Tag Archives: American radio

Oh, The Insanity

The National Association of Broadcasters (NAB) submission to the Federal Communications Commission for the FCC’s 2018 Quadrennial Regulatory Review is eye-opening.  You can read it for yourself HERE. It left me shaking my head.

The NAB told the commission that “’local radio stations’ Over-The-Air (OTA) ad revenues fell 44.9% in nominal terms ($17.6 billion to $9.7 billion) from 2005-2020.” Local 2020 digital advertising revenues by stations only increased the radio industry’s total ad revenues by $0.9 billion bringing them to $10.6 billion.

The NAB’s solution to the problem is for the radio industry to become more consolidated.

The definition of insanity is doing the same thing over and over

and expecting different results.

-Albert Einstein

Say What?

Back in the mid 90s, the radio industry was telling anyone who would listen that the problem with the state of radio broadcasting in America was that the industry was made up of little “ma and pa” radio stations/groups which could not scale and if the ownership caps weren’t lifted the radio industry would perish.

Excuse me, but I’ve already seen this movie and how it ends. So, why would doing more of what didn’t work, result in a different outcome.

The Media World Has Changed

I don’t think anyone would contest that the media world we live in has changed dramatically since 2005. Facebook, the world’s largest social media company with over 1.84 billion daily active users, opened its doors on February of 2004. YouTube began in 2005 and Twitter in 2006.

Google, the dominate search engine on the internet, began in 1998 and internet retailing behemoth, Amazon, began in 1994.

The new internet kids on the block that dominate our day are WhatsApp (2009), Pinterest (2009), Instagram (2010), Messenger (2011), SnapChat (2011) and TikTok (2016).

The Top 10 internet companies at the end of 2020 raked in 78.1% of the digital ad revenue ($109.2 billion).

All Ad Dollars Are Green

While we like to break money spent on advertising into distinct categories like digital media, traditional media etc. the reality is the total number of advertising dollars is a finite number and in the end you can’t tell a dollar from digital from a dollar from analog advertising.

“You can’t handle the truth!”

Colonel Jessup

(played by Jack Nicholson in the 1992 film “A Few Good Men”)

Since 2005, many young entrepreneurs have created a better mousetrap to capture those advertising dollars. No one ever made a regulation or a law that prevented the radio industry from doing what any of those internet companies did. The passenger railroad industry never thought of themselves as being in the transportation business but only the railroad business. That’s why it found itself challenged by other means of people transportation, namely the airlines.

The radio advertising industry was born by entrepreneurs that learned how to create a product that attracted a large listening audience, which in turn enabled them to sell audio advertising to companies wishing to expose their product or service to these consumers.

Unfortunately, we found ourselves challenged by new media competition. Initially, it was television, but transistor portable radios, along with car radios, allowed our business to reinvent its programming and flourish once again.

With the advent of the internet, radio was caught flat-footed.

If that were its only problem.

Radio Stations (2005-2020)

In 2005, America had 18,420 radio signals on the air.

  • 13,660 AM/FM/FM Educational radio stations on the air
  • 3,995 FM translators & boosters
  • 675 Low Power FM stations.

By 2020, those numbers increased to 26,001 radio signals.

  • 15,445 AM/FM/FM Educational radio stations
  • 8,420 FM translators & boosters
  • 2,136 Lower Power FM stations

18,330 vs. 26,001

That’s a 41.8% increase in the number of radio stations.

While radio folks were busy trying to steal radio advertising from the station across the street or consolidating with their former competition, the internet folks were focused on selling more advertising. From 2005 to 2020, the sale of digital advertising grew from $12.5 billion to $139.8 billion. That’s an increase of 118.4%.

But during that same time, radio grew its digital advertising footprint by $0.9 billion.

Quantity vs. Quality

When radio regulation began in America under the Federal Radio Commission (FRC) the decision was made by that regulatory body to focus on the quality of radio programming versus the quantity of radio stations they allowed to broadcast. Only people or companies with the economic capital to operate a radio station in the “public interest, convenience and/or necessity” would be allowed to obtain a radio broadcast license.

I believe you could say that the radio industry’s downfall began when we ceased worrying about quality and went with the more signals we license, the better for radio listeners mantra.

Sydney, Australia

Sydney is a major city in the country of Australia with a population of 5.312 million people. There are 74 radio stations on the air in Sydney.

By comparison, Los Angeles (America’s second largest city) has a population of 3.984 million people and 158 radio stations serving its metro.

In July 2021, radio revenues in Sydney were up 11.3% year-on-year according to Milton Data.

The Benefits of Pruning

Gardeners know that pruning is the act of trimming leaves, branches and other dead matter from plants. It’s by pruning a plant that you improve its overall health.

A beautiful garden is one where the plants have been trained to grow properly, to improve in their health/quality, and even in some cases to restrict their growth. Pruning is a great preventative gardening and lawn care process that protects the environment and increases curb-appeal.

The irony of gardening is, the more fruit and flowers a plant produces, the smaller the yield becomes. Pruning encourages the production of larger fruits and blooms.

Why do I share this with you?

I believe that everything in the world is interconnected. You can’t for a moment think that what makes for a bountiful garden would not also make for a robust radio industry.

