolute-Lee Debt-Free

When it comes to debt, or more specifically stations possessing the luxury of operating without it, the hands-down poster child is Jerry Lee Radio’s WBEB (“B101”). The Philadelphia adult contemporary is the definitive standalone outlet, as it functions as Lee’s singular prized broadcast gem. It has no siblings in Philly or anywhere else for that matter.

WBEB logoIn Arbitron’s eighth-largest metro, “B101” competes against such forces as CBS Radio (news KYW, classic hits-oldies WOGL, sports WIP-FM, talk WPHT, sports WIP-AM) and Clear Channel (urban AC WDAS-FM, alternative WRFF, urban contemporary WUSL, CHR WIOQ, and hot AC WISX).

Other notable radio owners with an ample Philadelphia presence are Greater Media (rock WMMR, classic rock WMGK, adult hits WBEN-FM, sports WPEN-FM); Radio One (gospel WPPZ, urban-rhythmic oldies WRNB, urban contemporary WPHI); and Beasley (country WXTU and rhythmic CHR WRDW).

leejerryDespite rivalry from such opposition, independently-owned “B101” is consistently Philadelphia’s #1 or #2-ranked facility (6+). Debt, Jerry Lee states, “Has been an ongoing negative factor” in the industry.

Radio though remains a very profitable commodity. “As in any business, if you can control costs during a slow economy and take advantage during periods of growth, you can really thrive,” he declares. “At today’s multiples, I would say ownership is very attractive.”

By virtue of B101’s single-stick status, the powerhouse AC has the advantage, Lee says, “of being able to act quickly and adapt to unforeseen events and circumstances beyond our control. There are really [only] three people in the company who make the key decisions, and we all work under the same roof.”

Greater creative freedom is a major plus for an independently-owned signal. “We do not have the sometimes lengthy approval process that bigger companies have,” Lee points out. “One of our greatest strengths is the ability to make decisions instantly.”

Another significant distinction between independent “B101” and a station owned by one of the giants is that Lee does not even begin discussing cost of a certain idea or project until after he and his management team have decided if they wish to proceed with it. “We do not let price limit our actions,” he insists. “The biggest drawback is that the larger companies are able to realize economies of scale in terms of such areas as back-end personnel that we are not.”

Americom logoquinntomAnother debt-free entity is Americom Broadcasting whose president/chief executive officer Tom Quinn is extremely grateful for that condition because, “It gives me a comfort level that I perhaps would not otherwise have. If I incur debt to expand, I might have a lot more pressure than I have today. It is challenging to own a station because the economy is still pretty weak.”

Luckily, the industry does not still have restrictions on the number of AM and FM stations one company can own in a market. “That would not be viable in small markets today,” Quinn remarks. “Radio would have either disappeared or it would have to operate on such a shoestring that it would not be of much value to anybody.”

Growing Pains

smulyanjeffPremise of a company that is $10 million in debt with $3 million in cash flow would translate to a leverage ratio of 3.33 times, and Emmis board chairman-president-chief executive officer Jeff Smulyan opines, “That is easily manageable with no problems. If cash flow, however, drops to $1 million, all of a sudden, there is 10 times leverage, and that company is smothered by debt. The reason that debt is [such a concern] is that the industry has not grown – that is the problem.”

It is a disturbingly memorable state of affairs to Smulyan, as it happened to Emmis, although as he recounts, “We lived through it – we had to solve it. We were levered at 4.5 times; cash flow dropped in half; and you are levered at nine times. Mostly, we sold assets and we cut costs.”

Especially in retrospect, Smulyan is the first to grant that he may have been very lucky, since Emmis – one of Fortune Magazine’s “100 Best Companies to Work For” (2005) – held licenses of exceptionally good assets in attractive markets.

Merlin Media LogoCapitalizing on that luxury, it sold WRXP, New York City, as well as Chicago outlets WLUP (“The Loop”) and WKQX (“Q101”) to Merlin Media about two years ago. “I have had many peers in the last year who have not been as fortunate,” Smulyan acknowledges. “There is an emotion in selling things; however, I learned many years ago that, if you love your business, you would do what you need to in order to survive. One of my favorite sayings is, ‘The human mind can rationalize any conduct.'”

Stark reality is that Smulyan was fully cognizant he had to fix the balance sheet. “If we did not, we were not going to survive,” he succinctly states.

It was in 2007 that he famously and selflessly saved his company in the neighborhood of $879,000 by slashing his annual salary that year to $1. It thus further reinforced that Smulyan is one of radio’s few radio executives who not only talks the talk, but genuinely walks the walk. “I have had many good friends who haven’t survived in the last three or four years, and I have many other good friends who are hanging on the brink right now,” he comments. “When you are hot – everybody loves you – but when times are tough, [it tends to be a different story]. We must try to change the perception of the growth cycle in the industry. That has been a challenge – no doubt about it.”

christianedSaga logoSentiment of Saga Communications board chairman-president-chief executive officer Ed Christian is that debt has been on a downward trend the last couple of years. “There was a terrible, systemic shock to the industry when 2009 came in and the banks just shut off the faucets,” he explains. “This is a problem with the banks because they were encouraging people to take money. It is very difficult when a bank is saying, ‘Take it, take it, expand – we love you. Do not worry if you are levered at seven, eight, or nine times. We are there for you.'”

That was at a time when multiples were at 12 or 15, but Christian notes they are now in the five to six range. “Banks are lending at three, whereas they were lending at seven,” he states. “There was a deep dive with companies trying to get down their debt. Some have done a pretty good job of paying it down, while others still have a lot of debt on their head.”

It is causing them to operate accordingly and Christian maintains there has been some good financial discipline in the industry. “I do not think we will see anybody pushing the envelope, getting gutsy, or buying for the sake of buying,” he forecasts. “Early-on, if your stock was trading at 16 times cash flow and if you bought something at 14, it was accretive – so buy it.”

A reasonable attitude has settled in. “It is lower than it should be right now, but it is like housing prices that went down,” Christian reasons. “It took several years to rebuild confidence. The five to six times range, which is what everything has been trading at, is here to stay.”

Reset iconOn the other hand, we will not see what Christian labels “the silly season” that eventuated. “Everyone has pushed the ‘reset’ button and we have to live with that,” he declares. “That is why there has not been a lot of trading market. There is denial on the part of sellers and not a lot of money for buyers. The trading market has ground down substantially the last couple of years. There used to be a euphoric feeling – much like that of flipping homes.”

