RBR+TVBR 2015 Fall Special Report

S

E

P

I

3

N

T

S

I

D

E

M

B

E

R

2

0

1

5

E

Pat McGee: The Race for Political Advertising Dollars With $5 billion predicted to be in play, Katz Radio Group SVP/Political Strategies McGee discusses how radio can get the windfall it deserves.

4

NextRadio and How to Make It Work for You

6

John R. Brooks: Seven Lessons Learned by a Former Radio CFO With 20 years in the job, John R. Brooks shares the most important things a CFO needs to know

7

RBR 2015 Annual Radio Regulation Retrospective Gregg P. Skall of Womble Carlyle Sandridge & Rice LLP sums up the past year’s new regulations

10

The Greatest Radio Programmatic Show On Earth Our cast of industry kingpins boils down programmatic, how it works, and what it really means for radio

12 14

Dissecting the Digital Imperative Station Trading 2015: Midyear Thoughts

15

Keeping Radio Strong for Our Communities

15

GAO Study Points to Airplay Value

The Focus, Urgency, and Passion of Ginny Morris

By Dave Seyler

Ginny Morris is the CEO of Hubbard Radio. She was kind enough to answer a few questions for us.

How did you get your start in the business?

Through the birth canal! I have the great fortune to work in a third-generation family business that loves broadcasting.

How is business looking for the remainder of 2015 and in 2016?

On balance, business is pretty good. Not the best, not the worst. We still hope to finish the year pretty strong.

Any plans to attract political dollars, especially since the presidential campaign has already gotten started?

While we obviously welcome political business and will work for those dollars that come the way of radio, we have not invested in a directed effort to do so. I’d say we are hopeful, but we aren't counting on anything more than what we have gotten historically. I champion the efforts of some larger companies to really target those dollars aggressively from a national perspective, but we aren’t big enough to fund our own effort in this regard.

The acquisition of the Omni Minnesota group late last year was an interesting move.

What was the thinking behind it?

All of the stations in the Omni group are excellent brands and have a long heritage of success and service to their communities. They are also in our backyard. It's a perfect marriage of our love of local broadcasting and our love of Minnesota. We are lucky enough to have Dan Seeman, who runs our Twin Cities cluster, working with those markets on further under-

S EP TEM B ER 2015 · RB R .C O M · 1

RBR september 2015.indd 1

9/14/2015 1:44:51 PM

Untitled-9 1

9/11/15 9:04 AM

standing how the bigger clusters can learn from them and vice versa.

I would expect that as much or more learning will come from the smaller markets to the larger as opposed to the other way around, but I do know that the two groups can learn from each other’s successes as well as their failures.

What are the major differences between running large-market stations and these smaller markets?

Fewer or more zeros, depending on your perspective — it's all about serving your local communities and providing the listener with content that is relevant and entertaining and our clients with ideas that will work for them.

Any plans for further acquisitions?

We look at things all the time but have no desire to get bigger simply to get bigger. If we can get better and get bigger, great! If not, we will continue to simply get better.

What is Hubbard Radio's digital strategy? How do you attract users, and how do you monetize it?

Eight percent of our billing in 2014 was associated with digital business. In 2015, we expect it to be 10.

Let's talk about 2060 Digital: What is it doing for stations?

2060 Digital was started by our former market manager in Cincinnati, Jim Bryant. He started a digital agency in Cincinnati to provide digital solutions for clients who were not necessarily radio clients. He and his team had such success that within the same week, Jim, Drew Horowitz, our COO, and Dave Bestler, our CFO, all suggested that we ask Jim to try and scale it across the entire company.

We just finished deploying 2060 in the last of our larger markets and are experiencing good and steady progress. The feedback is very encouraging and exciting.

What is 2060 Digital doing for clients, and is the business catching on?

2060 Digital offers our business partners website and mobile site development, SEO, SEM, social media management, demographic-targeted display, retargeting, e-mail management, inbound marketing, and more. Jim Bryant is very much about developing a long-term, resultsoriented relationship with his clients, and that seems to be paying off.

I've heard some really great stories about clients’ businesses growing as a result of doing business with 2060, and, of course, to help our clients grow their businesses — that's the best way we can think of to grow our business.

Hubbard has made a significant investment in PodcastOne — what is the thinking behind this, and how quickly do you think it will impact your bottom line?

We made a significant investment in PodcastOne, the largest player in the space, because we think podcasts are here to stay and will continue to be a greater and greater part of how the public gets its audio entertainment. And besides, if you had a chance to do business with Norm Pattiz, why wouldn’t you? Norm, as we all know, is a very bright and passionate visionary who makes things happen. His partner, Kit Gray, is also terrific — the company has a great leader out front and a very solid bench. As with everything that we do, we expect this investment to ultimately impact our bottom line, but for now it has enabled PodcastOne to accelerate its plans for growth and further dominance in the space.

What is the balance on decision-making? What sorts of things are decided at the local level, and where does Hubbard HQ fit in?

Most day-to-day operational decisions are made in the markets themselves, with little or no consultation with anyone on the corporate team. Music and personnel decisions are always made locally, sometimes with input from someone on the corporate team, sometimes not. If something on the scale of a format change is contemplated due to a shift in the competitive landscape, the corporate team will be very engaged in discussions with the team that is closest to the opportunity, but at the end of the day, the market manager makes those decisions.

Everyone is expected to do perceptual market and music research on a very regular schedule.

