Tag Archives: John Hogan

Radio’s $$$ Challenge

Revenues going downRadio, like all traditional media, is in the economic fight of its life.

In 2006, before the start of the Great Recession, the radio industry booked $18.1 Billion in advertising revenue. In 2006, the thought of earning digital dollars from doing anything on the internet was under development.

The Great Recession

Then America’s economy went catawampus. Radio’s ad dollars at the peak of the Great Recession dropped to $13.3 Billion in 2009.

Companies like Clear Channel began jettisoning employees, their biggest expense, by the boatloads. I sadly remember coming back from Clear Channel management meetings with a thumb drive and the dates that different spreadsheets would open and outline where the next employment cuts would be implemented.

John Hogan, Clear Channel CEO, told us at one of those meetings, “Never let a good crisis go to waste.” By that he meant, by using cloud of the Great Recession that the entire structure of the company could be changed.

Digital Dimes

In 2010, the radio industry began tracking the impact that the Internet of Things (IoT) began having on the total revenue of the business. That first year, $0.4 Billion was earned.

In those early years, traditional media talked about how they were converting traditional advertising dollars into “digital dimes.” In other words, for the same amount selling effort, the Return On Investment (ROI) for digital was minuscule.

U.S. Inflation Rate (2006 to 2018)

Not helping the radio industry chiefs was the inflation rate in America. A dollar in 2006 was only worth 75.44-cents in 2018.

How did radio revenues in 2018 compare to what they were in 2006? They were down $4.8 Billion. That’s comparing the same Over-The-Air (OTA) revenue of 2006, which had no digital income, to the OTA revenue produced in 2018.

But what about those digital initiatives?

From $0.4 Billion in 2010, they rose to $0.923 Billion in 2018.

So, comparing total revenues for the radio industry from 2006 to 2018, we see that radio is only down $3.9 Billion. But here’s the problem, just to stay even with 2006, and not grow in revenues, radio would need to have earned about $22.5 Billion in 2018. In other words, instead of being down $3.9 Billion, radio needed to be up about $4.4 Billion. That’s an $8.3 Billion gap!

A Look Ahead

Local radio is one of the top five advertising platforms in America today. BIA Advisory Services SVP and Chief Economist, Mark Fratrik, is predicting that OTA radio revenues will continue to decline one to two percent in 2019 and for the next few years.

Even adding in those digital revenues predicted to be $1 Billion for radio in 2020, Fratrik says total radio revenues are expected to remain flat for the next five years.

That’s why we’re continuing to see radio companies trimming their employment rosters every time we read the latest radio trade publications.

If misery loves company, the only bright spot – if you can call it one – is that the advertising dollar challenge for newspapers and television will be even greater.

Traditional media is converging on one delivery platform, the internet.

Today in China OTA radio trails streaming music for in-car listening. Even in America, for people who listen once or twice weekly, streaming and OTA listening are tied at 33%.

“The decision we have to make is

not whether this is the media environment we want to operate in,

it’s the one we’ve got.”

-Clay Shirky

 

 

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Is Radio Biting Off More Than It Can Chew?

caravelle radio broadcast stationThere are lots of items in the news these days about what the radio industry should be doing. Streaming, podcasting, smart speaker accessible etc. The one thing I hear little talk about is, improving the core product and focusing on what the listener is seeking.

The Radio Ecosystem

If you think about it, the radio ecosystem, AM/FM radios, have not seen any real changes in decades. Oh, there was the introduction of HD Radio – introduced around the same time as Apple introduced the iPod (R.I.P. 2001-2014), but listeners never really understood the need for it. HD Radio was embraced by commercial broadcasters when they learned they could feed analog FM translators from HD Radio signals and have more FM radio stations in a single marketplace. This was hardly listener focused and actually chained the radio ecosystem to old analog technology.

What IS Radio?

In the beginning, radio was a way to wirelessly communicate with other people using Morse Code on spark gap transmissions. Guglielmo Marconi built a radio empire on this technology.

David Sarnoff, a skilled Morse Code operator and a Marconi employee envisioned a “radio music box” and wrote a memo about developing a commercially marketed radio receiver for use in the home. It wasn’t until after World War I, when Sarnoff proposed the concept again, this time in his new position as general manager of the Radio Corporation of America (RCA), that it would see the light of day.

Sarnoff would demonstrate the power of radio by broadcasting a boxing match between Jack Dempsey and Georges Carpentier. In just three years, RCA sold over $80 million worth of AM radios, and not soon after created the National Broadcasting Company (NBC).