Responsible and Manageable

smythpeterAny company has the potential to be adversely compromised by a leveraged situation, but as Jeff Smulyan noted, certain levels of debt are controllable. “Everyone has some debt – Greater Media even has some,” its chairman-chief executive officer Peter Smyth notes. “It depends on how well it is managed. Interest rates will eventually spike up. Then suddenly, many companies will be in trouble. If you have not locked in rates and those rates shoot up, all the metrics of your leverage ratios will again be thrown out of whack. Too much debt inside of a company inhibits its ability to grow and to invest in talent, technology, and building brands. We make sure we invest in the plant and the equipment – but most importantly in the people. We create an environment where these great people can be entrepreneurial and can succeed. When you have way too much debt [though], that goes out the window. You just do not do it or even think about it [because] you are too worried about month to month.”

bergmansandiMyMediaBroker logoCogent business people set realistic goals and MyMediaBroker president-chief executive officer Sandi Bergman shares an enthusiastic deportment. “Let me say loud and clear that many groups are highly profitable and have very little debt,” she proclaims. “They keep their expenses in-check and they know what needs to be done to meet their revenue goals. It can be done, but you must stay on task.”

To suggest these are challenging times to be in the brokerage game would be approaching the height of understatement. “We were all very hopeful at the first of the year that everything would turn around,” notes New Mexico-based Bergman, who heard business had picked up, only to discover actual transactions were down in the first quarter, compared to 2012. “That is a little bit disappointing, but I think it is realistic in the times that we are living in now.”

The good news is that there are many great opportunities out there for people who have wanted to get into the radio business, but were unable to, owing to cost prohibitive prices. “We are now seeing some very low multiples of cash flow,” Bergman points out. “Many owners/operators who are selling will carry a partial seller note, or at least do partial financing. It is a great time to find some very good opportunities.”

An obvious factor to a sluggish selling market is inability to obtain funding for deals under $10 million. “Sources are just unavailable,” Bergman explains. “That is a big part of the equation. People may not be as excited about the promise of an improved national economy.”

pearlmandavidARS logoFor a memorable five-year stretch commencing in 1993, American Radio Systems, with 96 stations strong, was one of the hottest radio groups on the landscape and its co-founder and co-chief operating officer David Pearlman stresses, “Everybody was in debt then, but you [tended] to be responsibly in debt.”

A different lending environment was in-place. “With the tightness of money and the tightness of lending today, multiples have come down, in terms of what a station can potentially sell for,” Pearlman states. “The problem is that lending institutions will probably only lend somewhere around three times cash flow. Equity money is much more expensive than borrowing money from a bank, so it takes a lot more equity funding today to purchase stations. That makes it very difficult for people trying to buy their first station or even expanding on the group of stations they already own.”

When American Radio Systems was in its formulating stages, Pearlman’s group had the opportunity to borrow at higher multiples. “We were able to go public and have sustaining multiple value in the marketplace,” he explains. “It gave us a currency we could use to expand our business.”

Dwindling On-Air Positions

farberericaIt is hardly a secret that some companies have an ocean of red ink; however, Radio Advertising Bureau president-chief executive officer Erica Farber hastens to add there are some with no debt. “It is the same in any industry,” the former WXLO, New York City general manager declares. “From that standpoint, I do not think radio is any different. The difference is technology is changing everything in every kind of industry. In radio, the change is how and where it is being consumed. As an industry, we have to ‘investment-spend’ so we can stay on the forefront of the changes. We all know that change is not easy. The focus has to be on the way we adapt and move forward with it.”

vandykedaveOperators with limited revenue resources end up facing an inability to function as is generally necessary because they are servicing so much debt. “This goes back to the days when people were getting off-the-map multiples for acquisitions,” maintains Radiate Media director-general manager Dave Van Dyke. “They were getting in too deep because they perhaps were too optimistic about how things would go.”

In most cases, they are able to address the debt, but actually have very little leftover with which to operate. “When times get tight, they can’t cut the amount of money they are paying the bank, unless they re-negotiate,” comments Van Dyke, who previously held management positions with CBS Radio, Viacom, and Westinghouse. “They cannot afford to keep the people who make the engine run. They are cutting out promotions, marketing, and are hiring one person to oversee six radio stations. You come up with ways to make your dollars go further. You start to reduce local sales staffs, and start to hire call centers to do local leads because the debt has gotten you to a point where you cannot operate effectively.”

At a time when larger companies are cutting – if not completely eliminating – research budgets, independent operator Jerry Lee has “invested heavily” in those areas. “Some bigger, publicly-traded companies place much greater emphasis on short-term achievements for the sake of their shareholders,” the owner of Philadelphia’s “B101” notes. “Conversely, we have the luxury of making decisions that may be more beneficial in the long-term.”

Jay Leno and Jimmy FallonseacrestryanFelt on multiple levels is personnel skewering at the on-air level. An overnight talent, for instance, on a music station is now an ultra-rare commodity and, courtesy of voice-tracking, some well-known national names can be heard in various day-parts throughout the country. “On a day-to-day basis, people are trying to put together and provide the best content,” insists Farber, who for many years was the publisher of Radio & Records (R&R). “Someone like Ryan Seacrest [heard on many Clear Channel contemporary music stations] has developed a name for the content he represents and does a great job at what he does. Jimmy Fallon and Jay Leno provide great content for local television stations, regardless if the stations are in New York City or [the smallest market]. I do not have an issue with that and I don’t think anyone else should.”

Elimination of jobs is troubling to Pearlman because his assessment is that radio is all about local, local, local, which means local content, local promotions, and local sales. “Eighty cents on the dollar is still locally-driven in the business – those fundamentals have not changed,” he comments. “It is the reason why Sirius XM is only a niche business. Ultimately, local will always win. The most successful operators understand that it is all about local.”

More and more broadcasters subscribe to the fear that there is no longer a farm system to create the next round of great local personalities. “I was always driven to try to build great morning shows and other personality-driven day-parts at any station that I have ever been involved with,” Pearlman notes. “My record on that is very clear.”

KFI logoKNX KIISCBS Radio logoCertain radio groups have unmistakably high debt levels, although Americom’s Quinn comes to the defense of two of the largest chains. “It is easy to criticize certain companies and say they have homogenized radio but on the other hand, a station like [Clear Channel, Los Angeles talk outlet] KFI does a tremendous job – probably every bit as good as it ever did,” he states. “[CBS Radio-owned all-news] KNX, Los Angeles is certainly doing a terrific job, so big companies do not necessarily lead to an inferior product. On the music side, [KFI sibling and Ryan Seacrest’s morning drive home base KIIS] ‘Kiss-FM’ still sounds great.”

Progressive Perspective

lontinechuckHeadwaters MBIf anything is impeding radio’s growth, media and entertainment investment banker Chuck Lontine proposes that it may be the medium itself. “Broad expansion and consolidation of our industry has led to far too many generic sounds coming out of the radio that have clearly taken a toll – media lenders have taken notice of that,” the founder of Marconi Media Ventures and current managing director of investment bank Headwaters MB remarks. “Simply put, radio, has lost its edge by losing its edge at the local choice level. It is no wonder that Pandora and Sirius XM now reach almost 75% of all radio users. As radio loses its share of listeners, it is a race to the bottom as radio [relinquishes] more advertisers to other digital media options.”

Weak economy has certainly not helped, but the onetime vice president-general manager of Denver smooth AC KKHI (“K-High”) mentions that, “Over the life of broadcast radio, there have been major economic impacts. There has never been more competition or choices in audio media.”

