RADIO (as we know it) is DEAD!!!

And so are the Managers who run it. Seriously!

If you're in business, public or private, commercial or non, and you're basing any part of your future on essentially the same business model from prior decades, then don't be surprised when you find yourself in the express lane to both irrelavance and obsolescence. After all, radio is no commodity.

Remember the old saying, "You gotta change with the times." Well, do you really think Coca Cola is using the same business model or business practices from fifty years ago? McDonald's? Microsoft? Clear Channel? These organizations are leaders for a reason, usually because their management acclimates to each unique era our medium lives through.

These days, a CEO typically acknowledges this reality of constant flux. Yet, typically, they either don't demand innovation from their managers OR they do demand innovation... and then quickly re-emphasize the bottem-line. Any manager worth their weight in research will then quickly dismiss the innovation side and focus all energy on the bottom-line. Who can blame them? Such indecisiveness can lead to a fear of innovation simply because of innovation's lack of short-term ROI.

The people who are going to completely reinvent radio from the ground up, business model and all, are quite literally, us!

So where does this leave us? Back at Square 1? Not quite. This leaves us with the realization that the majority of program directors, consultants, general managers and executives are not doing their jobs. Lately, there is no reinvention of radio or it's fundamentals. Many of those who should be reexamining, redefining and reinventing radio are routinely finding themselves reverse-engineering their programming and local cluster/station business models. They're looking at the 50's, 60's, 70's, 80's, and 90's, and trying to remember what worked.

Case in point: WXRK, New York

The station is, by target demo consensus, boring. Listeners would agree to the potential this stick holds, yet is not currently exercising. It's quite a waste and CBS Radio should be ashamed of themselves. I realize Dan Mason has only been CEO for so long, but I have a sneaking suspicion that the reverse-engineering mentioned earlier is just about the safest journey for K-Rock right now. Sad indeed. And now, Emmis unleashed their brand new NYC rock station this week, WRXP, to exploit this vulnerability. Hopefully, they will see the err in CBS's ways.

Barack Obama isn't getting support for nothing. His campaign is based solely on CHANGE. What an interesting and competetive idea!

What worked then will not cut it anymore. If you're in one of the above mentioned positions, you have a responsibility in the time we are living in to bring the best to your audience. If that means creating your own, new, innovative clocks, you do it. If that means creating your own new, innovative programming, you do it. If that means creating your own new, innovative radio station business model, well, you do that too!

Any person off the street can program your radio station with clocks that have been used since way before Selector was invented, with syndicated or automated programming, and with the same playlists available on any child's Ipod throughout the world. Why differentiate your product on such narrow levels? The listener has no option but to be entirely frustrated and NOT become a fan of your station. In fact, stop using the "listener" moniker entirely, seeing as how radio's future is based in multimedia. Our listeners don't just listen anymore. You want fans! And your fans want radio that is new. They want new ideas, different music, unpredictability, and personality!

Inevitably, without drastic change, you won't have personality.
And you won't have any fans either.

Start reinventing radio by reinventing your managers, especially from the top down.
Realizing where your priorities lie, bottom line or serving the audience, is likely a moot point with executive in our industry. But serving your audience/fans will facilitate building a stronger, unbreakable trust. And that's the relationship you want!

A relationship where your fans will go nowhere and stay put.

Reinvent radio, already!

~ Damrow

www.MattDamrow.com

Excellent point! Of course, it also helps if stations are live and local. The stations that stay on the air in the years to come witll have a local commitment. It will be up to the powers that be to decide what direction the industry should go in. :-\

Revival Meeting

Matt, you're a victim of history - or lack of it.

On one hand, you're crying "reinvent radio". Forget the past. Try something new. You say:

Many of those who should be reexamining, redefining and reinventing radio are routinely finding themselves reverse-engineering their programming and local cluster/station business models. They're looking at the 50's, 60's, 70's, 80's, and 90's, and trying to remember what worked.

A few paragraphs later, you say:

You want fans! And your fans want radio that is new. They want new ideas, different music, unpredictability, and personality!

Which is EXACTLY what radio USED to be - in the '50s, '60s, '70s, '80s, and even early '90s.

You cite "Case in point: WXRK, New York", and blame Dan Mason. Let me cite "Case in point: WCBS-FM", and praise Dan Mason. Mason junked Jack, and brought back interesting, broad-based personality-oriented radio that resembles a station out of the '80s. It has been a smashing success in NYC.

Radio does indeed need to grow and change, but looking at the past is hardly a mistake. In fact, the practices of the past - live, local radio, with a broader playlist and people who know how to sell new music to the audience - are a great guide to radio's future.