They also know that we believe in marketing, and that they need to be investing in marketing their brands. As to how to market? That’s up to them.

On the scaling of 2060 Digital, nobody got a vote, but the team was excited to get started and was candid with their positive and constructive feedback.

Are there particular strategies in place to maximize Hubbard's local presence in its markets?

We are very fortunate to have a lot of local talent that is very successful. We are always aggressively looking for more people who can connect with an audience and set us apart from not only our local radio competitors, but also from the ever-growing field of streaming services. We believe that it is imperative to our future that listeners come to us and love us for more than just our music.

For music stations, the right music is critically important, but the right personalities combined with the right music — that's our strategy for long-term and sustaining success.

How many ways does Hubbard have to connect a client with its audience?

Just about all the ways that consumers connect with brands these days: over the air, online, on the phone, on Facebook and Twitter, and just about anything else you can think of.

Hubbard's guiding principles are focus, urgency, and passion. Can you describe how that might apply to an average workday at a Hubbard station?

Those three words describe Drew Horowitz to a T. As the president and COO of the company, he makes sure that we are urgently focused on the right things and that the people we have in the markets are passionate about their business and the communities they live in and serve.

The Race for Political Advertising Dollars

By Pat McGee, SVP of Political Strategies, Katz Radio Group While it’s way too early to guess the winners, here’s one prediction about the 2016 national election that’s certain to prove correct: More money will be raised and spent — by political campaigns, by super PACs, and by outside groups — than ever before. Much more.

Some observers have projected political spending will surpass $5 billion, more than double the last national election. And with most of it spent on advertising, you can also be sure political advertising revenues — television, radio, and digital — will set new records as well.

Yet even in this era of campaign-finance abundance, campaigns must still spend their resources most effectively.

In the fight for political dollars, radio makes a strong case as the most influential and cost-efficient medium for campaign advertising.

At Katz Radio Group, we represent more than 4,000 radio stations reaching 240 million listeners a week. As the largest radio representation firm in the nation, Katz is focused on solving marketing needs for advertisers, using the unparalleled reach and connection of radio. We have spent the last several election cycles building relationships with key political decisionmakers, telling radio’s impressive ROI story — loudly and frequently. Now, armed with new research, we have been able to identify key findings that resonate with political advertisers to even better illustrate radio’s power.

Radio’s reach has never been stronger. In fact, 93 percent of U.S. adults listen to the radio weekly, which is more than use the Internet, television, or smartphones.

The typical American voter spends more than 3.5 hours a day listening to the radio, and it is by far the dominant medium used away from home during the day — and many radio listeners tune in regularly to highly popular political talk shows, marking them as the kind of high-propensity voters who are most likely to respond to political advertising.

Radio advertising can also have a decisive impact with low-turnout voters and the all-important swing voters — those voters who haven’t yet made a decision or who are willing to change their minds. A recent poll by Vox Populi found: * More than 75 percent of swing voters listen to radio most or all of the time that they’re in their cars. * Swing voters spend 10 percent more time listening to radio than do other voters. * Swing voters are 40 percent more likely to find political radio ads more credible than online advertising. * More than 60 percent of swing voters think radio ads are a smart way for people to reach them.

About three-quarters of low-turnout Democrat and Republican voters regularly listen to radio, most of them to FM. Registered voters across the political spectrum find radio ads more credible than Internet ads, but that is especially true for low-turnout voters, who consider radio ads more believable by a margin of 62-38. Most people spend 60 percent of their listening time with their favorite station and develop a “trusted friend” connection.

What really makes political advertising on the radio so efficient and impactful is the propensity of radio listeners to pay attention to ads, and radio's ability to deliver more complex messages with greater reach and frequency than TV or digital can.

Research by Media Monitors, Nielsen, and Coleman S EP TEM B ER 2015 · RB R .C O M · 3

RBR september 2015.indd 3

9/14/2015 1:51:12 PM

Insights that examined listener behavior during 18 million commercial breaks observed that 96 percent of radio listeners were exposed to ads during commercial breaks. That’s an astonishing degree of attention that TV or digital could never match.

Radio allows for more nuance and sophistication in campaign messaging. The context of radio ads can be more elaborate and finely calibrated, and the central message can be emphasized more in radio advertising’s 60-second format, compared to 30-second TV spots. And, of course, the lower cost of radio advertising allows campaigns to air commercials many more times, reaching diverse and attentive audiences, and targeting voters with a variety of interests and political intensity levels.

Let’s take a look at how radio impacted some key races in 2014. In the VA-7 Republican primary between then-Majority Whip Eric Cantor and Dave Brat, radio personalities such as Laura Ingraham played a major role. As Politico reported, “Brat’s surprise victory is a powerful reminder, as if any were needed, of the immense influence talk radio has over conservative politics — it was not only Ingraham boosting Brat, but also Glenn Beck and Mark Levin bringing their considerable influence with the right to bear as well.”

Radio also played a key role in moving the numbers in the hotly contested Alaska race. Candidate Dan Sullivan had low name ID. With an early and steady radio campaign during the first six months of 2014, Sullivan increased his name recognition by 40 percent and saw his favorability rise by 12 points. The steady rumble of radio continued through the November election and lifted Sullivan to the United States Senate, defeating a wellfunded and well-known Democratic incumbent.

