INK TANK

The Battle For Radio Relevance

 
 

 

 

 

 

 

 

 

Imagine for a moment that you're running a computer company instead of a radio station. Your job is to sell as many computers as possible, and the only way to do that is to remain relevant. Your computers need to do everything expected of computers. These days it's all about touchscreens, apps, and loads of other features.

You would strive not only to make sure the computers from your company were equal in features to those everyone else was offering, you'd be looking for advantages. Right?

Why, then, are we not doing the same thing in radio?

For the last two or three years, at each of my conferences, I've heard one major radio advertiser after another say something like this:

"Radio stations must show the advertising world that they are not stuck in 100-year-old technology. Radio needs something new to appear relevant in this digital era. Radio needs to be a digital medium, not only in delivery, but in capability."

What are we demonstrating to advertisers about the cool new features radio can accomplish digitally?

Perception Or Reality?
Remember the old saying "Perception IS reality?" What is the perception of digitally focused advertisers about radio? And how do we change it?

Playing What If....
What if you could show your advertisers a radio that does things they have never before seen on a radio?

What if you showed advertisers how you could put their logo or their website up on the screen of a radio while their ad plays?

Or a radio that could show a picture of a new car or a dealership when an ad comes on?

Do you think advertisers would want that?

What if you showed them a radio where you could press a pause button, and resume listening when your phone call is over?

Or a radio where you could press a button when an ad comes on to remember the name of the advertiser, or to remember a song?

Getting Them Excited About Radio
Do you think local advertisers and agencies would get excited about using radio again if shown the things they can do with their ads? I think so.

What about you?

Would you get excited if you could show a picture of your morning team on the screen of the radio when your promo for the morning show airs?

...or if, when a song plays, you could show a picture of the artist, with your afternoon talent and your call letters?

You Can Have It By Christmas
You won't find it on just any radio today. But you will find it on my new Mighty Red HD radio, which is a tiny little radio with booming HD sound. A high-fidelity HD receiver, with pictures,  that you can use for jogging or the gym.

After our big push last week, we have only 1,297 of them left for radio stations to use as Christmas gifts for clients and employees (and you gotta have at least one for yourself).

Buying In Bulk
We've already seen stations buying bulk quantities so they can show clients what radio can do that's new. What about you?

Guaranteed For Christmas
Last year we sold our first Mighty Red HD radio, and this one, Mighty Red HD 2, has more features and showcases what radio can do. Last year we probably sold more HD receivers on Black Friday than any retailer in America. More HD radios in the hands of advertisers is a good thing for radio. Remember, we have just 1,297 left.

Show your employees what radio can do so they can invent cool things to do with your HD Radio signals. Show your advertisers the possibilities to get them thinking about spending on your HD stations.

Your advertisers will love it more than any fruitcake or gift basket, and it will show them radio is indeed proactive about its digital future.

To order, go to www.mightyredhd.com. Limit of 50 per radio station, please.

Eric Rhoads
Radio Ink
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PS: If we have any left, we'll bring a few to our Forecast Conference on December 7 in New York. Last year we sold 2,000 units (and this new unit has 3x more features!).


 
  

Why I'm Thankful For Radio

 

 

 

 

 

 

 

 

 

You know you're a radio geek when .... You're thankful for radio.

But think about why we should be thankful.

We work in an industry that EVERYONE in America relies upon every day. Ninety-seven percent is pretty impressive. What product has that kind of penetration?

We work in an industry that has 100 percent distribution in automobiles. You cannot buy a car without a radio. (As Bill Burton at the Detroit Radio Advertising Group always says, "A car is a radio on wheels.")

And as the average in-car time increases due to traffic congestion, these people spend more time with their radios. There is a silver lining in everything, and here's it's a captive audience for our advertisers.

When people want to be entertained, they turn on their radios.

When people want to be informed, they turn on their radios.

When a disaster strikes, they go to their radios.

We have a medium people can use passively in the background when they are doing other things and they turn us on to fill the silence.

People sing along with us. Their favorite radio personalities are family members and have been part of their lives, in some cases, for decades.

We can go in your pocket, on your phone, on your computer, on your iPad, on your home stereo system.

Every home has loads of radios -- I believe the average is 5.2 radios per home. People rely on these radios to wake them in the morning at their bedside, inform them about the weather and news in the kitchen in the morning, tell them about traffic and entertain them on the way to work, play in the background while they sit at their desks, entertain and inform them on the way home.
If you were inventing a new medium today, you could not invent one that would become so ubiquitous.

Am I thankful for radio? Absolutely.

I feel blessed we live in a place where we can say what we want on the radio, no matter what our opinion. No country in the world has our on-air freedom of speech, and we must protect it at all costs. Our democracy depends on radio, which fills a void not filled by others in media. Radio can change the world with our words.

Think about it:

We work in an industry where we get to go to work to entertain and inform everyone in our communities. How cool is that?

And we get to invent ideas for businesses to help them grow. Think of the hundreds of times you have personally been responsible for filling a car lot with customers or a retail store with shoppers. We are helping drive the economy and change the lives of business owners.

And though commercial radio just turned 90 years old, unlike newspapers and television, we have NOT lost our audiences. And even with the world of digital media devices expanding, research indicates that radio is actually growing among young people.

