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The future of O.T.A.

S

secondchoice

Star Participant
With CBS officially ridding themselves of their radio operations, one has to ask why? Was the division a “drag” on earnings or cash flow? I believe they are profitable and generated cash. IMHO the radio division was perceived as a no growth business. Could it be because iHeart / CC and Cumulus are killing the industry by cannibalizing their inventory to pay their debts? Both need to be taken out of their zombie status by restructuring. Just moving the chairs around on the sinking debt ship will not solve the issue.
IMHO there should be a lowering of cap limits in ALL markets to 3 FM and 3 AM stations or if existing cap limits are lower in small markets, let them stay in place. The ratcheting of the ownership caps should be lowered 1 station per band every 16 months. Translators on AM stations would be allowed 20 miles radius 60 Db from tower no matter what class the station was. If the AM signal allows more coverage under current regulations then that is OK. Hopefully this will bring more competition and maybe some innovation into the business. The profit margins in radio are not bad 15 to 19 %*. If you can’t program and sell 3 FM signals plus the AM’s and their translators you should to go out of business. If you pay too much for any business you usually end up in bankruptcy court. Radio is no exception. Eight times EBITDA would be the most I would pay for a station unless I felt there was a big increase in billings possible. 106.7 in Atlanta is such a station: Big payroll (news talk) while 104.7 (CCM) with a smaller staff on the same tower but at a lower power is rumored to be billing twice what WYAY is.


The future may not be internet delivery. Just about anybody can set up an internet “radio station” but how get enough listeners to stream the station to sell adds can be an issue. Just ask the shareholders of Pandora:

http://data.cnbc.com/quotes/P/tab/5

I guess those antiquated towers and transmitters apparently are serving a purpose. Cumulus had an EBITA of 17%.
http://www.cumulus.com/investors/

Is it safe to assume on the air radio will remain a viable medium until the cell companies give away streaming data?
 
secondchoice said:
IMHO there should be a lowering of cap limits in ALL markets to 3 FM and 3 AM stations or if existing cap limits are lower in small markets, let them stay in place. The ratcheting of the ownership caps should be lowered 1 station per band every 16 months.
Click to expand...

What makes you think more regulation will help? There are no ownership regulations in any other business. WalMart can own as many stores as they want Trump can build as many hotels as he wants. Broadcasting is one of the few businesses where the government restricts the number of outlets. Viacom has no restrictions on the number of cable channels. Even Sirius has no government regulations on the number of channels they can offer. Their only limitation is bandwidth. Perhaps the lack of growth in radio is because the government has placed caps on how big it can grow. Don't you think that might be the issue?
 
secondchoice said:
With CBS officially ridding themselves of their radio operations, one has to ask why? Was the division a “drag” on earnings or cash flow? I believe they are profitable and generated cash. IMHO the radio division was perceived as a no growth business. Could it be because iHeart / CC and Cumulus are killing the industry by cannibalizing their inventory to pay their debts? Both need to be taken out of their zombie status by restructuring. Just moving the chairs around on the sinking debt ship will not solve the issue.
IMHO there should be a lowering of cap limits in ALL markets to 3 FM and 3 AM stations or if existing cap limits are lower in small markets, let them stay in place. The ratcheting of the ownership caps should be lowered 1 station per band every 16 months. Translators on AM stations would be allowed 20 miles radius 60 Db from tower no matter what class the station was. If the AM signal allows more coverage under current regulations then that is OK. Hopefully this will bring more competition and maybe some innovation into the business. The profit margins in radio are not bad 15 to 19 %*. If you can’t program and sell 3 FM signals plus the AM’s and their translators you should to go out of business. If you pay too much for any business you usually end up in bankruptcy court. Radio is no exception. Eight times EBITDA would be the most I would pay for a station unless I felt there was a big increase in billings possible. 106.7 in Atlanta is such a station: Big payroll (news talk) while 104.7 (CCM) with a smaller staff on the same tower but at a lower power is rumored to be billing twice what WYAY is.


The future may not be internet delivery. Just about anybody can set up an internet “radio station” but how get enough listeners to stream the station to sell adds can be an issue. Just ask the shareholders of Pandora:

http://data.cnbc.com/quotes/P/tab/5

I guess those antiquated towers and transmitters apparently are serving a purpose. Cumulus had an EBITA of 17%.
http://www.cumulus.com/investors/

Is it safe to assume on the air radio will remain a viable medium until the cell companies give away streaming data?
Click to expand...
Cumulus is putting in new transmitters this year..99 to be exact
 
TheBigA said:
Perhaps the lack of growth in radio is because the government has placed caps on how big it can grow. Don't you think that might be the issue?
Click to expand...

I'm pretty sure the growth limit on radio/TV is due to the laws of physics and not gubmint regulation. Gubmint regulation appears to limit ownership primarily.