In the 2016 elections, with such a large field of candidates, many of whom are unknown to the general public, advertisement spending will be at an all-time high. The airwaves in Iowa, New Hampshire, and the other early primary states will be flooded with political ads. Regardless, campaigns are still looking for new ways to make their budgets go further. For media and new technology tools, the stakes are high to compete for those political advertising dollars. The good news for radio: There is more excitement today around audio as an advertising medium than ever before. Radio remains the most cost-effective way to reach voters of all political stripes and levels of interest. In the contest to spend campaign resources smartly and yield the most benefits at the lowest cost, radio is the obvious winner.

NextRadio, and How to Make it Work for You

By Dave Seyler We’ve been hearing a lot about NextRadio for some time, usually in the form of periodic updates on its growth and penetration. Then came the stunning news of the AT&T deal, followed soon by T-Mobile’s getting on board. It will all provide a major boost to FM on cell.

We wanted to know more about what it’s like to be an active NextRadio station. TagStation’s Maura Kautsky was more than happy to tell us.

What investments in hardware and software are necessary to get a viable NextRadio presence up and running?

TagStation powers the NextRadio experience by displaying enhanced content (images, text, and various interactions) in sync with the broadcast audio. No new hardware is required at the station to send information to TagStation. For a onetime setup fee of $400 and a $35-per-month subscription, radio stations can connect to TagStation through software-based middleware. This provides a rich, engaging experience when their listeners tune to their station in NextRadio. Provided a station uses one of our supported automation systems, there are no additional hardware or software costs. (For a list of supported automation systems, visit https://tagstation. zendesk.com/hc/en-us/articles/200849835.)

What are the staffing considerations for making the most of NextRadio? Is this something that can be set up once and then works automatically, or is it a situation where more attention can breed better results?

The first step is to get all of the radio staff informed about what and how NextRadio works. Setup is done by engineering and can be done in less than a day. Engineers can pass off configuration to programming.

A story from Hubbard’s Paul Webber explains his real-life experience and time commitment for ongoing management: http://rbr.com/succeeding-with-nextradio-a-first-person-account/.

Best practice is a team effort — promotions, programming, design, and sales all working together to maximize content and revenue opportunities. It can be as much or as little work as the station sees fit — looking for songs that need to be matched can be done daily or once a week, promotions can be daily, weekly, monthly, etc., ads are sold, and if they don’t change, continue to run as long as the advertiser pays for service. We know that content increases listening on average by three minutes, or 14.3 percent, so the more content and interactivity, the better the results. The average interactive response rate on enhanced ads can run up to 5 percent.

When some staff attention is required, what’s the best approach?

Establish guidelines on who is doing what. For example, programming can manage setting up your default image, match songs as needed on music formats, or build rotating schedules for news/talk/sports formats, then update promotions to utilize interactivity features with the radio station inside NextRadio — as in like, call, or share on social. The design team can automatically create a NextRadio image for all promotions. Sales can sell enhanced ads and work with a sales coordinator and traffic to input artwork.

What are some key marketing hooks to get listeners interested in the services?

Uses three times less battery and 10 times less data. Live, local radio on your smartphone.

In what ways can the service be used to engage listeners?

Listeners can now see and hear live, local FM radio on their smartphones. The LiveGuide allows them to see what song or talk show is airing and choose what they want to listen to. They can easily listen to their local FM station on the go, not just in their car.

4 · RB R .C O M · S EP TEM B ER 2015

RBR september 2015.indd 4

9/10/2015 3:02:20 PM

When it’s all on the line, you need someone who delivers.

Telecom Media IT Infrastructure Renewable Energy •

•

•

www.mediaventurepartners.com

Securities and Advisory Services are offered through Financial Telesis Inc., Member SIPC/FINRA.

RI_31.indd 1

9/11/15 9:31 AM

Seven Lessons Learned by a Former Radio CFO

By John R. Brooks For the last 20 years, I’ve been a CFO or CFO consultant to several radio groups, ranging from startups to midsized multi-market operators. Each situation was a challenge for varying reasons, and each was a learning experience — mainly from mistakes made. In this piece I’ll share what I’ve learned and would do differently today, in an effort to help others avoid the pitfalls I’ve encountered.

In my view, there are two kinds of CFOs: accountant CFOs and finance CFOs. Then there are the rare hybrids who are strong in both areas. If your company is fairly static, without grand plans for expansion, perhaps a strong accountant CFO is right for you, someone who can manage the day-to-day financial operations, collect the money, get bills paid on time, and generate good financial reports — a necessity. For a more dynamic company bent on growth through acquisitions, a finance CFO might be more suitable, someone who knows the ins and out of M&A and can manage relationships with the financial community, whether the company is private or public. I was a finance CFO, and that forms the perspective of my lessons learned below.

1. Make sure you have abundant cash and available liquidity to protect the company from cash crises. I’ve been dropped into assignments where I’ve floundered from crisis to crisis, usually involving liquidity. So now my very first question is, “How much cash do we have in the bank, how many bank accounts do we have, how do we move money around, and do we have an available line of credit?”

If you have a line of credit, is there a borrowing base contingent on covenant compliance, or is it based on a percentage of accounts receivable (which is unusual in this business)? Can you access the entire line? What is your collection pattern? Are agencies or others slow payers?

Plan for your seasonal low point — usually Q2, when you have interest and principal payments due but are collecting Q1 receivables. If you are returning to the well with your investors and lenders, don’t be bashful about asking for as much liquidity as you can manage, since you have limited chances at the money altar.