Offering a somewhat different philosophical viewpoint of the industry’s collective balance sheet, Newsweb Corporation president Charley Gross contends, “Debt is not smothering the radio business. If a station has too much debt, it can be restructured. The lender has no interest in its borrower being smothered.”

WCPT logoNewsweb Radio Company is comprised of suburban Chicago progressive talk outlets WCPT-AM, WCPT-FM, WCPQ, and WCPY. “Our stations do not have outside debt,” Gross points out. “As a smaller group, we may be able to make/implement decisions more quickly, and offer a more positive, less bureaucratic environment to our employees.”

Their Turn at Bat

WFAN logoSeattle MarinersIf ever there were a perfect application for the “Hindsight is 20/20” cliché, it involves station acquisition. Several radio companies have grown into absolute monsters in terms of the number of licenses they hold, but such mind-boggling expansion comes with ramifications. “I always say call me in three or five years to see if it was a good deal or a bad deal,” remarks Jeff Smulyan, whose impressive portfolio over the years has included such holdings as radio’s first all-sports station – New York City’s WFAN – and Major League Baseball’s Seattle Mariners. “There are deals we would not have done and sometimes a few years later, we look back and say we were smart. Conversely, we look at some deals we did not do and think we were pretty dumb.”

Since he could not imagine putting himself in the situation of aggressive acquisition, Ed Christian viewed what others were doing with a bit of bemusement. “Many people in the industry told me that I wouldn’t learn how to swing the big bat,” he confides. “They might have been correct but we like to sleep at night. We like to know that our company is not encumbered and that it cannot be threatened by other areas.”

Different executives have varying degrees to evaluate investments and assets. As an example, Saga could not go on a wild spending spree because Christian asserts, “Our DNA would not allow us to do it. An element on my part said this party was going to end. There are boom and bust cycles, such as what we saw a number of years ago with the savings and loan industry. When an industry gets hot, it attracts a lot of different money that should not be in there. They are the first to cut and run when things get bad.”

Unfailing at being fiscally conservative, Saga actually got up to 4.5 times cash flow, which was the highest for the suburban Detroit-headquartered company and Christian maintains, “The banks were still comfortable with us. In the last couple of years, we took down our debt from $135 million to $57 million, so I absolutely do sleep better at night. The party atmosphere is gone and it has been replaced by many dispassionate broadcasters who are owners. They have lost the feeling of the richness and wonderfulness of what this industry is and what it can do in terms of having a communicative relationship with its communities. Many people running stations just do not care; [however], we look at ourselves as artisan cheese-makers. Saga stations are different and we adapt to what is going on in a specific community. There is no common playlist – it is all market-sensitive.”

greater media 2While Greater Media is conservative as it relates to station acquisition, Peter Smyth has scrutinized “every deal” and points out his company was “at many of those tables,” including the one in late-2005 involving Susquehanna, which Cumulus eventually acquired for a reported $1.2 billion. “We looked at it very closely and put a bid in on it,” he recounts. “It is not the quantity of stations you own, but the quality and the location of the stations. Many people call us the ‘crown jewel’ because we own the last great spectrum in these big markets. We are fortunate to be a family-run business with great products, great management, and great programmers.”

Resource availability is not the issue for the greater Boston-housed company, which owns 22 stations in Philadelphia, Boston, Detroit, and New Jersey. “We could have done anything we wanted,” Smyth comments. “The key in all those deals is whether it is accretive to the culture of our company. I see our role as being a mid-sized company. Our job is to be the best local company we can be in our markets; to grow our audiences; service our customers; and grow our revenues. In addition, you cannot win, unless you have a great signal. Regardless what anyone else says, if you put 16 crappy signals together, you still have crap.”

Being a day-to-day CEO is something Smyth does not delegate, “I work with these men and women every day,” he states. “That is an honor to me and I never wanted to get to a size where we could not do that. The most important thing is how the stations are performing and what the people are saying about the company. I let the quality of our people speak for itself. The day we start to put everything on hard drive is the day I do not want to be in that business.”

Full Plate

smart-phone iconGiven all the consolidation that has taken place, opportunity for the entrepreneur to build from scratch to a significant company is a long, arduous process. “One of my philosophies is that you always want to be where your listeners are,” advises David Pearlman. “Listeners now are going online and to smart-phones. It is a much more complicated, competitive highway, where consumers can get audio entertainment. As long as the financial community keeps the same view of the industry that it currently has, the economics is not very appealing.”

Although normally a proponent of high-risk/high-reward, Pearlman notes, “Today’s high-risk will not ultimately give you the exit strategy that you would really desire. I am not sure where the payoff is for these big behemoths that have their own cost-to-capital challenges, which is putting pressure on performance to grow the bottom-line in some dramatic way.”

Multiples at which banks will lend is significantly elevating stress levels on anyone occupying what Pearlman calls, “the ownership suite” to efficiently raise and expend capital for the purchase/operation of a radio station. “That really is the problem,” he underscores. “When lenders and potential equity investors look at the radio business, they do not see it as a high-growth industry at the moment. The way the cycle works is that you have to be able to see growth and build up bottom-line results that can justify the multiples that people are lending on, or purchasing on.”

Usually though, it all comes down to what banks are willing to tolerate and Dave Van Dyke feels they are not going to allow the types of deals that many companies need in order for them to feel comfortable in selling – or buying. “There are a few deals here and there, but the structure is different from the way it was,” the former KCBS-FM, Los Angeles president-general manager comments. “Banks have a very different view of the radio industry. There are times when top executives can convince a bank that their company can take on more debt but, for the most part, we probably will not see much activity because many radio groups are upside down. Not many people out there will give them the kind of multiple they need in order to make the overview of their business model work.”

Either things will remain status quo, or people will ultimately just throw in the towel. “It is almost a game of chicken to see who has the stomach to stay with it,” Van Dyke observes. “The broadcast radio business does have a chance to recover. It is a robust business; it is not dying – but it is changing. Due to the financial pressures, people are so myopic and they are having a hard time finding the right path.”

In many cases, there is too much on an owner’s plate, so Van Dyke reasons they might not be able to get to everything. “I do not think it is impossible for broadcasters to turn a corner,” he remarks. “All it takes is a state of mind and a positive approach to understand strategically where you need to go.”

Considerable radio station buying was still going on in the early-2000s, and Van Dyke recollects the people he was working with in terms of acquisitions were looking at the multiples. “I distinctly remember one banker saying to me, ‘Multiples you are seeing today will not be there in five years.’ I thought he was nuts because, in those days, multiples were anywhere between eight and nine on the small side to 14-15 on super large deals in major markets.”

Recommendation given to Van Dyke was to cut those in half and that is what he would see as being more realistic. “I was dumbfounded when that happened to our industry,” the founder-chairman of media research firm Bridge Ratings and president-CEO of AntennaDen Broadcast Group concedes. “When you see that, you really begin to wonder if the industry has a future. By looking at it though, you start to realize the business is starting to reset itself. It was growing and growing all those years. At some point, even the digital business will not be able to continue to grow at these rates.”

