Just for fun: Is it possible to own your own radio station in 2023 and make a profit?

[fordranger797]

I've always been interested in the prospect of owning my own radio station someday. Obviously, I don't hear many positive stories about the experience of venturing into station ownership, but nevertheless, I am curious about what it would be like. I decided to jot down some basic numbers of what I think it would cost to purchase and operate a commercial FM radio station in a small market. I thought it might be fun to share what I came up with, and see if I'm far out of reality, or if any of this actually makes sense. Full disclosure, I don't have millions of dollars burning a hole in my pocket to go out and buy a radio station with. But if for any reason I did have that kind of money to throw around, I think it would be a very cool experience. I'd treat is as a business, but I feel that it would be more of a hobby, given that the potential for profit seems pretty bad.

Additionally, I had to leave much of the projection blank (or rely on basic estimates of what certain services would cost). I think it would be interesting to have a discussion with people who actually "pay the bills" to determine an accurate value for electricity, how much staff cost to employ, etc. I'm also making the bold estimate that a smaller market FM could generate $40,000 in revenue each month in advertising. That is likely not the case, so perhaps we can touch on the actual revenue generated from advertising in this discussion as well. From what I've been able to come up with, there's realistically no way to keep a radio station afloat on $40,000 in advertising revenue.

Edit: Just as a side note, I'm also making the assumption that a broadcast engineer works on somewhat of a contract basis, where they may work 8 hours per week for the station.
Edit: Another important note, I am assuming that an existing radio station could be purchased, not constructed with a CP. The million dollars of upfront costs goes toward the license, existing station transmitting site, transmitter equipment, and tower.

Just for fun, let's explore it.

 

[Mikey Radio]

@DavidEduardo is most likely your most experienced person to turn to with this kind of query. A few months ago in another thread about someone buying a station or looking into a station for purchase, he was able to rattle off everything you'd need to consider, potential pitfalls or hidden costs, approximate budget to allow for staffing, utilities and the like.

The overall general consensus is that independent ownership is possible, but it's not at all easy not only due to competition from other stations, but also the current media and entertainment landscapes that fracture your potential audience, and then, of course there's the struggle for advertisers and their $$ that you need to support you. There are lots of variables - market size, location, demographics there, amount of "local" businesses with cash and willingness to spend it on your station, if your'e a startup or taking over an existing signal. Coverage, format, yaddda yadda yadda.

The other question you seriously need to ask is how long you potentially want to be in business. I don't think anyone here in their right might would suggest you take on an AM signal. They can be expensive to operate and as you may have seen in other threads, some car brands aren't even including AM radio in the dash anymore. As more and more entertainment options become available, as streaming is more widely accepted and other factors come into play, that will no doubt eat into your listenership.

 

[TheBigA]

The one line missing from your budget is LAWYER. In today's world you need a good lawyer.

Lawyer for the FCC, lawyer for the music royalties, lawyer for disgruntled employees, and lawyer for dealing with advertisers who don't pay.

Just for starters. Assuming someone in the audience doesn't sue you for something.

The other line missing is music royalties. If you stream, multiply it by five.

 

[davideduardo]

@DavidEduardo is most likely your most experienced person to turn to with this kind of query. A few months ago in another thread about someone buying a station or looking into a station for purchase, he was able to rattle off everything you'd need to consider, potential pitfalls or hidden costs, approximate budget to allow for staffing, utilities and the like.

You bring up one important element: pitfalls or hidden costs. What do you do when a storm takes down your antenna and the insurance is taking months to settle... and for less than the replacement cost? Or when a dismissed staffer files a nuisance suit, running up thousands in legal costs?

Beyond that, one can visualize the expenses by doing an imaginary "walk-through" of a station:

Building or office space rental or purchase. Property and city/county/state property tax and business licenses. Insurance on property and liability. Maintenance on property, tower, transmitter site.

Engineering includes utilities, parts and supplies, salary or contract engineer fees. Additional costs for emergency repairs or equipment replacement. FCC fees, plus costs of attorney for FCC actions and filing as well as a consulting engineer for any change in operations.

Office expense includes phones and Internet as well as company cellular phones. Utilities, gas, water, cleaning service or supplies, office supplies, computers, software purchase or annual fees, furniture and repairs, A/C and heating units and maintenance. Shipping, postage, etc. Salaries or fees for office manager / bookkeeper / traffic person.

Programming includes salaries, music licenses, promotion, remote vehicle, overtime for special events, acquisition of music (if in smaller market with no promo service), music software if programming done locally, etc.

Sales includes seller salaries and commissions, regional or national rep commissions, agency commissions. traffic software, billing software, vehicle allowances for sellers,

Insurance, FICA, health plan, promotion and advertising, memberships in CofC, NAB, etc. State and national convention attendance and seminars on EEO, FCC and programming matters. Loan payments if purchase was financed. Mortgage on property if not rented.