2. Understand what the company owes its creditors and vendors. I’ve found myself blindsided not by lender obligations, but by vendor obligations that have been deferred for lack of cash, buried somewhere in the A/P aging report (assuming it’s correct) — music license fees, professional fees, the accommodating billboard operator who gave you net 30 (and you still don’t have the cash). You may have to negotiate short payment extensions, something that vendors loathe, as they aren’t in the lending business. This reinforces the importance of point number one.

3. Get to know your lenders and investors intimately. Review your loan agreement and covenants to see how much cushion you have. Another

pet peeve of mine is discovering in a new assignment that the company is less than a heartbeat away from covenant default or, worse, payment default. In a perfect world, we want a lot of latitude to miss budget without landing in the penalty box, a very expensive proposition, considering default interest, lender, and legal fees. And that’s the bestcase scenario.

If your lender wants out, a covenant default means they have their ticket. But if your company signed up for a leveraged deal, then the lender will insist on a choke chain — i.e., don’t miss budget. That’s the bargain. So make friends with your capital partners, because they count on you to be their financial steward, and chances are generally good that you’ll need to tap that goodwill should the company stumble.

4. Get to know your staff at the market level. It’s crucial that you have good relationships and communication channels with your market and business managers. Make a point of visiting them regularly, and make them feel valued, especially as the trend in radio has been to supersize, leaving the market staff feeling neglected. They are the eyes and ears on the ground.

What are the challenges? What accounts are problematic? What local competitors are causing heartburn? You may not have the magic solution (that should be the COO’s or CEO’s job), but show that you care. People like to be appreciated.

5. Reports. A mundane subject on its face, but having accurate information from the markets on weekly sales pacings, collections, and variance to budget are crucial. This underscores the importance of number four above, as your local market staff knows the ground game far better than you do.

6. Become the financial cheerleader for your company. Whether the company is static or dynamic, any CFO should take on the role of financial cheerleader, befriending possible new sources of capital. This is especially important if you have a good story to tell. Lenders and investors are always looking for new investment opportunities.

Make your company visible by joining professional organizations, writing pieces for trade publications, and participating in panel discussions at trade events. It’s all about promotion and making sure the market knows who you are.

7. For startups only: Plan for the worst, and never borrow money without cash flow, even if it’s foisted upon you. You may have a foolproof business plan to generate cash flow immediately, such as leasing out your facility in a time brokerage agreement. Everything pencils out, and you cut back the projections just to be on the safe side. Even the downside scenario demonstrates that you can cover the debt service with lease revenue. Perhaps. But if you’re wrong (as I have been), you’re sunk. Plan for a massive liquidity war chest because, even in the best of circumstances, it’s almost impossible to predict the early performance of a startup with any degree of accuracy, and you often end up being wrong.

For seasoned CFOs, these may be “no duh” pointers. There are many radio groups that have the good fortune (or dumb luck) of being well structured and fortified from the outset, but many aren’t, even as they’ve done many other things right. These lessons learned are aimed at those companies.

In general, what are the best ways to monetize NextRadio?

The platform was built for radio stations to sell enhanced ads with their on-air radio spots. More importantly, it provides broadcasters and advertisers a form of real-time and consumer interactive measurement that is more in line with the expectations of digital marketers.

At what point can NextRadio be seen as a viable revenue stream?

It can easily ramp up at the station level to become a viable revenue stream. We are currently doing a national beta test with Allstate, and we see the first quarter of 2016 as the timing for national NextRadio buys to occur and stations starting to generate a revenue stream from national placements. We are already seeing some local radio stations including visual enhancements for their local advertisers to be displayed inside NextRadio.

Does the platform offer benefits to clients that are not possible over the air?

It allows consumers to see and hear FM radio and brings bring a station to life on a smartphone with album artwork, promotions, and listener interactions.

It helps make on-air programming more accessible and engaging. It allows stations to create and provide relevant content in sync with their broadcast to drive engagement and listener retention. Plus, it allows broadcasters to generate incremental revenue by selling enhanced ads that complement the on-air spots with interactive content.

A key argument in support of FM on cell is its value as a public-safety device. What should a station do to back up this claim when an emergency does actually strike?

Continue to air their shows, and share emergency updates if cell towers go down. Consumers will be able to hear their station through their FM receiver in their phones if they have the NextRadio app installed, and a “Basic Tuner” option is available inside NextRadio that can be used by the consumer when cell towers are completely down. This function essentially makes the smartphone a standalone FM radio.

Should stations that lack the funds and staffing to be a source of public information during an emergency honor their commitment to the public interest and refer listeners to stations that are on the story?

This is an individual station decision. However, every radio station in America can be tuned to through the app, so the consumer can choose.

How important is it for stations to make local elected officials aware of the service? Should stations coordinate in advance with local government and first responders?

It’s very important to continue to advocate for mandating the FM chip be activated to provide consumers with the necessary safety updates if needed.

6 · RB R .C O M · S EP TEM B ER 2015

RBR september 2015.indd 6

9/10/2015 3:02:21 PM

RBR 2015 Annual Radio Regulation Retrospective The Radio Show is an annual time for reflection on the industry and the regulatory events of the past year. Below are some of the highlights:

tions in the studio monitors used in its editing bay and that the image appeared for only a fraction of a second on the extreme edge of a montage, and was thus fleeting and barely perceptible. Its appeal is pending. Although this was a TV case, given their history with such issues, radio broadcasters should take note that the commission is ready to pursue indecency complaints in all regulated media.

