INK TANK

Is This The Breakout Year For FM Talk?

Pioneers are the people with arrows in their backs. Talk radio pioneer Walter Sabo told me more than 15 years ago that FM talk would become a hot format, but it was a tough sell. He suffered a lot of criticism and resistance because companies that owned big talk stations didn't want to cannibalize their successful AMs. After all, AM had been dead for years until it was born again with talk radio. Sabo's vision from back then has yet to come to full fruition -- but it may be just around the corner. Here's why:

There is a 50-50 chance radio will lose the performance fee issue this year or next and will have to pay some percentage of revenues to record labels. With the current state of radio, taking dollars off the top line may be economically impractical, especially if the rates are as far out of line as some anticipate. Music radio could become a shadow of its former self, and we may see a proliferation of FM-based talk formats. Though there will likely be multiple traditional talk outlets doing politics, I believe a new breed of FM talkers will succeed by offering variations on talk lifestyle formats with younger demographic targets.

Because many believe they see this coming, there will be companies, perhaps those with less successful music stations, that will want to establish a beachhead now, before everyone comes to the realization that music formats will be less profitable.

The generation that grew up with music on FM is now favoring talk programming, and the generation behind them is entering the age when talk becomes more interesting. Younger, hipper FM-talk presentations like "real radio" and new variations for younger audiences will be embraced in every market. And with PPM results showing how much listenership National Public Radio is taking, it's clear that a large chunk of all listening is talk-based. Commercial radio will begin to engage strategies to take those audiences away from NPR.

According to BIA, in 16 of the 20 top U.S. radio markets, lower-ranked AM talk formats generated more revenue than higher-ranked FM music formats. Meanwhile, Arbitron says the combined spoken-word formats -- news, talk, sports --  add up to the most most-listened-to format in the country, comprising 17.5 percent of radio listening.

But 80 percent of all radio listening takes place on FM. So imagine what could happen to talk stations on FM. If the total of all the talk in your market is a combined 10 share or less, there is an average of seven points to be gained by an FM talker.

Of course, the talk format has more available inventory before it's not considered annoying. Music stations may find they need to reduce inventory in order to compete. And in almost all markets where an FM talker competes with an AM talker, the FM is outperforming the AM. Typically, there are multiple choices for similar music formats, which further dilutes opportunity. But FM talk takes over in most of its markets rapidly, often within one or two rating periods.

For those of you who fear that putting on an FM talk station could cannibalize your AM talker, the evidence is to the contrary, especially if you're doing a talk format designed for FM. For instance, when Walter Sabo launched WTKS, it took no audience from traditional AM talker WDBO and shared no cume. Most of its cume is shared with the alternative rocker in the market and with WOCL and, formerly, with  WMMO. The same held true at NJ 101.5, which shared audience with classic rocker WAXQ-FM.

If I were a betting man, I'd bet that spoken word, which saved AM radio, may in fact be the format that soars on FM in every market. New iterations of talk will emerge as this soon-to-occur phenomenon takes radio by storm. Can you say "opportunity"?

Eric Rhoads

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As Radio Thinketh

From the 5/4 issue of Radio Ink Magazine

 
“This recession is killing my business. I can’t come close to what I did last year. I don’t know what I’m going to do. I’m afraid I might lose my house.” I’ve heard these words every day for the past several months, and I’ve been guilty of saying them myself. But then I read a great book by James Allen, titled, As A Man Thinketh (So He Is). The title says it all. What are you thinking?

My father raised me with a can-do attitude. During a recent visit, we ran into an impossible situation at 11 p.m. the night before Easter. I played through all the scenarios and finally realized I could not solve the problem that night. “Have you thought about this — or this?” my father asked, offering different solutions. “Yeah, but they would never do that on a holiday weekend,” I answered.

Then I began to adopt his thought process: “If you believe you can solve this tonight, you can. If you don’t, you won’t. I guarantee there is a solution if you decide to win and are willing to work until it’s resolved.” It was late, I was tired, and I had mentally given up. But my dad had laid out the challenge. Though it took several phone calls, some driving around late at night, and a bit of creative thinking, the problem was solved by 2 a.m. The incident was an important reminder of the impact our thinking plays on our ability to succeed.

