iHeart Strategy Revealed?

iHeart LOGOCan you remember the last time something impacted the radio business the way the current iHeartMedia re-org has?  Neither can I. 

It seems that after years of trimming, cutting and doing everything possible to make money there would be no further cuts possible. And if there were the bankruptcy would have cleared them up.  Yet Monday this week they announced with great fanfare a re-org that will cut almost 10% of their workforce. Everyone asked the same question.  Cut?   Where?  

So what are they up to…?  Everyone whose jaw is not on the ground is buzzing with theories.  And so now you get to hear mine.

IMHO 

iHeart has 855 stations with 448 outside the top 100 markets.  Assuming that maybe 80% of the radio revenue comes from the top 30 markets it’s conceivable that iHeart has decided that all the stations below the top 30 are going to essentially be shut down.  Oh, they’ll keep them on the air, but eliminate the local staffs – no more programmers, DJs, sales people, etc.  These stations will all be programmed, sold and managed from larger market hubs.  Local sales will be handled on the phone as necessary and because in the scheme of things that’s not a lot of money,  most of the station inventory will be for national network clients through Premier or as part of their national packaging.

iHeart may have concluded that the hassle of managing those stations below the top 30 simply isn’t worth the small incremental revenue (at a much lower profit margin)  that local advertising creates for iHeart.  It takes the same management bandwidth to manage stations in Grand Forks, ND as in Los Angeles.  All the staffing, engineering, studio maintenance, traffic, promotion, office rent and legal liability is minimized in my theory.     And by retaining the stations in these smaller markets, iHeart can clear national campaigns and continue to promote their iHeart digital platform and events.

Might sound crazy and lots of holes in my theory…but there you have it.  That’s my story and I’m stickin’ to it!

Time to Fight Back

I’m in Radio.  Have been since a ‘we lad’.

Living in Seattle however is a bit of a bubble.  Between the legacy of Microsoft and it’s hundreds of spin offs, Amazon’s virtual takeover of most real estate between Lake Union and downtown, and Google’s thousands of hooded coders swarming the Eastside, the Seattle metro is a bubbling cauldron of young tech people.

So I share two stories – both humorous and yet gut punching.

photo of woman using her laptop

Tech in Seattle Area

In the first, while at a social affair I met a young late 20s millennial who asked what I did for a living. When I told him I ran radio stations, he was startled.  “I didn’t think radio existed anymore!”  I assured him it did exist, was still surviving and helped myself to another Glenlivet on the rocks to salve my wounded ego.

We all remember when traditional media was the ‘new tech’.  With that statement, “I’m in radio”, people would want to know which station, expound on their favorite jock or station and maybe even say, “You don’t look like you sound on the radio…!”

In the second story – at another event a woman in her mid-30s asked what had happened to well known TV host John Curley.  Curley has been around for 20+ years hosting

Curley

John Curley – KIRO FM

Evening Magazine, a locally produced prime access show for KING-TV, the NBC affiliate.  When I told her he had migrated to doing an incredible job on KIRO-FM as a mid-day talk host, her comment was, “Can you make a living doing that…?”

 

And as much as I bemoan our fall from prestige and glory (kill the shades dude) we need some solid solutions.  Not more griping…so I offer a couple of ideas. Not complete solutions…but ideas.

  • Local isn’t always relevant. Relevant is relevance.  We are obsessed with being “live & local”.  Guess what.  No one cares.  Be relevant.  With the exception of a few years on WNBC, Howard Stern was never local but he sure has been relevant.
  • Leverage streaming. I know.  The stats are that only 5-10% of radio  listening is streams. There seems to be little streaming conversion from over the air.  Some of my clients see a much bigger conversion, so don’t let that discourage you.   And we all know that the ‘receivers’ are in everyone’s pockets – their mobile phones are what they listen to.  Even in-car radio listening is quickly losing ground to the Bluetooth connection with the phone.
  • Unique content. Start  your own unique station branded streams.  This is an idea that Kurt Hansen tried years ago with RAIN.  And I don’t think he got much traction.  But that doesn’t mean that today – maybe 15 years later it isn’t viable if you can find a local audience to super serve.  Look at what WFED in DC has done with a focused format for federal workers.  Abandoned mass appeal formats can create strong local audiences – oldies, smooth jazz, progressive talk, etc.
  • Forget most digital. It is a waste of energy – and takes your focus off your  primary product – audio!   Unless your digital is supported by on-air and vice versa it’s small dollars with no margin and a lot of work. There are exceptions…but this isn’t the future for radio/audio.
  • But don’t forget Podcasting. It’s really not podcasting. It’s audio-on-demand.  And much like the TV side of our business, it’s the only way we’re going to utilize media going forward.  So get with it.  We’re all so music format oriented we need to rethink what content would go into local podcasts.
  • Hang in and experiment. We don’t all have the resources of iHeart or Entercom…but you’ve got to give them credit for experimenting.  Entercom has done more with Radio.com in a year than  CBS did in 10 years. And iHeart has really invested in podcasting big time. So for us – try low risk experiments – remember the courage it took to play rock on the radio back in the mid-50s.  And even more courage to play a tight playlist…but it worked.