Oh, and the fees and costs from your ex-wife's divorce because you spent 14 hours a day at the station, weekends too, to make it survive.

I've missed some I am sure. This just comes off the top of my head.

 

[TheBigA]

The other question you seriously need to ask is how long you potentially want to be in business.

That's something a lot of people don't think about, and it really determines how you go about setting things up.

If you shoot your wad in the first month, what happens if it takes a while to catch on? You have to put a time on it.

 

[davideduardo]

If you shoot your wad in the first month, what happens if it takes a while to catch on? You have to put a time on it.

And with the economy being more unpredictable from year to year, you may not be able to calculate start-up costs with any ease.

When I built my first station, I seriously miscalculated the time I would go with little or no billing. It was over 7 months during which I never billed more than $50 a month (who would buy on a new station when the market already had 30 full signal stations that were well established). I was within 30 days of having to close when I was saved by "a very good book" that got me an instant flood of agency buys but that was more "destiny" and "good luck" than a planed happening.

 

[TheBigA]

When I built my first station, I seriously miscalculated the time I would go with little or no billing.

Sounds familiar. We bought a building in the first year, before we were even on the air. Talk about miscalculating.

 

[inari]

Music royalties, FCC annual fee, insurance (E&O, property, injury), internet provider, utilities for studio water/garbage/sewer, potential bank fees and more are missing. Those are just the ones I can think of off the top of my head.

Also an employees making $27/hour will cost more than $56,160/year. You have to pay FICA/Medicare which is another ~7% on top. That's another $4,000/year. Plus you need to pay their healthcare cost too. That is highly variable on area and age but say another $500/month, or $6,000/year.

 

[inari]

Unless you have a huge amount of cash you want to burn through if you are launching from scratch you probably need to run things a lot tighter at first. For example, the station manager is half of the morning show duo. The afternoon DJ also does traffic. Find a local accountant business you can outsource to. Maybe most positions are part-time instead of full-time.

Buying an existing operating station that is profitable would be a significantly better move. You are going to pay a premium over a license only station but most things are figured out and running well.

 

[Kelly A]

Owning/operating a radio station, especially a stand-alone these days, closely compares with opening/operating a restaurant.

 

[b-turner]

Some think I'm crazy but I find it much easier to make it in a small town. If it's out away from cities and bigger towns, all the better. People in small towns don't spend much but they feel the need to support their own if you are willing to give them what they want in a radio station. If you do what they want, don't expect much the first year. You have to prove yourself, earn trust and serve the community. Those that might buy early likely are signed to contracts and budgets are spent.

You can make a profit in the right place if you do radio the way they want. It will not be easy and you will adjust to taking a step forward and then back a step. Your goal is more steps forward than backwards. Eventually you'll build up nicely and be an important part of the community. You won't be buying a bank with the proceeds. I'm not going to speculate an hourly wage but I think whatever it works out to, you'd find yourself saying you're underpaid for all the work you do.

For me, I sell in a county of 40,000+. We are the only station with local news & local sports. I put $20,000 on a credit card thanks to the pay in the first couple of years. My paycheck started matching expenses at the start of year 3. Now, after 4 years, I have about $4,500 left to pay off and I am signing up a few new accounts a week. I do that by visiting my clients in person versus doing business by phone or email. They know me and like me. They appreciate that I'll be straight with them and never oversell. I say this to demonstrate it is not just selling, it's actually working for the client. And this is just the sales. I'm successful because I have an incredible product to sell. When I can deliver almost 1 in 4 age 35+ in my county, nobody can come close. You have to be just as dedicated to programming and engineering. In other words you have to cover all the bases if you expect success.

 

[gr8oldies]

You bring up one important element: pitfalls or hidden costs. What do you do when a storm takes down your antenna and the insurance is taking months to settle... and for less than the replacement cost? Or when a dismissed staffer files a nuisance suit, running up thousands in legal costs?

Beyond that, one can visualize the expenses by doing an imaginary "walk-through" of a station:

Building or office space rental or purchase. Property and city/county/state property tax and business licenses. Insurance on property and liability. Maintenance on property, tower, transmitter site.

Engineering includes utilities, parts and supplies, salary or contract engineer fees. Additional costs for emergency repairs or equipment replacement. FCC fees, plus costs of attorney for FCC actions and filing as well as a consulting engineer for any change in operations.

Office expense includes phones and Internet as well as company cellular phones. Utilities, gas, water, cleaning service or supplies, office supplies, computers, software purchase or annual fees, furniture and repairs, A/C and heating units and maintenance. Shipping, postage, etc. Salaries or fees for office manager / bookkeeper / traffic person.

