RBR-TVBR 2014 Spring Special Report

Exit Interview: Del Bryant, BMI President And CEO

By Carl Marcucci

R In this issue...

Lew Dickey, Cumulus CEO What’s next for Cumulus?

Les Moonves, President and CEO of CBS, shares his vision.

Elliot Evers, Managing Director, Media Venture Partners: Navigating today’s M&A marketplace Pat Liguori, COLTAM Chair and ABC SVP, Research: Measuring TV tuning on tablets, smartphones El Mandril: He’s back and bigger than ever with a new deal Christopher Golub & Studio Orca: Broadening FM’s horizons FIN Branding Group’s Jimmy Marston: FIN e-cigs likes radio

ecipient of the 2014 Golden Mike Award from the Broadcasters Foundation of America, Del Bryant joined BMI in 1972, and worked in numerous areas of the company for 32 years, rising to president and CEO in 2004.

The son of Boudleaux and Felice Bryant, the legendary songwriters who penned such classics as The Everly Brothers’ “Bye, Bye Love,” and many more, Bryant’s rich musical heritage inspired his accomplishments and passion for the business.

Del has seen the industry change with the explosion of online music companies, direct licensing deals, and government involvement in how licensing should be structured. As Del has announced his retirement after 42 years with BMI this coming June, RBR-TVBR sat down to ask him some important questions.

Tell us how it feels to be this year’s Golden Mike recipient [asked before the event].

Well, I couldn’t be prouder. I am just a little bit bowled over that I am going to be receiving this award. There are so many deserving members of the broadcasting community out there.

I am flattered at the number of people in the music industry who stepped forward to be there that night and say something nice about me, and entertain on my behalf. I can’t tell you how proud I am that Kris Kristofferson, Michael Bolton, Brenda Russell, my dear friends Sandra Lee and Jack Sander are all showing up. Most of all, I am extremely proud of the work the foundation does.

It is heartfelt work.

Give us some highlights on how you’ve grown BMI’s business since starting there and after becoming CEO in 2004.

I am probably most proud of having put together a team of the industry’s most capable and sought-after executives to head new divisions and new offices in important emerging genres of music. I was an early believer in the rising popularity of urban music, and helped assemble a powerful team dedicated to that music. Our Latin music department formed strong relationships with songwriter-producers and artists. BMI’s London office was a priority, and we developed it into a major hub to attract the best songwriting and performing talent from Europe and beyond. We expanded BMI’s footprint in Los Angeles in film and television music to include not only legends like John Williams DEL BRYANT and Mike Post, but also multiple Oscar winners like Alan Menken, Latin composer Gustavo Santaolalla, and international sensation Alexandre Desplat, to mention but a few. And our leadership in country music is legendary.

All the while, our New York- and Los Angelesbased creative teams built the industry’s most successful roster of pop and rock stars, from Pink, Kid Rock, Jennifer Lopez, Adam Levine and Maroon 5, to Kesha, Pitbull, and so many more.

Technology became a mission-critical goal for us during my presidency. We introduced the industry’s first iPhone app, and a groundbreaking program to permit performing songwriters to digitally upload data on their songs and performance venues from their smartphones and iPads.

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Exit /Del Bryant continued from page 1...

Beyond the business achievements, I am proud that during my tenure we maintained a corporate culture that bore Frances Preston’s legacy, her hallmark — an abiding and genuine care, concern, and support for the writers and publishers we represent. That tradition continued during my time at BMI without losing a step, and under the new leadership of CEO Michael O’Neill, I am sure it will continue to flourish.

How did your songwriter parents help influence your career direction?

When you are raised in a family that writes songs, and they are writing songs in the home, at the dinner table, in the car, in the living room, on the front porch — when that is going on in your life, you have a tendency to think the world, indeed, is all about music. If my parents hadn’t been in the music industry, I don’t believe I would’ve gone into this industry. I think their unique involvement, their tremendous success, and the sheer force of their talent colored my life greatly.

I learned all the ins and outs of that end of the business from the time I was born. My parents had their first hit the year I was born, in 1948, and continued having hits throughout much of my adulthood. I worked for my family and their publishing company shortly after college and the Air Force, and before I went to work at BMI. So I was completely programmed to work with songwriters, dealing with their creativity and channeling that into the business of music.

What was it like growing up in such a musical household at such a unique time?

It was very exciting. I had the opportunity to see all of the early country stars, pop stars, and many of the early rock and rollers come through our household looking for material.

Music was truly coming together — country, rockabilly was fusing into what was being called rock and roll. My parents had a truly significant role in that. My father had been raised in South Georgia, where he had been steeped in the blues and the gospel church music of the Deep South.

He has been classically trained from 5 years old and by 18 was playing in the Atlanta Symphony.

He was in a perfect position and had the talent to fuse country, blues, gospel, folk, R&B, into a commodity that exploded in the 1950s. Their importance has been cited by everyone from The Beatles to The Rolling Stones to Paul Simon, Eric Clapton, and Bob Dylan. From my childhood, I was around a who’s who in the business.

What are some emerging trends in the music licensing business today?

There is a lot of attention right now to the digital distribution of music. What many people don’t understand is that digital today is just a small part of a songwriters’ income, far outweighed by royalties from other forms of distribution, or what we call “musical performance.”

A growing revenue source is “general licensing,” royalties from bars and restaurants, exercise salons, anywhere music is used to make the experience more attractive. General licensing revenue is growing faster than ever, and that is very good for the creators we represent. BMI is also seeing an increase in license fees from live music in large and small venues alike; it is increasingly important today.

Another key area for BMI is music on television. Whether it is American Idol, The Voice, or the many similar shows, music is again at the center of the entertainment, and more so than ever. These shows have been helping established songwriters and established stars. These shows allow the “long tail” of music to get longer and longer, because so much of the music used is standards, or newly created standards, and it gives them renewed life on the airwaves today.

For example, the work of songwriter artists like Adam Levine, Blake Shelton, Christina Aguilera, Cee Lo, or Shakira (all BMI songwriters). Their success has been enhanced greatly by TV and by the visualization of their artistry. The building of a new star has become closely tied to video and the ability to see the music performed.

Radio is still a large part of our business.

Cable is a true juggernaut and it is still growing. Our foreign business, our catalog around the world, is growing dramatically. The money that we make around the world from radio, film, television, cable, and general licensing now accounts for about a third of our entire income.

We are at approximately $950 million. At this point, our digital piece of that pie is approximately $60 million. It is important for us at BMI to keep our eye on the entire ball — and the ball is made up of many, many, many important pieces.

Now, when we look at the digital world, the biggest trend would be the tremendous growth of streaming. Downloads are starting to diminish, as, of course, CDs have. That has reduced the amount of “mechanical income,” the money for duplicating a piece of music that songwriters and publishers are paid generally by the record companies. We are moving more into a streaming world, which is the type of “musical performance” that BMI licenses.

The income to be derived from streaming is being sought by all sides of the creative industry — the writer, the publisher, the artist, and the record label. But right now, this new group of digital distributors, which have tremendous investments in the technology to help bring the music to the masses, would like to pay far less than we feel they should. There is a need to develop sustainable business models that work today and in the future.