I'm not the only one who thinks this way. Check out the articles below. The first one is a short summation of the problem. The second is longer, lacking in paragraph separations, but more in-depth.

Short article

Long article that needs to buy a paragraph mark

Two things stand out. One, radio is still immensely profitable, whether there's growth in revenues or not. Wall Street is focused on growth, not profit, which is why stock prices are sinking. Two, "Back to the Future" may be the best route to future profitability. Radio MUST become relevant to the next generation of listeners. MORE must be invested in compelling content, both on the air and off, not less.

MORE must be invested in compelling content, both on the air and off, not less.

And where does the "invested" money come from? Small operators barely able to pay the mortgage now in a weak advertising economy where "radio just isn't sexy anymore?" From conglomerates who depend on Wall St. private investors who's only demand is "make us money ... we don't give a damn what you play." A bottomless pocket of cash with a very difficult time of recouping a return on investment?

I hate to disagree, but this is blind-sided tunnel vision. Radio is an expensive "business" to operate ... not a "hobby." Towers and transmitters, building leases and staff cost big money. The economics of such ownership has changed. Your comment of "extremely profitable" couldn't be farther from the truth.

Yes, there are very profitable radio stations. But remember, before CBS-FM in New York changed to "Jack" -- it's revenues were down from the mid-$30 million a year mark to just over $20-million. "Jack" took it down to just over $15-million ... with a lot of "cuts." That revenue does not appear overnight. Now, WFAN makes $50-million a year ... but one person, alone, accounted in 2006 for $20-million of that revenue. We all know where he is.

Look at the smaller markets that barely make $10,000 a month in revenue. Or $20,000. Those in the $30,000 a month level aren't guaranteed dollar one in "profit." Those billing $50,000 a month or more are just eeking out a profit ... and then the cuts begin with $10 an hour voice tracking and board ops. You find a station billing $100,000 a month ... you'll find similar stations as competition still taking 50-70 percent of additional revenue from the market away to serve their multi-station clusters.

And many are NOT making money at that. More than 50 percent of the stations in the country do not make a profit. That's different than "operating expense." To make it through an economy like today, whatever addition that station making $100,000 a month makes better be used for days like these in order to survive.

Yes, we'd like to offer personality, more and better jingles, better equipment and, yes, "company provided coffee cups" ... but without the engine of consistent sales resulting in stable billing and results for those clients ... radio is having a difficult time ... and not just in "isolated markets."

It's all over the place.

You have to earn "profitability." Programming is no guarantee of profitability. The ability to raise revenues to pay for it through sales and promotion is the key.

I also hate to say this ... but "rich owners" don't owe you anything more than what they can afford ... but they DO owe, from day one, banks, stockholders and investors a "return" first and foremost ... or, in these times of inflated station prices, we'd have no radio station to employ you or me in the first place.

And keep this in mind ... investors don't give a damn. They're in it for the money. You're job ... is to provide that return, no matter how good you are "on the radio." If it doesn't bring in revenues to cover your costs and the costs of doing business, while leaving about a 36% profit margin (as in any successful business...) you've got a losing business that won't make it past the business plan in front of a bank.

And banks, trust me, hate rate radio stations for loans and investments. Have for many, many years, in fact. Too "unstable."

Incidentally, Citadel stock opens Monday at $1.38 a share ... down six months ago post-Disney at over $11 a share. Clear Channel, with a guaranteed buyout to shareholders of $39.20 a share is down to under $30 a share. Now ... would YOU buy Clear Channel at $39.20 a share today?

Didn't think so. Nor will Bain-Lee, at least for now.

Number Games

Oak, don't confuse stock prices with profits. Radio is still very profitable. The problem is that the profits aren't growing, which is why Wall Street is spooked. Even Clear Channel, who's crying poverty, had a profit margin of over 11% through the third quarter of last year. Flash that number in front of a major retailer, and they'd drown in their own saliva.

The stock price doesn't really affect the day-to-day. Radio stations are making money. The problem is that the fat cats told investors that profits would continue to rise despite that fact that some companies were leveraged to the hilt because they borrowed money to acquire more properties, and lending rates started to climb.

Radio "just isn't sexy" because major operators - like Clear Channel and CBS - have made it unsexy. They've diluted programming to the point where there is no compelling reason to listen. Joel Hollander drove CBS down the tubes. Dave Mason is trying, with some success, to haul it back up out of the gutter. Clear Channel is just cutting and cutting and cutting - and NEVER where the cuts need to be made - AT THE TOP.

