A future for a new small market FM?

Hypothetical question: is there a future for a new, locally focused FM in a small, unradioed market? Unradioed in this case means no stations licensed to any town within the proposed listening area, although there are a number of FM stations in adjacent counties that get into parts of the proposed listening area. None of them put city grade signals over a significant part of the area, but three commercial small market FMs put solid service grade over at least the south half of the area.

There is listener competition from an adjacent larger market with seven commercial FMs that covers the north half of the area, but they focus on their home cities.

Population to be served: about 15,000, scattered among a number of towns, none over 3,000. Strong ag area. Plenty of weather action both summer and winter. Several High schools with solid sports programs. Retail sales in the area...between $75 million to $100 million.

Ten years ago this was a more clear cut answer, but with competing new media platforms does a traditional small to micro market FM have a chance, even if it embraces the new platforms, video, podcasts, etc. as much as it can?

And would you even use music content as a filler between local programs and play by play, or would you go all talk?

joebtsflk1 said:

Retail sales in the area...between $75 million to $100 million.

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Separate out all national chains from local stores. What's the local business?

I happen to have a station that meets exactly, including population numbers, your hypothetical scenario for sale. Problem is post recession, this particular small, un-radioed market hasn't recovered from hard times. Restaurants and local shops don't stay in business long enough to pay their bills, so you won't be collecting for the ads they have purchased. Regional advertisers are moving to digital advertising because it's cheaper. Will they be back? Probably. I just don't have the patience or liquid assets to keep up with expenses and making payroll waiting around for advertisers to come back.

Re: local business, the $75 to $100 million reflects all local business after the national chains have been subtracted out (no WalMarts in the listening area, but almost all of the listening area is within a half-hour's drive from three different WalMarts.)

Vitality of local businesses...yes indeed that could be a problem.

This operation would have to be lean, with only one full-time employee on the ground (probably me) primarily in sales, another "employee of record" at an insurance agency or similar business who would answer phones, serve as the depository for the public file and who would be able to take the station live if needed. Most programming would have to be VT'd from a friend's station 60 miles away. HS Sports PxP would be a part-timer or two from the community.

Even if running lean, it might be a tough go...

Is this a good place for a new local FM station? I say yes initially but I'd want to learn a bit more, the stuff statistics won't tell you. I assume you are talking a real place.

You mention a population base of about 15,000 made up of several towns not larger than 3,000 people in a heavy agricultural area. Retail sales of $75,000,000 to $100,000,000. All of this sounds great.

Your first step is to get a bit intimate with the communities. How do people interact. Here's what I'm talking about: In looking for towns myself, I saw one town I loved with half the population and retail sales of the second town with double the population and retail sales. Of the two towns, the smaller was the absolute best. The small town was quite united, concerned with its survival and had a volunteerism spirit. The larger town was very divided between the locally perceived 'haves' and 'have nots'. The community wanted to know what side of the fence you were on. By comparison, the local paper in this town had about 200 subscribers and about $250 in advertising a week compared to the smaller town that had 500 subscribers and about $750 a week in advertising.

In fact, gather all the local papers in that area. See who is advertising, how much they spend, etc. Ask for rate cards from the papers.

If you are impressed with how the communities function and the level of local dollars that stay local, I'd say you have located one of the last undiscovered small markets out there.

What might you project for potential income? I looked at a number of small markets myself. I used comparable markets (ethnic, economic and other factors) to see how same size market examples did. I found that on average of about $2,400 in radio income for every $1 million in retail sales. Note these were markets where most of the major national chains had not overtaken the local businesses.

By this formula $15,000 to $20,000 a month on average would be possible. That's not quite enough for live 24/7 but not at all bad.

As for the format, I'd go heavy ag. I'd need to know the state to know how intense that might be but the Midwestern states like to carry updates through the day, sometimes in long form blocks. I'd carry a news network. I'd carry a State News Network if possible. I'd do local sports, as much as you could. I'd have local news and be heavily weather intensive. I'd likely do a Swap Shop. I'd run several general interest features, local getting priority over syndicated but certainly stuff like Kim Komando's Computer Minute, etc.

Musically, I sure would play music. That is not to say I would not carry an ag oriented talk show or two. I figure about 50-66% music during the weekdays. You might be able to be live 6am to 6pm on weekdays. See what the area wants to hear. Depending on how much non-music you have, you might find simply being hit oriented works just fine.