What about the regulatory environment in D.C.? How do you advocate for the creative element with those agencies?

With Congress, our biggest need from that body is modification of some of the laws to en-

sure that there is a level playing field for all of us. Music is far more valuable today than it was in the past. The value continues to rise, based on the trends we discussed. We need to be able to play by the same set of rules that everybody else is playing by. That brings us squarely to the Justice Department, our consent decree, and rate court, which regulates the rates we are able to charge.

We need modification to our consent decree to ensure there is a level playing field for all the constituents, small or large.

What other challenges are PROs facing as you turn over the reins at BMI? We are highly focused on the relationships with our largest publishers. When I first came to BMI, there were hundreds of important publishers. Today there are a small handful of very important publishers. We are carefully managing the relationships with these publishers, fiercely maintaining the relationships with our writers and smaller companies while delivering the value they need for their livelihood. We are in the process of redefining the services we can provide, the best pricing for the services that we render, and how we can best work together.

The RMLC was fairly recently denied an injunction in its lawsuit against SESAC. The court did note, however, that BMI’s rates have gone down, whereas SESAC’s have gone up.

SESAC does not operate under a consent decree, like BMI and ASCAP. This situation points up once again how BMI’s consent decree may not be enabling us to get the true value that is available in the marketplace. Performance rights are so vitally important that publishers feel they can take specific catalogs outside of a consent decree environment to achieve a dramatic increase in revenue. If that is true, then the true value of music is not being reflected by organizations that are bound to a rate court, such as BMI, and so we need to correct for that.

What is next for Del Bryant?

My brother and I own a large number of copyrights whose potential to grow is vast. We have a handful of important copyrights that I think I am going to “work” a little bit harder. I am going to become more involved with the heritage my family left my brother and myself. In the coming years, I will pay more attention to songs such as “Bye, Bye Love” and “Love Hurts” and “All I Have to Do is Dream,” and “Wake Up Little Susie”, and dozens of classic songs that could have a little more oxygen breathed into them, and consequently breathe out a little vitality for my family.

Most importantly, I have a 9-year-old, Thaddeus, that I and my amazing wife, Carolyn, are going to enjoy raising. I want to enjoy every moment of this experience while being a father and a friend to my 43-, 41-, and 31-year-old children, and of course my five grandchildren.

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Lew Dickey On The Future Of Cumulus, And Radio

By Carl Marcucci

I

n 2013, Cumulus created $1.2 billion of shareholder value. The company is on fire, and Lew is considered the biggest leader in the radio industry today. They recently completed a major refinancing, the buy of WestwoodOne/ Dial Global, and a major investment in Rdio; they’ve purchased WLUP and WIQI Chicago from Merlin Media, signed Michael Savage, set up the Nash Country lifestyle brand and transitioned many country stations over — the list goes on and on. We want to know what makes Lew Dickey so driven — his passion for radio, business success, and how he’ll be putting all the pieces of the puzzle together. What’s next for Cumulus, and what does he see for the future of radio?

You have steadily grown Cumulus into a strong, vertically integrated multimedia machine, all in the very challenging economic environment that both our industry and our country are facing. What is the formula, philosophy, and mindset that guides your major business decisions?

We are building a very interesting media company on a solid foundation of radio broadcasting assets. We believe content is king across all media today, and it is content that drives our decisions. The heart of our strategy is the desire to produce unique and compelling content that we will distribute first and foremost through our broadcast affiliates, and secondarily through our digital platform. And then, as a corollary to our operating philosophy, we are creating content verticals around key audience segments designed to engage people with

unique and compelling content through multiple platforms, as we’re doing with Nash.

The WestwoodOne/DG purchase: You haven’t made a lot of changes there yet, other than deciding to remove a layer of management in Paul Caine. What have you found to be the division’s strengths and weaknesses at this point?

We are integrating WestwoodOne with our existing network to create an efficient engine for content creation, distribution, and monetization. We have the good fortune of having a number of talented folks join us through the acquisition to complement the people we had in our existing network business. We feel confident that over time, as the integration process is completed, we will have a very strong and talented staff of people to run this business.

The network business is very competitive. If you think about the primary verticals in it, you have information, entertainment, news, sports, and services, and you have several good competitors out there, of which Premiere is the largest.

There are some areas in which we are stronger than others, but overall, it is a very competitive space. Network business offers little barrier to entry, and it’s a business where you truly have to earn your keep every day. So we are very focused on being the go-to place for producers and for talented people in programming and sales, and on providing a great experience for our affiliates and a value for our advertisers. If we do that, we can continue to grow our business. It is an important cornerstone asset for our company, but we have to earn our keep every day, and we’re very focused on that.

WestwoodOne, merged with Cumulus Media Networks, has a lot of news and sports product. Do you see all of these brands as being viable down the road, or might one of them have to be folded in?

What does it depend on, in your eyes?

You wouldn’t want to go into your favorite sports bar and find there’s only one kind of beer to drink. You want choice. The same is true in network radio for sports, information, talk, entertainment, and services. We’re doing business with 10,000 local radio stations. In many markets today, there are multiple stations in virtually every format. They all need unique and compelling content. We are in essence a premium marketplace for broadcasters to provide high-quality content at an excellent value.

We are definitely focused on maintaining diversity in our product line, and we allow the products to compete with one another. We think that’s healthy and makes them better.

Our network is all about diversity, competition, and choice. That’s the key focus of our product strategy and is driven by the feedback we receive from our affiliate partners. Even if we could save money by consolidating lines of businesses, I

think it would be short-sighted in the end. We want to have a broad customer base, and we want to sell them unique and premium content and services, and that requires a significant investment. Quite frankly, it’s very difficult for smaller businesses to do it at that scale. Scale affords us the ability to invest in a broad variety of premium content, so we can better serve our customers. We know firsthand the challenges of operating local radio stations today, and we design our network product offering to meet the wide range of needs of radio broadcasters.

Many think radio has too many commercials. Do you think that our industry could take a lesson from Pandora or iTunes Radio and, say, play only one or two spots between songs, rather than a heavy spotload during regular spot sets?

Radio has a moderate commercial load compared to broadcast and network television.

Commercials are valuable content for listeners because they communicate useful information about commerce. In addition, radio is over 85 percent local, which is where consumers spend the vast majority of their disposable income.

That said, I believe our medium can do a better job when it comes to creative, particularly on the local level. We are currently working on several different offerings to help our local affiliate-partners have access to national-quality talent, writing, and production skills to produce spec creative on demand. I’ve been doing this a long time and have yet to see anything that beats great spec creative when pitching a client to shift their dollars into radio.

I do think, though, that it’s the age-old question: How much is too much? And we have to be mindful of that, and commercial loads tend to ebb and flow with overall demand and the economy. It’s very self-governing at the end of the day, because there’s plenty of empirical data to show (an almost perfect correlation) that if you’re over-spotting, you’re running too many commercials, too many interruptions, it will impact time spent listening and ultimately cume — and your ratings will be adversely impacted.