AM Revitalization

The Songwriter Equity Act

Two years ago, the FCC proposed six rule changes to revitalize AM radio: Open an FM translator filing window exclusively for AM licensees and permittees; modify the daytime community coverage standards of existing AM stations; modify the nighttime community coverage standards; eliminate the AM “ratchet rule”; permit wider implementation of modulationdependent carrier-level control technologies; and relax AM antenna efficiency standards.

All those proposals received overwhelming industry support. FCC officials themselves have voiced support for the proposals, and at the last NAB Convention, FCC Chairman Tom Wheeler supported AM revitalization, with the exception of a new FM translator window. In an August 12 posting to his FCC blog, Wheeler stated that he will recommend adoption of several AM-revitalization proposals and seek further rule updates to enhance the viability of the AM broadcast service through a further notice of rulemaking and inquiry.

As expected, the Songwriter Equity Act has been reintroduced in both houses of Congress; in the Senate by Senator Orrin Hatch (R-Utah) and in the House by Rep. Doug Collins (R-Georgia). Taking aim at Sections 114 and 115 of the Copyright Act, the bill seeks better rates for songwriters. In addressing songwriter royalties for online streaming, the Copyright Act currently allows the Copyright Royalty Board to consider four objectives: maximizing the availability of song uses, providing a fair return for a copyright owner, providing a fair income for the user, and minimizing the disruptive impact on the music industry.

The act would benchmark rates to those that would have been negotiated in the marketplace between a willing buyer and seller.

This is intended to allow evidence from other rate proceedings as evidence for setting that benchmark, including the rates set between SoundExchange and the record labels. The NAB has consistently opposed this legislation, arguing that it could impose “new costs on broadcasters that jeopardize the future of our free locally focused service,” and that it would seek to rectify a financial imbalance between songwriters and artists by subjecting free broadcast radio stations to new fees.

By Gregg P. Skall, Womble Carlyle Sandridge & Rice, LLC

Online Public File for Radio

With the FCC’s online public file system for television now fully implemented, last fall the commission announced its intention to apply it to radio. As with television, it proposed to begin with commercial stations in the top 40 markets with five or more full-time employees. Two years later, the rule would apply to all other stations with five or more full-time employees. The commission also suggested permanently exempting noncommercial stations and commercial stations with fewer than five full-time employees.

Under the proposal, the FCC itself will upload materials already filed in one of its electronic filing databases, such as CDBS or ULS, while other materials will have to be uploaded by the radio broadcaster. Stations will not be required to upload their existing political files, but will have to upload new items going forward.

Many expressed concern that with nearly 10 times more radio stations than TV stations, the rule could result in a logjam at filing deadlines and unduly burden both small stations and large groups with many station clusters. As it did with TV, the FCC proposed to work with hosting services on an interface to create greater efficiencies and relieve that burden. To date, the commission has been unable to deliver on that promise, and private web hosting services wait for an opportunity to test their systems.

The FCC has sought comment on staggering filing deadlines to avoid network traffic jams and a newly organized online file structure to facilitate public-file uploading and review. Flatly rejected was the objection that an online file would do nothing for the local community and would benefit only non-local advocacy groups.

With the 2016 political season bearing down, action should occur soon.

Construction Time Limits

The FCC has finally put its foot down on construction time limits. The commission has a firm policy that a construction permit is good for 36

months, and will be extended only for extreme circumstances out of the permitee’s control.

With few exceptions, it has taken a natural disaster to justify an extension for construction.

And in May, the commission enforced its policy against KCIY, a Spanish-language noncommercial station. KCIY’s engineer had certified that it was operating according to the rules, which turned out to be, at best, an overstatement.

The FCC declared that a station not constructed in accordance with its permit cannot be declared “ready for operation” within the meaning of the Communications Act and that temporary facilities fail to satisfy the act’s requirement. It therefore declined to grant the appeal of the automatic forfeiture of KCIY’s permit.

Contest Rules Disclosures

For some time, broadcasters have sought authority to publish contest rules on their websites and do away with the required on-air disclosure, where the details can devour significant broadcast time. Late last year, the FCC proposed a rule that would allow contest information to be published online in place of on-air announcements. However, the commission included several new requirements that some broadcasters have protested as burdensome.

Yet, given that fines for failure to properly disclosure rule details have been issues, even when contests were in fact properly conducted, even a broadly inclusive new rule would be viewed as a relief. In August, Wheeler posted on his blog that he intends to move on this unanimously supported item. The item may receive FCC action before the Radio Show.

EAS Tones

The misuse of Emergency Alert System tones in broadcast programming or in broadcast advertising produced by others is a recurring issue that needs broadcasters’ continued diligence. A particular event last fall focused the FCC again on the issue: iHeartRadio’s WSIX-FM in Nashville aired a false emergency alert during a broadcast of the nationally syndicated Bobby Bones Show. This spring, the FCC obtained a settlement in which iHeart agreed to pay a $1 million civil penalty and adhere to a compliance and reporting plan.

The FCC noted that in the previous six-month period, it had taken five enforcement actions totaling nearly $2.5 million for misuse of EAS tones by broadcasters and cable networks.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

Indecency

The FCC has cleared out much of the backlog of indecency matters, but made news again this past spring when the it issued a notice of apparent liability to Schurz Communications, licensee of WDBJ-TV in Roanoke, Virginia, for allegedly airing “graphic and sexually explicit material” during its evening newscast.