Some owners cannot sell or operate the way they need to, so they are in a quandary. “The model that seems to be succeeding is the one where traditional sellers do not sell digital because traditional sellers are a different kind of an animal,” Van Dyke remarks. “The compensation plan for sellers on the digital side of our business has to be very different from what a traditional salesperson is used to. Hiring people to go specifically after digital business seems to be a model that works, but radio today does not have the ability to do that. In many cases, it is faced with the pressure of not having enough money to operate.”

Syndication Stranglehold

Given that radio is still a business he enjoys, Americom’s Tom Quinn continues to investigate purchases that appear to be good deals. “On the other hand, this is more difficult than it was,” he notes. “Even so, I would be open to buying more stations and, from time to time, I have looked at things. It might be changing, but until very recently, there was a big gap between what sellers want to sell for and what buyers [are willing to spend]. The last time I looked, people were asking eight or nine times cash flow – now we are seeing deals for six times, which is a lot more attractive.”

KRNO logoCumulus logoAll of Americom’s radio properties – including adult contemporary KRNO (#2, in Arbitron’s fall 2012 book) – are located in Reno, Nevada (market #124), where Cumulus is among its rivals. “We are – and have been for a number of years – the top-billing group in the market,” Quinn reveals. “I don’t know if it is skill, luck on our part, or lack of attention [by the competition]. We have had more stability through the years in terms of programming staff and that helps a lot. Lotus has some real stability in the market and some good people; it is the #3 biller behind Cumulus.”

limbaughrushPremiere logoSyndicated programming is one specific area where it is highly challenging for an operator like Americom to knock heads against a massive group such as Cumulus. “Citadel – now Cumulus – has had Rush Limbaugh in Reno [on #1-ranked, talk KKOH],” Quinn points out. “Someone in my position has a very difficult time talking to Premiere in hopes of having them give Limbaugh’s show to me. Cumulus can do group deals and we cannot. In situations such as that, small companies are at a disadvantage [but] in local radio, whether talk or music, we can be fully competitive.”

Internet Jukeboxes

Notwithstanding the naysayers and those guaranteeing doom & gloom, radio remains a highly practical business. After all, it is an industry reaching approximately 93% of those living in this country.

When you paint with a broad brush though, Ed Christian suggests there are many different types of radio. “There are very small markets, there are medium-sized markets, and there are the top 25 markets,” he distinguishes.

Each has a different environment under which they work. “Outside of the top 25 markets, the smaller the marketplace, the greater the tie to the community and they are much more relationship-oriented with their clients,” Christian remarks. “When the station goes out to talk with them, they do not have the pressure of selling under certain measured radio metrics.”

Boston Red Sox logoperryedAmong the caveats for radio’s viability is that the medium must provide a unique service and it does not compete against things that can vanquish it. “That is the reason a minor league baseball team does not play the Boston Red Sox,” jokes WATD, Marshfield, Massachusetts founder-owner Ed Perry. “Boston stations are corporately-owned and they have a lot of money. We are the last FM station on a commercial broadcast frequency to get into the Boston market.”

That happened 36 years ago (1977). “We built it up very well,” Perry comments, “but you play your own game.”

Not only has Perry identified and targeted a region of 15-20 towns on Massachusetts’ south shore, his adult contemporary station is a member of every single chamber of commerce in that area. “We do the stuff that Boston stations cannot afford to do, such as local news,” he notes. “We care about a limited number of communities – not a 40-mile circle of coverage.”

Virtually all Boston signals penetrate Marshfield, a community some 30 miles from The Hub and approximately halfway between Boston and the Cape Cod Canal. “We are perfectly happy to take people listening on their car radios to their parking lots and parking garages in Boston,” Perry comments. “If they really want us after that, they can find us on the internet. Our goal, though, is not to become the radio station that every employee listens to, instead of what they are supposed to be doing for their company.”

Able to hear his 1,600-watt Class A station on a table radio in Martha’s Vineyard, Perry nonetheless considers the Cape Cod Canal a moat. “We have a good FM signal that gets into Boston, but Boston is not what we serve,” he emphasizes. “We only care about it getting into Boston so the people who drive there from the south shore can continue to hear their local radio station.”

Jukebox iconIf WATD just played music, Perry would be very worried because, “There are many more convenient ways than radio to get music. They invented jukeboxes so you could select your own music. The internet is the equivalent of a jukebox in every house. Radio is at a competitive disadvantage because we are still that serial medium where people must wait until they get what they want, if in fact, we know what they want.”

Adult contemporary WATD does not play music between 5:30am – 9:30am. Instead, it airs local news, sports, weather, and talk in that four-hour, weekday block. “We go to music at 9:30am and one of the first things we do is play a [format-compatible] song by a local group or local artist,” Perry points out.

Auction Blocked

In addition to having owned WATD for the last 35 years, Perry’s other business possessions include an office building and three broadcast towers. “We do not owe a dime to anybody,” he proudly proclaims. “In general, we pay our predictable bills in full at the beginning of the year. We generally get a discount, or we put them on a credit card so we can get some airline miles. We have no obligations to anybody to do anything financially, other than what we feel like doing. That is a big advantage because it allows us to take risks with programming. We have developed a whole series of local talk and local music shows that we run in the evening when everyone else is watching television. We can afford to make a mistake. It is not the end of the world if we screw up and lose a couple of thousand dollars. If you have the ability to take risks, all you have to do is win a few times and you can make back everything you have lost. Some big guys cannot afford to take those risks because their costs are multiplied much higher than ours.”

A two-hour, local music show, “Almost Famous,” airs Tuesday nights on WATD and the program’s benefits go beyond just selling ads in it. “When those performers go out in concert, they make it very clear that people should be advertising on our station – they practically become part of our marketing department,” Perry explains. “We do the best we can with the resources we have. Part of the reason we can do that is that we do not have someone with their hand out every month saying if they are not paid first, we are going to lose our business.”

With no intentions for the straightforward Perry to mislead anyone, he readily concedes his station has had its share of vicissitudes. “Many times, I have asked why I am doing this, but we have stayed with the market and have consistently developed it,” he stresses. “This is one of Massachusetts’ few areas that have not had a big drop in property values. You have to look beyond what you do with the radio station and ask what you can do for the market to continue to make it a desirable place for people to live. You always must remember that your customers are not your advertisers – your customers are your listeners and you have to keep those listeners happy.”

Genuine passion for radio has kept the 72-year-old Perry in the industry he has been deeply involved with since he was a youngster, but he emphasizes that the key to the radio business is that, “You must make it available to new people.”

Regrettably though, it is very difficult for a person without huge resources to win an FCC auction for an FM signal. “Decisions today are based on who has the most money – not who could do the best job,” maintains Perry, whose heart was broken regarding a case that happened about five years ago. “A young on-air talent who worked for me desperately wanted to own a station. She lived on Cape Cod and we were able to push people around a little bit to open up a frequency for her in the town in which she lived.”