It’s self-governing, and if you pare back and you run a lighter load, you will likely increase time spent listening and even increase cume, thereby driving your ratings up. There’s a fine line in order to compete. If you cut your commercial load in half, you’ll get increased ratings, but you certainly won’t double your ratings, and that’s a bad economic trade-off.

What if you just put one commercial between each song, kind of like Pandora does?

There’s been a lot of experimentation, and back in my old research days we did a lot of this in focus groups and auditorium-type settings, applying sophisticated statistical-analysis techniques

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like conjoint analysis to weigh trade-offs. There’s a perceived difference between the length of the commercial break and the frequency of commercial breaks. A 15- or 30-second commercial break between every song is perceived as a greater overall interruption than if you did two four-five minute breaks an hour at :40 and :55.

The reason commercials are clustered in pods is because programmers have lots of data and there are a lot of smart people in our industry that have a lot of experience with this, and over time it has been proven that the tolerance for the interruptions, to actually listen to the commercials and actually stay with the radio station, is better set in two or three breaks an hour of four or five spots for a total spotload of 12 minutes per hour.

A break with four-five spots is ideal, and you serve both purposes. You keep people tuned in because they look at the commercial breaks as a point of punctuation. Radio is a linear medium.

People listen through the breaks. Unlike television, when people are time-shifting their consumption and fast-forwarding through breaks or using devices like Hopper and not watching them at all, radio is consumed linearly, and as a result people listen to the commercials.

Pandora is currently playing fewer spots per hour but increasing their loads because their business model is upside-down and they’re burning cash. The amount of inventory they have to run at the rates they’re able to charge would have to increase arithmetically in order to create operating profits and therefore a sustainable business model.

It’s important to note that there is a big difference between a radio station and a playlist punctuated by commercials. A curated radio station with talent, with production values, with features and imaging, is a very different audio experience for a listener than a static playlist punctuated by commercial announcements. One is a hell of a lot more compelling than the other.

That’s the difference between Pandora and local broadcast radio stations. Radio salespeople would be well served to go on the offensive with advertisers to sell our medium’s value and not allow us to be redefined by a digital playlist service that has never let the facts get in the way of telling their story.

Tell us more about your vision with Rdio, which Cumulus has invested in heavily.

We’re very excited about our partnership and investment in Rdio. Rdio enables us to play in the ever-widening audio space, and what I mean by “widening space” is that traditionally, radio listening has accounted for about three quarters of audio consumption, and that is still true today. The other roughly one quarter of audio consumption was music that you bought and playlists that you made, and that speaks for itself. Back to the days when there were physical copies of music — records, tapes, 8-tracks, and CDs — they were sold through retail and people

bought music. iTunes changed the way we buy music, and today, Apple is the largest music retailer, having disrupted the brick-and-mortar stores that sold physical copies of music.

Today, the model is changing once again, as consumers prefer to rent or “access” their media in the cloud, versus buying and owning individual songs, movies, or television shows. It’s a far superior value proposition to the consumer to pay $99 a year and have access to over 20 million songs, plus virtually every song that is recorded in the future. With Rdio and Spotify, consumers have unlimited access to all of this music on any device, with the ability to cache music.

These services have in essence rendered your iTunes library and that ownership model obsolete. It’s a superior value proposition to pay $99 a year and have it all. Through our ownership in Rdio, it enables us to also play, if you will, in music e-tailing. We as radio broadcasters could never play in the space of music sales, because we weren’t music retailers. We played their content for free and promoted it, and that’s what drove sales. Now all the promotion we give music through its on-air play, we can capture a portion of that value through the increased value in Rdio as people use that as their service to consume on-demand music. That’s the first part.

The second part is the playlists that you make — and that was changed with Pandora — that created in essence a much easier way to create a playlist than having to sit there and make a tape or a CD or rip songs to create a digital playlist.

It was a much easier way to do it, and a more thoughtful approach. A custom playlist from Pandora, by the way, draws from about a million songs. In contrast, Rdio offers a custom playlist feature that draws from over 20 million songs.

So it’s definitely a more robust offering. One of the big negatives we consistently hear from our research on Pandora is extreme fatigue.

What are your plans in Chicago, with the recent purchases of WLUP-FM and WKQX-FM from Merlin Media? What opportunities do you see?

I think in the first month WKQX jumped to a top five radio station in Chicago. We’re very excited about the early progress we’re making on that station, and The Loop’s ratings are up as well. It gives us, strategically, a really important toehold in the marketplace, and the assets all complement one another now, with the three class-B FMs and a big 50-kilowatt clear AM radio station. We’ve got a great presence in Chicago and look for the market to be a growth driver for our company.

You’ve recently completed a major refinancing, freeing up a lot of cash flow.

Tell us a bit about how that was done and what that extra cash might be used for.

I think we’ve managed our balance sheet very adroitly. We have the lowest cost of capital in the

industry, and we are deleveraging nicely. That affords us a high conversion rate of EBITDA to free cash. In our company today the conversion of EBITDA to free cash is about 60 percent.

That’s a big number. That gives us the flexibility to continue to add high-quality assets to our portfolio, like for instance what we recently announced in Chicago. Moreover, our balance sheet gives us the firepower to buy both content and distribution assets as we continue to grow our company while also continuing to pay down debt. We’ve paid down $420 million in debt since we bought Citadel.

Do you think the shrinking value of radio stations, coupled with the huge debt that post-1996 consolidation brought on, is a major factor in hindering radio’s product at some companies? How can that be resolved?

What I’d say is that radio station values, like all assets, ebb and flow over time. I don’t view the value of radio assets as being in secular decline. The value of radio assets today is closer to the level they had pre-consolidation than post-consolidation. However, it goes in cycles — broadcast television spiked last year.

Generally these are event-driven, things like retrans, which really helped multiples in broadcast television — and increased consolidation. It’s empirical, however, that radio station values are improving. I think the promise of continued consolidation and the industrial logic behind scale is buoying asset values in radio, in combination with historically low cost of debt capital.

I do think that, to your point on debt loads, it’s no different than in any other business. If you capitalized a business when asset values were at the top of the cycle, and asset values decline, it can be very difficult to meet your obligations. There were a number of media companies that restructured in the last cycle, and there are still more to come because ultimately, a balance sheet restructuring is unfortunately the only way out if you’re hopelessly burdened by debt.

What is the latest update on the Nash brand?

The Nash brand is progressing very nicely.

As you know, it’s being incubated in our owned platform of stations first. We will continue to roll Nash out over the next several quarters as we continue to build out the various platforms and elements of the brand. We have a lot of exciting things in store for this brand. It’s off to a very good start, and we now have it in two dozen markets across the country for America’s Morning Show, including the stations that have been re-branded Nash. We will continue to roll those out across our platform in the months ahead.

We haven’t really been actively syndicating outside of our owned-and-operated platform yet, and we expect that to come toward the end of second quarter. We’ll really be in a position to

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The future of music. today. Everything music licensing should be...and more.

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more aggressively take the entire package out to our affiliate-partners in the back half of this year.

We’re just really focused on getting it right internally first, and so far we’re very pleased with what we see. There will also be a significant video component to the Nash brand. Look for some announcements on that over the next couple of quarters.

What do you see as the future for radio?

Do you see two possible paths the industry could go?

