Another Big Push For More Deregulation

Radio Ink ran a story today about a group of broadcaster leaders coming out in favor of deregulation.  The group includes:

Bob Proffitt

President & CEO

Alpha Media

Jeffrey D. Warshaw

Founder & CEO

Connoisseur Media

Jeffrey H. Smulyan

Chairman & CEO

Emmis Communications

Michael Wright

COO

Midwest Communications

Thomas A. Walker

President

Mid-West Family Stations

Beth Neuhoff

President & CEO

Neuhoff Communications

Mary Quass

President & CEO

NRG Media

Russell Perry

Chairman

Perry Publishing and Broadcasting

Dhruv A. Prasad and Bill Wilson

Co-CEOs

Townsquare Media

John Zimmer

President/Owner

Zimmer Radio of Mid Missouri, Inc.

The group makes a well-reasoned, thoughtful argument.  Access the story here:  https://radioink.com/2018/08/06/another-big-push-for-more-deregulation/

George

NAB Board Made the Right Call on Dereg

By Ed Levine, Paul Stone, and George Reed

Much has been written in the radio trades over the last week regarding the NAB Radio Board vote in favor of recommending to the FCC an update of its radio ownership rules. We’d like to give you our take.

Some in our business think the NAB board went too far in calling for significant relaxation of the rules; others think the board did not go far enough, arguing that for broadcasters to be competitive with our totally unregulated digital competitors, radio needs complete elimination of any ownership restrictions.

You can count us — as small- and medium-market radio station owners dedicated to localism and delivering great radio to our listeners — as strong supporters of the NAB Board recommendation. You can quibble over details of the specific board recommendation. But we say hats off to the NAB Board for facing down a tough issue, and for taking bold action that will allow radio operators the opportunity to achieve the scale needed to endure and thrive in the digital world of today.

The reality is this: radio ownership rules have remained unchanged for 22 years. Forget whether the consolidation ushered in by the 1996 Telecom Act was good or bad for listeners. What is undeniable is that the world has changed dramatically since 1996, and regulations on our business need to evolve with the times.

Radio faces challenges today that would have been unimaginable 22 years ago — or even five years ago. The competition for listeners — whether it’s from YouTube or Sirius/XM or Pandora or Spotify — is intense. And it’s growing. Moreover, we aren’t competing for advertising dollars just from radio stations across the street or even across state boundaries. Collectively, we’re losing ad business by the billions to digital companies like Google and Facebook. Case in point: BIA Kelsey analyzed the Syracuse market last year and found the following: Google, Facebook, and Bing combined exceeded the local advertising market of all the local Syracuse radio stations ($40.5 million to $32.5 million).

That’s not just an upstate New York problem; that’s a problem facing every radio station owner across America, and it’s only going to get worse. Digital platforms like Google and Facebook are unregulated business models hell-bent on eating local broadcasting’s ad-dollar lunch. And they could care less about FCC mandates of serving localism and the public’s “interest, convenience and necessity.”

As we see it, the NAB Radio Board faced two options: Option 1 was to bury its collective head in the sand and ignore a tsunami. Option 2 was to address the issue honestly, forthrightly, and directly, and present to Chairman Pai and his FCC colleagues some ideas that will keep free and local radio alive for our millions of listeners for decades to come. We think the NAB Radio Board chose the right option.

Ed Levine is President and CEO of Syracuse-based Galaxy Media, LLC, which owns 14 radio stations in Syracuse, Utica, and Rome, NY; Paul Stone is President of Southern Broadcasting Companies, which owns 33 radio stations in Virginia, Florida, Georgia, Alabama, and Tennessee; and George Reed is co-owner of Monticello Media, which owns six stations in Charlottesville, VA, and co-founder of Media Services Group, a brokerage firm.

“An Existential Moment for Radio”

A respected radio broadcaster friend of mine used this phrase recently in describing the current state of the radio industry.  I admit to consulting the dictionary for the definition of “existential”:  pertaining to existence.  His comment followed our discussion about one of his radio markets where all of the car dealers had canceled the broadcast advertising (both radio and TV) and put their entire budgets into digital.  He consulted BIA research to dig into the problem a little more deeply and discovered to his horror that digital ad revenues in his market exceed radio and TV spend combined!  And this is apparently true in most, if not all, markets.

At our company meeting at the NAB on Sunday, my partner, Stephan Sloan, made a presentation on radio revenues.  One of his slides was terrifying; we essentially have gone backwards for a decade. After stripping out digital revenue, radio never really recovered from the 2008 recession.  The forward-looking projections from analysts do not look any better.

Radio is in trouble. Google, Facebook, and the rest are devouring local radio budgets.  Our local competitors, TV and newspaper, have been deregulated by the FCC.  Radio ownership rules are the same today as in 1996 (when neither Google, Facebook, or the iPhone had been invented).  The world has changed.

Additionally, we now face competition from Spotify, Pandora, and XMSirius (even XM and Sirius were allowed to combine).  Our two biggest companies are both in bankruptcy.  What is wrong with this picture?

There is some hope. The FCC has apparently recognized the problem and plans to take action (thank you Chairman Pai).  Having just returned from the NAB Show, I can confirm that this was a major topic of discussion.  But where is our industry’s leadership on this issue?  I hear that the NAB Board of Directors is divided on the subject, with the NAB’s largest radio member, iHeart, adamantly and inexplicably opposed to deregulation.  Given the seriousness of the subject (the survival of free, over-the-air commercial radio), how can this be?

Tom Taylor’s lead story today brings this topic to the forefront.  I urge you to read the story and take action.  Start by calling your NAB rep.  File comments when the NPRM is released.  Talk it up with our broadcaster colleagues.

There are station owners who cannot exit.  Due to our outdated ownership rules, there are no buyers in some markets.  The banks have fled our no-growth business.  We no longer compete with the radio guy across the street, we are competing with Google and Facebook.

What the FCC chooses to do is critical.  If they merely relax the subcaps, AM values will go to zero (unfortunately, not a huge drop from where they are today).  The FCC must act on relaxing or eliminating the caps.  In small markets, one ownership should be permitted.  The NAB must get on board.  I agree with my broadcaster buddy, this is an existential moment for the radio industry.  If you own stations (or hope to one day), it is time to form a bandwagon, then get on it.  Radio’s leadership cannot sit quietly on the sidelines and miss what is likely our last opportunity (politically) to save the industry we love. 

George Reed
904.285.3239
george@mediaservicesgroup.com