We have much to be thankful for.

Best wishes to you for a happy Thanksgiving.

Eric Rhoads
Radio Ink

PS: I have lots more to be thankful for. We made some tremendous strides at Radio Ink this year.

We launched an iPad-iPhone version of Radio Ink via Zinio.

We launched our first radio iPad, called PastBlast.

- We launched our Mighty Red 2 HD Radio, with new features like on-screen album covers and station logos, live pause, and bookmarking.

- We sold out our Convergence digital media conference.

- We're about to sell out our annual Forecast conference, set for December 7 in New York, and we even got Bob Pittman, the new Chairman/Global Media & Entertainment Platforms for Clear Channel, to keynote, as well as Arianna Huffington, Andrew Ross Sorkin, and Dave Ramsey.

- Best of all, Radio Ink magazine helped thousands of radio professionals with thousands of ideas to help them sell more ads and make their radio stations more compelling. 

- I'm blessed with a killer staff who are working hard to develop stories, ideas, and tips on behalf of radio.

- I am also blessed with a life of laughter with triplets (age 8) and a wonderful bride. A true blessing.

And I've been blessed with many great friends in this industry, which I truly love.

We take our responsibilities very seriously. Thank you for giving us the opportunity to serve radio.

The Pittman Effect

Plus an exclusive interview and a special announcement

Like many of you, I've known Bob Pittman from when we were newbies in radio at a very young age. We've been friends, have stayed in touch over the decades, and have spent time at one another's homes. I can remember sitting in his office at WNBC in New York when he told me he was going to leave to start MTV. Of course, I told him no one would ever want to watch people sing songs on television. So much for my vision.

Radio is about to enter a new era. I'll call it the "Pittman Era," and, if you pay close attention and follow his lead, we may see radio soar.

How is it that one man can make that much difference? Bob Pittman is to radio what Warren Buffett is to Geico and the other companies he invested in. Bob is a nationally respected superstar CEO, and when he jumps into radio at a time when others are not, he's signaling that there is big opportunity for this industry. Already, on his first CNBC interview after his new post at Clear Channel Communications was announced, he's signaling a new era.

Though Pittman is on board as the new chairman of media and entertainment platforms for Clear Channel and though Clear Channel will be the biggest beneficiary, make no mistake: Bob understands that the best way to lift his own company is to lift the tide beneath all ships. As a result of Pittman's coming into radio, you'll very rapidly see new private equity money and new advertisers coming into this business. Mark my words.

When I received a call from Clear Channel this morning and they said Bob Pittman had requested that his one interview with a radio trade publications be with me, I was excited. I know Bob well enough to know that he never enters anything unless he knows he can win, and win big -- his own Pilot Group is a radio investor. He'll transform Clear Channel, and lead the transformation of radio.

The Pittman factor is very real. He's investing his own money in Clear Channel, and that sends a signal that there is great opportunity in radio. I also know Bob is a big believer in the core values that build great radio stations: talent, entertainment, local community involvement, and great people. This is great news for our industry.

Eric Rhoads
Radio Ink

PS: Bob spoke exclusively with Radio Ink Monday afternoon; see my interview with Bob here.

Pittman To Keynote Forecast
Clear Channel's new Chairman/Global Media & Entertainment Platforms, Bob Pittman, will present a keynote address at Radio Ink's Forecast conference, where the industry gathers to learn about what's ahead for the coming year. If you've never heard Pittman speak, you'll want to attend this event to hear his vision for radio and what radio can do to leverage its brands into the digital era.

Forecast is set for December 7 in New York, and less than half of the seats remain, as we limit attendance to 200. Join radio owners, CEOs, executives, investors, operators, and advertisers for Pittman's historic speaking debut as a Clear Channel executive. Call 561-655-8778 to register, or register online at www.radioink.com/forecastsummit.

Warning: I Was Wrong

New Information Has Changed My Opinion About The NAB's Royalty Settlement Proposal
For those in opposition to the NAB royalty term sheet, I encourage you to read this in full and then make up your mind.

 

As you know, I'll carry the flag for the radio industry to the ends of the earth and will try to lead our soldiers to win every battle on behalf of radio. I'm willing to stand in the face of opposition to do what is best on behalf of this industry.

But any good military strategist will tell you that there is a time to stand down and not lead troops into slaughter. There are times when wars must end, and the parties must come together. Now is that time.

The Changing Battlefield
A good general will change his battle plan based on new information about opposing troop locations, weather conditions, and increased or decreased armaments to be faced. Intelligence operations play a key role in not walking into an ambush. Wars are lost when leaders stick to their opinions even when additional information sheds new light on how they should proceed.

Radio is at war, and our war over royalties must not be lost. That is why I'm changing my opinion.

It's Not About Being Right
My intelligence reports have shed new light on the conditions of radio's battle over performance royalties. I am not interested in proving myself right by sticking to my past opinions.

I now believe I was wrong in my assertions against the NAB.

Listening To Intuition
I recently wrote two very strong editorials in opposition to the NAB legislative term sheet that proposed a settlement with the music industry over performance royalties. Yet, in spite of countless hours of research, something did not sit right with me. My instincts were telling me I'd missed something.

