Guy Wire: Hug Your Radio

by Guy Wire, 04.20.2009

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When a once-proud and highly valued company like ABC Radio was selling for one penny a share, you knew things had truly run amuck.

You can buy a share of many radio companies for less than the cost of an ATM transaction. But no matter what the stock market might think, our industry is still a helluva lot better off than many others.

Radio is down about 15 to 25 percent from a year ago. Yet many companies are still flowing cash and making money, thanks to ongoing belt-tightening. To be sure, they aren't making the lofty margins they've been used to, let alone making budgets.

Be very glad you don't work for a car company. Automotive is down over 50 percent, with our Big Three essentially bankrupt. I won't even mention the banking and brokerage business, or what's left of it.

There's no sense banging away on the same old drum that times are tough and may get tougher. It's time to hug our radios and count our blessings. We had it very good for a very long time. And consumers are still counting on us.

THEY AREM LISTENING

A comprehensive study released in December by the Consumer Electronics Association entitled "Evolution of Audio ... Is Anyone Listening?" confirms that if consumers could only pick one device to use for the day, traditional radio is still the #2 choice behind television. IPods and MP3 players were roughly tied with desktop PCs and laptops for third.

This quantitative study was administered via a Web form to an online national sample of 947 U.S. adults last September. The margin of sampling error at 95 percent confidence for aggregate results is +/– 3 percent.

According to the study's summary results, audio consumption for all sources has decreased slightly from last year but remains at very substantial levels. The study lumps together listening on all devices including radio. Some 73 percent of respondents had listened to music in the last 12 months, down from 81 percent the previous year. Sixty-eight percent listened to news and information, down from 72 percent. Forty-five percent listened to sports programming the past year, down from 47 percent in 2007. And talk radio, which is 100 percent radio station listening, pulled 40 percent of all respondents, down only 2 percent from 2007.

The same study reports that while the majority of projected consumer spending on new devices will go to big-screen TVs and home theatre, there is a growing interest in extending home entertainment systems to include surround sound and built-in speakers throughout the home. Various respondents mention the desire to have the convenience of tuning in a program or music selection and having it play in every room on demand.

In spite of the influx of portable audio players that can go anywhere, most audio consumption is reported to still occur in the home. The leading audio device consumers intend to buy in the next 12 months is a new set of earbuds (11 percent). MP3 and portable digital player devices are second at 10 percent. Down the list a little farther are surround sound and stand-alone A/V receivers at a combined 6 percent. Folks still intend to buy radios for the home and their A/V systems. Sadly there is no mention of any HD Radio interest in this study.

Car radio usage is highlighted as a key component of audio consumption throughout this study. Commuters depend heavily on news, traffic and weather reports that affect their local areas. The companionship of music stations and the engagement of talk radio come up often in respondents' comments.

During all past recessions, including the Great Depression, radio listening remained steady or increased. In times of stress and uncertainty, folks need, and depend even more on, the reassuring companionship and wisdom of the personalities they have trusted for a long time via their local radio dials.

IF YOU SERVE THEM THEY WILL LISTEN

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A recent Radio World editorial talked about serving the audience and surviving the Meltdown. The real lesson of this era of smaller staffs and slashed budgets is that we have to concentrate more than ever on maintaining and even improving our core strengths to remain viable and successful. It always comes down to the content … the offerings and attributes of our product that attract listeners and keep them coming back day in and day out.

The challenge for programmers is to find creative new ways to enhance that personalized link listeners discover and embrace in their favorite stations. Listeners seek out programming that makes them feel more connected to their communities, their friends and family, their careers and their avocations. Living successfully in an ever-changing and inter-dependent world demands good connectivity.

Staying on the cutting edge with innovations that enhance the radio product to attract, expand and hold their audiences is a top priority for good program directors. The Internet has become a resource for many of those innovations that are finding their way into radio. Texting, Instant Messaging and social networks like MySpace, Facebook and Twitter have reinvented the way folks connect and stay connected with the most important relationships in their lives. Radio stations that are adapting these innovations into their programming are gaining an edge.