I once had a friend who accused me of “buying into all of that positive thinking stuff.” He was one of the most negative people I know. No matter how much I tried to make him understand the power of his subconscious mind, he had more reasons why it was a fool’s game. His career crashed, no one wanted to be around him, and he died 20 years prematurely.

Some things may truly be out of your control, but you can change your behavior and your belief systems. It will impact the people around you, and the way they think and react; if your influence is convincing, you can impact the decisions they make toward your business.

Last week I spoke to a promoter who had sold out a conference for car dealers despite a competitive conference having been cancelled a few weeks earlier. He said his decision to succeed impacted how he came across in his marketing, his phone calls, and everything he did. “If they smell fear, they won’t support you,” he said. “The first thing I had to do was remove my fear and decide to succeed.”

You can succeed while the other stations in your town are planning for failure. How can you influence the attitude of advertisers? What lengths are you willing to go to beyond the point where others would have given up? How much is your acceptance of failure creating your own failure? What can you do to exceed last year’s numbers? You may have to invent new ways, but belief is the starting point. Though I don’t recommend detachment from reality, there is value in avoiding negative influences like the news and focusing on changing the business atmosphere in your local community.

Immerse yourself in the great positive-thinking classics, listen to audio books, take a seminar. Seek ways to free your mind from the bonds of negativity. You’ll notice a significant uptick in your own belief systems, which will impact your actions, your ideas, and others within your sphere of influence.

Eric Rhoads,
Radio Ink

Why Larry Wilson Matters

A little good news can go a long way these days, and the news of Larry Wilson buying the Paul Allen stations (KXL and KXTG) in Portland, OR, is very good news. Unless you've been living under a rock, or perhaps have entered the radio industry since Larry Wilson left, you already know that Wilson was the founder of Citadel Broadcasting, which he sold for over $2 billion. His legacy was a great company, great management, and great success market by market. Wilson was known for how well he cared for his employees, and the company events he held at his ranch in Wyoming are legendary.

Larry phoned me almost two years ago and told me he was waiting in the wings for the right opportunity to get back into the business he loved and missed. But it was also clear he wanted to get back in because he believes radio is a great business and a profitable business. He came to our Radio Ink Convergence conference to study how radio and digital fit together.

A little over a year and a half ago, Larry and his acquisition team invited me to dinner to dig more deeply into my insights on radio in a digital world. Clearly, Larry gets it. He understands the huge opportunity I've been trying to get the radio industry to embrace: Radio, when fully integrated into the digital world, becomes a much more powerful medium. It was just a matter of time before Larry's methodical search for the right properties would be the start of Larry Wilson 2.0.

On Tuesday Larry announced he's buying the first of many stations he plans to acquire with no debt, only equity. He promises to not fall into the trap of overpaying because if you buy right, you can operate well and flourish. I have a hunch we're about to watch a wild ride.

Larry Wilson is a beacon of hope for this tired and bloodied industry and its thousands of employees who have been on their knees praying for someone who values employees, talent, promotion, localism, and reinvestment in radio --values that others tell me are "unrealistic" and "not possible" in this day and age. But they are values that will be be shown to improve profitability when properly managed.

Clearly, we have many great companies in this industry who already value these core principles and who follow them religiously to this day. But many of today's industry icons look down on them as the rare exceptions. Because Wilson was a major player, his re-entry provides hope that he will again build a large, successful company based on those ideals.

Everyone knows that Larry Wilson does nothing small. The name of his new company, Alpha -- as in "alpha dog" -- says that Larry and his equity partners are serious about the radio business and the huge opportunity there is to succeed if you are not underwater and saddled with debt.

Wilson's biggest challenge will be buying properties right and having patient capital to get through this recession. Meanwhile, if he's investing in his stations while others are shrinking, it's a giant opportunity to grab market share. A year or two from now he will either look like the smartest guy in the room -- or the most foolish. Only time will tell.