After all, the NAB Radio Board is made up of very smart and capable people who have a great deal to lose. Why, then, would they be leading this industry off a cliff? Was it possible they could all be so wrong?

Starting From Scratch
I couldn't get that out of my head. Though I had read the term sheet, the NAB press releases, and their responses to my editorials, and though I had spoken to a number of people, I still felt uncomfortable with my own conclusions, even after publishing them.

I could have left it alone and said nothing more, in the interest of standing my ground. But my only interest is in a positive outcome for the radio industry.

I started my research again from scratch. I re-read all the comments on my blog, read through my notes, and went over the conversations I had had with dozens of broadcasters. I revisited all my assumptions, and the facts stated in the NAB term sheet.

I then spent almost two hours on a call with NAB Joint Board Chair Steve Newberry. I fired off some very tough and pointed questions, and he openly addressed them. I then took part in a second call, with the negotiating team and NAB and Radio Board representatives including Newberry, Charles Warfield, Bruce Reese, John David, and NAB EVP/Communications Dennis Wharton.

Off-The-Record Comments
Those of us who have been the die-hard opposition to this term sheet could not fathom the NAB Radio Board's willingness to go along with it. The term sheet appeared to give up too much, and I believed the starting point of under 1 percent of revenues would end with a much higher rate. I felt there were better options that would have limited radio's exposure and kept radio's fees from rising.

So I asked the board members to share, off the record, the complexities of their negotiations and meetings so I could understand the story behind the proposed deal. To their credit, they trusted I wouldn't ambush them by publishing their comments, and they were forthcoming about every detail. They talked openly about the state of their relationship with Congress, about things they were told privately that could have changed the direction of the deal, and about the feedback they'd gotten about the opposition to the term sheet.

I now believe I was wrong in my assertion that the NAB is selling fear. What insiders understand about the complexities of negotiations cannot be fully revealed, in light of the ongoing negotiations. The NAB Radio Board cannot fully articulate in public all the behind-the-scenes conditions -- and that need for discretion, of course, is a good part of what prompted the backlash.

'Trust Me' Makes Me Nervous
Following their vote to accept the term sheet, the NAB Radio Board asked us to trust their judgment. But my instincts are to distrust anything that doesn't reveal the full story, and I tend to think of back-room dealings as underhanded. But, in this case, I now agree that the NAB is dealing with a political world where back channels are critical.

To fully understand the facts of this matter, one must probe every issue, every discussion, every rumor and conspiracy theory, and every part of the negotiations leading up to the Radio Board's announcement.

That's what I have now done, step by step, with hours invested. Once one learns of the strategy behind the decisions, everything becomes clear. Like others, I had the "a-ha moment," when it all made sense.

Unfortunately, I cannot share what I've learned. So now you'll have to decide if you can trust my judgment.

Avoiding The CRB
The focus everyone has been taking, myself included, is on the royalty rate, which of course is critical. But there are other critical issues this term sheet resolves. The biggest, of course, is avoiding the risk of having rates set by the Copyright Royalty Board. The CRB has a history of unreasonable rates and erratic behavior. Having the CRB involved could have disadvantaged either radio or the music industry. It's in the interest of both to keep them at bay.

Though in my previous editorials I did agree that avoiding the CRB is a must, I felt there were other options to structure a deal, such as a consent decree. But I now know that those options have all been quietly played out and would devolve against the rate on the table.

Lowering Streaming Fees
Another issue is the rate radio will have to pay for streaming -- which many believe is the future of distribution beyond transmitters. (There are still limitations on the number of simultaneous streams in any market; today it caps out at about 80,000.) This term sheet lowers overall streaming fees by at least 10 percent, with more specific criteria for smaller stations and religious broadcasters.

Also, the AFTRA portion of the agreement will allow radio to play spots created by AFTRA talent in streams, no substitution required.

Both these provisions will be good for radio, especially as streaming increases.

A Cellphone Mandate?
Of course, another much talked-about issue is the proposal that FM chips be mandated on all cellphones. As I have previously stated, I'm not a big fan of mandates by our government, and I believe a mandate to require cellphones to have activated FM chips will not be passed due to the strong lobby from the CEA and the wireless industry.

I have never been opposed to the idea of pursuing an FM chip for radio. My biggest concern is that it wasn't worth paying onerous fees in exchange for it. But that was based on being incorrectly informed about how the royalty percentage would be subject to growth.

The NAB has since shown me why it would be almost impossible for MusicFirst to come back to the table to increase the royalty rate down the road. The foundation for that is a written agreement that both parties must agree to any rate increases.

What About Promotional Value?
Radio, of course, has been in opposition to paying performance royalties because of all the promotional value we have brought to the labels over the years. In this deal, the labels are not only acknowledging radio's promotional value (which is why the rate they are willing to accept is not higher), but they want to become partners with our industry, to grow together.

As Steve Newberry put it, "Wouldn't it be a nice change that instead of the president of the Grammys slamming radio on national TV, he speaks of the importance of radio's role in the success of artists?" I couldn't agree more. The industries have always had a mutually beneficial relationship, and it's time to end the friction.

Surprisingly, the labels seem to be getting beyond their vitriol toward radio since we finally came to the table to negotiate. This term sheet could end the battle and start a world of cooperation. And it doesn't restrict radio airplay, which was a major concern of mine.