Federal Radio Commission

America’s first attempt at regulating radio transmission was the Radio Act of 1912, that was enacted after the sinking of the Titanic. This law didn’t mention or envision radio broadcasting.

As radio broadcasting began to grow in the 1920s, then Secretary of Commerce Herbert Hoover would begin the process of trying to regulate the limited spectrum that everyone now wanted a piece of.

The Radio Act of 1927 was America’s first real attempt at regulating radio broadcasting. The Federal Radio Commission (FRC) was then formed by this act.

It should be noted that the FRC operated under the philosophy that fewer radio stations, that were well funded and provided live original programs, were better for America than a plethora of radio stations providing mediocre programming. It was an idea that the major radio receiver companies championed.

Federal Communications Commission

In 1934, the Congress took another attempt at regulating broadcasting (radio & TV) as well as all the other forms of communication that now existed. The Communications Act of 1934 created a new regulatory body called the Federal Communications Commission (FCC). By 1934, radio broadcasting had evolved into a highly profitable business. Broadcast educator, Fritz Messere, writes: “Many of the most powerful broadcasting stations, designated as ‘clear channels’ were licensed to the large broadcasting or radio manufacturing companies, and the Federal Radio Commission’s adoption of a rigid allotment scheme, under General Order 40, solidified the interests of the large Broadcasters.”

The biggest and most well-funded broadcasters have been favored since the very beginning. What kept things in check until 1996 was the limit on the number of AM, FM and TV stations a single company could own.

Telcom Act of 1996

Those limits would evaporate with President Clinton’s signing of the Telcom Act of 1996. Radio, as America had known it, would be over.

Now, for the most part, a single owner could own as many radio stations as their pocketbook could afford. Lowry Mays and Red McCombs, founders of Clear Channel Communications, would grow their portfolio of radio stations to over 1200 from the 43 radio stations they owned before the act was signed.

In 2003, Mays testified before the United States Senate that the deregulation of the telecommunications industry had not hurt the public. However, in an interview that same year with Fortune Magazine, he remarked, “We’re not in the business of providing news and information. We’re not in the business of providing well-researched music. We’re simply in the business of selling our customers products.” (Mckibben, Bill (2007). Deep Economy. San Francisco: Ignatius Press. p. 132.)

Radio Zoning The FCC is now considering whether to further loosen up the ownership limits of radio and TV stations in America. FCC Attorney John Garziglia recently wrote:

“If radio stations could be erected like fast-food establishments and grocery stores, with no numerical limits imposed other than a businessperson’s risk tolerance, it would be difficult to argue for FCC-imposed ownership limits on radio. Indeed, a regulatory agency enacting numerical limitations on restaurants and grocery stores would likely not pass legal muster.

But there are widely-enacted municipal limitations on just about every type of local business. The limitations are called “zoning” – the permitting or prohibiting of certain uses in certain areas to protect the character of the community.

The FCC’s radio ownership rules can be thought of as a kind of radio zoning. In the same way as land-use zoning protects a community’s character, the FCC’s ownership rules permit or prohibit certain radio station combinations protecting the amorphous concept of the public interest.

With land-use zoning, communities maintain a distinct character, livability, aesthetic, and economic success by not bowing exclusively to the profit motive of land developers. Allowing several or fewer owners to own virtually all of the radio stations in the country would doom the specialness of our radio industry.”

 

I think John makes some excellent points and I would encourage you to read his complete article HERE.

Biting Off More…

Radio operators today can’t properly staff and program the stations they already own. What makes them think that will change if they own even more of them? Most radio stations are nothing more than a “radio music box” run off a computer hard drive, an OTA (over-the-air) Pandora or Spotify.

Former Clear Channel CEO, John Hogan, introduced the “Less Is More” concept when I worked for the company. While it actually introduced more on-air clutter, not less, the idea was neither new or wrong.

If owning more radio stations was the answer in 1996, then why in 2018 are we worse off than we were then?

Why was Jerry Lee able to own a single station in Philadelphia and dominate that radio market?

Why are many locally owned and operated radio stations some of the healthiest and most revered in America today?

Radio not only needs zoning on the number of radio stations a single owner can control in a market, but the total number of radio station on-the-air in a market. And it needs radio stations that are neglected to be condemned like property owners who let their land go to seed.

The FRC wasn’t perfect, but the concept of “less is more” served America well for many decades. Fewer radio stations that provided high quality, live programming, operating in the ‘public interest, convenience and necessity’ and by virtue of that diversity of ownership, provided diversity of voice and opinions, as well as healthy competition.