Driving home from college in Utah to Wisconsin, I used to love leaving Salt Lake early in the evening and heading home DXing to WLS, WCFL in Chicago…to KOMA in OKC and KOB in Albuquerque across the high plains of Wyoming and into Nebraska.  It was a comfortable, wonderful time that is rapidly receding in the rear view mirror.  So we move on.  New tools for radio in this century.

Not only do we exist…but we can make a living doing it. 

YOU’RE KILLING ME.  WHAT DOES KILLING KFOG MEAN?

 

 

bridge california cliff golden gate bridge

Photo by Life Of Pix on Pexels.com

The legendary radio stations just seem to continually have a harder and harder time hanging on.  WPLJ in New York.  KLOS in Los Angeles.  WRQX DC…and WABC in New York.   And not all of these historic stations have been sold to Educational Media Foundation either.  They are moving on….

The latest to fall – though not a sale – is Cumulus Media’s KFOG in San Francisco.  For almost 40 years KFOG was the backbone of an evolving a mix of classic and new rock formats in the Bay area.  Of course, the call letters are killer for branding…but couldn’t save the station from mis-management, format fatigue and a well known staff massacre (ok, firing)  about three years ago.  Cumulus has now chosen to simulcast KFOG’s 104.5 signal with their powerhouse sports station, KNBR 680AM.

Other than declining ratings – there are several reasons this is a wise move for KFOG.

  • Sports is still a power-ratio killer.  And sports is big in the bay area. All the major leagues are resident and a large passionate fan base seemingly for all of them makes it’s a much easier sale.  I recall a friend of mine who worked for a big AOR station.  You know.  The long stringy hair…loud Metalica blasting stereotype audience. So  his fear was that every time he had a remote he was afraid no one would show up…then he was afraid they would!  The audience comp of sports is decidedly better.
  • Younger formats are being killed off or there’s room for just one station in a category. I know that the sweet spot remains Adults 25-54, but we all know the 12-34 demo is weakening much faster than the 35+ demos.  KFOG’s alt/rock format skewed younger.  Sports is about as broad based as you can get.
  • Move to FM continues – SFO is one of the biggest AM markets in the country and it’s fading too. The hills of San Francisco can make AM a better listening experience – and often better than FM with HD.  The HD picket fencing is ferocious.  Still, with the sad decline of former market leader KGO, rated AM stations have a total share of 14.1% of the total audience with just two AM’s in the top 20 (right, one is KNBR).
  • Split inventory – this is simple. They can do more play-by-play without conflict by splitting the stations and play-by-play is still a good revenue generator.

It takes some guts to shut down a heritage radio station – or any heritage business for that matter.  Cumulus management is to be given a kudo for having the courage to walk away from the branding value and probably pretty profitable billing.  Even if they had a 70% power ratio, they still were doing $2M a year with little overhead after their staff reductions.

Having been tasked with turning around a legendary radio station or two in my career, I’ve learned the brand value can only go so far.  An advertiser once told me, “Yeh…everyone in town knows your radio station…but no body listens anymore!”  Time to move on…

What’s $6 Billion Among Friends…?

So it looks like Sinclair’s bid of some $10 Billion for the Regional Sports Networks (RSN) that Disney  was required to spin off to get DOJ approval of their Fox acquisition will be accepted.  A nice addition to the Sinclair oligopoly.  In addition, the Yankee Entertainment and Sports network (YES) is fetching another $4Billion for Disney.  All nice work if you can get it.

But in sportsontv-600x400selling off these regional sports nets, Disney had projected a $20 billion valuation.  So what happened to the other $6 billion….? 

RSN’s are pretty much a straight advertising play – no retrans revenue as in broadcast TV.  So the value is obviously declining as sports rights get more expensive and advertising moves to other platforms.  

We’re all fighting for our place in the media ecosystem.  No one – not even the RSN’s are immune.  #disney #advertising #sports #media #broadcast #marketing

DELILAH…

I just wish I could have seen the ability she had to touch people…particularly women. I mean really seen it.  But back in the late ’80 the now famous Delilah Rene  worked for us at KJR 950 (Seattle) doing middays.  She already had a substantial audience following when we hired her…as well as the ADHD sort of personality that seems to be normal for really talented on-air people.   

