Tag Archives: President Bill Clinton

What’s the Purpose of a Radio Station?

WSM Tower SiteRadio is a business.

Peter Drucker said the purpose of a business is to create a customer.

For radio, that means creating two types of customers: 1) a listener and 2) an advertiser and when done correctly, a radio station makes a profit.

Making Money

For most of my radio career, radio enjoyed a revenue expansion that rivaled the infamous “internet bubble.” Owning a radio station was considered a license to print money. Bottom lines often delivered a profit of 25 to 50% or more, so, while those profits were noticed by Wall Street investors the ownership limits on radio stations kept them away. Investors were frustrated that there was no way to scale up the size of a radio broadcast company.

Telcom Act of 1996

Then President Bill Clinton signed the Telecommunications Act of 1996. It relaxed radio’s ownership rules making it possible for one company to own multiple radio stations in a single market.

Wall Street loved the change! The money poured in from eager investors, and companies like Clear Channel, Citadel, and Cumulus quickly bought as many stations as they could using other people’s money. Mom & Pop radio operations had multiple companies vying for their properties and radio station values soared.

Ownership Limits

In 1953, the Federal Communications Commission (FCC) adopted its so-called 7-7-7 rule to encourage diversity of broadcast ownership. In essence, no single owner could own more than 7 AM radio stations, 7 FM radio stations, and 7 television stations in the entire United States of America.

By July of 1984, the FCC said they sought to encourage media competition and increased the number of radio and television stations a single owner could control to 12-12-12. The FCC Chairman was Mark S. Fowler. The President of the United States was Ronald Reagan. The five member FCC was 3 Republican appointees and 2 Democratic appointees. The vote to expand the ownership limits was 4 to 1 in favor.

“Bigness is not necessarily badness,” Chairman Fowler is reported saying. “Sometimes it is goodness.”

The New York Times reported reaction on Capitol Hill to the expansion of ownership limits this way:

On Capitol Hill, there was mixed reaction to the plan to abandon all limits on broadcasting ownership in 1990, although sentiment has grown in recent years for raising the ownership maximum somewhat.

Representative Timothy E. Wirth, the Colorado Democrat who is chairman of the House telecommunications subcommittee, said, ”The 12-12- 12 rule is just as arbitrary as the 7-7-7 rule.”

Mr. Wirth said a broad bipartisan consensus in Congress favors adoption of ”objective, long-term rules that assure diversity and competition.” He said such rules would provide for increased broadcast ownership but would not completely deregulate it.”

He went to say “If they deregulate in 1990, we could end up with a handful of companies owning every broadcasting outlet in the country.”

President Ronald Reagan

Reagan loved two things, cutting taxes and eliminating regulation. Remember Reagan famously said that “Government isn’t the solution to our problems, government is the problem.” Reagan’s pick for FCC Chairman, Mark Fowler, fully embraced this vision and actively applied it to the FCC.

However, the prediction of Congressman Timothy Wirth wouldn’t come into existence until President Bill Clinton signed the Telecommunications Act of 1996. It would be the first significant overhaul of the 1934 Act in more than sixty years.

Radio station ownership in the first five years under this new act went from 5,100 owners to 3,800.

Instead of opening up ownership to new and more diverse ownership, it created an opportunity for media monopoly. The Wall Street funded radio companies could now buy out the Mom & Pops and the temptation to sell at never-before-seen-multiples was too good to pass up.

Operating in the Public Interest, Convenience and Necessity

When no one really knew what radio broadcasting would become, they did know they wanted radio to be a communications business that would serve its community of license for convenience in good times and of necessity in times of trouble. The airwaves were considered to be owned by the public, so operating in their best interests was a requirement to being an FCC broadcast licensee.

Changing Competitive Landscape

Historically, radio stations competed against one another. Most markets had such battles as, WLS vs. WCFL, WMEX vs. WRKO, WPTR vs. WTRY, KHJ vs. KRLA etc. When FM radio began to take over from AM, a station such as WABC no longer had just WMCA to beat, but now WTKU-FM too, which offered better fidelity and stereo. This new radio competition replicated in every radio market in America.

Then came Satellite Radio, followed by Pandora along with other pureplay streamers, and podcasts so that today, the radio competition landscape lines are blurred beyond recognition.

Mission vs. Platform

Today’s communications company needs to clearly define its mission and needs to earn the trust of all of its stakeholders. That means building trust between its employees, advertisers and listeners.

We need to stop thinking of “radio” as AM or FM.

We need to think of radio as being the audio leader for creating an environment for convening and supporting groups. We need to be preparing for a future that is still coming into focus.