Will The Artists See Any Money?
I stand firm in my belief that since MusicFirst, the opposition, is funded and controlled by the four major record labels, having SoundExchange -- which was formerly part of the RIAA -- collect and distribute the royalties is not in the best interest of the artists or of independent labels.

This past weekend I spent time with the manager of a major recording artist, and we discussed my editorials on this topic over dinner. Though he believes radio should pay royalties, he agreed with me that the financially troubled labels might not be willing to share as much of the collected fees as they should, and he agreed with my premise that artists cannot speak out for fear of retaliation from the labels. He urged me to seek a solution where SoundExchange will not collect these fees.

I'd love to see Congress step in with a mandate to form an independent third-party collection firm, much like ASCAP or BMI, to make sure the artists are being well represented. But frankly, radio needs to stay out of that fight and continue to negotiate in good faith with MusicFirst. Getting involved in that aspect will only hamper negotiations.

This Could Have Gone Badly
Most of us who have taken an opposing point of view to the NAB efforts to negotiate have done so because we were not fully informed. Radio started this process with a no-negotiation stance, and it didn't look good to Congress. Had we continued on that track, we would be looking at results that make this term sheet look like manna from heaven.

Consumed By Passion
I now believe the NAB Radio Board has acted in good faith on behalf of this industry. Though I questioned it and became consumed with my passion to prove them wrong, I now believe I was the one who was wrong. The reason many of you still hold the hard line is because you have not been privy to the confidential conversations and back-room deals. I encourage you to pick up the phone and find out firsthand, then make up your own mind.

When the NAB press release about the term sheet hit my desk, I immediately erupted and reacted with a scathing editorial. Though I have to take responsibility for not picking up the phone to understand this deal in more detail, I think those of us who have opposed this action were in the dark, and had missed the NAB's change of attitude toward negotiations.

In spite of a town hall meeting that was highly publicized in the middle of the summer, many of us were off doing summer things and missed those communications. I don't think the NAB should assume that its press releases, its speeches, and even video town hall meetings are enough with a pressing matter like this. I encourage them to continue communication efforts inclusive of the entire industry.

Lesson Learned
My lesson from this is that if my intuition is telling me something isn't right, I should pick up the phone and dig deeper before reacting. I didn't call the right people who could have let me in on the back story. For that, I have deep regret.

The Power of Unity
Greater Media's Peter Smyth recently wrote an online column calling for industry unity as a response to my editorial. He said I was creating industry division. I responded that it was the NAB's acceptance of this term sheet that was creating division. Smyth was right, I was wrong.

I'm sure some will suggest I'm wishy-washy and say, "The NAB got to Eric." So be it. The bottom line is that I am willing to admit when I am wrong, no matter what the outcome or criticism. It is better than leading our troops to slaughter.

A child becomes an adult when he realizes that he has a right not only to be right but also to be wrong.
Thomas Szasz, The Second Sin (1973) "Childhood"

I encourage you to make up your own mind by viewing the NAB town hall meeting and reviewing the term sheet. But to get the rest of the story, you may need to make a phone call.

Eric Rhoads
Radio Ink

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P.S.: NAB President/CEO Gordon Smith and other NAB Board members will be on hand at our Forecast meeting, on December 7 at the Harvard Club in New York, to discuss the performance royalty issue.

To learn more, go to www.radioink.com/forecastsummit. Register online or call 561-655-8778.

Show Radio In A New Light

No, I'm not about to pitch you on the same little radio I sold last year.

Warning: In the interest of preserving my credibility, I should give you the heads-up that if you read further, you'll be asked to buy something. I don't want you to read the whole thing and feel betrayed. I told you this last year and you still read it, and bought the product. So consider yourself forewarned. -- ER

I can see your client's eyes light up like a child finding a new bicycle under the Christmas tree. "Oh, wow! Just what I wanted, a basket full of stale crackers, smelly cheese, and different kinds of jellies and sausages packed in a plant in China eight months ago. They must use some amazing preservatives. Those people at the station always go out of their way to be creative! I'm going to reward them by placing some more ads with that station."
 
Have you caught yourself telling the salespeople, "Go see what you can trade so we can give something to our clients for Christmas or Hanukah"?
 
I know. It's the thought that counts.
 
Clients really don't mind getting 20 or 30 gift baskets, cookie tins, or giant cans of popcorn. These gifts help you blend in with the rest of the radio/TV/cable stations, newspapers, shoppers, websites, and fellow Kiwanis club members. The nice thing about gift baskets is that they can be re-gifted. Right? You're doing them a favor and saving them from spending money on gifts, and you're making a wonderful impression for your station.
 
Sorry if I sound sarcastic, but your image is at stake.
 
The other alternative is to give clients something they'll want to keep, something brand-new and cutting-edge, something that gets them thinking about radio and its possibilities. Though you can't get it on trade, it costs about the same as a low-priced gift basket.
 
The Ghost Of Radio's Christmas Past

Last year, right before Thanksgiving, I told you that I had a plan to get some low-cost HD radios in the hands of radio staffers. My goal was to introduce radio people to HD Radio firsthand to create momentum for the product. I went to iBiquity and asked them to brand a little HD radio for me, and I called it Mighty Red™ -- the little radio with mighty HD sound. I made it red because I can never find small radios or MP3 players in my black bag. The red stands out.
 