She was delightful and entertaining and at times a little crazy…like the time she brought a homeless guy into the station to just hang with her as she did her show.  His odor permeated the station and he assumed that because he knew Delilah  he could wander anywhere in the building, stick his nose into any office or studio and eat whatever was in the kitchen fridge.  I let it go the first day attributing it to her short attention span and warm heart.   But when she brought him baDelila Vetteck the next day, we had to have a little discussion about “guests in the station”.  I think there was some talk about a marriage in the mix…but I don’t think that ever came to be.

That is Delilah…a soft heart for anyone’s story but with a backbone she’s developed over the years to hold her listeners more accountable for their own roles in whatever crisis they call her about. 

She left KJR shortly – off to Boston and ultimately syndicated by Broadcast Programming and then Premier when Craig Kitchin  realized how good she was.   Good enough to throw $50 million at her for a multi-year deal.  She’s now heard on some 300 stations around  the country, including Entercom’s 94.1 The Sound, here in Seattle.    Kitchin  had the cash and station leverage that BP didn’t to turn her into a household name.  And that is what she became…a household name with a huge audience. Her weekly cume is over 8 million – and when you figure Rush reaches maybe 12 million these days, she’s doing well.

The story of her life has been anything but a joy ride.  She’s been married multiple times and currently has something like 14 children, both adopted and biological.  A big heart indeed. Frankly this is such good news for those kids. She’s an exceptional, if emotive mother.   Living on the Olympic Pennisula in Washington in an old farm house, Delilah takes calls and records her show at home daily.

One of her biological children, Zack committed suicide in 2017 which devastated  her. But she recovered as much as anyone does in this crisis…and by her own admission seems to have more compassion than ever with her callers.  She is a woman with a strong backbone and rock solid faith in her God.

I don’t write this to do anything but celebrate her.  Her talent. Her journey.  Her wonderful personality. Her ability to listen to people and spread the love.   Kudo’s Delilah.  You are one of radio’s great success stories…

(Great Seattle Times Article on Delilah’s life story is here.)

Turn off your Transmitter!

SECRET TO SUCCESS IN RADIO.  TURN OFF YOUR TRANSMITTER.

You may have heard it somewhere…but I caught it on Mark Ramsey’s podcast, Media Unplugged

woman in gray strapless long dress standing under waterfalls

Stream it…

 

, an entertaining review of media topics.  Ramsey has a radio background but his podcast with co-host Tom Asacker covers a wide range of media topics.

So as he closed out a show a couple of weeks ago he spilled the beans.  It seems Nielsen, the audience rating service of great renown, has been recording a dramatic decline in radio listening in virtually all of their markets and has been mum about it.  The decline is double digit in a couple of markets – and the largest declines are in the tech savvy markets – San Francisco, Austin, Boston, & Seattle.  And of course, no one is talking about it.  Plenty of people are ‘hair on fire’ freaking out – but they’re not talking about it…certainly not to investors, clients or their own staffs.  And Nielsen has been very quiet too…understandably.

Nielsen calls it PUR – Persons Using Radio.  Essentially it tracks the TOTAL number of radio listeners by hour in each market.   It’s an obscure piece of data that used to reside on the bottom of the page when rating books were…well, books.   Published on paper.  The use of secondary software like Tapscan means that most audience runs don’t include anything about the total listening in the market.

All this does is confirm what we’ve known for some time.  Radio still works very well for our clients…make no mistake, but the total listening is older, more sporadic, in shorter bursts,  mostly in-car and on a slippery downward slope.  No surprise…and really no real solution except…

A NO BITCHING SOLUTION

We need to consider the platform our audience listens to as irrelevant.  The magic of a signal that anyone with a radio can listen avoids the fact that we don’t have radios in every room like we used to.  No more kitchen radios.  No more alarm clocks to wake up with the Morning Zoo.  And increasingly, more competition for the dashboard listening in car.

FM DOWN THE SAME PATH AS AM AND MORRIS CODE

Look at what happened to AM radio…the audience migrated to FM leaving about 10% of the total listening on the AM band.  Following that scenario we need to fully embrace the move to streaming.  Everyone has a phone with streaming capabilities…well OK, not everyone.  I think the actual percentage is about 92% which is much more than have a Philco Kitchen radio next to the Frigidaire.  Add tablets, AI boxes and old fashioned desktop computers and our signals have much more sampling opportunity  through streaming than over-the-air.

As an audio business we need to promote our signals as a digital business.  Facebook instead of TV ads.  URL and app locations are as important as dial location, maybe more.  And we need to double down on local relevance to our audience.

In the early 70s when FM radio was beginning to get traction thanks to format diversity, stations would install an FM converter under a listeners dashboard to get more audience in car.  It was slow – one-by-one conversion but it paid off and within a decade a majority of radio listening was on the FM band.

vintage music antique radio

Any of these in your house…?