There are some small operators who are in trouble because they overpaid for their properties in hopes of turning a profit on resale. There are some major operators in the same situation. The real problem is that those people who bought & sold radio stations like real estate have turned out to be lousy operators. Most of them weren't even smart enough to hang onto the people who made their properties so valuable in the first place. Now, the chickens are coming home to roost.

The suits are upset because so many of them have deals that give them stock at set prices as part of their compensation. Since they've poisoned the Wall Street well, the set prices are higher than the actual trading price - making their stock options worthless.

Take the money out of the golden parachutes, limos, Lear jets, $1000.00 lunches, and the rest of the corporate perks and put it back into programming. The guys in the trenches didn't screw up this industry. The guys in the penthouses did. Well, it's time for them to stop sucking million-dollar salaries out of the company and put that money back into places where it will help revitalize revenues.

Gentlemen,

I really appreciate your input. VERY articulate and different perspectives!
The common denominator here is we all acknowledge a state of disrepair the industry is in. More or less, we all seem to be generally on the same page.

With that said, would you have any suggestions on where our industry can go from here.
I like where some of the posts were leading, some different theories.

Can you flesh this out more? What I mean is... How would you fix radio?

Would you invent something? Would you re-engineer the business model? Would you encourage an evolution? And if so, how?

~ Damrow
www.DamrowVO.com

To reinvent radio, in my opinion, I would hope for "Less is More." 50 percent of the radio stations today DON'T make a profit. Haven't since the 50s, in fact. Secondly, an 11% profit ... when a moderately successful business runs at 36% is not a good business ... nor is the climate for radio.

Radio is not "sexy" because the content "thrives" on decades old modeling. It's the same old same old ... just the "concepts" have change. What is "new" is not always successfully accepted by business or listeners (Free FM, for example.) New "music" isn't the answer, and that has been proven. There are so many alternatives to "audio media" today that the pie is fragmented into where the ad pie is cut up so much.

So, to "reinvent," it must be a combination of less "corporate" playlisting, more visibility in alternative media, including Internet, social networks, on-demand technology, podcasting, the end of five hour morning shows (or four or three, even) to relevant information that can be downloaded and used at will via iPod, smart phones, etc.

To have new content work, it can't be spread out over every terrestrial station in the world. There are too many radio stations. Again, I live in a market with 26 metro stations, serving a market of 250,000 people. That's absurd. The AM band is over-rated with bad radio, poor radio, revenue challeged radio in small, medium and large markets ... and the clock is ticking on its demise. FM is also becoming way over crowded.

There needs to be a thinning out of the number of radio stations, in my opinion. It's not "the medium" anymore.

Oaktree, I agree 100%.

Radio is a business and in order for any business to survive it needs money.
The way I see, problem #1, way too many stations in every market. Thin the hurd or we all die.

No Sale

The problem is NOT too many radio stations. Are the stations in your area interfering with each other? Probably not. Is there a real variety of programming? Probably not.

The problem is that the consolidators pushed the prices of stations up in their attempt to create regional synergies. Ask anyone who's been in the business long enough to know who Bill Drake is, and all of them will tell you that the price of stations went through the roof in the last 15 years.

Clear Channel and others thought that regional synergies would allow them to cut bodies and/or raise rates by creating virtual monopolies. What they found is that both listeners and customers ended up unsatisfied with the product or the return on their investment. Double-digit growth every year is unrealistic in any business, especially when the inventory level is fixed. Bad programming turns off listeners who have other alternatives.

The challenges of other delivery systems will likely affect the value of radio stations. Stations will start selling for much more realistic numbers - as has already happened with some of the Clear Channel sales (like this one). Reduce the debt load, and you reduce the cost of operation. Reduce the cost of operation, and you can spend more on programming - just like they did before 1996.

The suits have put themselves in the hole, but they've got the golden parachutes. The grunts and the stockholders take it in the shorts, while the suits bail with lifetime health insurance, multi-million dollar bonuses and buy-outs, and dump shares picked up for a song at inflated values guaranteed by their contracts. Killing radio stations does not serve the public interest, convenience, or necessity. Revoking licenses of failed operators does.

Revoking licenses of failed operators does.

And I still contend, that to make the properties retain any value, there are way too many ... and more on the way. Failed operators should be like other businesses gone bad ... fold them up and go home in many instances.

A station that can only get a fire-sale price in a small town and causes the band to be further subject to noise, co-channel interference and other problems need only look at the cutbacks and hatchet jobs that are going on in supposedly pre-dominant stations and facilities on a regional or major market basis.

