Friday, April 13, 2018

“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  Due to our outdated ownership rules, there are no buyers in some markets.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