Schurz responded that the image had not been visible to the station’s staff due to limitaS EP TEM B ER 2015 · RB R .C O M · 7

RBR september 2015.indd 7

9/14/2015 1:50:55 PM

RBR september 2015.indd 8

9/10/2015 3:02:27 PM

S EP TEM B ER 2015 路 RB R .C O M 路 9

RBR september 2015.indd 9

9/10/2015 3:02:27 PM

The Greatest Radio Programmatic Show on Earth

By Dave Seyler

Starring:

Brian Burdick, Executive VP/Digital & Programmatic, WideOrbit Jeff Haley, President/CEO, Marketron Mike Dougherty, Co-Founder & CEO, Jelli Mark Rosenthal, CEO, Katz Media Group Special Behind-the-Scenes Guest Star: Heather Monahan, Chief Revenue Officer, Beasley Broadcast Group, who helped develop the question framework.

When will radio programmatic be ready for prime time?

First, let’s dispense with a couple of basic factual matters. The advent of programmatic being ready for radio is imminent — all the executives we spoke with are either ready or nearly ready to go.

And as far as integrating it into a station’s sales machinery, it will generally work with traffic systems already in place, with very little learning curve required on the part of stations and clients alike.

Briefly, how does it work?

Each system will have its own design.

Haley says, “Mediascape Marketplace works in a similar manner to sell-side and buy-side platforms found in interactive marketplaces. Both seller and buyer have a set of unique dashboards that help offer up inventory and view what is available.”

Dougherty says, “The sales teams use SpotPlan, a web application that allows campaigns to be planned and run from the inventory in the exchange.

SpotPlan makes buying radio easy and fast, and much more aligned to how digital is bought.

Eventually Jelli will also provide software directly to ad buyers to use on a self-service basis to buy inventory directly, but that will be in a future release.”

According to Burdick, “Our system resides in the traffic software our customers use every day, so the format will be very familiar from the very first time they go to use it. When an offer arrives from a potential advertiser, it appears in a heat-map-style grid of half-hour time slots. When the box is green, the offer price is more than the station normally receives for that time. We know whether the offer is less or more based on the sales history from their logs. To accept, all they have to do is click on it, see who the advertiser is, listen to the creative, hit approve, and send the ad directly to traffic. That’s it.”

What kind of money are we talking?

Burdick games out the next few years, using history to project the future. “We can make some assumptions based on programmatic’s growth path in other media,” he notes. “It was introduced in digital 10 years ago. Now about two-thirds of digital sales are programmatic. TV is just getting started.

MAGNA Global estimated 4 percent of TV ads will be sold through programmatic in 2015, growing to 17 percent by 2019. We expect programmatic radio to follow a similar growth curve.”

At the moment, Dougherty sees a huge pile of cash served up hot and fresh on the table, but no radio operators have a seat. “There was $10 bil-

lion spent programmatically in the United States in 2014, and radio received essentially none of this spending,” he says. “Our technology is helping to change this. Radio is very effective, and programmatic marketers whom we have spoken to are excited to add radio into their media mix.”

Rosenthal adds, “While difficult to project an exact revenue lift in terms of percentages, programmatic’s automated enhancements will allow both local and national sellers to proactively pursue and generate greater value for advertisers. And the introduction of rich data to a world once restricted to the limited insights of a rating will help introduce an entirely new type of buyer — the digital ‘audience buyer’ — to radio, allowing us to tap into what is likely to be a $40 billion programmatic and digital ad-buying pool by the end of 2016. This can only enhance radio’s bottom line.”

Whatever programmatic’s potential, Haley stresses the importance of thinking of it as a new addition to a station’s sales arsenal, not a replacement for any one thing. “Broadcasters should remember that this is one sales channel amongst many — direct-sold, rep-sold, network, etc.,” he says. “Programmatic will not replace any one of those channels, but rather add incrementally to the overall efficiency of selling inventory.”

Who determines how much programmatic is on the schedule?

For control-freak stations, there is good news: The amount of programmatic advertising accepted or rejected is totally in the station’s hands, and the percentage of inventory allocated to programmatic can be predetermined.

“Our system suggests pools of inventory that could be made available to the marketplace,” says Haley, “but at the outset we envision stations making the decision about what inventory to offer in a manual way, using the interface.”

Burdick indicates much the same thing, saying, “Users of our system aren’t required to carve out inventory. Orders are pegged to time blocks. The station can decide to accept based on whether they will get a better price than from their other sales channels. If they wish, stations can allocate a set percentage of their inventory to programmatic.

“Let’s say, for example, they set aside 10 percent for programmatic. The system will then fill 90 percent of their inventory with direct-sold ads and the remaining 10 percent with ads sold through programmatic. They can also use the system to fill in when they don’t have enough direct-sold ads.”

Dougherty notes, “Radio stations, networks, and advertisers can allocate a certain percentage of inventory ahead of time. Most of the advertisers are buying inventory ahead of time, so this allows for the best chance for the inventory to be sold. Very

soon we will have the ability to also sell inventory that is published dynamically, which will allow both buyers and sellers of radio advertising to tap into more last-minute opportunities.”

Rosenthal simply does not see it as an issue, period.

“A benefit of Expressway by Katz is that it is not necessary to carve out inventory for programmatic.”