DAUNTING CHALLENGES

For engineers, your job has become more than just keeping your stations on the air and sounding good. Engineers who expand their knowledge base and skill set beyond the hardware focus can become more valued team players for all departments in their stations. Become the enabler and the go-to-guy of technology of all kinds, whether it be studio equipment, computers, software apps, audio editors, cell phones, BlackBerries and even the copiers and printers. One-on-one help for needy staffers takes time but makes you more valuable.

Perhaps even more important nowadays, station engineers should align themselves with the interests of their program directors. Ratings and revenue, and ultimately whether the station succeeds or fails, depends on how well the PDs do their job. They can't deliver the best possible version of the on-air strategy and product they have developed without you being fully invested.

These demands and expectations are (to be sure) becoming more difficult to fulfill, especially if you have lost part of your engineering and IT staff to layoffs and cutbacks. The industry is running out of competent and qualified engineers. Extraordinary times need extraordinary people to hunker down and work smarter in multiple roles. You'll find more of those people at the stations that perform above their market averages.

MORE CONSOLIDATION

As the recession grinds on and stations everywhere struggle to hit ratings goals and make budgets, I'm predicting we'll see more consolidation at several levels. We've all seen many instances in which a PD, GSM, promotions director and, of course, engineering position is eliminated at one station with a stronger sister station's personnel taking over those roles.

The media advertising money that is still out there will land on the best-rated stations. Few buyers or agencies are buying three or four stations deep anymore. As revenue and ratings shares drop on their weaker stations, cluster managers will be compelled to consider moving their strong formats onto their best signals and even creating AM/FM combo simulcasts to increase total ratings performance.

Witness a number of legacy news-talk AMs adding an FM or HD2/HD3 simulcast in quite a few major markets, such as New York, Philadelphia, San Francisco and Washington over the past year to increase their under-35 demo returns.

Carrying a marginal format, especially on a marginal AM facility that doesn't pay its own way and hasn't for a long time, doesn't make financial sense. Even in decent-sized markets, quite a few of these stations have become devalued to levels that don't justify keeping them on the air. Selling them at even fire-sale prices is difficult with the credit markets frozen.

Maybe the National Association of Broadcasters should press our congressional bailout barons to offer such licensees their slice of the bailout pie or at least a tax credit to make these stations go dark forever. After all, we shouldn't waste the opportunity of a financial crisis to get the relief we've wanted for a long time.

TUNING IN THE FUTURE

The fate of HD Radio will not be known for some time. If it survives the Meltdown, that should be a reasonable indicator of its longer term efficacy.

I'm betting FM-HD will survive and succeed, mainly because it's the only game in town and the technology offers consumers important and attractive enhancements over analog. Adding extra format opportunities almost for free in the HD2 and HD3 channels will eventually pay off. But the power increase will be needed to ensure HD Radio's ultimate success.

I'm feeling a lot less sanguine about AM-HD. Making it successful was always going to be a long uphill climb. For many of the same reasons AM stereo did not succeed, AM-HD may very well meet the same end. Increasing the FM-HD power will unwittingly hasten that end. Successful AM formats will eventually either wind up on FM or an HD2 or HD3.

It's tough to admit, but AM as a service is simply running out of time. It doesn't need the digital enhancements to make its core talk format listeners become interested in it or embrace it at any level.

As more news and talk formats find their way to the FM dial and AM/FM simulcasts are created during the next consolidation phase, the days of the AM service become numbered.

The big 50 kW blowtorches will be the last sticks standing. As WiMax ramps up and Internet radios start appearing in all new cars, the AM component of their combo ratings will start falling. When it reaches levels that don't justify paying the power bill and other direct expenses, even those stations will eventually hit "plate off" one last time. I sincerely hope I'll be pushing up daisies instead of pushing the plate off buttons when those days arrive.

Fortunately, it's going to be many years before AM has to worry about becoming extinct. It might be an endangered species in some areas but as long as Americans stay in love with their cars, AM radio will always be one easy button push away. With over a billion AM radios in the hands of consumers and so much sparsely populated area in this country that will not get WiMax for a very long time, AM still has a long stretch ahead.