Radio Survivor

Conservative commentators may be cackling about the failure of Air America radio, trying to make it into an indicator for both the inherent weakness of liberal-leaning radio and liberal politics. But any reasoned analysis of the radio industry demonstrates that neither is the case. Rush Limbaugh, in particular, and the rest of the nation’s most popular conservative hosts owe much of their success to first-mover advantages taken before and after the Telecom Act of 1996 completely changed the business of radio. The fact that they are politically conservative is less important than the cleverness, deviousness and luck of the companies that made it happen.

Fundamentally, Air America was a mediocre idea, poorly executed. Make that, disasterously executed. As former Crossfire co-host and current talk radio host Bill Press notes, Air America was insufficiently funded from the very beginning and

Even before its launch, it was taken over by a con artist who was later convicted on un-related charges of business fraud. Managers spent money lavishly on talent and studios, while generating little advertising income….

Except for Jon Sinton, few of their executives had ever worked in talk radio. In many ways, it was amateur hour from the beginning.

Putting aside even that inauspicious start, any new radio network started in 2004 would have faced an uphill battle, regardless of its political leanings. Simply put, timing was not on Air America’s side.

By comparison, let’s examine Premiere Radio Networks, which is the largest radio syndicate in the country. And while not explicitly conservative in the same way that Air America espoused itself as liberal, Premiere is home to the nation’s most highly-rated conservative hosts, including Rush Limbaugh, Sean Hannity and Glen Beck (along with liberal Randi Rhodes). There are many commentators who would argue that the success of Premiere and its roster of talent springs primarily from the sheer popularity of conservative views, especially on AM talk radio.

That may be how it looks today, but let’s turn back the clock to a time before AM talk equaled all-conservative, all the time. 1988 was the year when Rush Limbaugh’s program first went national with the support of former ABC Radio executive Edward McLaughlin’s newly founded EFM Media Management. While the radio business was stable, at the time AM radio was having a tougher go of it, relative to FM, which offered higher fidelity for music, the mainstay of radio programming for the last quarter century.

It’s a simple fact that Limbaugh’s program grew quickly, reaching a nationwide listenership of two million in 1990. But the question that doesn’t get asked so often is, how did he get there?

Bill Mann, a former contributor to Inside Radio, reminded us just last year:

[a] little-known practice in broadcast syndication called a “barter deal.” (Barter deals were briefly mentioned in Michael Wolff’s first-rate recent piece on Rush in Vanity Fair).

Here’s how a barter deal works: To launch the show, Limbaugh’s syndicator, Premiere Radio Networks [then EFM] — the same folks who syndicate wingnut du jour Glen Beck — gave Limbaugh’s three hours away — that’s right, no cash — to local radio stations, mostly in medium and smaller markets, back in the early 1990’s.

So, a local talk station got Rush’s show for zilch. In exchange, Premiere took for itself much of the local station’s available advertising time (roughly 15 minutes an hour) and packed the show with national ads it had already pre-sold.

(more…)

As I said in my introduction to our subjective and opinionated review of radio in the 2000s, I still think it was darn near impossible to predict how the medium of radio would end up at the beginning of 2010. Sure, the seeds for satellite radio, HD radio, low-power FM, internet radio and MP3s were already planted by the turn of the century. But home broadband–nevermind wireless or mobile–was a relatively exclusive luxury. MP3 players were lucky to sport enough memory to hold about a hundred minutes of music and weren’t integrated into cell phones. Satellites for Sirius and XM were launched, and HD Radio was being experimented with, but no stations were on the air. Clear Channel was flying high for more than $90 a share.

Anyone taking a broad view of the radio industry in 2000 could certainly see a lot of balls being thrust up into to the air, but it would have taken a psychic to predict where they would land. Nevertheless, for all of the churn we can say very safely that audio-focused content is alive and well.

It’s become clear to me that we Radio Survivors do consider radio to be greater than just the traditional electromagnetic broadcast medium. While we included the RF-based college radio, pubic radio, LPFM, HD Radio and satellite radio in our review, we also touched upon internet radio, Pandora and digital downloads. I believe we are first and foremost fans of terrestrial broadcast radio, but that does not cause us to ignore or discount new audio media. Nor does it cause it us to claim that they are not, in essence, radio services.