Get over the idea that you have a license to ‘steal’.  The value of all broadcast licenses are falling as the audience moves to streaming – even TV which is getting killed by OTT has declining audiences.  A radio station I was involved in the sale of about 10 years for $2,500,000 is on the market today for $500,000.  And if it weren’t for retrans fees even Sinclair wouldn’t be buying TV stations.

Streaming offers everything we’ve dreamed of and lots of things we never dreamed of.  Universal coverage (no more coverage maps or holes), excellent fidelity, easy access and low cost are all powerful enhancements to our over the air signal.  Of course we also have to compete with thousands of other signals from other broadcasters and net-only streamers.  Which is where the compelling local content trope is still relevant.

As an industry we’ve got to move quickly – the critical mass in streaming is already here.  Stop worrying about your transmitter and strategize how to move “…them doggies over to the streaming corral.”  Think of the day when you turn off your transmitter because it’s no longer needed.

Looking to Get Out?

Selling a radio station used to be the equivalent of falling off a log.  Just let a couple of brokers know and you’d have five offers before the log was cut down…

woman in denim jeans and jacket sitting beside a bullet train

Photo by Anderson Miranda on Pexels.com

Today – frankly, everything is for sale.  Putting the large groups aside for a moment, many of today’s operators are at the end of their careers.  The promise of selling to a family member or a hot shot GM just doesn’t work.  I talk to operators daily who truly don’t know what to do with their stations.  They made a good living, but the future  of the business, the decline of local retail and the onslaught of digital media has dried up the pool of potential buyers.  And of course, the sellers all want to sell at 8-10 times cash flow…but the market is at 4.5 – 6 times with healthy stations and non-existent elsewhere.

So when Sunnylands Broadcasting, with three stations in Palm Springs, CA  tried to sell their stations they found the market dead.  For several years we tried numerous strategies…selling to another under the cap group, offering financing to local employees, selling to a religious broadcaster, etc.  Nothing.

We had for some time noticed that non-com stations continued to be successful and could represent an additional 15-20% of the revenue in a market.   Working with Greg Smith and David Hartman, partners in Sunnylands, InTown Media began exploring moving the stations to a non-profit 501 c 3 organization.

Why would that make sense…and what are you thinking??

There has long been a big, fat line between commercial and non-commercial stations in the business.  Neither of us acknowledged or understood the other.  Non-Coms weren’t really radio.  They did those dumb fund raising Beg-a-Thons for money and offering clients ‘underwriting’ that were a series of words with no call to action.   And those of us on the commercial side were just greedy money changers in their eyes – playing the same 30 records and cramming lousy commercials down our listeners throats.  (Probably truth on both sides!)

But while commercial radio struggled with flat or no growth the past entire decade, stations like WNYC in New York grossed $82.3 million in 2016.  Hyper targeting  the local hip music scene in Seattle, KEXP developed a unique AAA format.  While always registering less than a 2 share in the ratings the station just completed a $12 million dollar studio renovation with a restaurant, coffee kiosk, community meeting space and a concert venue. They have some $21 million in the bank and grossed over $10.3 million last year.  It’s my back of the napkin that non-commercial radio stations take about $25 million out of the market with listener donations, grants and underwriting PLUS whatever the religious stations gross.

kexp studio

KEXP performance stage – Photo by Amber Knecht.

What could we learn from these stations that would give us an exit strategy in Palm Springs?? Indeed what kind of thinking would be necessary to get listeners to pay for the audio they want to listen to…?

First of all we had to rethink audiences, ratings and how we traditionally do business. Successful local radio is about local – we’ve all heard that for decades.  But now we need to rethink local.  What audience is there that has a common passion?   A common interest?  A common community?  Just saying hello to Evanston doesn’t make a Chicago station relevant to a listener in Evanston, does it?

In Palm Springs the obvious answer was the LGBTQ community.  By some estimations the city is 50% LGBTQ.  The entire city council is gay and the community has literally hundreds of thousands of tourists every year, many from the gay community in LA.

So we developed a format around the music and lifestyle of the LGBTQ community without alienating the straight members of the audience.

We then worked with local advocates to create a 501 c 3 organization, install a board of directors and set up the organization to run the stations for the benefit of the non-profit.  Called Qchella Media, they entered an LMA with Sunnylands.  Qchella Media also has an option and first-right-of-refusal to purchase the station.

Launched the day after Christmas, KGAY 106.5 has been warmly received and sales/underwriting is accelerating quickly.  Interestingly, the talent coming out of the woodwork to sell, produce and do on-air work is like it was 1970.  They are knocking on our door…!

We see this model – moving support from strictly advertising to listener/donor support as a next generation model for radio stations.  Not all of them – but for owners looking for something that makes sense and gives them an exit or a solution for an underperforming station, this kind of broadcast asset management may make sense.

Listen to KGAY 106.5 at http://www.kgay1065.qchella.com.