What is the effect on sales staffing?

Programmatic is universally expected to empower salespeople, and is not intended in any way to replace them. Essentially, it will relieve them of much of the drudgery that goes with the job, empowering them spend more time creating new business.

“Programmatic will improve the effectiveness of busy sales staff, providing powerful options to sell more inventory while reducing the operational overhead,” explains Dougherty. “Programmatic technology will automate some aspects of the broadcast sale, which are the most tedious parts of the process for sales teams, and allow the sales process to become more strategic and consultative. Instead of spending time on repetitive steps, the technology will enable new planning capabilities and transaction models, all of which will need to be communicated, described, and pitched.”

Rosenthal agrees and says his company sees it as a revenue builder. “Programmatic has the ability to make a largely labor-intensive process far less manual for stations and their sales teams,” he says.

“Much like on the national front, we see programmatic alleviating many of the local salespeople’s administrative tasks, allowing them to shift their time to focus more on proactive, ROI-driven results for clients. We believe this shift will ultimately bring more money to the industry.”

Burdick also sees it as an easy integration, but nevertheless suggests that stations do a little trialand-error as they adopt programmatic into the mix.

“It won’t radically change the way they do business today,” he says. “We are telling our clients to experiment when they start out instead of going all-in.

Their biggest fear is selling their inventory tomorrow for less than they do today. They will quickly see that our system lets them keep control over their prices to drive profit. Once they are comfortable that programmatic leaves them in control, we’ll start seeing greater inventory commitments.”

What kinds of stations will benefit the most?

Any and all stations are ideal candidates for programmatic advertising, say these execs. Asked which stations would benefit the most, Burdick responds, “All kinds, right now. Ads will be sold against any music format, sports shows, daytime talk, syndicated content, news/talk, middle of the night. Transactions happen when there’s a match between the station’s listener profile and the brand’s

10 · R B R . C O M · S E P T E M B E R 2 0 1 5

RBR september 2015.indd 10

9/10/2015 3:02:28 PM

engagement goals. Whenever a marketer sees strong audience value, they will be motivated to buy.”

And there is only one thing a station needs to do to make itself attractive to programmatic buyers: be available. “Participating in this marketplace makes it easier to transact,” Haley explains. “Stations’ key metrics of audience reach, demographic makeup, brand strength, and engagement are equally important in this marketplace as they are in any other.”

Will radio be vulnerable to the programmatic problems experienced by print?

The marriage of print and programmatic is not universally seen as a happy one — it’s been said that they traded traditional dollars for digital dimes. Asked if this is a concern for radio, Dougherty says, “Radio’s approach to programmatic is different than digital’s in several ways. Radio is value-oriented, not priceoriented, with the best ROI for the advertiser as the overarching goal. There will be a focus on automation, real-time reporting, and data-enabled buying, and less focus on real-time bidding and remnant inventory.

Programmatic radio is focused on premium execution.

Radio will marry its huge scale and effectiveness, unmatched in digital, with a programmatic platform that makes the process more like a digital buy. In addition, broadcasters will have the ability to put strict price controls and floors around their inventory, and the algorithms of the marketplace are oriented to quality and ROI, in addition to price.”

What will be the effect on rates?

Along the same lines, a natural concern at the station level is the potential damage to rates inflicted by accepting programmatic. Rosenthal is convinced it shouldn’t be a concern. “We often hear terms like ‘race to the bottom,’” he says, “but what we should hear is ‘race to the ROI.’ Katz’s programmatic

exchange will streamline the buying process with data insights on the quality of inventory, which in turn will allow clients to get more from their budgets and focus on more return on every dollar spent.

“Programmatic buying is not about rates or pricing; it’s about providing the most desirable targeted inventory that leads to a better ROI. The highest-value inventory will always be available at an appropriate cost, but highest value is no longer the ‘one size fits all’ of a ratings-driven world. The highest-value inventory is wildly different for each advertiser and campaign.”

What is the danger of ignoring programmatic?

Rosenthal sums it up: “Programmatic is a rapidly growing revenue sector, and one that is already an important and expected method of ad buying in digital. Now we can bring broadcast radio into that world, at a scale that no digital audio provider can offer. It’s extremely important to put radio into the programmatic planning process and allow it to attain dollars specifically allocated to automated buying. Through programmatic, radio will have the ability to provide new tools to advertisers to buy more effectively, and it allows us to capture pools of revenue currently allotted to digital — driving new, substantial, increased revenue to our sector. It is a win for all participants and something no station will want to be left out of.”

Describe radio programmatic from the client’s perspective.

“There are two primary reasons buyers want to buy radio this way,” says Burdick. “Automating transactions accelerates identifying and transacting the right inventory. The current process is too inefficient and expensive for the buy side. To build and fulfill spot market plans that reach the right audience at scale, brands and agencies have to commit

significant resources.

“The other big reason is that ad buying is increasingly data-driven in other media. In digital, it’s the whole ball game. Programmatic lets buyers ‘bring their own data’ and customer analytics for finding audience value. Most local stations don’t have the data buyers want, or systems that let them BYOD. When neither the buyer nor seller can prove out the value of an audience, transactions won’t happen.

Programmatic gets them past this problem.”

Dougherty notes, “The benefit to advertisers and agencies is an opportunity to increase efficiency in their ad buying, apply strategies used in the programmatic buying of digital and video to radio, and increase their ROI overall through advanced new tools that make the experience of buying and running radio advertising more on par with what they are used to in digital advertising.”