Also agricultural co-op dollars are essential. Years ago I had a John Deere dealer on the station who spend a good deal because John Deere didn't gauge co-op dollars to actual sales from the merchant but paid 1/2 of all they spent that qualified for co-op dollars. In fact, co-op dollars may well mean you can billing double or more than I project from my research. The value of the farms/ranches and what they represent to an ag product can really change these figures, so much so a farm director might be a good idea.

In short, the more local more often concept seals your fate. Creating a feeling if the listener tunes away they might miss something important should be your goal.

Talk at night or mostly music, even on weekends, works just fine if you are sure to have people who will jump in and go live when the weather goes south.

If I can help you figure it all out, I'll try to help. I had help finding my spot so it's paying it forward for me.

In the old days, we used to figure that total broadcast advertising revenue might be on the order of 3/10 of 1% of retail sales. This rule-of-thumb may be seriously flawed anymore because so much of retail sales is dominated by the chain stores, including Wal-Mart. You won't get any local money from Wal-Mart, Sears, JCP, Costco, Best Buy, etc. You should get auto dealers and casinos, but the rest will have to come from the remaining local businesses.

But the most important factor is whether or not there is even the potential for another FM allotment in your area. Without that, nothing else matters. Rarely will you find a vacant allotment anymore. A consulting engineer can help you find out if there is an available frequency that meets the mileage separation requirements, and a community that can be used as City of License. If so, then you'll need to file a Petition for Rulemaking. If the FCC eventually allots the frequency to a community, then it will come up at a future FCC FM auction, and you will need to bid on it. Others may bid against you. If you are high bidder, you will then get a Construction Permit and be required to build it out within three years. Remember that filing the Petition for Rulemaking is at your own risk and doesn't mean you'll end up with it. You will be required to state that you will bid on it if it comes up for auction, and I believe there is now a fee associated with filing the Petition.

My FM fits the criteria listed above. I am the sole employee, I do the morning show, sell, traffic, engineering, the works. You need to be out in the community, no exceptions. You need to be the voice of the community. One part time person would suffice. Sales and community is the key.

Filing Petition for Rulemaking could be a long and expensive process. I see one, maybe two more auctions left in the future. Until the AM revitalization and TV auctions are completed (that could be sometime in 2018/19) I don't see anything happening on the auction side) Bids were low in the last few, and several permits were cancelled due to a lack of interest. Another words, the pickings are slim.

I also have a CP for sale in a similar situation. PM me if you are interested. Please don't if you are curious, a tire kicker, or I dream of owning a radio station. I don't mean to be rude, but I will ask you questions, and cut you off fast if you fit our criteria listed.

That is very true that the once $3 per thousand dollars in retail sales once worked. The issue today is 'leakage' of retail sales and chain stores that do not advertise. I've seen figures as high as $8.40 but I discount such because it seems such high figures are relegated to major markets versus small town stations.

To gauge a more accurate reflection might be to look at local newspapers, typically the only mainstream advertising medium, to determine the dollars spent locally by businesses. For many small markets, the local business simply wants to remain top of mind to get the local dollars they can.

Leakage is a serious problem in some places. When many choose to shop at the big chain stores in the larger towns, generally out of the county, the leakage can easily eclipse the number of dollars spent locally.

Looking at the state figures for the towns in question, the data shows a 10 year spread. It indicates number of businesses, average dollars per business, total retail sales dollars and the number of those dollars going out of the county, or leakage. Fortunately for the towns in question, the number of businesses has remained quite stable and leakage has not affected year after year retail sales. Unlike so many communities, the sales figures are keeping pace with inflation, so I'd say that is a good sign.

Naturally these figures do not depict the 'on the ground data'. By this I mean, the mindset of the business owner. If they feel the economy is depressed or a community is not very centered on remaining vibrant and supportive of local ventures, then the best figures available are not worth much.

As one that has studied many towns for a potential site for a LPFM, figures can be elusive of actual results. I found healthy appearing towns where the community was divided by an imaginary line in the sand that leave media performing very poorly. In other cases I saw small communities with a smaller business community and not much in retail sales that had incredible community pride and a proactive attitude in keep the town economically viable eclipse the more healthy appearing community by figures that were staggering (ie: 75 cents per thousand in retail sales compared to as high as $12). So, while figures might look good, the mindset of the business community and the community at large is the real driver of success or poor performance and/or failure.