Perhaps I Underestimated The 'Blog Effect'

I only asked iBiquity for 250 because I figured we would sell about that many. But 400 sold out in the first two hours after my e-mail. We placed a rush order for 400 more,  and those sold out in the next two days. We got to a point where we could not keep ordering and overnight shipping the units from China, so we cut it off at 2,000. Frankly, not a month has gone by all year that we didn't get requests from people wanting to buy more radios. They became a collectors' item of sorts, and lots of radio stations bought them for their entire staff last year as a holiday gift.

The other thing I underestimated was the blog effect. My letter was posted on my blog, Facebook, and Twitter, and we sold hundreds of units to consumers who are not in radio. Who knew?
 
Wait. Don't hit go away yet. This is NEW TECHNOLOGY NEVER BEFORE AVAILABLE ON HD RADIO.
 
A Radio Game Changer?

I know HD Radio has its critics, and for good reason. Sometimes those guys at iBiquity haven't been playing with a full keyboard. This HD adoption thing has taken far too long. It has some technical issues and limitations (especially on AM) and could have been handled a whole lot better. Plus, HD Radio will never catch on unless radio companies start devoting more custom live content to the HD stations. But we shouldn't abandon it. We should learn from our mistakes and move on.
 
I want HD Radio to be adopted because it's an opportunity for radio to function in a digital age. I want to see commercial tagging to Twitter and Facebook. Radio needs to be tied to digital in every way, and that's not possible without HD technology. Radio has invested heavily, and there are now over 2,300 stations broadcasting in HD, and an additional 1,200 radio stations on the HD band across America.
 
No, there are not enough consumer HD units yet, but now there are units in many major car manufacturers (Ford, Volkswagen, BMW, Volvo, Mercedes-Benz, Lincoln, Audi, Scion, Lincoln, Subaru, Land Rover, Hyundai, Jaguar, Mercury, Kia, Rolls Royce, Mini), and rumor has it a large Japanese brand is about to make it standard issue. iBiquity claims there are now 3 million units in the market. (Of course, they may all be in a warehouse someplace in New Jersey.)
 
A Toe In The Water

Will HD Radio catch on? I honestly don't know. I know I'll get a thousand e-mails telling me I'm an idiot for helping push HD. (If this were 50 years ago, I'd get people telling me FM is a bad idea.) Radio is competing in a digital era, and there are things that can be done on HD that can't be done on regular radios. Getting more HD units into the hands of radio people, advertisers, and consumers can't hurt. Consider it a toe in the water.
 
Lots Of Happy Customers

My original Mighty Red™ unit was a small portable radio about the size of a pack of mints that packed POWERFUL booming sound. It came with an armband that makes it perfect for use at the gym, jogging, etc. The audio fidelity really blows you away for a unit that small. I still use mine every day at the gym.
 
Wanna Make Advertisers Drool?

I'm about to offer you my Mighty Red 2, which has two powerful new features, plus a touchscreen. If you're in HD markets on FM (sorry, no HD AM on this unit -- yet), I suggest you consider buying them as advertiser holiday gifts because it will show advertisers new things radio can offer on HD, and that will help generate HD revenue.
 
Mighty New Features:


 
Artist Experience: Each Mighty Red 2 has a little color screen that can display a graphic every time a song, spot, or promo comes on:
 
You can show the album cover for the song playing:

 
 Or a photo of the artist with your call letters:

 
Or a graphic for your station promos:
 
 
Or a graphic for your air personalities:
 

Advertisers can show a logo, store photo, or website in sync with their spots. When advertisers get these as gifts and see how radio can deliver ANY graphic with their ads, they will drool.
 

 
Live Pause: I can't tell you how many times I've needed this. I was on the treadmill at the gym the other day listening to my Mighty Red. I had "Just My Imagination" by the Temptations cranked up when suddenly I noticed my wife was trying to get my attention. By the time I was done talking to her, the song was over. Now with Mighty Red 2 Live Pause, you simply pause the song, then you can un-pause when you're ready.
 
Bookmarking: If I want to remember the name of a song, I just hit the "bookmark" feature and bookmark up to 20 songs -- or advertisers. Don't you think they'll love that feature?
 

A BIG FAT GIANT MISTAKE

I learned a lesson. Last year we sold out our factory order in hours. Because we had to reorder twice, we ended up paying FedEx charges from the factory in China so the units could arrive in time for Christmas. This year we've ordered 1,400 units. As of this moment, I'm preselling these units. If we sell more, this week only, we'll up our order. This week is the cutoff for ordering more.
 

Will We Repeat History?

Last year we sold 2,000 units and had to stop taking orders. This year we could bomb and get stuck with the 1,400. I'll report back -- I may have to make room in my garage.
 
As a client or employee gift, this sure beats a cheese basket. Clients will love the Mighty Red HD 2. Last year a major radio supplier bought Mighty Red for its top national clients, and the reaction was spectacular. And best of all, you'll be exposing clients to new HD technology by showing them what you can do with their ads. It's a great gift that sends a positive message about radio.