WGBH logofcccolorIt was auction time and Perry told the woman that she needed to find a backer with some money. “It was going to be big because everyone wants to go to [Cape Cod],” he explains. “[Boston public broadcaster] WGBH came in with a bid that exceeded $3 million. This woman would have done an absolutely wonderful job with the radio station, but she did not have a chance of getting into ownership. Public radio people – funded with her tax dollars – grabbed it away from her and even from the big private companies. The FCC essentially gave up trying to determine who would bring the best quality to a market. It is now a question of who will give the most money to the government – that is totally wrong. Kids do not have to pay to get into the internet or into social media. If we want radio to be a viable medium 25 years from now, we must get younger people into ownership now so they have a stake in it.”

Waste of Time

From broker Sandi Bergman’s point of view, the environment is there for those willing “to make the extra effort” to become entrepreneurial. “It is not uncommon these days for potential buyers to be willing to do things such as leveraging personal property for a down payment,” she states. “I see many people who are excited about getting into this business. Radio still has a very incredible future. If radio can figure out how to get the best marriage done with digital, it would just be a powerful partnership. It is out there.”

Megaphone iconSeveral groups Bergman knows of are interested in selling their holdings. “They realize where the marketplace is now, so hopefully, we will see increased transactions in the next quarter or two,” she predicts. “It is an interesting time to be in this business. The people who figure out how to take advantage of radio’s powerful megaphone and marry it with an online presence that can generate digital revenue will be [successful]. That is simply a reality. As far as individuals are concerned, I see many people who have worked for major group owners who are now anxious to run their own show and make their own money. Now is the time.”

harrisonmichaelSupporting that outlook is RadioInfo and Talkers publisher Michael Harrison, who recommends recently pink-slipped market managers, vice presidents of programming, and/or marketing executives to cease “floundering around in things that are not rooted” in realistic career endeavors. “They are perfect candidates to be new-wave owners,” he maintains. “They could get good deals on radio stations in the heartland, so they should move into the community, roll up their sleeves, and ‘work’ these things. That is what is needed to happen for AM and FM radio to again become a viable business.”

Some will put forth the concept that the greatest roadblock to radio deals is the absence of “easy money,” although Harrison insists that is what caused prices to go through the ceiling in the first place. “As opposed to venture capitalists and major national money-lenders, local banks might finance local owners if, in fact, they know that the business plan used by the people coming in to operate them made sense,” he speculates. “The cost of the station would have to be reasonable and the debt could be serviced. You cannot get financing, of course, if the debt is so high.”

Naturally, as is the case with virtually everything else, it all comes down to pricing, with Harrison stating, “Radio has to be purchased at a cost that can be serviced by the revenue that it generates and earns, as opposed to the ‘greater fool’ theory. If leaders of the huge corporations continue to feel they must cutback to the bone – and then even deeper – to pay the debt, they will really kill the medium of radio.”

Rather than that dire outcome coming to fruition, Harrison would encourage them to shed their stations. “Get rid of them and take a loss,” he emphatically urges. “Local ownership is not easy, but people dedicated to the community and to radio’s principles could reinvigorate this medium with fresh enthusiasm. They should program every aspect of the station with pride – no filler or dead spots. Hopefully, it will not reach the point when it is too late to revive the body.”

herskovitzalFacebook Like iconReferences to anything about “content being king” are certain to infuriate Harrison, since as far as the former owner of Springfield, Massachusetts’ WSPR (H&H Broadcasting, 1986-1988, with longtime friend Al Herskovitz) is concerned, “It is an empty statement and I’m sick of hearing it. No one talks about what it takes to meet people and to be in the community. Create great radio shows, as opposed to taking valuable time by forcing radio personalities and producers to write blogs and get people to ‘Like’ them on Facebook. All this concentration on blogging and having people visiting a Facebook page wastes time. It is an obsession in the wrong direction – stations should be concentrating on the product.”

Familiar Names

Various banks are willing to loan money for radio station acquisition, but Chuck Lontine points out, “There are stronger EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortization] requirements today than in the past. Time was, a technical arbitrage would insure a credit facility, but as those signals failed to produce ratings and revenue, many lenders began to look into other media verticals for stronger valuations. Any lender today is going to look at a minimum of five to seven times broadcast cash flow for any middle-market deal.”

karmazincraigEncouraged by what Good Karma Broadcasting president-chief executive officer Craig Karmazin (son of Mel) is doing in Cleveland and what Sonoma Media Group managing partner Lawrence Amaturo (son of Joe) is building along the California coast, Lontine quips, “Radio is in their DNA. Frankly though, I believe that is a requirement to succeed.”

wilsonlarryRe-entry of Larry Wilson in Portland with his Alpha Broadcasting has been “exciting” for Lontine to witness. “The ‘L&L’ in his L&L Broadcasting stands for ‘Live & Local’ and that says it all,” Lontine comments. “It will be of high interest to see how they develop the Triad Radio acquisition.” The reference is to former Citadel chief executive officer Wilson’s recent purchase of Triad’s 32 stations for $21 million.

Townsquare logoWKXW logoOn the issue of several other groups running radio in a fiscally sound way, Lontine is “very impressed” with Erik Hellum at Townsquare Media, whose stations include New Jersey talk juggernaut WKXW. “Townsquare has a proven model utilizing the strength of local radio, combined with its digital vertical Radio Pup,” Lontine comments. “Within the Townsquare and Radio Pup platform, they can effectively serve both broadcast and digital media online. Townsquare has initiated an effective pyramid of leadership between its programmers and sales managers that seems to be taking hold. It has a remarkable NTR program driven by vice president Jeff Schatz.”

Cherry Creek logoAnother standout, in Lontine’s opinion, is Denver-based Cherry Creek Radio. “Joe Schwartz, has quietly and effectively built a radio company serving the local smaller markets within its group of stations,” Lontine states of the Cherry Creek founder. “Each market cluster within Cherry Creek is designed just for that market, so it is local radio at its best. [Future frontrunners] will be broadcasters who effectively blend true local content with worldwide digital applications to an eager local audience/user base clearly ready for something new.”

No “Gone Fishing” Signs

Gone Fishing signOnly once – in 1996 – was Ed Perry tempted to sell his standalone Marshfield, Massachusetts station WATD. “It wasn’t a great time financially for us and we would have kept the real estate,” he recounts. “Finally, I said we would do it. The person waffled by wanting me to take stock in his company but I [preferred] money, rather than a stake in someone else’s business. We have turned down multi-million dollar offers to buy the place, which would have allowed me to spend time on Martha’s Vineyard digging clams and catching fish. I did not do that and I am glad we did not sell. We have remained a community service and we have many cell phone tenants on our towers. We are having fun. Listeners can tell that and they want to stay with us.”