Radio/TV also has some built-in protections that other businesses don't have. You can't get a license to operate a broadcast station where its operation will step on a previously existing station (in theory, anyway) whereas I can fire up my Burger King within blocks of yours if I want to - no legal restriction.

Broadcast entities are sharing a finite resource - a frequency band. For obvious reasons you can't let the operator with the most bucks set up his flame thrower to obliterate all others.
 
landtuna said:
I'm pretty sure the growth limit on radio/TV is due to the laws of physics and not gubmint regulation. Gubmint regulation appears to limit ownership primarily.
Click to expand...

That's what I said. My comment was in response to a post that said ownership caps should be set at 3 AM and 3 FM. That isn't the laws of physics. That's the federal government. There has been discussion about expanding the FM band, and the feds are opposed to that. The FM band is only finite because humans have made it so.
 
landtuna said:
...I can fire up my Burger King within blocks of yours if I want to - no legal restriction.
Click to expand...

No, you can't. Larger franchisers have procedures that limit cannibalization of existing locations by new ones. If "your" Burger King seriously dings another one, then they won't license it.

A better analogy would be putting a gas station on a corner right across from another one, selling a different brand. If your place can get the permits and meet other requirements, the government will not limit competition to the preexisting gas station.
 
DavidEduardo said:


No, you can't. Larger franchisers have procedures that limit cannibalization of existing locations by new ones. If "your" Burger King seriously dings another one, then they won't license it.

A better analogy would be putting a gas station on a corner right across from another one, selling a different brand. If your place can get the permits and meet other requirements, the government will not limit competition to the preexisting gas station.
Click to expand...

And that is an established strategy for several major corporations. A CVS across from a Walgreens, a Home Depot across from a Lowe's, an Applebee's across from a Chili's.
 
CTListener said:
And that is an established strategy for several major corporations. A CVS across from a Walgreens, a Home Depot across from a Lowe's, an Applebee's across from a Chili's.
Click to expand...

And you have it on the radio dial...there are no regulations prohibiting multiple stations in the same format in the same market. There are even competing NPR affiliates in the same towns.

The FCC has been adding translators and LPFMs. The dial itself is jam packed with stations. There is no need for the kind of ownership rules that exist.
 
CTListener said:
And that is an established strategy for several major corporations. A CVS across from a Walgreens, a Home Depot across from a Lowe's, an Applebee's across from a Chili's.
Click to expand...

And, to an extreme, car dealers like to be near other car dealers in groupings of different makes. Apparently the convenience of car shopping in a single location draws customers who can easily compare and price all in one area.

Here in the Desert we have a cluster of the Infiniti, Mercedes, BMW, Rolls, Porsche, Land Rover, Bentley, and Audi dealers and another big one with 20 economy and mid-price brands.

The restaurant business often thrives when there is a "restaurant area" which becomes a hub for dining in consumer minds.
 
DavidEduardo said:


And, to an extreme, car dealers like to be near other car dealers in groupings of different makes. Apparently the convenience of car shopping in a single location draws customers who can easily compare and price all in one area.

Here in the Desert we have a cluster of the Infiniti, Mercedes, BMW, Rolls, Porsche, Land Rover, Bentley, and Audi dealers and another big one with 20 economy and mid-price brands..
Click to expand...

And GM doesn't mind having multiple dealerships in the same area, just as long as they're selling different GM brands -- I know of a Cadillac dealership and a Buick dealership across the street from each other, with a Chevy/GMC dealership not far away.
 
TheBigA said:
That's what I said. My comment was in response to a post that said ownership caps should be set at 3 AM and 3 FM. That isn't the laws of physics. That's the federal government. There has been discussion about expanding the FM band, and the feds are opposed to that. The FM band is only finite because humans have made it so.
Click to expand...

No matter how large the FM (or AM) band becomes through legislation it still remains a finite resource. It could become large enough, I suppose, that all the radio operators in the country would not have the financial resources to fill it up and I suppose that would count as infinite - but that ain't gonna happen.
 
DavidEduardo said:


No, you can't. Larger franchisers have procedures that limit cannibalization of existing locations by new ones. If "your" Burger King seriously dings another one, then they won't license it.

A better analogy would be putting a gas station on a corner right across from another one, selling a different brand. If your place can get the permits and meet other requirements, the government will not limit competition to the preexisting gas station.
Click to expand...

I knew my example would be challenged by someone. Didn't expect it to be DE.

What I meant was that there is no federal or state regulation of location of businesses such that competitors cannot locate close by each other. Because radio stations use the public airwaves they are not licensed to step on each others signals. There is no such regulation saying two burger joints cannot locate on the same intersection.