Radio is the heart and soul of our company, and we are eternal optimists about radio’s future and believe very strongly in it. We are also realists, and we see that all media today is experiencing some form of digital disruption.

One of the things that radio enjoyed in the past was high barriers to entry, as did television and newspaper, and quite frankly, all of that is being challenged today by digital media.

Consequently, scale is becoming increasingly important in media today. We believe that the scale we’re creating on the content side can be enormously helpful to the industry because local radio broadcasters are now competing

with a lot more than other local broadcasters.

WestwoodOne is making multi-million-dollar investments in content and services to serve our affiliate-partners across the country with premium content and services to help them run a more profitable enterprise. It’s important to us that this industry not only survive, but thrive.

As in all businesses today, I think we’ve got a real opportunity to play a key role in that by offering high-quality content and services at a very affordable price to our affiliate-partners.

From your perspective, where would you like to see Cumulus in three to five years from today?

I think we’ll continue to transform our company. I think it will be much larger, and it will continue to be focused on creating great content and investing in strategic distribution channels, including local broadcast radio in the top 50 markets, with a focus in the top 25. We’re going to continue to build out our Nash brand, and there are a couple of others behind it that we will be launching.

Cumulus will be a multiplatform media company that is really going to be built on a foun-

dation of broadcast radio assets, primarily in the major markets. WestwoodOne will be a key strategic cornerstone in our growth as we work closely with our 10,000 affiliate-partners to help them leverage the investments we’re making in premium content and services.

What can we as an industry do together to help strengthen our place in the dash and the smartphone?

I think it’s the same challenge that we’ve always had as a business and as an industry — which has been, to date, our relative inability to speak with one voice. We have been up against competitors, both satellite and digital, who have been somewhat monolithic and speak with a unified voice. Consequently, they have been successful in communicating their message designed to redefine our industry in the minds of business press and the investment community.

I think if we have suffered, it has been because of our inability to communicate with a unified voice and to tell our powerful story and market our strengths.

That is, I believe, the biggest challenge our industry has to overcome.

Les Moonves Shares His Vision

By Carl Marcucci

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eslie Moonves is chairman and CEO of CBS Corporation. He joined CBS in July 1995 as president of CBS Entertainment. From 1998-2003, he was president and CEO at CBS Television, then was promoted to chairman and CEO of CBS Corporation in 2003. He now oversees the CBS Television Network, the CW, CBS Television Stations, CBS Television Studios, CBS Television Distribution, Showtime, CBS Radio, CBS Records, CBS Outdoor, Simon & Schuster, CBS Interactive, CBS Home Entertainment, CBS Films — and more. During his tenure, CBS has become America’s mostwatched network. RBR-TVBR asked Les’ opinion on a variety of issues shaping and affecting the media business today, and why he’s such a big believer in — and defender of — broadcast television.

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You seem to be the biggest believer in broadcast television. Why is that?

Broadcast television is still the best game in town. The value of pulling together the largest audiences continues to increase — especially with all the choices out there. Also, broadcast television is the best launching pad for creating hits and then selling them across multiple platforms, including streaming and domestic and international syndication, not to mention retransmission consent. So it’s a good business to be in, and I’d venture to guess that those who aren’t as bullish just haven’t had as much success.

Looking back, would you have done anything differently in the fight with Time Warner Cable over retransmission consent fees?

No, I wouldn’t have done anything differently, other than I wish we hadn’t gone dark. As was widely reported at the time, we had never gone dark before, and it certainly was not something we took lightly. It was reassuring that as people looked at the issue closely and really studied what we were asking for, most agreed that the path we chose was fair, and, despite it not being the most enjoyable summer, I’m very pleased with the outcome.

Fox has announced that it’s not going to participate in the pilot process. What are CBS’s plans?

Pilot season still works for us. It may not be perfect, but the model works for those who continue to make the best content. It is an intense period of time for the producers and executives involved, but the pressure inspires great creative energy and the competition among pilots leads to the best shows being selected for the fall schedule.

In fact, two important shows on our schedule benefited greatly from the pilot process. CSI was the last script ordered that season and the last pilot delivered before our scheduling meetings. Those producers made very smart creative choices under pressure and created an outstanding pilot that won its way onto the fall schedule. Another example was Big Bang Theory, which had a different actress playing Penny in the original pilot. From there, we realized we had something special, but shot a second pilot, adding Kaley Cuoco. We also continue to develop programming year-round with series such as Under the Dome and Extant, both of which were developed off the traditional pilot-season calendar and ordered straight to series from the script.

Sometimes CBS Radio gets overshadowed by your broadcast TV and cable interests. How’s the radio division doing? Is CBS committed to radio ownership long-term?

Radio has been a part of CBS since its founding in the 1920s, and it remains a vibrant part of the company today. Having the best local content is extremely valuable. CBS Radio continues to throw off a lot of cash and has a number of exciting, fast-growing initiatives, such as our CBS Sports Radio Network and our events business, which includes a partnership with the Brooklyn Nets and Barclays Center.

Radio is also working closely with our television stations to grow its share of political ad revenue, including the midterm elections this year. In addition, our stated strategy of focusing on the nation’s largest markets has worked for us, so if any adjustments are made going forward, it would support that strategy.

The NAB seems to have recaptured its mojo under Gordon Smith.

What’s your take on NAB and how it’s doing in Washington?

I’m a big fan of Gordon Smith. Leading an industry as diverse as the broadcast industry, where you have big markets, small markets, radio, and TV, is a challenge. From where I sit, he’s doing a great job staying true to our business and navigating technological changes while keeping an eye on the future and what is best for the industry. I have full confidence in his ability to communicate the importance of broadcasting’s agenda to Congress and the FCC.

In addition, he and his team have done a terrific job advocating for local radio stations and their listeners. I look forward to continuing to work with Gordon and his team on these and other important initiatives.

Broadcasting seems to be the darling of Wall Street these days. How do you account for the remarkable surge in stock prices over the last year or so?

There are a number of factors at play, but as I’ve been saying for years, this is the golden age for content companies that create and own the best programming. Wall Street also recognizes that we are just beginning to find new ways to monetize our programming on new and emerging platforms. As the distribution landscape continues to grow, those of us who have the best content win. As has been proven time and time again, broadcasting remains the best way to launch content, so owning the content as well is a winning combination.

What’s your take on new FCC Chairman Tom Wheeler?

Chairman Wheeler has tackled a number of significant issues in his first months on the job. There are some in the broadcast industry who are concerned about the direction the chairman is taking. While those concerns are understandable, I do appreciate the perspective he brings to the FCC — that of a businessperson who understands the need for regulatory certainty. As he and his colleagues at the FCC address many issues, including the important and complex spectrum auctions and mergers, I look forward to continuing discussions with him about the importance of a free over-the-air broadcast system and the value that the CBS Television Network and CBS stations provide to communities day in and day out.

As you noted, the FCC is charged with implementing legislation that allows broadcasters to voluntarily sell spectrum and get out of the business. Is CBS planning to participate in the incentive auctions?

CBS is not planning to participate in the auction. We do, however, want to make sure that once the auction is completed and our stations are repacked, that the coverage area we had before is the same coverage we have after. Our viewers expect nothing less.