The homogenization and delocalization of the broadcast dial caused listeners to seek alternative places to hear more interesting and diverse content. At the same time the popularity of MP3 players and Pandora shows that people were also looking for customization.
(more…)

At end of the first decade of the 21st century there are more audio entertainment options available than any time before. Even if traditional broadcast radio has a case of the doldrums, the viability of radio-like media has never been stronger. Satellite radio is one medium that entered the scene, although its long-term prognosis is still hazy.

By 2000 the perception that commercial radio had seriously declined in quality was widely held. Even listeners unaware of the massive consolidation in the industry perceived the tightening of playlists, more repetition, the inability to talk to a live DJ and make a request and an increase in commercials.

Then, with what seemed like perfect timing, two companies emerged on the scene to offer up a new radio service that promised a real alternative: satellite radio. Americans were already accustomed to receiving television by direct broadcast satellite. But satellite radio would be different. Where satellite TV mostly offered a cable-like service with the same channel, the new satellite radio companies–XM and Sirius–would offer up scores of new radio channels produced and programmed by the companies themselves.

Both companies vowed that their music channels would represent a return to the values of progressive rock radio, with programs hosted by live DJs choosing music according to their informed tastes. By the time both services were live in 2003, there were countless press profiles marveling at Sirius and XM’s array of narrow program genres and guru-like hosts. Home entertainment magazine Sound and Vision ran a lengthy cover story in June 2003 that asked “What’s so great about satellite radio?” The question was answered by four hosts from each of the services. Remarks by Lou Brutus, programmer for the XM freeform-revival station “Special X” were characteristic:

I don’t care how many CDs you have, there’s never been anything like Special X. It could be the day-to-day stuff that falls under the umbrella of “weirdness,” where you might hear “What’s He Building in There?” from Tom Waits, followed by William Shatner singing “Lucy in the Sky with Diamonds,” followed by a 28-minute Jack Kerouac piece… The people at XM are thinking all of this stuff out and putting it together in coherent neighborhoods of sound, for lack of a better term. When radio is done right, I think it’s the most personal medium of them all. *

(more…)

At the start of the decade the nation’s largest owner of radio stations, Clear Channel Communications, was flying high with a stock price over $90 a share in January, 2000. While public interest advocates and media reformers continued to batter the company with criticism over its tactics, Wall Street was still in love with the profits the company was generating. But the love affair wouldn’t make it through the rest of the decade.

Indeed, by the standards of the 1980s and 1990s acquisition and merger-driven economy, Clear Channel’s formula looked like genius. Aggressively search the country’s radio markets looking for clusters of stations ready to be snatched up. In each market buy as many stations as you can, up to the legal limit. Then fire redundant staff, combine studios and other business departments–into the same building if at all possible. Replace as many on-air hosts as possible with syndicated or voice-tracked programming. Finally, sell ad packages for groups of stations at market-beating prices that smaller groups or mom-and-pop operations can’t possibly match.

The method was so successful that the nation’s other largest radio companies followed the pied piper down that same path.

To anyone who didn’t actually listen to radio, especially commercial radio, the Clear Channel way looked like a sure bet. But radio listeners knew better, and voted with their ears. More commercials per hour, no local requests, nationwide playlists, radio contests that sound local but covered the whole nation — it all added up to stations that just didn’t sound as good as they used to. So listeners went elsewhere: iPods, satellite radio, internet radio. (more…)

On Friday the Wall Street Journal reported news that’s no surprise to radio industry watchers, that the third largest radio owners in the country, Citadel Communications, is about to declare bankruptcy in a deal pre-arranged with its creditors. The loudest critic of Citadel has been industry-insider Jerry Del Colliano who predicted last week that the company would declare Chapter 11 ahead of a January debt hearing.

Citadel used to be a player in small and mid-size markets–which are comparatively healthy–until buying the ABC radio network from Disney in 2006. That enormous purchase was worth $2.7 billion, with $1.6 billion of it in cash. The deal made it a much bigger nationwide player, especially in the largest markets, along with saddling the company with massive debt just before the commercial radio industry peaked and the economy tanked.

Various reports attribute responsibility to the overall decline in the radio industry, combined with the loss of two major personalities: Paul Harvey, who died in March, and Sean Hannity who was lured to Clear Channel’s Premiere Radio Network. Certainly these events didn’t help Citadel along. But I side with Del Colliano in attributing the true responsibility to the disease of consolidation. Well, that and lame-brained business practices, like cutting off non-Citadel stations from carrying ABC network news, and the typical consolidator practice of firing local personnel and moving to voice tracking.