Individual franchisers may have their own rules about co-locating their stores but it is not a government mandated legal requirement. And before someone says the cities do it, no they don't. They have other reasons for not co-locating like businesses too close together (traffic, access, business type etc.) but they don't base their decisions upon competition.
 
The Harsh Reality said:
Give this a read. There are 3 Shell gas stations on 3 of the 4 corners of Rayford Rd. & Interstate 45 North in The Woodlands, Texas, as another example. It can happen; the proof is in the brick and mortar.
Click to expand...

Are they company owned gas stations? Or the same owner? It may be that traffic patterns support three of them.

http://www.chron.com/business/article/One-on-corner-there-are-3-places-to-get-your-1745816.php
Click to expand...

Is the bookstore even still there? The herd of bookstores has thinned considerably in the 8 years since that article came out.
 
The Harsh Reality said:
Give this a read. There are 3 Shell gas stations on 3 of the 4 corners of Rayford Rd. & Interstate 45 North in The Woodlands, Texas, as another example. It can happen; the proof is in the brick and mortar.

http://www.chron.com/business/article/One-on-corner-there-are-3-places-to-get-your-1745816.php
Click to expand...

It used to be common in most American cities to have 2, 3 and sometimes 4 gas stations at intersections. Now it seems to be mini-marts (selling gas and donuts).
 
landtuna said:
No matter how large the FM (or AM) band becomes through legislation it still remains a finite resource. It could become large enough, I suppose, that all the radio operators in the country would not have the financial resources to fill it up and I suppose that would count as infinite - but that ain't gonna happen.
Click to expand...

There is not going to be an expansion of either band. Listening to OTA radio has declined more than 50% in the last 6 years in the major markets, with PUR going from around a 17 to 18 range to an 8. In the 90's, PUR was around 20 to 21 in many markets based on 6 AM to 12 MN listening levels.

PUR: persons using radio expressed as a percentage of the universe using radio over a specified time period.
 
DavidEduardo said:


And, to an extreme, car dealers like to be near other car dealers in groupings of different makes. Apparently the convenience of car shopping in a single location draws customers who can easily compare and price all in one area.

Here in the Desert we have a cluster of the Infiniti, Mercedes, BMW, Rolls, Porsche, Land Rover, Bentley, and Audi dealers and another big one with 20 economy and mid-price brands.

The restaurant business often thrives when there is a "restaurant area" which becomes a hub for dining in consumer minds.
Click to expand...

The "auto malls" were actually created by the cities trying to locate a major source of sales tax revenue in their jurisdictions. It became so dealer-eat-dealer in the Phoenix metro area that now you pay sales tax based upon the buyers city of residence rather than the physical location of the seller. Nevertheless, big areas catering to car sales and repair are easier to legislate and develop than scattered shops across the valley.

I have asked several dealers whether or not co-locating stores in giant malls is a good selling point and they all told me it doesn't matter much. It is very unusual for buyers to visit dealers selling vehicles not closely related by cost. Most said buyers were drawn in by price (generic car buyers) or reputation so they don't expect a Chevrolet sedan lookee lou to walk next door to the BMW store and comparison shop.

Restaurants in my area tend to be either free standing or in some sort of mall environment. Most of the big malls here tend to have stores in the center and restaurants on the outer access roads. Unlike car shoppers, diners probably do take advantage of the nearby theaters and other entertainment venues and everybody prospers.

Edit: I forgot to add that the dealers I talked to were part of big dealer chains. Each store handled one or more specific lines but they were all owned by a corporate master. They said it is also easier to located the corporate management staff in one of the stores and have the remainder a quick golf cart ride away.
 
Last edited:
DavidEduardo said:


There is not going to be an expansion of either band. Listening to OTA radio has declined more than 50% in the last 6 years in the major markets, with PUR going from around a 17 to 18 range to an 8. In the 90's, PUR was around 20 to 21 in many markets based on 6 AM to 12 MN listening levels.

PUR: persons using radio expressed as a percentage of the universe using radio over a specified time period.
Click to expand...

I probably, no - definitely, listen to more radio now than I ever have. But I listen exclusively to OTA stations who stream online from outside my market.

How am I measured as a listener?
 
landtuna said:
I probably, no - definitely, listen to more radio now than I ever have. But I listen exclusively to OTA stations who stream online from outside my market.

How am I measured as a listener?
Click to expand...

You (and I) probably aren't. We're not listening to local broadcasters when we do this. And even if we do (in my case, it's necessary for most Phoenix-area AMs, which don't make it out to east Mesa at night), I'm not sure that they'd count it.
 
landtuna said:
No matter how large the FM (or AM) band becomes through legislation it still remains a finite resource.
Click to expand...

As finite as space. My point is the ownership limits are man made, and haven't been changed in 20 years. In the meantime, the government has forced hundreds of new signals into that same small band. It's time to adjust the ownership limits to account for all those new signals.
 
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