The Perry-WATD scenario is one of countless instances of someone owning a station in the town where they want to live.

haleyjeffMuch like in her trade publication days, Erica Farber hears inspiring stories like that repeatedly from numerous broadcasters she encounters. “There are many different businesses within the radio business,” notes Farber who succeeded Jeff Haley at the RAB one year ago (April 2012). “We have some extremely large companies using public money or private investment money in an effort to make money off the investment. Those are very different challenges. I do not see a gigantic exodus today of people saying that, ‘The sky is falling’ and they need to get out of the business. If anything, there are stories of people who were in the business; sold their stations; did rather well; and are now returning. You can sit at a computer, or turn on a smart-phone and have access to radio programming. We are now in the video business, and we can push out specific information to specific consumers.”

Ad Council logoOver and above her RAB duties, Farber is on the board of the Ad Council, “which does amazing work” with public service. “Advertisers and agencies use their creative expertise, while media outlets provide the way to reach consumers,” she explains. “With over 243 million listeners – or consumers of the product – radio is still an important part of a person’s life. That has not changed. There are over 13,000 radio stations, compared to 1,400 television stations. Small radio operators are focused on being involved in their local community and making a difference there.”

Perception versus Reality

Newspapers have had a shocking decline in consumption and there has been monumental fragmentation in television the past 25 years, but Jeff Smulyan insists radio’s biggest challenge is perceptual. “It might be more daunting than a lack of utilization because you cannot go anywhere without hearing someone talking about Pandora,” he remarks. “A few years ago, it was satellite radio; it is always something.”

CheersDespite television’s splintering in the last quarter of a century, Smulyan points out that it has held its revenue because people perceive it as a primary medium. “If you look at the ratings for the #1 TV show in America in 1990 [‘Cheers,’ with a 21.3 rating] as opposed to 2013 – the decline in shares is remarkable, but people don’t seem to care,” Smulyan comments. “Everyone has to be on television because it is the primary medium.”

Many seem to focus on the perception that radio is a secondary or even tertiary medium. “As a result, a little fragmentation kills us while a great deal of fragmentation has no bearing on the television business,” Smulyan laments. “Even though we have more listeners, we fragmented because time spent listening is down. The widespread rollout of PPM has exacerbated that. It is fascinating to me that it seems to have really, really killed us and that has been frustrating – very frustrating.”

emmis 2Not long ago, Emmis was in the visual medium business with 15 television facilities in markets that included Portland, Orlando, New Orleans, and Honolulu and a candid Smulyan reluctantly admits, “I have to be honest: It looks like a better business than ours right now. It is growing much better.”

The reason Smulyan eased Emmis out of television in 2008 is the same reason that he entered into it 10 years earlier (1998). “I thought it needed to be more entrepreneurial and they would get a meaningful second revenue stream,” he explains. “When we got out of it, they had made almost no progress. Six years later, they are making tons of progress. Television has done a better job. I am hopeful, yet frustrated. We must do something to break this cycle.”

That is why Smulyan has been “so fanatical” about how one particular omnipresent part of technology can greatly assist radio. “I am very encouraged by the overall response to the desire to get radio in cell phones in this country,” he remarks. “We are seeing progress on many fronts and I am very excited.”

Print in the ER

bradleytombrownjerryBased on Arbitron numbers, radio listenership levels have remained relatively consistent and Americom’s Tom Quinn concurs with Smulyan that radio has not had the problems that television has experienced vis-à-vis fallout from TV channel proliferation. “We now have 200-300 television channels to choose from,” notes Quinn, who managed Jerry Brown’s successful 1974 California gubernatorial campaign, and was Los Angeles Mayor Tom Bradley’s 1985 campaign chairperson. “These days, if a primetime television show has a 9 rating, it is a roaring success. When I used to be involved with politics, you would be looking for primetime shows with a 25 or even a 30 rating. Those do not exist anymore. Individual television shows only give you a small fraction of the audience that it used to.”

Reviewing past stats of television’s golden age, we are able to substantiate – if not actually even embellish – Quinn’s point.

I Love LucyAll in the FamilyFor example, on an admittedly extreme anomaly, CBS-TV’s “I Love Lucy” posted an astonishing 67.3 rating in the October 1952 – April 1953 season. Some 20 years later, “All in the Family,” also on the Tiffany Network, registered between 30.1 and 34.0 (October 1971 – April 1976). Television’s last 30-share series was NBC’s “The Cosby Show” with a 33.7, September 1985 – April 1986, and starting in September 1998, the highest rated show, NBC-TV’s “ER,” had dipped to a sub-20 rating (17.8).

Los Angeles Times logoLos Angeles Herald Examiner logoPitfalls with print are even more pronounced. “The Los Angeles Times had a circulation of a little more than one million persons a day at a time when the population was 30% smaller than it is now,” Quinn mentions. “In those days, we had The Los Angeles Herald-Examiner. Before that, there was The Mirror News and The Herald Express. Unfortunately, the newspaper business seems to be eroding very rapidly. While radio has a challenge, it has – at least so far – held onto its audience.”

Corporate Hot Spot

Growing up as a newsperson/sportscaster is how journalist at heart Pearlman learned the business. Seizing a late-1980s opportunity, he bought a Spanish-formatted station in Hartford. “It had no ratings and no revenues, but it had a 50,000-watt signal,” he explains.

Part of the startup picture included his wife serving as business manager and his kids helping to pull wires when studios were being built. It was Pearlman’s appraisal that Hartford was one of the most under-radioed of the top 50 markets. “There was a decent amount of revenue in the market with relatively few competitors,” he recounts. “It was dominated in those days by WTIC-AM & WTIC-FM. We flipped [the then WLVH] to a weather station while we waited to put on our ‘real’ format. The property [at 93.7] became WZMX, which is still a very powerful [CBS Radio-owned rhythmic CHR] station.”

Purchasing a standalone in a metro such as Hartford would probably be a far greater challenge today than it was approximately 25 years ago, and several factors make that so. “When I set out to buy the station, ownership rules were very limited,” recounts Pearlman, who found venture capital to back him. “It was a very difficult time with very little banking money available. I found two money funds that helped me with the first radio station purchase.”

They actually stayed right through to 1993-formed American Radio Systems, a collaboration of Steve Dodge, Tom Stoner, and Pearlman. “Strategically, we were trying to create a rollup company that would take advantage of the new ownership rules,” Pearlman states. “We became the fourth-largest radio company. It was not just me – I was very proud to have helped to create a unique culture in the broadcasting community. At that time, we were a very hot place to work. We were extremely content and people-driven. We understood that you had to have great facilities; sensational programming; and wonderful, talented people to lead the effort. People were our biggest assets.”