I based my above post on several small markets where I looked at radio station billing versus retail and radio-utilizing service industry businesses (banks, auto repair, etc). It appears a decent station, on average, can do about $2.40 per $1,000 in retail/service sales divided by number of local signals. Naturally this is not an average of simply dividing signals and sales as one station might do double the billing of the competitor, for instance. In one scenario I researched for a friend, I projected about $125,000 a year from a total of $1,775,000 in radio revenue already spent, a figure determined by the $714,000,000 in retail sales comparing the long-term local signals so well established in the community and looking historically at new entries in that market and basing projections on their early track record.

The real challenge is the upstart. With auctions fetching such high prices in some locations, by the time you have a chance to earn revenue the debt is so great you can not afford to do too much. And many of those higher bids for those stations never get built either because the numbers don't work or under the table a local competitor got an entity to bid it up to prevent any new competition. As hard as the FCC tries to nip this in the bud, there are those trying just as hard to work around that.

Very hard business to be a new entrant in. Especially if you'd be a single-station operator with no established stations to lean on for revenue. Even established stations in places like this seem to be struggling because of more advertising dollars moving to Cable TV and digital.

Definitely should fiish the local business community before committing to such a venture.

First format question is whether you should use one of the packaged formats from Westwood One. I would have said yes a decade a go, but now that they've gutted the operation and everything is voice-tracked it's less clear. If you're looking at being a one-man band then probably the answer is yes. Probably country, AC or classic hits depending on the competition.

I agree. Nothing is ever easy in radio and this is one of the tougher choices. Competition, being as it is, I believe is more about outworking the competition. Cable TV is an option once not available but production costs preclude many clients and with all those channels, the reach is sometimes questionable. Digital is important but why can't radio sell the website as a bundled package. We all know if a business has a website built, the trick is getting people to go there and mass media seems to be a good tool for that.

As for programming options, a service might be an option unless an operator can create their own. There are some tricks to making a computer in a closet sound as live as possible and quite local.

I think the key is always keep start up costs to a bare minimum and operating costs on a shoestring that looks more like a side view of a postcard. It will take a bunch of hard work and little sleep to build such a station even if you are the only local station. It takes time to educate and create new buying habits and no shortcuts to either, just hard work.

I think you are spot on for format options. I have found that in many rural areas it's not always country that prevails as top dog but that many grew up on top 40 and now classic rock. I knew of one station that was classic rock musically, billing itself as the farm station. Quite frankly I was rather shocked hearing a Chicago Grain Report followed by a livestock auction sale commercial followed by a liner in to You Shook Me All Night Long by AC/DC. I had this mental image of a guy in a John Deere out in a field jamming to the song. My Dad put it in perspective: son, you're of the age of the average farmer. It makes perfect sense.

b-turner said:

I think the key is always keep start up costs to a bare minimum and operating costs on a shoestring that looks more like a side view of a postcard. It will take a bunch of hard work and little sleep to build such a station even if you are the only local station. It takes time to educate and create new buying habits and no shortcuts to either, just hard work.

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This is the best description of small market radio adventure
in a nutshell. Both of my stations (one on the air, another CP) were from the last two auctions. My expenses are low and with exception of my antenna, everything was EBAY bought and paid for).

Hard work yes. Loss of sleep yes. Would I do it again Yes. We are not Country, and with today's hard drive technology, you can produce a sound just like the big guys.

We have a major market sound (we run a tight playlsit), the difference? we do local weather, community announcements, and yes a brief swap shop for about 10 minutes on our morning show. We make sure to always talk about something local in the community,and we have open door invite to the community (the morning show), and yes they stop by.

I worked for someone for 20 years. I decided to take the plunge. November will be three years that we have been on the air. I'd rather fail, than not of tried.

Sounds like you are very much like me in thinking. I wish you every bit of good thoughts and luck in keeping your station, about to be stations, successful. You're fighting the hard fight and making it...something I admire. I hope you're loving it. To leave a paycheck to create your own is always scary but I believe it is always better to try than to say you never did.

b-turner said:

Sounds like you are very much like me in thinking. I wish you every bit of good thoughts and luck in keeping your station, about to be stations, successful. You're fighting the hard fight and making it...something I admire. I hope you're loving it. To leave a paycheck to create your own is always scary but I believe it is always better to try than to say you never did.

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Thank you. Don't get me wrong, there are days I throw up my hands, and count to 10

Groove1670 said:

I'd rather fail, than not of tried.

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I'm studying markets and numbers in order to buy a station somewhere in the future. Regardless to say this forum is always a good source of knowledge but that statement sir, made my day.

Respect.