 

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“Corporate FM”

corporate fmKansas City Filmmaker Kevin McKinney originally released his movie “Corporate FM” in 2012, but unless you lived near a community that was screening the film or attended a film festival where it was being shown, you probably never saw it. Or even heard of it.

Amazon Prime

After re-editing the film in 2015 to reflect updates and changes in commercial radio since 2012, McKinney decided it was time to let more people access the information he covered in the film and just released it on Amazon Prime. (Here’s the LINK ) “Corporate FM” explores the consolidation of radio after the Telcom Act of 1996 and how big corporations with the help of Wall Street and private equity firms swallowed up the radio industry in America.

February 1996

I remember the day that President Bill Clinton signed the Telcom Act of 1996 into law. Clinton signs Telcom Act of 1996It was supposed to provide competition between the phone companies and the cable companies with the goal to increase services and reduce prices to the consumer.

Inserted into the bill at the 11th hour were two paragraphs that would change the radio industry forever.

In the film, Robert McChesney, Professor of Communication Studies, University of Illinois points out that commercial media lobbyists, without a single public hearing or any public debate, would insert these paragraphs and open up the consolidation floodgates for radio/TV. Politicians would later say they didn’t know what they were voting for. Even President Clinton would say that he didn’t know that those two paragraphs had been added before he signed the bill into law.

Cumulus and Clear Channel

As the McKinney film told the story of the rise of Cumulus and Clear Channel, it reminded me of my time with both of those companies.

In Waterloo, Iowa I was running the #1, #2 and #3 radio stations. When Cumulus took them over, John Dickey showed up at the stations and proceeded to tell all of us gathered in the station’s conference room what our new logos would look like, what our new jingle packages would sound like, who our new station voice guys would be, how our playlist would be compiled, who are new consultants were etc. To say we were all stunned would be an understatement.

Then later when I was working for Clear Channel (after the Bain/Lee takeover, but before it became iHeartMedia) in Sussex, New Jersey, we received a survey from corporate asking us how local decisions were made about branding, marketing, promotions, music and the like. I assume a similar survey was sent to every market cluster inside Clear Channel.

When the results were tabulated at HQ, we then received directives that no longer would those types of decisions be made on the local level. Local radio had changed.

Local Bands

Growing up, local radio was a way for local bands to get exposure and grow their audience. “Corporate FM” tells the story of how Jewel became a national artist being discovered by local radio and played on-the-air in San Diego.

In fact, it was seeing a drop in attendance at live shows that got McKinney to wondering what was happening, and giving birth to his movie about the consolidation/corporatization of the radio industry.

I know a local band here in Winchester, Virginia “Sons of Liberty.” They play all over the Shenandoah Valley and beyond. They have a CD that Rob McKenzie of Fireworks Magazine spoke glowingly about. Where you won’t hear the “Sons of Liberty” music is on the radio.

Oh, they’ve been heard on an FM radio station (98 Rock) out of Harrisonburg, Virginia on their Sunday night “Wet Paint” show that starts at 11pm. But as “Corporate FM” points out it takes repetition to have an audience become familiar with anything, and for someone to decide they like it, or don’t. Radio used to provide that type of exposure and then monitor audience reaction to see if the record was a hit or a miss. (Remember features like “Champ & Challenger?”)

Sneak Preview

ABC Radio Networks used to air a feature hosted by WABC’s Chuck Leonard called “Sneak Preview.” The network would call affiliates of the ABC Contemporary Radio Network to get their hottest new song and then play it to a nationwide audience. I remember being at WBEC in Pittsfield, Massachusetts when we told Chuck that our hottest new song was “Tracy by The Cufflinks.” He told us he had a terrible time trying to find a copy of the song in New York City.  But Chuck Leonard did find it and it played over the ABC network to a national audience. That was how radio made the hits.

Fifty to Six

“Corporate FM” tells how in the 80s ninety percent of mass media in America was owned and controlled by about fifty different companies, but after the Telcom Act of 1996 it was down to just six corporations.

“Most radio studios are completely empty after 7pm and for the entire weekend.

They set the phone lines to “busy” so callers will believe that someone is there.”

-Slide shown in film

Big N Rich

The popular country recording artists “Big N Rich” addressed the FCC in Memphis, Tennessee. They told the commissioners that one person in a corporate office today can dictate what 35, 55, or 100 stations play.

“Let’s say an artist puts out a song with a political viewpoint and that corporate person says I don’t believe in that position so we’re not going to play that record (Dixie Chicks?). One guy can affect what 30 million people get to hear.

That’s censorship.”

-John Rich

Fatherly Advice

Dick Fatherly says “the broadcasters have become the victims, and the winners are – who do you think? -Goldman Sachs.”