Today’s radio industry is so overgrown with signals and other air pollution, that it has impacted its health.

Doing more of the same, and expecting a different result is insane.

It’s time to get out the pruning shears.

Less Is More

I believe that the way to improve the radio industry in America, to have more advertising revenues to support quality local services including news, sports and emergency journalism, along with entertainment by talented live performers, is by reducing the number of radio signals.

AM radio is the logical first place to start.

Elsewhere in the world we are seeing that not only the AM band being sunset but the analog FM band as well. The world has gone digital.

American radio has one final chance to get it right by correcting for past decisions, hurtful to radio broadcasting, in creating a new and robust digital broadcasting service.

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The Day the “Dumbest Idea” Invaded the Radio Industry

shareholder valueLast week I wrote about killing the goose that lays the golden eggs. It was my way of comparing the Aesop fable to the world of American radio. It got a lot of discussion. But I felt that while I touched on how radio operators twenty years ago wanted to harvest all the golden eggs immediately versus waiting to get one each day, by virtue of a last minute insertion into the Telcom Act of 1996 that basically removed the ownership caps on radio, there was – as Paul Harvey used to intone – ‘the rest of the story’ to be told.

The rest of the story involves “the dumbest idea.” I grew up about a decade after World War Two ended. This was the period when America enjoyed an extended period of economic growth and a shared prosperity. By “shared prosperity” I mean it was a time when the workers who produced a product or service shared in the profits produced by the company. Managers and workers would see their income grow together. As everyone’s pay increased, there was more discretionary income to spend. This was the rise of the middle class in America. All boats were rising with the economic tide.

In 1968, I started on-the-air at one of my hometown radio stations while in the 10th grade in high school. I was paid the minimum wage; $1.60 per hour. Did you know that 1968 was the year when someone making the minimum wage had the most buying power for that rate of pay? The equivalent in 2012 dollars is $10.34 per hour. So what happened?

Somewhere in the 1970s things changed. Firms began to focus on themselves. The productivity gains produced by the workers were no longer shared with the workers. Since no one complained, this new way of doing business continued.

The 1980s really saw this new operational style take hold. And as it did, incomes for the middle class stagnated. When the middle class incomes stop growing, the ramifications on the rest of the economy are magnified. Workers no longer have discretionary income to spend. This was initially covered up by women entering the workforce producing two wage-earner incomes. Then when that ran its course, credit cards, second mortgages would keep the party going under false pretenses.

Today we are in a vicious cycle of decline.

What changed in the 1970s was a new idea about what metric should be used to measure the success of a business. Before this new idea was born, Peter Drucker’s measure was the rule. The purpose of a business, said Drucker, was to create a customer. But that went out with leisure suits, the new crop of business wizards would proclaim. What replaced it was something that even GE’s Jack Welch has called “the dumbest idea in the world.”

What was this dumb idea? Increasing shareholder value.

In an effort to offset declining profits and performance, a new operating modus operandi was conceived that the purpose of a corporation is to maximize shareholder value. To make sure the captains of industry got the message, boards of directors would change their compensation packages to cause these business leaders to focus on increasing the company’s stock price. What could possibly go wrong?

Everything!

The concept was embraced by both America’s business schools as well as industry. Unfortunately, the new policy not only didn’t solve the problem it was supposed to address but by unintended consequences created a myriad of new problems no one foresaw.

Tell me if any of these “unintended consequences” sound familiar to you: short-term decision making, relentless cost cutting, staff reductions (RIFs), less investment in the business, virtually no innovation, low workforce morale, no raises in pay, reduced benefits, non-stop mergers, increased debt, lost ability to compete, declining R.O.I., and economic stagnation. I’m sure you can add to this list based on your own experiences. For a more detailed look at this, you should read Steve Denning’s “Why ‘The System’ Is Rigged And The U.S. Electorate Is Angry,” the inspiration behind today’s blog post.

So twenty years ago, in 1996, President Bill Clinton signed into law the Telcom Act of 1996. This would bring “the dumbest idea in the world” to the radio industry. Wall Street jumped into the new shiny investment opportunity; radio. Everything that every other industry was experiencing from this new operational style was now rearing its ugly head in the broadcasting industry. All with the same negative impacts.

Not all organizations adopted this dumb idea of operating. They stuck with Drucker’s rule. And it’s the same with the radio industry. The smaller radio operations do operate differently. Their success has others sitting up and taking notice.

However, most organizations – and not just in broadcasting – are still in denial. The evaporating middle class is not good for an industry that lives off of advertising. Advertising is pitched to the masses who are the consumers that drive over seventy percent of the American economy. I wrote about the future of ad supported media last year after I read Thomas Piketty’s book “Capital in the 21st Century.” You can read that blog post here.

Based on the tumultuous presidential election season we’ve seen so far, it would appear that the American society has awakened and is now “as mad as hell and not going to take it anymore.” Cue Howard Beal here.

Steve Denning writes: “We are now at an ‘emperor has no clothes’ moment.” It’s now clear that this way is not working and is not only leading to systemic value destruction but an economy that no longer works for the middle class.

If we’ve ever needed real leadership in America, it’s now — and from all directions.

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