I'd much rather listen to a station that I can get further than 20 minutes from where I live, before the frequency is taken over by someone else on that frequency or nearby interference because there is no signal from the little tea pot station that is failing miserably.

Further, we've been saying for years that a great deal of AM's problems have directly been related to overcrowding of the band.

As for "public need and necessity," that does not mean "new radio stations doing new things." Failing stations do not serve anyone's need or necessity. Nor does the regionalization of radio stations-turned-repeaters as is happening now in markets like LA.

If you have less of something, you create more demand. Less "bad" might make better radio, in my opinion.

And as one who grew up and worked in the "Drake Era" (which I deeply miss,) the price of stations going through the roof came about because then-owners could do it and others like the consolidators had the wide-open checkbooks to meet that "need."

The problem is, after scraping the cream off the top, they found they had debt-service problems just as homeowners of below-prime rate mortgages have today.

It's very seductive to have a plan before buying "too much" ... but it's a killer when it all catches up with you as that plan unravels. The good days are great ... but when the tide turns, look out. Ask Clear Channel, Citadel and CBS Radio. They know how it feels...buying too much too frequently...and losing.

A lot of those rimshots and second tier stations in smaller conglomerates would be better off off the air. After all, they don't even serve their city of license most times ... they compete to call the "bigger market" their sales target.

It's an abuse that the corporates needed to do to get the primary stations they really wanted. The rest of the stations were trashed ... as they were when the previous owners begged Clear Channel and others to buy them ... at way inflated prices.

And they did.

Thin the herd. There's way too much to go around now as it is. Radio isn't McDonalds.

well... all i can say is that let corporate thin their own hurds and give some breathing room for the
other owners of smaller operations... they made their bed so lay in it... ;D

cough

cough said:

well... all i can say is that let corporate thin their own hurds and give some breathing room for the
other owners of smaller operations... they made their bed so lay in it... ;D

Click to expand...

I've seen it spelled with a "t" but never with an "h."

The thinning of same seems, though, like a good idea.

Being one that was solely responsible for paying the bills and making payroll, may I cut to the chase.
You just want your job back. Sorry to say but it ain't ever coming back.

Talk to those who worked in the auto, banking, footwear, you name it industry, technology and cheap labor has taken over.
Computers can do it faster and cheaper.

You can start pointing fingers just about everywhere. Corporate, FCC-Docket 80-90, computers, take your pick.
It's 2008, way too many stations and not enough advertising revenue to keep them on the air.

Clusters came about from financial necessity. On paper the FCC plan looked great.
More Class A's in bedroom communities will bring more local programming.

Reality, very little or NO advertiser support. Only then did the FCC relax the rules and allow the successful stations to buy up the junk.

You may think you have the very best, Live-Local-Smooth Jazz station in the nation. If you're not getting listener and most importantly clients to pay the bills, the party will soon be over.

Sorry for the doom and cloom, it's just the way it is.
Looking back is great for a moment, moving foward is exciting and fun.

Shouldn't this thread's title be Radio (as we knew it) is DEAD ???

Missing the Point

Several of you admit the the big operators are in trouble because they overpaid for stations.

Your solution is to take stations dark because non-broadcasters thought that they could rewrite economic rules. Clusters came about because the FCC allowed it, and operators thought that they could corner the radio advertising market in certain demographics. Programming was cut because of the cost of borrowing money for the purchase, diluting the value of the product further.

The cluster strategy became a cluster-f*ck. In an attempt to attract more dollars, stations were refocused as rim-shots in the closest large market instead of serving their original market - another strategy that generally failed dismally. Some operators even went so far as shutting down some local stations so they could increase power at another rim-shot in order to get better coverage in a larger market. There are even stations that lose money because they're programmed as "spoilers", or to protect similar formats on successful cluster-mates.

The problem is NOT with frequency allocations. The problem IS with the business practices of some of the large operators. Let's make it simple. If you operate a station that loses money for three consecutive years, you have to give up the license. It should come as a relief that you won't be losing money, right?

Remember, nobody OWNS a frequency. You only LICENSE it so you can server the "public interest, convenience, and necessity". Operators that value stations CORRECTLY can make a profit if they program well.

Since this is the Business of Radio board, try taking your business plan to a bank.

If the Bank of Pie In the Sky gives you the financing and you have a rim-shot Class A with some success, the Class C blowtorch down the road will take your format, make it better and your history. Business 101

Business 101

12 In a Row said:

Since this is the Business of Radio board, try taking your business plan to a bank.