At this point in the economic crisis I am having a much harder time swallowing the line that radio is a uniquely dying business than I did even in 2006. Instead, the largest radio owners were a perverse type of innovator, way ahead of the curve in hollowing out their own companies by taking on mammoth quantities of debt based on the pipe dream that the industry–and the economy–would only continue on a steep upward climb. They weren’t alone, as we all know, since real estate, banking, insurance and other industries would follow in their tracks some 12 – 18 months later.
Frankly, the situation isn’t that different for newspapers–where the owners of companies like Tribune took on massive crippling debt in order to acquire and consolidate. Different industries with slightly different modus operandi, but otherwise the same disease of greed and consolidation.

Without a doubt the loosening of radio ownership rules in the Telecomm Act of 1996 provided the perfect storm for the creation of Clear Channel and Citadel, but that is not the only impetus. Indeed, the same investors and financial managers taking tokes off the same pipe filled with greed who created radio’s consolidated wasteland are those who who also engineered the financial collapse of 2008. Each had their own set of wet-kisses from Washington in the form of relaxed regulations, lax regulators and overheated enthusiasm. But the root cause is the same.

Unfortunately there’s nothing unique about the Citadel bankruptcy; it might as well be Chrysler. The radio lover’s best hope is a fire sale that might return some of these stations to local ownership.

Cautious optimism abounds for the economic outlook, with the Federal Reserve predicting that the Great Recession is “leveling out.” Financial markets are improving, the Fed says. Household spending is “stabilizing.” Businesses are realigning inventory with sales. Thus “market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.” Hooray!

But the prospects for  big radio continue to look pretty darned grim. Clear Channels’ second quarter report for this year is particularly gnarly. The company says that its revenue has dropped nearly a full twenty five percent from the same time last year. $692.1 million in the second quarter of 2009; 914.8 million in the second quarter of 2008.

The report also discloses that Clear Channel, recently acquired by Bain Capital, has slashed the operating expenses of its advertising company, Clear Channel Outdoor, by twenty percent.

Meanwhile Westwood One posted a revenue drop of 16.7% for the last quarter, which rather neatly translates into an actual loss of $16.7 million. “The decrease in revenue is primarily attributable to the current economic downturn and the continued decline in advertising spending,” the company notes. Network radio revenue fell by $7 million, aka 14.9%. “The decline was principally due to the decline in advertising spending in news, talk and sports programming, particularly from automotive advertisers.”

The press release continues:

The difficult economic environment continues to negatively impact revenue across the advertising industry in general including radio advertising. In early July 2009, Magna, the research and marketplace intelligence arm of Interpublic Group’s Mediabrands, released projections that concluded that the first half of 2009 will likely turn out to be the worst period of the recession for the advertising industry, with an 18% drop in overall advertising revenue versus the first half of 2008. In June, BIA Advisory Services, a subsidiary of BIA Financial Network, Inc., released 2009 radio projections, noting that “[t]he economy has affected the radio industry more this year than originally projected”, and predicting significant revenue declines in 2009 compared to 2008.

The question, of course, is whether this stark free fall is simply a result of the recession, or the decline of terrestrial radio in general. If it is both, does big over-the-air radio have any strategy for reclaiming its share of the media pie after the economic comeback?

It was definitely a feel good moment last week when Clear Channel announced that it plans to donate four radio stations to the Minority Media Telecommunications Council. The MMTC says it will work with the National Association of Broadcaster’s Leadership Training Program to “use the stations for training and to incubate new minority and women broadcast owners.”

If Clear Channel were giving these stations to me, I’d be, like, “THANK YOU CLEAR CHANNEL. DUDE. WOW. THANKS.” David Honig, President and Executive Director of MMTC, did the formalities with a lot more class. “Clear Channel Radio’s generosity and support creates an enormous opportunity not only for our own training programs, but for minority and women broadcasters who would not otherwise have the means to operate their own stations,” he said. Very well put.

(more…)

The commercial radio industry’s reaction to last week’s Boston Globe article reporting on the relative dearth of young listeners can be fairly summed up, as “Nuh uhhhh! Not true!” Despite radio’s collective denial, I had this reality reaffirmed for me this past Friday.