Programming includes salaries, music licenses, promotion, remote vehicle, overtime for special events, acquisition of music (if in smaller market with no promo service), music software if programming done locally, etc.

Sales includes seller salaries and commissions, regional or national rep commissions, agency commissions. traffic software, billing software, vehicle allowances for sellers,

Insurance, FICA, health plan, promotion and advertising, memberships in CofC, NAB, etc. State and national convention attendance and seminars on EEO, FCC and programming matters. Loan payments if purchase was financed. Mortgage on property if not rented.

Oh, and the fees and costs from your ex-wife's divorce because you spent 14 hours a day at the station, weekends too, to make it survive.

I've missed some I am sure. This just comes off the top of my head.

A real example was the fire at Carolina Gold in Myrtle Beach, where the station was totally lost and new facilities had to be leased and built out. As I recall, insurance did not pay immediately.

 

[fordranger797]

Thank you for the feedback! I agree with everything being said. Station ownership is not an easy feat by any stretch of the imagination. I think I’ll have to go back to the drawing board on this plan, because I think I need to adjust the budget a bit. I’m going to rethink this a bit and come back with something different. Before I do so, here are a few questions:

1. What is the realistic market price for a medium market or rimshot station that is already built? The closest comparable I can find is a station that sold near my home market a few years ago (KZTM). The station sold for 3 million dollars, and quite honestly, that sounds too high to me. I’m valuing a station like that around a million dollars.

2. What kind of salary would be paid to the on-air talent in a situation like this? There are tons of examples out there of stations paying minimum wage for these jobs, but I want to value the talent a little higher.

3. What is a realistic valuation for revenue generated per month from advertising? Again, I’m thinking about a smaller or medium market, where there isn’t a ton of businesses to seek out. Obviously, the revenue will be virtually nothing when the station first gets going, but what about a year or two into the game? Are we looking at 40k? 50k?

 

[davideduardo]

1. What is the realistic market price for a medium market or rimshot station that is already built? The closest comparable I can find is a station that sold near my home market a few years ago (KZTM). The station sold for 3 million dollars, and quite honestly, that sounds too high to me. I’m valuing a station like that around a million dollars.

There are formulas for pricing. Typical for an ongoing station is a multiple of billing. In the buying furor around 1995-1996, stations were going for over 15 times gross billing. Today, an FM might go for 5 to 6 times gross. Less for an AM.

If a station is not being bought for billing, such as EMF purchases, the price may be based on how many people the signal covers.

2. What kind of salary would be paid to the on-air talent in a situation like this? There are tons of examples out there of stations paying minimum wage for these jobs, but I want to value the talent a little higher.

It can be in the millions in NYC or LA, or just over minimum in small markets or marginal stations. You have to base this on how much you can pay for good talent and how much the market can sustain as well as things like cost of living in your station's market.

3. What is a realistic valuation for revenue generated per month from advertising? Again, I’m thinking about a smaller or medium market, where there isn’t a ton of businesses to seek out. Obviously, the revenue will be virtually nothing when the station first gets going, but what about a year or two into the game? Are we looking at 40k? 50k?

Depends on the station, its audience, the local economy, the amount of advertisers that use local media. Small single station town might not bill even $300 k a year, while a medium market leader might bill that much a month.

 

[TheBigA]

Depends on the station, its audience, the local economy, the amount of advertisers that use local media.

And let me add : The creativity of the sales staff. These days, people aren't breaking down the doors throwing money at radio stations to buy :30 spots. They want creative sales & marketing plans, and the station usually has to come up with the ideas. Or else you end up with some awful spots.

 

[davideduardo]

And let me add : The creativity of the sales staff. These days, people aren't breaking down the doors throwing money at radio stations to buy :30 spots. They want creative sales & marketing plans, and the station usually has to come up with the ideas. Or else you end up with some awful spots.

And you raise a key point: most successful owner-operator stations are run by industry veterans who have years of sales, management or programming or even engineering experience in real radio stations.

If a new entrant has no experience, they need to bring in an experienced leader and be willing to share equity.

 

[PTBoardOp94]

Buying an existing operating station that is profitable would be a significantly better move. You are going to pay a premium over a license only station but most things are figured out and running well.

100%. Buying something with cash flow and staff is a much easier time than buying a license only, especially for a first time owner.

IMO one of the biggest challenges in broadcasting is finding the right sales people. Without good sellers, you cannot succeed.
If you're an owner of a station with no cash flow, that usually means you have to sell on top of everything else.