Focus for American Radio Systems was on markets 10-50; CBS Radio, a group that – at the time – was primarily in the top ten markets, would later acquire ARS.

gehronjohnmasondan (2)Selling American Radio Systems was not a particularly painful experience for Pearlman. “All the hard work that the people put into American Radio was greatly rewarded financially,” he points out. “We basically sold our radio assets to CBS Radio for a then record enterprise price of $2.4 billion. At the same time, we spun out to our shareholders, one for one, American Tower, the world’s preeminent tower company. Our CEO, Steve Dodge, continued to run and dramatically build American Tower to what it is today. Don Bouloukos, John Gehron, and I went to work for my good friend, [CBS Radio president/CEO] Dan Mason, to create what I thought was perhaps the best operating group ever in radio. For several years, we really had a very satisfying professional extension of what we were doing into CBS Radio.”

On the boards of several companies, the 10-year president of Pearlman Advisors provides senior-level consulting and management services at the CEO, and COO level. “I am involved with products that range from new media to traditional broadcast companies to sports teams,” he notes. “I have had the chance to run companies and purchase stations, but I have remained on the sidelines for a number of years. I stay very connected to what is going on across all media.”

Tainted Tablets

PPM iconUndeniably, a radio station’s one-on-one relationship with its advertisers is an incalculable advantage, however, Ed Christian contends things change around entirely in larger, PPM-based markets. “What we have here is a measurement that was introduced by Arbitron that over-promised and under-delivered,” he charges. “It was meant to explode advertising dollars but the converse has happened. It is used as a measurement to continue to push down the cost-per-point in marketplaces. We have seen this denigration over the last several years where rates have been slowly moving down in most of the larger markets. Some secondary markets even have a bit of this extreme rate pressure because it becomes a commodity.”

Years ago, radio salespeople could sit down with an agency time buyer who would be familiar with a market because that person might have utilized the station on various occasions. “They knew the radio stations; knew the advantages each station had in terms of its attachment to the community; and recognized a station’s place in the community,” Christian commends. “All of that has gone out the window in the larger markets, so that makes the business model changing in that area.”

Larger markets are getting more into an automated process of numbers being punched into a computer. “If a station meets the cost-per-point, it gets the business,” Christian matter-of-factly states. “There is no care for the passion. Radio will still be a good business, but it is much more delicate business, especially in the major markets.”

Moses - tabletsIn light of Christian’s feeling toward PPM, Saga stations in portable people meter-based metros such as Columbus and Norfolk, are non-subscribers. “When salespeople have their hands on radio information, they become a clone to it and they lose the spirit of selling,” he maintains. “All they are focusing on are numbers on a page, rather than what a radio station has to offer. It has always been this way – stations take the numbers from Arbitron as if they are tablets that Moses brought down. They are viewed as concrete, cut-in-stone and the exact number of people listening to a radio station. Well, there is actually a lot of variation, but no one cuts you any slack on that. You are never really able to tell the unique richness, perception, and history of the radio station, or what it does in the community to make it value-added. Frankly, buyers now do not care at all.”

Tragedy Trumps Competition

When there is loss of life and you witness dozens upon dozens of catastrophic injuries that will forever change the lives of others, it is painfully complex to locate anything positive, let alone dwell on radio ratings.

Boston Marathon #1Entercom logoSuch an ominous dark cloud hovered over Boston this past April 15, yet in a ghastly paradox, it happened to be a picture-perfect Patriot’s Day. As horrific and loathsome as the events of that day and the shootouts that would follow days later, there were scores of genuinely heroic acts. Radio played its role and customary combatants displayed cooperation. “CBS Radio, Clear Channel, and Entercom all have fabulous people here and we all get along with each other,” Peter Smyth explains. “We agreed that we are all ‘radio’ and we worked well together. It was very collegial and for the betterment of the community. All the radio companies in Boston – as well as stations in Worcester and Cape Cod – did a great job. In a very unsettled setting, we provided a soothing pace [and place] where our stations were a constant companion.”

24 logoEverything that unfolded on that Marathon Monday as well as throughout a breath-taking week was surreal to those who experienced it and as Smyth recalls, “It was like you were reading a suspense novel or that a version of ’24’ was happening in your backyard.”

Instantly, the decision was made for Greater Media to suspend all on-air contesting on its Boston properties. “We are here and we are living it,” Smyth emphasizes. “Out of respect, it was not the time to win $1000 when you hear the cue to call.”
Boston Marathon #2Although Boston was in complete lockdown mode on (Friday) April 19, Greater Media was prepared, as some employees were lodged in nearby hotels; others had stayed in the company’s 45,000- square foot building located next to The Boston Globe; and a few displayed their media passes so they could get to the studios. “It is such an unbelievable situation that you do not know how you are going to react,” Smyth comments. “It didn’t matter who you were from ‘Yale to jail,’ everyone came together.”

Prognosticating Profession

Canary in a coalmineEquating radio to the canary in a coalmine, Ed Christian elaborates on that analogy by commenting, “We sense problems in the economy before others do. [Entercom executive vice president-chief financial officer] Steve Fisher had a great line when he said we do not need economists to tell us what is going on in this country – just ask broadcasters because we see it beforehand. We are an early warning sign.”

Among radio’s strongest attributes is that advertisers can get on the air immediately but the downside is that they know they can cancel right away. “We do not have any binding long-term contracts that are enforceable,” Christian notes. “The timeframe in buying time has narrowed down to a very short window right now.”

A particularly healthy quarter has the incessantly positive Jeff Smulyan even more upbeat than usual. “The increase is very high single-digits,” he explains. “While I am thrilled about it, this appears to be aberrational. It is hard to build cash flow when you are only up a half a point or one point.”

Format changes can be expensive propositions; consequently, they might not be as prevalent as in previous years.

WTKK Boston logoWBQT logoWOR logoSeveral days into the new year though, Greater Media jettisoned talk on Boston facility WTKK and replaced it with rhythmic hot AC (“Hot 96.9”) under its new calls, WBQT. “[Greater Media’s late co-founder-chairman-chief executive officer] Peter Bordes, Sr. would always tell me to run stations as if you would own them for the rest of your life,” Peter Smyth notes. “We looked at the talk business very closely and studied it for about a year. It was not anyone’s fault at WTKK – they all did an outstanding job and I salute each of them. The country however has changed considerably. Those leaning too far right are considered to be on the fringe. If you go too far left, you are too liberal and people will not listen. If you are way too far right, just a small circle of people will listen – and it is not a profitable circle. We had to look at that diminishing audience. I love talk radio and I was at [New York talk outlet] WOR for many years [as General Sales Manager until joining Greater Media in 1986], but it is not about what I personally like.”

When WTKK debuted approximately 12 years ago, it was, in Smyth’s words, “a centrist station – one click to the right.” There was most likely a good position for that because he reasons, “America is basically a centrist country. In the meantime though, we saw our revenue decline, decline, decline. Greater Media invests a lot of money in research. Each one of these stations gets one or two strategic studies a year. It is like reading a balance sheet: We want to know what is going on in the marketplace and what that radio mosaic looks like. We watched the rhythmic position get stronger and stronger. Things came together nicely and the station is doing very well.”