The Race Is On...Ready, Set, Go!

There is no limit to the number you can order, and we will guarantee delivery before Christmas. But after this week, we won't order more units from the factory -- so once we sell out our allocation, that's it.

To learn more, go to www.mightyredhd.com now.

Eric Rhoads
 
PS: What would happen if 100 advertisers in each of the top 50 markets received a Mighty Red 2 HD radio with Live Pause, Artist Experience, and Bookmarking? Would it influence their opinion about HD Radio, about new things that radio can offer them, and about advertising on HD? This could have a big influence on their opinion of you and your radio station.
 
Place your order now for client gifts, employee gifts, and personal gifts: www.mightyredhd.com.

Walking In The Shoes Of Others

Radio has provided us with powerful opportunities. Many of us have been fortunate enough to be given opportunities to lead companies, radio stations, or departments within radio stations. Most of us were thrown an opportunity due to a change or an unexpected opening. We probably weren't prepared, and most of us learned the art of management in the school of hard knocks and at the patient hands of a mentor.

As managers, we have developed systems, tools, and styles that have been influenced by those who we worked for, near or even against. Most of us have attended an industry seminar or workshop, and some have studied management formally, though it seems a rarity in our busy world these days.

As leaders, we call upon our past experiences for our perspective, which often color (or discolor) our perspective, which can often be a hard-line attitude about certain non-negotiable items. For instance, I once worked for a guy who had some non-negotiable attitudes about negotiating rates and how that process must be accomplished. These systems have stayed with me for decades and continue to influence how I lead those within my own company. Perhaps managers who have worked under me will adopt my ideals and carry them forward in their management practices.

But that isn't always a good thing.

You've probably heard the story of the grandma cutting off the ends of the ham before cooking it at Easter. When a little girl asked her mom, "Why do you cut off the ends of the ham before cooking it ?" The mother answered, "I do it because Grandma always did it."

The little girl asked her grandmother, who said she'd learned it from her mother. So the child asked her great-grandma. And her great-grandmother replied," I always cut off the ends of the ham because I didn't have a big enough roasting pan."

Sometimes we do things others have taught us for the wrong reasons. It stands to reason that we can all improve and increase our ability to lead and adopt new ways of thinking, because we may be cutting off the ends of the ham.

My wife used to work for an airline and was required to rotate to different positions. Though she was a counter agent, she had to work in baggage moving bags, had to work the tarmac to lead airplanes in, had to clean planes, had to work in customer service and in baggage service. Then, and only then, was she able to fully appreciate the services others in her company and what they had to go through.

It not only increased her patience, it made her -- and every employee who went through it -- a little less critical of those in other positions, because they could relate.

Your radio station or company is a community made up of different parts -- management, sales, sales management, traffic, programming, production, engineering, IT, promotion, reception, research, and so much more. How many people in your company have worked in all these disciplines?

Our community also involves the world of customers. It's a lot easier for a production director to throw a piece of copy in a fit and shout "Unacceptable!" when he or she has not had to go back to a difficult client to try to get something new. It stands to reason that not only should we try sharing disciplines within our own radio stations, we should do so with clients and advertising agencies as well.

Of course we're all busy and our jobs need to get done. But how would our service to our fellow employees and advertisers change if we were to work in their roles? Have you ever considered asking a client if some of your employees can come and work in their store for a weekend? Imagine how much better we would all be if we could relate more to the world of customers and other departments.

This is the core of a program adopted in the country music industry, Leadership Music. It was founded in 1989 with the intention of making their industry stronger. Each year about 50, younger managers in all disciplines make a nine-month commitment to gather once a month and learn about different parts of their business for a day. It's a wonderful program and has helped bring the current country music boom. In 19 years, the program has trained 790 people. Imagine the impact, and the depth of those connections.

What if we incorporated a similar program in our local markets with advertisers who could learn from other businesses, hosted by your station? What if we did this in our own stations? Can you imagine how service, internal culture, and communication would improve?

As they say, it's hard to see the perspective of others until you've walked in their shoes.

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The Politics Of Appeasement

The NAB Radio Board Is Selling Fear And Must Be Stopped
 

On September 27, 1938, Neville Chamberlain, then Prime Minister, spoke to the people of England, saying, "After my talks with Herr Hitler ... we cannot in all circumstances undertake to involve the whole British Empire in war simply on her account. If I were convinced that any nation had made up its mind to dominate the world by fear of its force, I should feel that it must be resisted."

Neville Chamberlain did a deal with the devil in the interest of unity and peace. He wasn't willing to step up and face evil, which ultimately came anyway.

Gordon Smith's NAB is about to sell out the radio industry, and our industry is buying his reasoning in the interest of avoiding something worse. Smith is telling you the deal on the table now is the best deal possible, and that we will face retribution from Congress and larger fees in the future under the unpredictable Copyright Royalty Board. He is telling you all the good reasons we should go forward and all the good things that will come from giving in to MusicFirst.

But other reasonable alternatives exist, and slowing the process now won't necessarily result in the other awful alternatives.

Selling Fear

Radio and the NAB are made up of good people, and Washington is made up of professional politicians who are masters of their trade. Senator Smith has talked reasonable people into buying his solution and has them believing that if we don't take this deal, we are doomed. He understands the depths of politics, but should we trust the NAB's recommendations? Smith is selling fear, and the importance of acting immediately to avoid tragic consequences.