 

[b-turner]

Giving this further thought, if I was looking for ownership but had no experience in all facets of broadcasting, I'd be on the hunt for a station in a community I liked where the owner was getting up in years. I'd explore a 'hire me and let me learn from you. When you are ready to retire, I'll buy your station.' Many small town station owner want the station to go to someone who will continue to serve the community. Some are willing to groom a person to step into their shoes at some point in the future, This way you know what you need to know, understand the community and are known meaning a smooth transition. You might even find a local backer or two.

You will have to know sales, programing and management. There is no way around that. You'll quickly learn nobody cares or is willing to put in the effort as much as the owner. Don't think you can just farm out what you don't care for. You need to understand every position and be able to perform when needed. It might be not knowing anything about engineering but you are on the phone being talked through a repair by that engineer. You might be taking over that sales manager's position until you replace that person or subbing for the morning show. If you can get the right people, you can catch a break on your weaker points of experience but that will not last forever.

I had an owner say he sold his station because he didn't feel he had 5 more years in him to groom the right person to buy his station. He wanted it to go to somebody who would continue the legacy he established but once he hit 70 and had no person he knew of ready to step in, he sold to the first buyer close to his asking price. That local station is gone as the new owner is interested in serving a wider area. The guy actually had a cash cow and worked hard earning every dollar.

 

[michael hagerty]

Thank you for the feedback! I agree with everything being said. Station ownership is not an easy feat by any stretch of the imagination. I think I’ll have to go back to the drawing board on this plan, because I think I need to adjust the budget a bit. I’m going to rethink this a bit and come back with something different. Before I do so, here are a few questions:

1. What is the realistic market price for a medium market or rimshot station that is already built? The closest comparable I can find is a station that sold near my home market a few years ago (KZTM). The station sold for 3 million dollars, and quite honestly, that sounds too high to me. I’m valuing a station like that around a million dollars.

2. What kind of salary would be paid to the on-air talent in a situation like this? There are tons of examples out there of stations paying minimum wage for these jobs, but I want to value the talent a little higher.

3. What is a realistic valuation for revenue generated per month from advertising? Again, I’m thinking about a smaller or medium market, where there isn’t a ton of businesses to seek out. Obviously, the revenue will be virtually nothing when the station first gets going, but what about a year or two into the game? Are we looking at 40k? 50k?

I think the question is how small a market we're talking about.

You and I have the Mendocino/Lake County area in common, if I remember correctly. The advertising base when I programmed KUKI in 1976 and 1977 was infinitely better than it was today. We had between 40 and 50 local businesses and franchises with co-op dollars for radio advertising on board, and only one real competitor for that business---KLIL, which is now K-Wine.

We were probably bringing in---maximum---$2,000 a weekday in revenue. Let's factor out weekends and 6 p.m.-6 a.m. Those were probably bonus spots even then.

So that's 20 weekdays in a month, give or take, and that gets us to $40,000 in revenue in a month (again---a rough average best case---December was way better--January was way worse).

Today? I don't know how you do that with a single, decently-staffed station. Bicoastal Media, which owns KUKI, now simulcasts what I guess is a satellite-delivered oldies format, on its Lakeport and Fort Bragg AMs and KUKI-FM looks like it's on autopilot. The last time I stopped by, they had essentially one employee, Roe Edmonds, who did the morning show, then went out to sell whatever advertising he could.

 

[fordranger797]

I think the question is how small a market we're talking about.

You and I have the Mendocino/Lake County area in common, if I remember correctly. The advertising base when I programmed KUKI in 1976 and 1977 was infinitely better than it was today. We had between 40 and 50 local businesses and franchises with co-op dollars for radio advertising on board, and only one real competitor for that business---KLIL, which is now K-Wine.

We were probably bringing in---maximum---$2,000 a weekday in revenue. Let's factor out weekends and 6 p.m.-6 a.m. Those were probably bonus spots even then.

So that's 20 weekdays in a month, give or take, and that gets us to $40,000 in revenue in a month (again---a rough average best case---December was way better--January was way worse).

Today? I don't know how you do that with a single, decently-staffed station. Bicoastal Media, which owns KUKI, now simulcasts what I guess is a satellite-delivered oldies format, on its Lakeport and Fort Bragg AMs and KUKI-FM looks like it's on autopilot. The last time I stopped by, they had essentially one employee, Roe Edmonds, who did the morning show, then went out to sell whatever advertising he could.

This information is very helpful! Unfortunately, I've never set foot in Mendocino, but it sounds like a lovely place to visit. I'm working through a new attempt at designing a budget at this exact moment, and I'm quickly finding that it is going to be insanely difficult to keep this operation going unless I can bring in 60,000 per month. While that may not be possible in a location like Mendocino, how about in a slightly larger market? Using my closest market comparable, KZTM in Washington State, they hit some key areas of population without being a full-fledged Seattle radio station.