Those companies still engaging in investigative projects typically stare at similar conclusions, so it comes down to efficiency of execution, with Smyth advising, “Make sure you have strategists – not tacticians – in your organization and that you empower them to be entrepreneurs. When you take risks, you must have strong intestinal fortitude. Life is a quick gallop and the job of a manager is to be certain that a person is better for working at a company than if they did not work there. Those are philosophical differences. At the end of the day, we will see who is correct.”

The Need to Regain Swagger

Although Reno is running a tad behind from where it was last year, Americom Broadcasting is doing slightly better. “In that sense, we are making some progress against some headwinds,” acknowledges Tom Quinn, who nonetheless is concerned that the market is down. “We are doing okay – but nowhere near as well as we were five years ago.”

Similarities exist between what happened in Las Vegas and Reno. “There was an enormous amount of construction going on in Reno and that collapsed,” Quinn points out. “It might be starting to come back a little bit.”

Indian gaming in northern California is another issue affecting Reno’s business. “Gaming revenue has been on the decline for the last eight years,” Quinn explains. “The recession may have something to do with that, but the trend was underway before the recession – and that is the bulk of the Reno market.”

Notwithstanding some red flags, Quinn emphasizes that he does not think radio is dead and, “There are no indications to believe that it is going to die. Many people are still doing well in the radio business. Listenership is hanging in there. It is easy to be pessimistic when you read things such as streaming coming into the dashboard of your car.”

That will signal more competition, with Quinn rhetorically pondering, “When you are in business, who likes competition? It would be nice if we did not have to compete against other radio stations, but it is just part of the world.

KSGG logoEver since launching rhythmic CHR KSGG (“Swag”) on March 18, the station has picked up more than 20,000 Facebook followers. “Since we can see the metrics, we know they are young people,” Quinn points out. “We developed that product and it seems to resonate with young listeners. According to Arbitron, they are listening. In addition, they are very active and very vocal – I look at that as a nice, healthy sign.”

Competition of a different sort is the threat posed to those owning AM and/or FM sticks from non-traditional, antenna-based radio, although Michael Harrison pooh-poohs one newcomer. “For the most part, there is very little good radio on the internet that is not connected to a broadcast company,” he states. “Broadcast companies know how to ‘make’ radio. Professional commercial radio is better than amateur radio coming out of someone’s basement.”

Debt #2Nevertheless, as long as much of AM and FM radio is in debt, Harrison contends, “It is vulnerable to internet radio eating its lunch. A business is not viable when, under the best of conditions, it cannot meet its expenses and has to shrink in order to survive. Once cutting back becomes the business plan, you are only prolonging the inevitable of death.”

Reduction of debt service remains imperative. “Thankfully, some stations in America are functioning, making money, and growing,” comments Harrison. “The first thing most executives at those operations will say is that they do not have a big debt service. Before you even begin to think about using this wondrous internet we have to spread your brand, you must have the product that is worth branding. We have many exhausted people making empty, follow-the-leader product [yet] it is branded all over the place.”

Strict focus, in Harrison’s estimation, should be on programming and sales. “Let the promotion, advertising, and digital marketing come later,” he forcefully counsels. “When the marketing is put ahead of the product, all you have is a label and nothing more. The biggest problem is lack of local ownership and lack of concentration on content. In most cases, the content is not worth promoting.”

Large radio companies have to ascertain how to curtail cutbacks and, as Harrison urges, “Start doing really great programming. I would like to see music radio again have people with reputations for their ‘golden ears.’ Computers and research can only take you so far. We need music directors in touch with pop culture and on-air personalities who can make the music come alive in ways that liner cards, voice-tracking, and Pandora can never do. In talk radio, there needs to be a local show for every syndicated one. All the people who grew up with radio are being abandoned by it. The way the present trend is going, today’s 55-year-old will be alive and kicking long after radio will be.”

Optimistic Vibe

Many, smaller, independent radio operators are succeeding at being proactive with recapturing revenue. “They continue to do what they do best on selling broadcast advertising,” Dave Van Dyke praises. “They do not really include or even think about national advertising. For many of them, that does not exist. They have the ability to go out into the community, work with some of these local businesses, and create new revenue streams on the digital side, which can help them to succeed. The industry is still reluctant to pursue this in an all-out way.”

RAB2Year-over-year growth is always critical to any business and as the RAB’s Erica Farber comments, “No one goes into any business and says, ‘Let me see how much money I can lose.’ They want to do the best they can at a satisfactory profit. Everyone is focused on that. The way they go about it and the strategies they use are different. There are great things happening in big markets and there are great things happening in smaller markets. The greatest thing that could happen to radio is to have several [strong] months in a row. We get a bump one month but it goes down the next, so there is still uncertainty. Automotive is our #1 category across the board. It was nice to see some movement that people are buying cars again, but our economy is still not solid.”

Local is doing a little better than national right now at Philadelphia’s WBEB. “I can only speak for myself, but I am very optimistic,” owner Jerry Lee beams. “Radio has remained very strong, despite the influx of new outlets such as Pandora, Spotify, podcasts, and Sirius XM. All across America, PPM is showing that radio has a newfound strength – and that strength is reach. Radio can stand toe-to-toe with television’s reach at about 30 cents on the dollar.”

In conjunction with the station’s “Engaging Commercial” initiative, management at “B101” has trained 16 copyrighters from across North America to produce radio spots so good that, Lee states, “They cannot be duplicated on television. This vastly accelerates our ability to take money out of newspapers and television.”

Yet another upper-level executive sounding a positive note is Newsweb’s Charley Gross who reports, “Business is a little better than last year and we are optimistic about the future.”

Check Is in the Mail

Check in the mailWATD logoMeanwhile, last year was one of the best ever for Ed Perry-owned AC WATD. “We automatically got a bunch of extra money because it was an election year,” he rationalizes. “Things this year are wonderful – at least here. I am optimistic about this year and I think we will do okay.”

As difficult as it occasionally is, owners such as Perry must accept what – and where – they are. “We hear a lot of national advertising on Boston stations,” he notes. “Much of that is scrounged up by people who do nothing but deal with agencies. If we did a very specialized format, we might be able to go to an agency with Arbitron numbers, but sitting on the perimeter of the survey area, you are never going to get a two-share. A one-share might stroke your ego, but it will not get you any agency buys.”

It is clear that this community-minded outlet does an exemplary job in the towns it serves and Perry gets some – albeit limited – agency business. “I can tell when I get an agency check because it always has pennies in it,” he laughs. “We sell advertising time based on an even dollar; whenever an agency is involved, they always take their 15%. You must be the best radio station you can possibly be for the people who are most apt to buy you and service the clients like mad.”

As opposed to dealing with agencies, Perry is face-to-face with actual proprietors. Approximately 95% of his station’s billing is done on a personal basis with the people who own the businesses – and he emphasizes, “There are many of them around here.”

Frustrated though to hear national advertisers on Boston stations, Perry realizes the opportunity of securing those clients on his station is minimal at best. “It is like when you were in college and you saw a beautiful woman with a football player: You knew you never had a chance to get a date with her.”


Mike,, (818) 985-0244



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Category: Features