Last year Congress told us we could save the country by signing a stimulus bill. They sold fear to facilitate speed. These are the ways of politics.

To be clear: I'm not questioning Senator Smith's integrity, or his belief in what he is promoting. But I don't think we should just accept his solution as the only answer and trust blindly in his experience in a political world we don't claim to understand. We have too much at stake.

Selling Unity

It appears that anyone who doesn't agree with the NAB's plan is a victim of "conspiracy theories" or is not working in the interests of "unity." These are terms we're accustomed to hearing from politicians who like to reposition points of view other than their own.

Unity is valuable and important. But on this, there is no real unity. And there won't be until a proper process has been followed to engage the entire industry.

Selling Benefits

It's the game of politics. "Support me on this, and I'll give you what you want." The NAB is selling us on the benefits we will receive if we negotiate with the labels: items like reduced streaming fees and, of course, the famous radio-on-every-cellphone.

Yet there is no guarantee these things will be built into the law. Even if they are, I still don't believe it's a win worth the fees as they stand. Though some allude to a study that said radio could reap $300 million in additional revenue by doubling TSL through cellphone use, that's just another spreadsheet myth.

Almost all cellphone listening takes place with headphones -- the tiny speakers on most phones can barely be heard. PPM won't record this listening, nor are panelists likely to plug their headphones into a PPM bridge device. So even if we do get more listening, it will be difficult to monetize.

Remember, we were promised PPM would significantly increase radio revenues. Looked good on paper, but has it come true?

Who Does NAB Really Represent?

The National Association of Broadcasters represents roughly 4,000 radio stations, or about one-third of commercial stations. The Radio Board of about 30 people has been in negotiations intended to lead to legislation, which, under the proposed plan, will saddle radio with taxes that can be changed at the whim of any future Congress.

My fear is that the point of entry, "under 1 percent," will grow over time. Increases will surely be aggressively sought by record labels that desperately need revenues and want revenge for radio's highly researched playlists, lack of new-music airplay, and refusal to back-sell over all these years.

Why Now?

This is one of those rare moments when the NAB must not be allowed to negotiate on behalf of the entire radio industry. I know they are using the terrible Performance Rights Act as a scare tactic, saying it could be quietly slipped into a bill on Christmas Eve. But it takes only two senators to put a hold on a bill, and opponents to this NAB effort tell me at least two senators are willing to hold the PRA. What's the hurry? Why the rush? If the balance of power in Congress changes today, in a direction that would supposedly favor radio, why now?

Though the NAB has offered talking points about the dangers of being an "industry of no" or "hell, no" to a performance tax, and though many have accused me of dividing the industry, I refuse to acquiesce in the interest of the appearance of unity.

"Unity" in this case means roll over and play dead. Packaging opposing voices as "destroying unity" is divisive. Thousands of radio stations whom the NAB does not represent (and many it does) think this proposal is a bad idea, and will be labeled as destroyers of unity. We don't have to be an "industry of no" to get a creative solution.

Do you realize that a 1 percent royalty will cut into your profits by about 5 or 6 percent? Furthermore, for the last 50 years, the NAB has stated it has no basis in rate determination. What has changed, and why is it involved in determining the rate now? Is it NAB that is dividing the industry?

Everything Will Be OK

The other concern is that the specifics of a deal -- in the sense of exact legislative language -- are not on the table. Some have told me, "Don't worry, Eric, the NAB is going to work in radio's best interest, and the definitions and specifics can be worked out later."

Sounds like the health care bill: "We have to pass the bill so you can see what's in it." Sorry, if you are in politics today, I don't trust you. Give me the exact specifics before you ask me to agree. I don't want the government making decisions about royalty rates.

Are We Repeating History?

MusicFirst represents the four major record labels (three non-U.S.), negotiating on behalf of themselves and, they claim, recording artists. As copyright holders, the labels will keep at least half of any money collected, and artists will divide the rest. And for labels trying to recoup lost revenues, 1 percent is just a foot in the door.

There is a better way.

Frankly, we never should have gotten into this position, and suggesting anything other than a hard line was a strategic error. NAB insists we should be talking because that's what people in Washington do. Now the cat is out of the bag, and perhaps fighting royalties is indeed a no-win battle, and the "hell, no" approach can no longer work.

In fact, let's assume negotiation is the only option. If we must negotiate, we should insist on a system that is in the best possible interest of both radio and artists, as well as the labels. The current proposal benefits only the labels; it can't benefit radio, because it is too easily subject to change.

Here is what I propose:

1) Demand a vote.

If the NAB is so confident that this is in the best interest of the radio industry, then they should agree to putting it to a vote by the full radio membership. An industrywide vote would obviously be even better, if it were possible to orchestrate, but an NAB member vote is a great start.

This is the biggest, most important issue to hit the radio industry since the Telecom Act of 1996.

Too big to rely on the wisdom of the NAB Radio Board alone. Frankly, it’s a good idea to take these board members off the hook if they are wrong.

Some may suggest we just don't understand how things are done in Washington, but it simply doesn't matter. The NAB, its Executive Committee, and the Radio Board members are acting on behalf of thousands of radio stations who are not members, and stations who are members in opposition.