How’s the CBS relationship with its affiliates? Is that a partnership that still works in a world of Netflix and Hulu?

We absolutely believe in the CBS affiliate model. A strong affiliate body helps CBS, and vice versa. The success of the CBS Television Network has been good for our affiliates, and we’ve had a partnership that has grown over the years. The arrival of new distribution outlets and platforms opens up new discussions all the time, but we continue to have a terrific working relationship with our affiliates and look forward to growing our partnership.

You recently won the bidding for eight Thursday-night NFL football games. Tell us about this process and how you might rearrange your primetime schedule to accommodate the games.

We submitted a very responsible bid that was greatly helped by our position as the number one network in America and the best possible platform to grow the NFL’s Thursday-night audience. As I’ve said before, this deal wasn’t about the money we offered, it was about the partnership. CBS will now have 32 hours of additional NFL programming to strengthen our schedule across the week, and we gain the greatest promotional platform in the business to launch our fall season. Some of our Thursday-night shows will launch later in the season, and others will move to another night of the week, where they will grow the night’s ratings. We’ll have more original programming on throughout the year with fewer repeats.

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Measuring TV Tuning On Tablets, Smartphones

By Pat Liguori, COLTAM Chair and ABC SVP/Research & Electronic Measurement

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his fall, Nielsen will begin to measure TV tuning on tablets and smartphones in both its NPM and LPM samples. The industry has been thirsting for this, and, finally, it’s here and you’re ready! Good news, right?

Well, maybe. Only if certain criteria are met will tablet and smartphone tuning be credited to Nielsen’s traditional TV ratings. So what are those criteria, and how difficult can it be to satisfy them?

First, the content must carry Nielsen’s new watermarks so it can be identified and attributed to the correct station or network.

Second, content viewed on tablets or smartphones must be identical to that which airs on a station’s or network’s primary feed for tuning to be credited to ratings. For a local station, that means 100 percent identical promos, ads, PSAs, and program material, both network and local.

For a network, only the national promos, ads, PSAs, and program material must be identical; local content is not part of the equation.

Not too burdensome, right? Your watermarks encoder is installed and you’ve obtained digital clearance for your program and commercial content. Let’s bring on the fall and begin to capture the mobile tuning we know is out there and for which we’ve yet to be compensated.

“Hallelujah!” you think, as visions of slightly higher Live Only ratings dance in your head. At last, people will be able to tune to a program in real time on a tablet or phone rather than having to wait until they’re home to view it on TV in playback mode, and that tuning will credit to your Live ratings.

Not so fast! There’s a wrinkle that gets in the way of those slightly higher Live Only ratings, and that wrinkle is how Nielsen defines “Live” tuning.

Currently, content viewed within 25 seconds of a program’s original linear telecast time is considered Live; anything later falls into the Live+ bucket. That becomes problematic when you factor in the time that exists between a telecast’s real-time linear start and when it hits a mobile device. In concept, this is similar to when multiple sets in your home are connected to different ancillary devices (games, STBs, DVRs) and simultaneously tuned to the same channel. That delay, generally just a few seconds, is what gives the audio a “stadium effect” echo (hello-lo-lo-lo.)

With mobile devices, however, that time difference is substantially greater and often ex-

set-top box with DVR capability Set B is SONY HD-TV with Cisco Explorer 4642HDC digital set-top box without DVR functionality. ** iPad 2 tuned via Fios WiFi to Fios TV streaming app: Set C is Sharp Aquos with Fios HD/DVR set-top box (unknown manufacturer). NS = not subscribed.

ceeds Nielsen’s 25-second Live criterion. Simply put: Tuning on tablets and smartphones has little or no chance of contributing to Live ratings.

Instead, it will go straight into the Live+ bucket.

The length of the time lag between linear “Live” and mobile “Live” is dependent upon several factors, including MSO/telco provider, device, and the method by which content is accessed.

On February 24, 2014, the following time delays were found to exist between “simultaneous” live streaming on an iPad and live tuning on an HD TV: Time Delay: Number of Seconds Source WABC-TV WCBS-TV WNBC-TV WNYW-TV ESPN HGTV BBC-HD

Set A* 32.7 39.7 33.4 38.9 29.3 20.1 20.5

Set B* 31.5 39.7 36.4 34.9 26.1 28.8 22.5

Set C** 38.0 34.1 36.1 40.5 35.8 31.7 NS

*iPad 2 tuned via Time Warner Cable WiFi to Time Warner Cable’s streaming app: Set A is LG HD-TV with Samsung SMT-H3272 digital

As surprising as the length of the delays is how variable the delays are across program providers. The same devices and means of access were used for each of the reviewed channels, yet there is a difference of 19.6 seconds in the length of delay between WCBS-TV (39.7) and HGTV (20.1) on Set A and 17.2 seconds between BBC-HD and WCBS-TV on Set B. The delay between Live linear and Live mobile affects all program providers, whether they be local or national, cable or broadcast.

There is a simple solution to this problem, and that is for Nielsen to redefine what constitutes Live tuning. This was done once before, when the original criterion of eight seconds was changed to the current 25 seconds. That change, similarly, came about because of a time delay caused by technology rather than by the user/ viewer.

In a recent meeting with the NAB’s COLTAM (Committee on Local Television Audience Measurement), Nielsen presented data that showed 92 percent of tuning falls within the current Live definition, while the rest occurs after 26 seconds. Further breakdown reveals 7 percent occurs after five minutes, and only 1 percent occurs between 26 and 300 seconds. Lest you think 1 percent hardly warrants a definition change, remember that tuning on tablets and smartphones is not currently measured by Nielsen.

Once those devices become measured, you should expect to see a technology-induced increase in that figure. Also, the percent breakdown above is based on Total Day; we don’t know how a daypart like Prime, where timeshifting is more prevalent, breaks down.

It is incumbent upon the industry to request that Nielsen change its Live definition. This can be accomplished by first capturing the delays that exist in your markets between linear Live and mobile Live tuning and forwarding that information to Nielsen. We must work together to determine a fair and reasonable criterion, somewhere between 26 and 300 seconds. Failure to act will only result in a technology-induced, less accurate representation of audience tuning behavior.

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Hey, Radio: It’s Not Me, It’s You Dear FM radio, Oh, how I loved thee. In 1980 you turned me on to The Clash’s “London Calling,” and I was changed forever. I remember walking down the street, boombox planted firmly on my right shoulder, volume at 9, cranking WMMR 93.3 and making sure anyone within a football-field distance could hear this new discovery that this great rock station turned me on to.

There were plenty of other moments. The Talking Heads’ remake of Al Green’s “Take Me to the River” just before that, and back in the early ’8os, I owed my discovery of local artists to Philadelphia FM stations. Bands like The Hooters, The A’s, and Schooly D never would have been known to a teenager who could not get into the club shows and didn’t have that luxurious thing called the Internet to discover these great acts.

Fast-forward to 2014, where we now have the Internet, thank goodness, as well as good ol’ commercial FM radio. Still huffin’ and puffin’ amid a bevy of music listening options. I imagine I am not alone in that I rarely use radio for discovery.

