THE OUTLOOK FOR RADIO Chris Byrnes – ByrnesMedia A friend who works in an unrelated industry recently returned from a trade show in New York. When I asked him how it went, he said “not so good.” He told me that many of his American competitors had not booked space at this show and some had already gone out of business or were cutting costs to survive. He also said customer visits were significantly down this year, and of those that did attend, many either spent less than previous years or did not spend at all.
My friend is normally very positive about his business but I was shocked by his rather gloomy view based on his experience at his biggest trade show of the year. Whoever gets into the white house is going to be faced with a huge challenge, given the rising unemployment numbers, a faltering economy and one of the largest national deficits America has ever known.
The faltering economy in the U.S. appears to be impacting the radio business as well. The largest operator of radio stations in the U.S., Clear Channel, has been laying off staff in record numbers as they prepare to hand over the keys to 1,100 plus radio stations to an increasingly nervous Thomas H. Lee Partners and Bain Capital because the stock is trading well below the takeover price. It’s hard to see how these new owners, who may know even less about operating radio stations than Lowry, Mark and Randall Mays, will turn these stations around because all the fat and some of the bone has already been cut. It would seem their most likely option will be to sell off pieces in the hope it will net them more than the 19.3 billion dollars they have agreed to pay for the radio and billboard assets. I suspect this next chapter for these radio stations, the staff and the consumers may not be pretty.
I am not picking on Clear Channel, as there are enough other detractors who have done that. What concerns me is that other radio companies in the U.S. look to be heading down the same path. In recent weeks, CBS cut staff and combined several key positions. Emmis, generally regarded as the most people-friendly company, has recently cut 5% of its employees, eliminating 46 positions in their major market stations. Entercom also gave pink slips to staff in Seattle for budgetary reasons, and some insiders are suggesting there will be more to come.
The Founder of “Inside Radio Magazine,” Jerry Del Colliano, commented recently “My perception is that radio is going down for the count and it looks like Wall Street is getting the lifeboats in the water as well.” In the same article he observed that radio consolidators turned out to be lousy operators of radio stations because they didn’t understand how to manage and grow these stations. All they really knew was how to cut costs, and in doing so, provide less service, so customers (listeners) went elsewhere.
What are the chances that the same thing could happen here? The prices paid for radio assets in Canada are setting new records, and will make it difficult for new owners to generate significant returns in the short term because of the large sums of money they are forced to pay towards CCD. So what can we learn from the mistakes made below the 49th parallel? Here are some observations.
Radio Needs To Do What It Does Best: Radio does local better than any medium. When the highway closes because of bad weather or the buses are running late, or the power goes out people tune to radio to find out what’s going on. But all too often the show is being voice tracked from another market and there is no one in the radio station. It was not that many years ago that regulations required there to be someone in the building twenty-four hours a day, seven days a week. Today, one of the metrics we use to judge a station’s performance is the “walk away time,” which is the amount of hours we can expect the radio station to operate with no one in the building. With today’s technology and some careful planning we can provide a 24/7 local service if we set our minds to it. The truth is that radio works best when it is local and the big mistake the Americans made was thinking that they could run hundreds of radio stations from a distant corporate office. The American consumer learned that radio consolidators are not local.
Make Radio More Accessible: RAB chief, Jeff Haley, wants to make an FM tuner "the #1 accessory" for the iPod. He is urging the industry to set a goal of having an FM on "every PDA and cellphone." Haley did more than talk about this; he demonstrated it, using working models, including a dual in-car unit that transmits timely traffic and other info to the dashboard with MSN and (in Atlanta) Clear Channel. Haley also talked up the Radio 2020 initiative, announced at last September's NAB Radio Show in Charlotte, to address radio's concerns "head-on," to "engage the industry and technology partners," and to engage consumers who "need a little nudge to re-ignite the passion." Starting March 3, "The Dr. Laura Program" will be available to mobile phone users on demand via Cellecast's distribution platform.
Come To Terms With Technology: Radio will quickly get left behind if we cannot all agree on the platform on which radio will be delivered in the future. Already, car makers are walking away from DAB, and if we can’t get the sets in the cars we will have lost the war. I believe the average consumer is fine with the quality of FM radio. We should stick with that system and improve the data delivery using RDS rather than invest millions in technology that the average consumer does not see any benefit from. I recall the AM Stereo fiasco; in the market I was working in, there were less than 10 AM stereo receivers. They were installed in the General Manager’s and Owner’s cars, we had three in the radio station, and the rest were in electronic stores as demo models. They never sold one because they were expensive and the consumer did not see the value. The radio group known as GCap in England are turning off their DAB’s because it’s not economically viable, and the adoption rate by consumers has been "incredibly slow." Look for GCap to be taken over in the near future.
If It Looks To Good To Be True: Some of the problems with radio in the US today stem from the way the Wall Street deals were put together. Radio was seen as a great free cash flow growth industry and radio station owners were probably ill equipped to deal with the sophisticated financial wheelers and dealers from Wall Street, who offered lots of money but expected a huge return. When the economy staggered and advertising revenues fell, the Wall Street money men forced radio operators to slash expenses to make the quarter look good. One of the positive differences between the US and the Canadian broadcasting system is that radio is owned largely by private individuals or companies who are broadcasters and investors who should be more protective of the product and less concerned about the share price. Time will tell.
Use Your Website: One of the speakers at the NAB in Charlotte said that radio, by and large, is not making the most of their websites and until they get desperate like newspapers did, then nothing much will change. Unless the folks at the top buy into the idea of using the power of the web to generate revenue and drive listening, the radio station website will likely be a brochure that people look at once and find no reason to return. Newspapers are far ahead of radio when it comes to a web strategy. They know how to seize the moment. A recent example is New York’s “Daily News” who quickly tapped into the hysteria surrounding the Giants’ Super Bowl win. They drove readers to their website to watch a video (provided by YouTube) of one of the game highlights – Eli Manning escaping from a sack and his throw to David Tyree. Readers then voted on their favourite name for this move, thus selling more newspapers. But in order to take part in this contest, web visitors were asked to register and include their name, year of birth and zip code, and were given the option of receiving emails. Additional optional information like household income, industry, career, and newspaper usage was also requested. There is a good chance this newspaper was looking for ways to gather important information about their readers in order to generate more revenue. Radio stations need to find ways to maximise their websites and use them to create a better relationship with their listeners. A radio station website can provide lots of perishable content, and done right, can become an important community portal. Two examples of this that already exist include www.mymcmurray.com and www.steinbachonline.com.
Conclusion: Radio remains the number 2 most consumed medium in America, based on all the audience data. Number two is not a bad place to be, but unless we continue to innovate and offer great service to our consumers (listeners and advertisers) radio will slip to number 3 or beyond. The number of young adults who listen to radio is falling as they consume media in new ways, through social networking on the internet or by downloading music and listening to iPods and other similar devices. We need to find ways to bring these young listeners back to radio and we’re not going to do it while the regulators penalise radio at every turn. |