I had the opportunity to speak with a group of high school and college age interns at an independent music promotion agency here in Chicago on the topic of the music radio. More so than any random grouping of teenagers and young adults, this was a group that is passionate about music and the artists that create it.

Yet, when I asked the group of about twelve interns if they listen to radio, only five rose their hands. Of that group a few of the older ones said they listen to public radio, primarily for the news. A couple said they listen to Chicago’s most well-known and widely respected commercial AOR station, WXRT, and one said she listens to a couple of the pop stations on occasion.

When I asked why they listen to little or no radio the answer was pretty similar to what we’ve been hearing in the press. They said there’s too much repetition, not enough music that they care about and way too many commercials. A few also said that none of the stations they’ve heard are diverse enough for their tastes. They don’t want to pick a station that only plays hip-hop, rock or dance music; they like their genres blended.
(more…)

The irony would be so delectable if it weren’t for the 1033 unfortunate drivers whose cars were stuck in the mud, many of which were totaled and not returned for over a week.

As Jerry Del Colliano reports at Inside Music Media, a Clear Channel station in Grand Rapids, MI threw its annual B93 Concert Bash on June 20 in nearby Ionia by the Grand Rapids River, apparently oblivious to flash flood warnings issued by the National Weather Service. In fact, a NWS representative told local WOOD-TV that there were warnings about the river level cresting as high as 17 feet by 9:30 AM issued as early as 5 AM the day of the concert.

Severe weather alerts are something that so many people still rely on radio for, and the reason why broadcasters are mandated to participate in a national Emergency Alert System. I can say from experience that the EAS system will spit out notifications of just about all NWS warnings. Recently I’ve certainly seen warnings for flash floods and river flooding issued to our EAS system at WNUR-FM, where I’m the adviser.

More than any old concert promoter, the staff of B93 was in a perfect position to be alerted to the flash flood avisory for the Grand Rapids river. But who knows if anyone at the station even checks the EAS anymore. The system is designed to override programming in the event of a significant emergency, like a tornado warning, but doesn’t with lower-level alerts. And somehow I doubt there was a live DJ on air Saturday morning prior to the concert starting.

Sure, any organization can make a bad judgement call in the face of unpredictable weather conditions. According to most news accounts it looks like local Ionia officials share blame for also missing the warnings and not shutting down the concert. Nevertheless we expect that the public service of radio at least provide this bare minimum of important information, and certainly not carry forward with events that put so many thousands of lives, not to mention millions of dollars in property, at risk.

Such a mishap could have occurred in the pre-consolidation era, but I doubt it. Localism means more than throwing a fee concert (but $15 for parking) once a year. Now thousands of car owners are learning the collateral damage of massive media consolidation.

Sometimes you have to hand it to the financial press, there’s nothing like a little money to make them believe in old fashioned values, like localism, again.

Any keen observer of the commercial radio landscape knows that right now the nation’s largest radio station owners are certainly not making money. But, as the Wall Street Journal’s “Heard on the Street” column points out, smaller owners focused on smaller markets ain’t doing so bad.

As the Journal’s Martin Peers reports,

Average revenue at stations in markets below the top 50 fell 6.6% last year compared with around 9% for bigger stations, BIA [Financial Network] estimates. It projects smaller stations will continue outperforming through 2013.

Peers chalks up the disparity to the suffocating debt that the likes of Clear Channel and Citadel Broadcasting took on to go on their post-1996 buying spree party; he even calls the current fall in fortunes a “hangover.” By comparison smaller market stations were less costly to vacuum up.

Peers points to Grosse Pointe Farms, MI based Saga Communications as one of these small market broadcasters, with 89 stations mostly in places like Des Moines, IA, Columbus, OH and Champaign, IL. Because I lived down in Champaign, home to the University of Illinois, for fourteen years, I’m quite familiar with Saga. In the six years or so following the 1996 Telecommunications Act the company acquired four FM stations in the market of roughly 150,000 metro. While stations in the number 220 market in the country (according to Arbitron) are cheaper than in Chicago, New York or LA, I was stunned when back in 2000 Saga paid a hefty $7 million for one of the top rated FMs in Champaign.

Five years ago Saga’s first quarter results of a 17.7% reduction in net operating revenue wouldn’t be such good news. But compared to Clear Channel, which became a penny stock before going private equity, it sounds like the party might be on again.
(more…)