 

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Tall Towers in Big Fields

55I worked for Clear Channel for five years. As best as I remember, not a meeting went by that John Hogan wouldn’t say “we’re not about tall towers in big fields anymore.” And as I watch radio companies all across America selling off their radio towers, I think that day has come to fruition.

Introducing the iPhone7

This week on September 7, 2016 the iPhone7 came out and the big news was that it eliminated the headphone jack. The radio industry was in shock. How would NextRadio be heard without the wire that connected the ear buds to the phone since that wire acts as the antenna to receive FM radio through a smartphone with the FM chip activated. Except Apple never activated the FM chip inside any iPhone.

PPM & the iPhone7

Then only two days later, Randy Kabrich published a concern that may be even more important to the radio industry, and that was, how would PPM* work with the new iPhone7? Randy posted this picture with his article iphone7-with-ppm and you really should read all that Randy has to say on the subject with his article on Tom Taylor’s NOW here.

Change is the Only Constant

Jim Carnegie, who founded Radio Business Reports, used to continuously preach to the radio industry you can’t hold back change. If you are to survive you must embrace change.

In the case of wireless headphones, the tipping point has been reached. More wireless headphones are now sold than wired ones. So I don’t think Apple was going out on a limb by eliminating a 19th century technology. I also fully suspect that AirPods will soon become the new “IN” thing.

What Should Radio Be Focused On?

MediaLife Magazine published a really interesting article on the seven important trends that radio should be focused on. You can read the article here. I will give you the “Reader’s Digest” version with some of my own thoughts.

The Future of Big Radio

Radio is best when it’s LIVE & LOCAL. The consolidation of radio has not been the successful business model that investors on Wall Street bought into. Of course the concept of “increasing shareholder value” and radio’s operating in the public interest, convenience and necessity were at odds with one another from day one. I would agree with MediaLife that radio’s future will be via locally managed radio operators.

The Future of Local Radio

Johnny Carson used to say: “If you buy the premise you buy the bit.” In this case if you believe in the demise of big radio, then you will also believe in the rise of local radio. I know right here in Kentucky many locally owned and operated radio stations that are fully engaged in every aspect of the lives of their listeners and they are thriving.

Radio Goes Digital

With radio company after radio company selling off their radio towers, the writing appears to be on the wall that all radio will be delivered digitally and via the internet. Gone will be towers and transmitters and FCC regulations, fees and fines.

Convergence of Media

I remember writing a paper on media convergence when I was in college. That was long before the concept of a world wide web. With the internet all media becomes identical. What difference is there between a newspaper, a radio station or a television station when each of them can do the same thing? What will separate them is the quality of their content.

NAB, NAA and IAB et al.

The coming convergence will really play havoc with media associations. When what once were separate and distinction constituencies will now also converge into a media association.

I remember being in Washington, DC when Senator Gordon Smith came on board at the NAB President. I shook his hand and asked him about the NAB inviting the satellite radio and internet radio operators into our big tent. I said better to have them with us than against us. He nodded and said that was certainly something to think about. (I think he may have just been being kind.)

Radio’s Opportunity

The History Channel did a program on the “100 Greatest Inventions” and number two on the list was RADIO. Number one was the smartphone. The smartphone really replaces many of our other devices. My digital camera lays somewhere gathering dust as my iPhone has been my digital camera since I got it. CD player, iPod etc, have been all replaced by my iPhone for playing my own music collection. My iPhone is my radio and TV too. Newspapers, magazines, books, are also easily accessible on my iPhone. I know I’m not alone in finding that their smartphone has become a very important part of their life. My iPhone is the model 4S. It’s ancient in the eyes of my students. That’s why the new iPhone7 with the 256GB storage, stereo sound, wireless AirPods, water resistant and all the rest has me thinking it’s time to upgrade.

For me, the big change is the size of the phone. I like the size of my 4S. It was just a bit smaller than the Blackberry Pearl it replaced, but the technology leap it offered over the Blackberry was incredible. I’m sure that the size thing is only in my perception and once I advance to the larger screen I will wonder how I lived without it.

No One Goes Backward

History shows that once people adopt something new, they never go back to the way it used to be. We may wax romantically about the good old days, but if we had to trade another time in history for life without our smartphones and wireless internet, I seriously doubt we could make the trade.

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*PPM is a Nielsen’s Personal People Meter. It’s a device used to measure radio listening in the top 50 radio markets in the USA.

Note: Randy Kabrich blogs here: http://blog.kabrich.com/

 

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