Radio for me has become nostalgic. Where else do I get to hear Howard Jones, Steely Dan, and The Eagles, besides maybe the outdoor patios of Colorado ski resorts? Sure, the Billboard top whatever is in full effect with most genres represented across the dial, but exciting discoveries? Hardly.

FM radio, for me, has become this big gorilla with broken flip-flops. Regurgitating a steady stream of producer-created music in high, medium, and light rotation. Zzzzzzzzz. OK, if my rental car does not have an iPod connection, Bluetooth, or satellite radio (becoming more and more rare these days), I’ll tune in, scan, and rock another “Hotel California” or the latest from Lady Gaga. Ugh. It’s not all bad, though. Inevitably I get turned on to something I didn’t know and really like.

This always happens below the 92.1 part of the dial, though. Never above it. Ever.

Well, who am I to be throwing a couple of pointers to the industry that raised me? First off, a very passionate music lover who just happens to have one of the great jobs in the world. I create music identities for brands. Selecting the coolest beats that engage customers and drive traffic not only to stores and restaurants but online, where they can take the music experience they love about their brand home with them.

Chipotle Mexican Grill is one of my clients, and the folks at RBR-TVBR thought it might be helpful to pass along some of the ways I put together their program, as we enjoy a pretty rapid following, not only for the food with integrity but for the playlist in stores and online, where over 900,000 people tune in every day.

While much of the structure for the Chipotle program is similar to radio programming, with dayparting, rotation levels, and frequent changes

to the program, that is where the similarities end.

When I first took the program over, Steve Ells, the genius founder and co-CEO of Chipotle, gave me only one guide in creating the soundtrack: Avoid what is currently being played on commercial radio. That may seem to be a risky proposition to most marketing directors and CEOs, as at first glance one might think creating a music program that will appeal to a broad age group from very different parts of our world would need to embrace the current pop charts, but Steve is far from typical.

To understand the program I created for Chipotle, we need to go back to the start, to borrow from the very successful Chipotle short film of the same name. Not only did commercial radio raise me, my father, a passionate music fan, had a large part in that musical influence sphere as well. Monthlong road trips every summer starting in the early ’70s, far before personal listening devices, had me in the back seat of a Ford LTD with little chance of escape from my father’s soundtrack, a vast collection of custom-curated mixed cassette tapes. Lucky for me, my Pops had mad skills in the area of good music. Ray Charles, Nat King Cole Trio, Nina Simone, Johnny Cash, and Frank Sinatra (the Capitol years) had me knee-deep in the school of amazing arrangements and songwriting. These road trips had me fall in love with these and many other artists I would never have been exposed to otherwise.

As I grew older, I had an openness to discovering artists from all different genres. Yes, Van Halen, AC/DC, and Led Zeppelin were prominent in my youth, but so were Miles Davis, Les McCann, Marvin Gaye, and Hank Williams.

My love for multiple genres and understanding of the emotional response that happens when some of these diverse artists are put together to make a patchwork quilt in a mix tape allowed me to see a whole new light in the curation of music.

Unknown to me at the time, the curating of those mix tapes for the past 30 years was the foundation for what is today the Chipotle music experience.

Beyond the B-Sides When selecting the artists and tracks for the program, I look for a couple of things. How does the track make me feel? While life is not always a bed of roses, I think it’s important to accentuate the positive whenever possible. Does the track hold up to the famous American Bandstand answer when Dick Clark posed the question, “What do you like about this song?” He usually heard in return, “It’s got a good beat and it’s easy to dance to.”

While I’m not creating a modern-day American Bandstand, I am looking for songs that will get toes tappin’, whether the customer is 5 or 50, and

By Christopher Golub Owner, Studio Orca www.studioorca.com twitter.com/orcastudio

all in between. Fela Kuti is never played on FM radio but is a frequent contributor to the Chipotle vibe.

I also never eliminate an artist from consideration, regardless of popularity. There are some wonderful cuts that have never made it out into the radio world from best-selling artists that excite listeners far more than their classic hits.

Elvis Presley had a little known track called “Crawfish” recorded as a duet in 1958 with the jazz singer Jean “Kitty” Bilbrew for the film King Creole. I featured this song in high rotation, and hands-down this track received the most e-mails from people around the world saying, “Who is this, I love it!”

A great example of how music is making a difference in Chipotle and providing another area for fans to further engage with a brand they love.

Architecture of Sound What makes the Chipotle music program work? Taking chances. Stepping outside the traditional norms to program exciting sounds that sound wonderful in the Chipotle environment.

Last year a journalist asked me in an interview if there were particular songs that don’t work in the Chipotle environment, to which I responded, yes, a number of them, many of which I love dearly, but the way they are recorded just doesn’t sound great with the various hard surfaces that make up a Chipotle restaurant.

The selection of tracks has to pass the “sound test,” a run-through of potential tracks, tested in a live Chipotle environment. While this part of the programming equation doesn’t really directly relate to the conversation about radio, it is important in the larger picture of curating the program.

What Can Radio Learn From the Chipotle Program?

I think the takeaway here is that the Chipotle program has broken rules and is not afraid to take chances with the selection of artists and genres, and the mixing of those to make up a fresh, exciting, and engaging program that works for the 18-25 demographic as well as any other demographic. In fact, I never use the word demographic except for articles like this. I never consider “what will work” for this or that group.

The program reflects the world we live in, and those people who choose food with integrity. I often liken it to a great big fruit salad, where grapes can live in harmony with grapefruit, bananas, and guava without having to be blended together in a smoothie. Each fruit stands on its own and sings its great solos while living in this wondrous place of different-tasting things. Except here the various fruits are Charlotte Gainsbourg, The Beastie Boys, and David Byrne.

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El Mandril Is Back, Bigger Than Ever

By Carl Marcucci

E

l Show Del El Mandril, hosted by Ricardo Sanchez, is back in L.A. in morning drive — and 40 other markets, via a partnership with Mexican Broadcaster Grupo Radio Centro and its Regional Mexican KXOS (Radio Centro 93.9 FM). In this Q&A Sanchez also discusses his last days at SBS’s KLAX-FM/L.A., which ended on a bad note over failed contract negotiations. Now he’s busy adding U.S. stations under a brand-new syndication deal with Premiere/Clear Channel Radio Networks and, very soon, jumping the southern border to expand into the Mexican market.

You spent a couple of months on the sidelines at SBS when negotiations with the company weren’t going well. Yet you showed up for work every day. How did you get through that difficult time, when you were number one in the market?

At the beginning, it was very hard, after they told me about the decision. They said, “You are going to go to the station, but you are not going to go to the studio. The only thing you are going to be able to do is just go to your office and stay put there while we decide what we are going to do with you.” That’s what I did. I went to the office and I stayed there with all my team.

Then, after a few days, it was so incredible to believe that they could take that position. They remained paying me, but at the end of November I started feeling sick. I have diabetes. I started feeling depressed. It really affected me a great deal. It was bad for me. I tried to be strong.

When I went to the doctors, they noticed it immediately. My blood pressure was very high. I had to start taking medications. Even up to today, I am still under medical treatment.