NAB radio members should DEMAND a vote on the specifics of this deal, conducted and audited by an independent third-party accounting firm. This is sea-change legislation.

2) Base a proposal on a proven working model: a consent decree.

Royalties may indeed be inevitable. But rather than rushing into this proposed NAB agreement, let's start over and get the right kind of deal done, using the model that has worked for the writers who use ASCAP and BMI.

We don't want Congress setting our rates. Therefore we need to involve the courts and call for a consent decree that can be negotiated in the courts and that cannot be changed at the whim of Congress.

Let's set up an independent industry body like the Music Licensing Committee, whose members deeply understand music-licensing issues and represent the industry as a whole. The MLC is currently fighting to reduce fees through the court system, fighting over a mere million extra dollars, and yet with this proposed term sheet we're about to get saddled with $120 million more in estimated fees (and that's just the beginning). We need a group like the MRC working on radio's behalf and fighting over every million.

3) Recast the negotiations.
MusicFirst is funded by and represents the record labels, and I don't believe it is working in the best interest of artists. It wouldn't be easy, but if there is real concern for artists, radio can become the hero by insisting that an independent third party be appointed to truly represent artists' interests, separately from the labels. As it is, artists are under pressure from their labels, and many are afraid to speak freely.

If royalties come to pass, they would almost inevitably be collected and distributed by SoundExchange, which handles performance royalties for other audio media. But unlike ASCAP and BMI, which are nonprofit organizations with published and fixed operational fees (SESAC is for-profit and operates under a different model), SoundExchange can decide what expenses to charge and how to distribute the money, with no oversight. Labels will receive 50 percent or more of the fees collected, and artists will have no choice but to rely on SoundExchange for their share.

When ASCAP became too large and demanding, BMI was created to give songwriters a choice. All negotiations should DEMAND that there be TWO nonprofit entities created to administer performance royalties, so both artists and independent labels will have a genuine choice.

Don't Give In Because It's Unpopular

There are moments in one's life when once must not be a Neville Chamberlain, when one must follow one's heart to do the right thing.

There are some whom I know are going along with things they don't believe in because they don't want to make waves, or because they can live with this plan as long as it doesn't go further, or because they are leaving their company in a year and have made their money, or because "Gordon says it's a good plan."

As a broadcaster, you will look back on this moment in time, wishing you had taken a stand, been willing to make unpopular decisions, and become more involved in this battle. When you're writing those monthly checks, when you see the percentages rise over the years, when you see the labels getting rich and the artists not receiving their fair share, when you see the onerous restrictions and requirements placed on your airplay, you will wish you had personally taken a stand.

I cannot change a thing. You can.

Not Clouded By Self-Interest

It's been claimed that I have no skin in the game, or that I simply don't understand because I haven't owned radio stations since the 1980s. It's true: I have nothing to lose by opposing these negotiations. Be thankful my opinion is not being clouded by the rhetoric of fear. I have no ax to grind.

In fact, I am standing in opposition to many women and men whom I highly respect for their love and passion for the industry. I respect their judgment and intellect, and I don't cherish the thought of looking them in the eye over this issue.

I know they are voting yes because they deeply believe Gordon Smith is offering them the right answer. I'm risking my own credibility in the eyes of these industry leaders because I'm taking a stand in opposition. I could quietly disappear into the background, which would be the politically expedient thing to do. But this does not smell right to me, and the NAB is pushing too much, too fast in the name of keeping this out of the hands of the CRB.

I'm not buying it, and I have to speak my mind.

Become Skeptical

By the end, the terms won't end up anywhere close to the 1 percent now on the table, nor will the electronics industry stand for legislation to put radios on all phones. The seductive benefits we've been sold won't materialize, and the proposed percentages will grow to get the deal done. Even now, MusicFirst continues to bloviate about how NAB already agreed to something else.

It's time to become a skeptic and seek alternatives to the flawed NAB term sheet.

I am not anti-NAB, but I strongly disagree with them this time. My only interest is in making sure you see both sides of the story before you sign your future away. Long after Gordon Smith has moved on, you'll be living with the outcome of these negotiations.

It pains me when I see stations resigning over this issue, and the reality is that NAB could survive without radio's membership dues because of its massive spring convention revenues. We need them more than they need us, and their service to our industry is ordinary invaluable.

But this isn't one of those times, and you need to find your own personal way to make your voice heard, whether or not you are an NAB member.

Today it is expected that the people will take back a government that many feel wasn't working in their best interest. Ultimately, the people have a voice. The NAB needs to listen to the voice of the radio industry.

Your voice.

Demand a vote.

Eric Rhoads
Publisher of Radio Ink

 

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The Debate Continues at Forecast
I've never seen stronger feelings than those expressed both for and against this issue of negotiation on music royalties. Dialogue and discussion is healthy to create proper resolution. I have given Gordon Smith time to share his feelings at Forecast, and each of the group heads will be allowed to share their feelings as well. This could be one of the most lively discussions in many years at the Harvard Club, and you should attend and make your voice heard. We limit attendance to 200 people. To register, call 561-655-8778 or go to www.radioink.com/forecastsummit.