If the Bank of Pie In the Sky gives you the financing and you have a rim-shot Class A with some success, the Class C blowtorch down the road will take your format, make it better and your history. Business 101

Click to expand...

EXACTLY. Business 101 says that you don't overpay for that rim-shot Class A and try to move into a larger market with it because a station with a better signal WILL blow you out of the water as soon as you demonstrate some success.

So, DON'T overpay, keep that Class A live and local in the market that it's licensed to, an you and a few key players will be able to make a very nice living keeping LOCAL advertisers happy at rates that they can afford. Their businesses will prosper, and your business will prosper. When you're ready to move on, somebody will take a look at your balance sheet, and say to themselves "Man, this guy could have done a lot better with that station." He'll "steal" the station from you for 10-15x cash flow, and you'll walk away with a nice retirement.

Meanwhile, he'll cut the local programming to cut expenses, try to program the station as a rim-shot Class A in a nearby large market, and.... (wash, rinse, repeat).

The industry is in for a "correction". Some owners who overpaid for stations need to lose those stations, or sell them at a loss. We need to get station prices back into the range where they can be profitable with programming that people actually WANT to hear, and spot loads and rates that actually SERVE the advertiser.

That, my friend, is Business 101.

Re: Business 101

SirRoxalot said:

12 In a Row said:

Since this is the Business of Radio board, try taking your business plan to a bank.

If the Bank of Pie In the Sky gives you the financing and you have a rim-shot Class A with some success, the Class C blowtorch down the road will take your format, make it better and your history. Business 101

Click to expand...

EXACTLY. Business 101 says that you don't overpay for that rim-shot Class A and try to move into a larger market with it because a station with a better signal WILL blow you out of the water as soon as you demonstrate some success.

So, DON'T overpay, keep that Class A live and local in the market that it's licensed to, an you and a few key players will be able to make a very nice living keeping LOCAL advertisers happy at rates that they can afford. Their businesses will prosper, and your business will prosper. When you're ready to move on, somebody will take a look at your balance sheet, and say to themselves "Man, this guy could have done a lot better with that station." He'll "steal" the station from you for 10-15x cash flow, and you'll walk away with a nice retirement.

Meanwhile, he'll cut the local programming to cut expenses, try to program the station as a rim-shot Class A in a nearby large market, and.... (wash, rinse, repeat).

The industry is in for a "correction". Some owners who overpaid for stations need to lose those stations, or sell them at a loss. We need to get station prices back into the range where they can be profitable with programming that people actually WANT to hear, and spot loads and rates that actually SERVE the advertiser.

That, my friend, is Business 101.

Click to expand...

AMEN!!!!!

I really wish you were correct with your business plan.

I wish the big guys will sell it to me at a loss.
I wish the FCC will take away their license.
I wish someone will come along with the money it will take to buy the station and willing to wait many years for a possible return on their investment.

Sad to say none of these wishes will happen.
Besides, who are we to say, "local" advertisers will support you?

Reality is, there are fewer and fewer "local" advertisers out there. They are constantly being replaced by the big box stores. Wal-Mart, Sam's Club, Best Buy, etc.

What gets me is listening to broadcasters complain about not being "local" and than driving out of town to buy their new car, new furniture and new HDTV. And shopping on line for Christmas.

I ask, did THEY support their "local" merchants?

The response is "it's cheaper in the bigger city and on line!
We as the consumer are just as much to blame.

If we don't support the local hardware store, jewelry store, car dealer, etc. how can they stay in business and advertise with us?

Rebirth

In case you hadn't noticed, Clear Channel has taken stations dark, and has sold stations at a loss. They're cutting their losses in some markets in order to stop bleeding dollars. They probably won't be the only ones.

Stocks are down because investors are realizing that they've been sold a bill of goods. Check out Jim Cramer's take on radio stocks. He gets several things wrong in my opinion, but he gets the attitude of Wall Street right. Stocks are an indication of the value that investors put on a company. Wall Street realizes that the days of double-digit growth in revenue and ever-increasing radio station values are over. That's why stock prices are down.

Radio has been in a recession for years because owners overextended themselves in a buying frenzy. Like homeowners who bought more house than they could pay for with the idea that they'd be making more money in the future, they're nearing default. The rising cost of interest on the money that they borrowed speeded up the process.

Does this mean that radio is broken? Or, does it mean that investing in radio is broken? IF the market corrects the value of radio stations, and IF operators get back to offering better content, radio will rise again.