I understand that there are a lot of options for syndication coming to the table. But it looks like, for right now, you are self-syndicating. Why did you decide to go that route?

I’ve always been interested in expanding my show to different markets and across the country. We had to negotiate with SBS for a long time to get the rights to syndicate my show. Finally, we did it. I spent my own money to build it. Lots of money. We got all the way to 40 markets. And then Grupo Radio Centro came into the picture.

You don’t know how happy I was to meet them and to get all their support. It’s amazing. They are huge in Mexico. And then Premiere/Clear Channel Radio Networks called us because they were also interested in syndicating my show in

the U.S.A. Are you kidding? Rush Limbaugh, Ryan Seacrest, and me, Mandril? What an honor.

How does it feel to “return home” by adding affiliates in Mexico?

I feel very good to be back on the air. Listening to the audience, they tell me they were missing me. Many people tell me to go after the American Dream, and I have. This is fabulous in two ways. Now I can live the American Dream, and I also have a chance to achieve the Mexican dream, because many people can only come to America to achieve the American Dream, but many Mexicans also want to become somewhat important and be known in Mexico too after they come here. This is happening to me.

Have you changed your show at all, knowing you’re heard in two countries?

At this very moment, my show is still broadcast only in the States. But we are starting the process to open up some markets in Mexico. But I don’t foresee making too many changes to my show in order to get into Mexico. Actually, my show is a true reflection of our Mexican roots. I think people in Mexico are going to like it.

Tell us a bit about striving for success.

How do you identify with your audience?

One thing that I feel gives me the strength I have is that I come from the borderline of the lowest socioeconomic demographics. I have performed all sorts of awkward jobs. When I talk to my audience, I talk like them — because I have been performing jobs like a painter, a driver, a janitor. And those are the jobs that the people must do in order to survive. When they are hungry, they have to work in anything. Just like I had to do.

I’ve been living like this since I was 12 years old. That’s something I have experienced because life had put me in a situation where I had to go around trying to survive. I learned a lot about different cultures in Mexico. So when I talk on the radio, they identify with my show because I am talking about things that they know.

Some people tell me, “Oh, you’ve had a really exciting life.” Well, it is, but it’s essentially because I had to survive. I had to move around for jobs.

Right now I have a production company called Mandril Productions. I have seven people on the payroll for my show. So I need to invest in order to make a good show. If I invest and have good results, then I can re-invest. I have four kids, and two of them work with me. The older one works in production, the other one is in charge of promotions and marketing. This is a popular show, but it is also a family-oriented show.

For example, I went to an event and a man comes to me and tells me he’s losing his sight. He works in a factory and tells me 60 people there listen to my show. He says, “Now that I’m turning blind, they don’t allow me to work. Now they don’t miss me, but they miss the radio that I had there that enabled them to listen to your show. When I had the radio on, it was because I was the supervisor.

But don’t worry, they have since requested from the owner to be able to use headphones.”

That’s 60 people listening to me. I want to multiply that thousands of times more. The satisfaction that I get also comes from people on the street that approach me and say, “Finally, I’ve found you again.” These are the stories that make me proud.

Tell us about your audience. Who are they?

My demographics are 18-49 men and women.

Much of my audience wishes to go back to their country to visit their parents, their families.

They have a lot of problems like everybody does, but somehow while they are listening to us, they are able to forget about their problems.

What’s next for you and the show?

We are going to keep working hard. I hope hard work will allow us to go back to the number one position. But of the utmost importance for me is to turn that success into a positive effort to help out our community. I have a nonprofit organization in Los Angeles. I fund 90 percent of it with my own funds. Our focus is to help single mothers, providing them with food and any kind of help they need and we can provide. I am a religious person, I am a believer. I want to give back some of what God has given to us.

Tell us why your show is such a success.

You need to be in tune with the audience, to have the audience recommend you, and then you become like a “booster energy drink” for them.

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SAVETHEDATE JUNE 4 & 5, 2014 13

WWW.RADIOINKCONVERGENCE.COM

SANTA CLARA CONVENTION CENTER Sa n t a Cla r a | S i l i c o n V a l l e y , CA

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Elliot Evers: Managing Director, Media Venture Partners

By Carl Marcucci

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edia Venture Partners has completed more than $16 billion in transactions in the past 27 years and has its finger on the pulse of M&A activity. We asked Elliot about factors influencing the trading and lending arena right now; the broadcast trading marketplace; current trending multiples; threats from Congress; the big deals of 2013; and major issues affecting valuations.

It’s true that JSAs and other such structures are ways around current ownership rules, but the more pertinent point is those rules are antiquated and need to be revised to reflect the current and future media landscape. But the TV rules have not been changed to take into account the realities of the TV business today. We hope Chairman Wheeler takes the time to realize that the direction in which he is heading is not productive.

With the retransmission consent issues being focused on in Congress and in the media, how might new rules against blackouts affect TV station valuations?

Political, retrans, and the ability to consolidate positions in a market (through a JSA or other structure) have been the primary engines driving valuations. We think that any prohibition on blackouts has a slim chance of passage — at least, we hope Congress stays out of what is a private contractual dispute. Although blackouts are certainly irritating for the consumer, they are relatively rare, as both the content providers and the distributors recognize an interruption in service is bad for everyone in the TV industry. However, we think that even if legislation or regulation is implemented, it would have little impact on the overall trend towards increasing retrans fees.

The radio trading marketplace was fairly flat in 2013. Why is that, and what do you foresee in 2014 for radio?

We are coming to the end of a six-year workout cycle. Prior to that, from the late 1990s until the mid-2000s, we saw massive consolidation fueled by leverage. And then the music kind of stopped on the revenue front and we had a lot of lenders and private equity sponsors that found themselves in some very tough situations. For some time now, they have been asking themselves (and us): “OK, what are these assets going to sell for if we hold on to them for three years, four years, or five years?” They have now come to the conclusion that there really is no major short-term catalyst for revenue growth in the radio industry, and it is time to accept multiples in the 6-times neighborhood.

There is a nice, steady drumbeat of deals.

When there was a disconnect between seller expectations and buyer willingness, deals didn’t happen. Now that expectations are more aligned, deals are happening. So we would say not “flat.” We like the word “consistent.”

If Aereo wins in the Supreme Court against the broadcasters and there’s a domino effect of other companies and MVPDs pirating broadcast content, does that affect the revenue model of TV broadcasting and the valuations of stations?

Although we think of Aereo as a bit of a science experiment, with limited channel choices and reports of poor picture quality, a Supreme Court decision that, in effect, removed copyright protection for broadcasters would be an extremely adverse thing for the industry. I am a lawyer by training, and I find it hard to believe that the court will allow Aereo to successfully argue that a rapidly growing distribution scheme that now serves thousands of customers is not a “public performance” as that term is used in the copyright law. In my view, this is Napster revisited: Those that produce the intellectual property are entitled to be compensated by those that distribute it. Having said that, if Aereo were to prevail, it would be very difficult to quantify the impact on TV valuations. Much of the economic loss would be felt at the network level, not at the local station level.

We saw a lot of big TV transactions go down in 2013 — Gannett/Belo, Tribune/ Local, etc. Do you foresee the trend continuing this year? And how might it affect revenues as things shake out?