I, for one, am happy he's back, because his very presence will increase confidence in the radio industry from other financial institutions and will probably signal other true-to-the-core broadcasters who have been waiting in the wings that maybe it's about time for re-entry.

FYI, I phoned Larry today and recorded a brief podcast.

Eric Rhoads
www.RadioInk.com

The Newspaper & Radio Bailout.

Newspapers are folding at the rate of two per month. The New York Times Co. supposedly only has $25 million in the bank, is closing other papers in major cities, and barely saved the Boston Globe this week. Congress is paying attention, and John Kerry and John Conyers have been holding newspaper hearings this week, talking about how to save the newspapers. Will a bailout for the dying newspaper industry be next?

Newspapers are dying because they have become irrelevant to a generation that no longer wants to wait for the news when they can get it by Twitter within seconds. Warren Buffett said recently that if someone were to suggest the invention of newspapers today, people would laugh at the business model. Write the news, cut down millions or trees for paper, build massive printing plants to print it overnight, have a distribution model that pays people to fold and bag hundreds of papers and burn thousands of gallons of gas to go house-to-house throwing papers out of their car windows so people can walk out into the cold or rain in order to read news that is 12-24 hours old. Or those could just turn on their full-page Kindle DX reader, due this summer, or look on their iPhone or laptop and use Google Reader to get news customized to their liking about any subject in the world.

Why would Congress want to save an industry that is based on Gutenberg technology? Is it possible that no amount of money invested in that business can turn it around? Do they really believe the Internet generation can be convinced to sign up for home delivery? Yes, probably. Because most people in Congress don't understand the world today, and they don't want many of these supportive voices to disappear.

If and when we hear of newspaper bailouts, those of us in radio shouldn't be tempted to shout, "HEY, WHAT ABOUT US?" Has it crossed your mind that when newspapers become nationalized like the car companies and banks, their businesses will be beholden to the direction of the government? Somehow the ideas of freedom of speech and government news-media ownership don't make good bedfellows. We don't want someone at the government pulling strings and saying, "Let's pull that story or we pull our money." Can you say "BBC"?

Could a newspaper bailout happen? Count on it. And when other troubled media see it, they'll be waving their arms to get their piece. And if by chance those in control of radio happened to be more concerned about their balance sheets than worrying about a little issue like freedom of speech, well, a bailout for radio could happen.

Newspapers are sunk because they were clinging to their comfort zone (sound familiar?). They were way ahead of radio by embracing the Internet early, but they still missed the boat on what is happening with interactive advertising. Radio needs to understand the plight newspapers are facing could happen to us too if we don't adapt rapidly, become willing to shed our tired old business models and comfort zones, and invest in seducing the next generation with vigor.

No, it won't pay for itself out of the box (which is why its being ignored) but it might just keep us from going to that great transmitter farm in the sky.

A radio bailout would be a fate worse than radio's death.

Eric Rhoads
Radio Ink

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Here Lies NAB's David Rehr: RIP (Radio In Peril)

Here lies David Rehr. Just over three years running NAB, and today he "resigned." Did he jump, or was he pushed? This is a sad day for broadcasters.

When they hired the "beer lobbyist," I was not sure he was the right guy. After all, he had no knowledge or experience in radio or television, and could easily become a puppet of his executive committee to execute their initiatives like a good soldier. But a good, experienced soldier should be willing to look his superiors in the face and challenge their directives, should they be misdirected.

Though I think Rehr exhibited good management skills and good industry leadership, I've never had the confidence that he could "push back" against the directives of his board, should he have a differing opinion about what is best for our industry. Clearly, Rehr has the guts to push back, but -- unlike Eddie Fritts -- he lacks the industry experience to know what is best for broadcasters when his board is wrong.

This is the single reason NAB needs a BROADCASTER at its helm. Yet NAB is a lobbying organization, and most broadcasters cannot navigate Washington like a great lobbyist. What Rehr lacked in broadcast experience, he made up in lobbying ability. Rehr was the Tiger Woods of lobbying.

But can a lobby with deep Republican roots succeed in this new Congress after the election of President Obama? Perhaps Rehr realized his limitations and decided to bail while he could. Perhaps he will run for office. Or perhaps he realized he could not win the performance tax issue and his board did not want to hear suggestions about negotiating to avoid the coming bloodbath.

