Thursday, October 28, 2010

Radio station owners fall into two camps: Pick one!

The last two years in the radio business have not exactly been a walk in the park. Defaults, bankruptcies and receiverships have been rampant. A ton of equity vaporized in a sea of debt. It has not been a good time for station owners, especially those "faint of heart" or with highly leveraged balance sheets.

All of this has precipitated a lot of gloom and doom talk on Wall Street, in the industry trade publications, and in the convention hallways, suites, and bars.

From my perch, it seems that station owners fall into one of two broad categories:

1) Those who believe that radio's best days are behind it and that the end is near, or

2) Those who believe that the current low station prices present the buying opportunity of a lifetime. The business will recover and even thrive in the new environment.

Let's look a little more closely at each assumption:

1) Radio is dead. Long live Radio!

• Old media is over. New media wins.
• Radio has lost the kids.
• We're too little, too late to the digital party.
• Who needs a transmitter when you can stream?
• There are too many "cooler" new media options.
• Who buys radios when you can buy a smartphone or iPad for your information and entertainment?
• The Internet will soon occupy the dashboard.

2) Shopping at the bargain rack!

• Radio is still a high cash flow business.
• We can and will compete in the digital world.
• Fortunes were made in the last major downturn (think Lowry Mays).
• Regulatory relief may be the catalyst for reigniting the business (think elimination of the subcaps).
• Newspapers have lost their strangle-hold on retail business.
• There is no better megaphone for generating web traffic than radio.
• Radio still drives customers on Main Street.
• HD holds long-term promise.
• In the face of competition, radio has maintained its ubiquitous reach.


Pick a camp. Now.

Yeah, this sounds self-serving (after all, I am a broker). But, it is now time to place your bet. Here's my logic:

If you're in the "Radio is Dead" camp, the best thing you can do is cut your losses. With station values headed south, your station(s) will never be worth more than today's valuation. If you're under water with your bank, hand 'em the keys. Get out now while you can.

If you believe that you can buy good radio businesses from the bargain rack, then step up. You will buy solid businesses at historic lows. The seller's pain will be your gain. Get on board before prices take off. Build great clusters and hire from the incredible talent pool stranded on the beach. There is no better time than now.

It is time to select the scenario you believe will pan out in radio's future. To do otherwise is to leave your personal future to fate. Hold 'em or fold 'em. One school will be right. The other . . .

Those are my thoughts. What are yours?

Media Services Group


  1. George, you are totally ON target. Find me a real bargain!!

    Bob Hamilton

  2. Radio is NOT dead. That is because radio is not just a mode of distribution, it is a content creator. More specifically, radio creates and customizes content to its particular listening audience - both demographically and geographically.

    But, if radio continues in only one mode of distribution - over-the-air broadcasting - it will be dead. Radio must adapt (and radio has a great history of being flexible)to how its audience receives its content. Radio must stream its content. And, even better! With streaming, radio even can add video content, such as commericals which now run on cable TV, so that radio truly becomes "radio with pictures" [which some of you may remember is what they called television]. Imagine that!

    Fred Polner, Esq.
    Polner Law Office

  3. Simply stated polarities are good at stirring reaction but I think (and I know you agree) that the situation is more complicated than these opposing views.
    Radio was a fairly simple business for many years that many of us profited from. However, many have characterized this current recession as very different from other downturns. It has been called a reset, which makes our situation much more nuanced. Today's leaders are making a few assumptions about the future of radio based on their view of what's driving listeners' and advertisers' behavior. Their view of the future leads them to "bet the farm" in a given direction. Decisiveness is admirable but a singular direction without contingencies in a complicated world is problematical. A group of about 30 owners, researchers, brokers and other interested parties have been participating in a dialogue forecasting radio's future using a model called Scenario Option Development. When we met in April of this year we agreed that there are 3 primary drivers of the future with opposing polarities:
    1. Advertiser Confidence in radio resulting in increased or decreased expenditures
    2. Radio transformed into an App on multiple platforms or being driven in the traditional tower game(RF)
    3. Users/listeners valuing our content or migrating away to other sources for their information, entertainment and energy
    By laying the polarities of these drivers out in a grid format you see 4 distinct scenarios for the future emerge. These scenarios and the rest of the work these people did are laid out on our web site Click on Whitepaper and read the work of this group. I would value your feedback.
    At the end of the day successful radio stations have 2 main assets:
    1. A brand with listeners that represents a lifestyle, music and a community, etc.
    2. A brand with advertisers that hopefully represents a degree of advertising expertise
    The challenge is maintaining these brands in the face of a challenging economy and leveraging them to create a new and profitable future.

  4. the best is yet to come; but radio has always been "change or die"...sorry to be so blunt, but if you are playing it safe, you are digging your own grave. jim seagull 813-777-8188