There are still a few large deals in the pipeline, but the list is definitely getting shorter. The past two years saw a perfect storm: low interest rates, growing political dollars, opportunities for inmarket consolidation, and larger companies having favorable retrans deals. If, for example, Sinclair or Nexstar buys a station or stations at an announced cash flow multiple of 8-, 9-, or 10-times, their “Most Favored Nation” retrans deals allow them to fold those assets into their operation at 5- or 6-times cash flow, making them immediately accretive on Day 1. That advantage is still very much in play, and we think political is going to be bigger than most analysts predict — but these two drivers are not really catalysts for the M&A market unless there are sellers out there.

We are very distressed by both recent comments from FCC Chairman Tom Wheeler and the increasing involvement of the DOJ in analyzing TV deals that incorporate JSAs or SSAs. These arrangements are vital to the continued health and viability of our industry, particularly in smaller markets.

The present rules are, in our view, arbitrary and capricious and really not appropriate for today’s media landscape. Unfortunately, we think all the mega-deals announced during the past three years have made the political winds blow against that, as the body politic thinks Rupert Murdoch or CBS now owns everything.

If, as has been suggested, Chairman Wheeler’s real goal in proposing to make JSAs attributable is to force more stations to tender in the reverse auctions, we like LIN Media’s idea: Allow JSAs to continue, but have the licensee with such a JSA agree to tender the second (or third) station in the auctions. This could be a smart way to get better participation in the auctions, and, presumably, the operator would then move the affiliation to a D2 channel (particularly if we could get must-carry for that second channel!).

Do you see a problem coming for the TV broadcast industry with Wheeler’s latest moves on eliminating JSAs?

Your thoughts on the incentive auctions?

First, we have little doubt that the spectrum auctions will happen. Congress wants the money, and it is clear this is priority number one for Chairman Wheeler. The 2015 target date is possible, but there are many factors that could lead to further delay. We should know more when the Report and Order comes out this spring.

What advice can you give for radio and TV station owners looking to sell right now?

If you are a radio owner considering selling now, our advice is to be realistic. If you are expecting 8-times, it is likely not going to happen unless there are some extenuating circumstances. If you understand that the market is 6 to 6.5-times for a cash-flowing asset, then there are plenty of buyers for your stations. Frankly, we don’t really see much on the horizon that could be a catalyst for multiples going up, but we also do not think there is much to drive multiples down, except interest rates creeping up, which could very well happen as the Fed eases its QE bond-buying program.

If you are a TV station owner, this remains a great time to sell, presuming some positive resolution of the JSA/ownership issue.

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FIN E-Cigs Likes Radio

By Carl Marcucci

F

IN Branding Group, one of the fastestgrowing brands of electronic cigarettes, recently launched a national radio campaign to support its retailer partners. The company spent just under $3 million on a mixture of traditional and streaming radio ads that ran in all major U.S. markets. FIN products are currently carried in over 45,000 stores nationwide including Wal-Mart, Walgreens, 7-Eleven, Rite Aid, Circle K, Winn Dixie, Sam’s Club, Hudson News and Sunoco. We spoke to FIN SVP/Sales Jimmy Marston about what’s next and what the company likes about radio.

Tell us about your role at FIN Branding Group.

As senior VP of sales, I manage our regional sales directors as well as the national account directors, assisting with customer calls and account management, product and promotional activity, and opening new lines of distribution through retailers and distributors. I also help manage the lines of communication between our marketing, supply-chain, legal, and finance departments to ensure all sales activities follow the company’s overall strategy.

Why did you choose radio for the latest campaign? What was the mix of streaming audio and broadcast radio?

Our goal was to build momentum going into the holiday season. It’s the busiest time of year for retailers, and we wanted to drive consumer traffic to stores. So many people are busy traveling and shopping during the month of December, and we thought that radio was an effective approach to reaching customers on the go. We chose an 80/20 mix of traditional vs. streaming radio, which we have found to be an effective blend.

Tell us about the creative and overall media buy. What target audience were you looking to reach?

Our creative is rather simple — it speaks to our target consumers from a familiar point of view, emphasizing the benefits of FIN, such as the convenience to use them in most places you can’t use a traditional cigarette. Our target audience focuses on existing adult smokers who are 25 and older.

How did you measure the effectiveness of the campaign?

The feedback we received on the campaign was great! The ad was well received by both our retailers and customers. We feel strongly that the campaign helped us close another record-setting year in 2013. For the month of December, we finished +104 percent vs. prior year, giving us great momentum heading into 2014.

What other media does FIN use, or plan to use?

In addition to our radio advertising, we have featured our “Rewrite the Rules” campaign in both print and digital advertising, along with television commercials. For this campaign, the focus was on depicting timeless images, giving the FIN brand an iconic feel – like it has been around forever. We received positive exposure for our company and for the category in general.

For 2014, we are continuing the success of the “Rewrite the Rules” campaign, using many of the same successful images and taglines — along with a number of additional new programs and media venues to complement our traditional approach.

What other marketing and promotions have you done?

In the summer of 2013, we launched the FIN Café in Pershing Square, a high-traffic area in New York City just outside of Grand Central Station, providing us with an opportunity to directly interact with consumers. We featured branded elements such as staff apparel, umbrellas, and menu items (FIN-tini and FIN Burger). The signage created a “billboard effect” in an area where they are traditionally not allowed.

In the fall of last year, the company participated in multiple NASCAR Sprint Cup Series events, where we set up product booths in the midway for each race. This was a great opportunity for

FIN to connect face-to-face with our customers about our products, while offering free samples for adult smokers.

In addition to these efforts, we also take pride in providing robust point-of-sale marketing materials and other merchandising incentives to ensure success for retailers. We feel that pointof-purchase and in-store marketing are crucial to building our brand integrity and gaining consumer recognition.

Did you use a media monitoring service to make sure the spots ran as purchased?

We worked with the professional team at the agency RSQ to assist us in monitoring the spots.

Tell us about the e-cig marketplace. Is it very competitive?

2013 sales of e-cigarettes totaled $1.8 billion, up from just $500 million in 2012 [according to Wells Fargo]. With over 200 players currently in the field, the e-cigarette marketplace is quite fragmented. The industry is still in the nascent stages, but there are a number of established players already, including FIN, and the category still has tremendous potential. While there has been an increasing presence of big tobacco in the space, there is still plenty of room for FIN and other strong independents.

How did you achieve such a high level of distribution across so many retailers?

In addition to serving as chairman and CEO of FIN, Elliot Maisel has overseen operations at Gulf Distributing Holdings, a leading wholesale beverage-distribution company, since 1985. During his tenure at Gulf, Elliot has built brands in his market and established a significant network of relationships with major beverage suppliers and retailers. We have leveraged his branding and marketing experience and relationships to create a solid foundation for FIN’s retail footprint. This has been tremendously helpful in crafting a strategic roadmap for FIN’s long-term success.

The strength of this approach is evidenced by what we have been able to accomplish as a company in a short period of time: FIN products are currently sold in over 45,000 stores in all 50 states, including Wal-Mart, Walgreens, and 7-Eleven.

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