Herding Cattle

A couple of weeks ago, while lunching with a friend at NAB, I was asked for some of my predictions -- one of which was, "Sadly, Rehr will be gone soon." When asked why, I suggested that there are so many critical industry issues on the table that he is likely to be the fall guy if broadcasters lose, and that being the head of NAB is akin to herding cattle with differing agendas, resulting in high levels of frustration.

Though Rehr never lacked professionalism or alluded to any dissatisfaction in his job, it's clear that the industry is not following his leadership. (Will broadcasters follow a hired-gun lobbyist with no broadcast experience?) When you have issues on the table that could literally kill an industry, such as the performance tax and, more importantly, freedom of speech, industry participation is a must. Yet that participation is lacking. Insiders tell me that few broadcasters have contacted their congressional representatives to explain the danger of the performance tax, despite constant urging by NAB.

Consumed With Survival

Broadcasters are consumed with survival on the financial side and ignoring their critical role in addressing issues related to the performance tax and freedom of speech, which is going to be the BIG battle forthcoming. We, as an industry, are not playing the critical role in "working" the halls of Congress, and the NAB cannot do it alone. There was a day when every group head knew every Congressman and every FCC commissioner, but how many can take time away from their desperate survival issues to play that critical role today?

Has the NAB executive committee lost the fire in its belly, become overly impressed with its power and perks and increasingly out of touch with reality? Are they so consumed with financial issues to the detriment of free speech issues? Are they consumed with defensive actions to keep "new technologies" like satellite radio away (yeah, that worked) or promoting limp offerings like HD Radio rather than embracing change and finding ways to adapt? Is it time to revisit the succession from NAB and the return of the National Radio Broadcaster's Association because the agenda and directives from the powerful TV membership are in conflict with radio?

Serious Danger

It really does not matter if David Rehr was pushed or jumped. The end result is the same. We have lost a critically important leader at THE MOST DANGEROUS TIME IN HISTORY FOR RADIO. Momentum and leadership will be lost, no matter how good those who step in to fill his shoes are. The only person who could step in without momentum loss would be Rehr's predecessor, Eddie Fritts, but these are different times and even that might not work. Plus, why go back to the past? I can imagine our opposition at the record labels throwing a champagne party right now over Rehr's resignation. Does the NAB executive committee understand strategy and war?

Clinging To Our Turntables

To the radio industry: NAB and RAB can continue to seek out and hire thoroughbreds, but if we don't follow their direction, if we don't take their advice, if we fail to adhere to their visions, we will continue to play musical chairs with our future. We hire these people pretending to want change, yet when we're faced with taking action inside our stations, we resist it. This, more than anything, is why radio isn't morphing into the "future" (actually the present), which it has so deeply missed. We cling to our 1970's turntables and transmitters hoping things will get back to the "gravy" days when things were better. We talk about change, but our actions say loudly that we're set in our ways.

Our appointed leaders like Rehr and RAB's Jeff Haley can only do so much. At some point, they rely on the broadcasters to follow their lead. Instead, they receive different directives from many different directors who like to throw their membership weight and checkbooks around like cannonballs.

Marriages are two-way, and both parties must participate in the unified direction of the family. Unity is lacking, and as a result we're losing David Rehr, and I fear we could eventually lose Jeff Haley for the same reasons. After all, if you put thoroughbreds in a kiddie park and lead them around with a rope, they'll eventually break out to find a real race.

Radio's Biggest Boxing Match?

If there is a magic "control Z" in life like the undo command on our computers, allowing us to reverse stupid mistakes, we should hit it now, write a big check, get on our knees and beg, and do anything in our power to get David Rehr back. This is no time for bruised egos. There may be a time for Rehr's departure, but not when we're in the middle of the boxing ring in the most important tournament of our history. This action is unconscionable.

If Rehr resigned, shame on him for doing it at this moment in time. If he was pushed out, then the executive committee at NAB made the timing mistake of their careers, and it will cost radio for the rest of its days.

Eric Rhoads

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