Josh Kosman, who wrote the book “The Buyout of America” put it this way: “Private equity took the radio business that was doing pretty well and gutted it.”

Josh has studied how private equity has impacted all industries in America. He used a simple example to explain the difference between you or I buying a house and a private equity firm buying a business doing a leverage buyout (LBO).

When we buy a house, we put down say 30% as a down payment and then take out a mortgage for the 70% balance.

When private equity buys a radio station, they make a small down payment and then the radio station they’re buying takes on the debt for the balance, leaving the radio station with crushing new debt.

The private equity companies then charge management and other fees, making back their down payment money, and a whole lot more. So, it’s zero risk to them.

It reminds me of the guys on the Atlantic City Boardwalk who used to entice you to let them guess your weight and if they got it wrong you won a prize. The only way those guys lost is if you didn’t pay them to guess your weight. For if they got your weight right, they gave you nothing and if they got your weight wrong, they gave you a prize that was valued less than what you paid them to play the game.

“Financial deals allow the corporate owners to keep their stations after bankruptcy.

This prevents local owners from reviving local radio.”

-Slide shown in the film

For those who hold out hope that if/when the big corporate entities fail, and it will return radio to local operators once more, that slide should send a chill down your spine.

America’s bankruptcy laws now favor the debtor in the corporate world.

Conclusion

This is probably a film that many will miss and that’s unfortunate. It’s only a little over an hour in length. It’s well worth your time.

For this is a film not just about what happened to the radio industry but what is happening to our way of life, in industry after industry. This modus operandi is being repeated today.

The people in the film offer their ideas for making radio great again.

I won’t spoil that for you, so you’ll have to watch the film.

Some of the statements made by various participants have since been proven wrong from the time the film was shot. Some of the statements are also inaccurate in terms of how today’s FCC license renewals can be challenged.

In all fairness, many people are still believing that the way it was, is the way it still is. Only it isn’t. Those laws have been changed by corporate lobbyists too.

I hope you will watch the film “Corporate FM” and then post your comments here on DickTaylorBlog dot com.

Note: Don’t have Amazon Prime, you can rent this movie for $2.99

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My 100th Blog Post

40Today is a milestone of sorts for me. It marks my 100th blog post since beginning my blog. Also notable since my blog has long passed the threshold of four months, the period of time most new bloggers quit blogging.

What Have I Learned So Far

Reflecting on my blogging journey on the way to my 100th post, I learned that running out of material to blog about was not my biggest problem, but rather having files of ideas and issues I wanted to address and not having the time to develop them due to more pressing issues bursting onto the scene.

I learned that blogging was more about organizing my own thoughts than if anyone else read them or reacted to them.

I learned that blogging connects you with incredibly talented people all over the world that you never would have met other than by doing a weekly blog.

I learned that blogging is fun.

My Biggest Hits

Two blog posts in particular standout as being noteworthy. It’s funny, because they are not the ones I might have thought would have gone viral.

The first one was me venting my spleen about the loss of great air personalities in my post entitled “We Never Called It Content.” What troubled me was the “forced retirement” of some iconic air personalities and that the radio industry wasn’t valuing the relationships that such personalities owned with their audiences. That short-term revenue gains due to expense reduction were at the peril of longer term audience erosion.

As the old farmers used to say “Anyone can tear down a barn, but it takes a craftsman to build one.”

The other blog post that would see over 3,700 reads in a single day was “The Day the ‘Dumbest Idea’ Invaded the Radio Industry.” This post grew from an article in Forbes I had read by Steve Denning. The “dumbest idea” was that of increasing shareholder value. What I realized was that when the Telcom Act of 1996 was signed into law by President William Jefferson Clinton it opened the doors of the radio industry to Wall Street. Wall Street would bring their philosophy of “increasing shareholder value” to broadcasting. The effects of this modus operandi would be as devastating to radio as it had been to every other industry it was used in. Sadly it doesn’t have to be that way and we see that privately held radio companies avoid this metric and as a result are doing well by both their stakeholders as well as the communities they are licensed to serve.

What’s Next?

So next week, I will begin my next one hundred blog posts. I have lots of ideas about what’s going on in our media world to reflect on, research and share with you.

The commercial radio industry is only about three and half years away from celebrating its 100th birthday in 2020. The year 2020 should prove to be interesting for so many reasons beyond just radio, TV or media, for the prognosticators are envisioning so many changes in all aspects of our world.

So I will end my 100th blog post much like the singing group The Statler Brothers used to say at the end of their television show….

“Don’t go anywhere, because we ain’t even started yet.”

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