Haley puts it even more succinctly: “Marketers and their agencies are looking forward to a more efficient marketplace, which will allow them to devote more time to investment decisions rather than building and executing buys.”

Where’s the human factor?

“Without human facilitation and intervention, programmatic cannot live up to its potential,” says Rosenthal. “The technology is being designed to automate the most tedious parts of the process, alleviating administrative burdens and allowing our sellers to become more consultative in their approach.

Instead of spending time on repetitive steps, the technology will enable new planning capabilities and transaction models, all of which will still need to be communicated to advertisers and agencies.

Additionally, features like real-time web-based reporting will allow broadcast radio to be on par with digital in terms of data, reporting, and tracking.”

WE'RE HONORED TO HAVE MADE THE LIST OF AMERICA'S FASTEST-GROWING PRIVATE COMPANIES

R A D I O ’ S P R E M I E R M A N A G E M E N T & M A R K E T I N G M A G A Z I N E SM

S E P T E M B E R 2 0 1 5 · R B R . C O M · 11

RBR september 2015.indd 11

9/14/2015 1:50:32 PM

Dissecting the Digital Imperative

By Dave Seyler

For radio stations, there really is no question about incorporating digital media any longer. It is something that simply must be done. It opens the door to revenue, it means that potential revenue won’t exclusively benefit the competition, and it very well may be a hedge against extinction.

It’s one thing to be aware of the need to present a strong multi-platform front. It’s something else to do it effectively. So we assembled the collective experience and know-how of 10 companies in the business of maximizing digital effectiveness.

Here’s what they have to say.

Carolyn Gilbert, owner, CEO, and president of research and marketing firm NuVoodoo Media Services, says that radio stations are aware, for the most part, that they have to extend their brand beyond their transmitter. But she also points out a common failure.

“Frankly, most radio station websites are far more about them than about the listener,” Gilbert observes. “But the opportunity to do better is absolutely there. Failure to extend distribution to the Web for a radio station is like Tide being so attached to the store shelf that they refuse to offer their product on Amazon. We’re shooting ourselves in the foot if we don’t use every channel available to connect.”

But she cautions that content offered on digital platforms must be genuine. “Consumers can

spot advertising attempting to disguise itself as content a mile away these days,” she says. “Your offerings need to be legitimately entertaining or informative — and, optimally, shareable. But don’t shy away from spending intelligently on Facebook and other channels; it’s a powerful way to get the word out.”

The good news, from Gilbert’s perspective, is that most radio operators are already equipped to monetize digital at a basic level “by doing exactly what radio has done brilliantly for decades.” She says, “Find partnerships among local businesses who will benefit from the exposure you can bring for them — but think outside of the box of simply selling traditional sponsorship assets.”

What is the danger of simply ignoring digital?

“The same danger buggy manufacturers faced by ignoring cars. The danger is premature extinction.”

Futuri Media, says CEO Daniel Anstandig, is all about maximum listener engagement. It is the inventor of Listener Driven Radio and related services, which give fans of a radio station a direct impact on the station’s playlist. Its TopicPulse service keys stations in on up-to-the-minute social media trends. The company also creates custom mobile phone apps for its clients.

Anstandig stresses the importance of taking digital seriously. “We encourage stations to think as though they have three microphones,” he says.

“You have a microphone that feeds on-air content,

a microphone that feeds your own website/mobile app, and a microphone that feeds your social channels. Be mindful of how you are producing content for each microphone. Your talent needs to use each mic differently.”

The problem for many stations is finding time to make the most of digital, and that’s where specialized companies come in. “Stations do not have time to innovate,” Anstandig says. “They’re busy operators, and the pressures of day-to-day business are only growing. Across the industry, the size of radio station teams has diminished in the last few years. There is more work to do, and fewer people to do it. We’ve been able to help stations meet and overcome the challenge of having enough ‘human bandwidth’ by investing in R&D for them, creating turnkey systems, and offering extremely hands-on support.”

Rob Stearns, senior director of sales for business intelligence firm BuzzBoard, is all about stations having a full array of digital platforms and monetizing them to the hilt, and that means offering multiple opportunities for business to pay to be on them.

The key, he says, is “being able to provide an array of advertising options that includes spots, sponsorships, website design, pre-roll, banners, retargeting, SEO, SEM, responsive design, and programmatic that makes your reps more relevant to solve the client’s needs.”

He makes two points about operating a multi-platform operation. First, use all of them to promote all the others. “By cross-pollenating the messaging across your assets, you can catch the listener in a myriad of ways and continue to recycle them to your various platforms.”

Second, get your money for all of them. “No

12 · R B R . C O M · S E P T E M B E R 2 0 1 5

RBR september 2015.indd 12

9/10/2015 3:02:29 PM

more no-charging the digital assets!” Stearns insists. “They will only have value if you demand it — and they’re worth it, especially when combined with your valuable spot inventory.”

He concludes, “Let’s face it — you’re not going to hit your number with your spotload alone anymore. Amassing an array of digital assets and getting your staff trained to sell them with the best software is the way to go and will pay off in spades. Now is the time to invest in the future and make sure you are still at the helm of your ship for years to come!”

Tim Singer is CEO of RINGR, a company that can connect a station with anybody anywhere on the face of the earth and make it “sound like you’re in the same room at the same time.”

Singer believes that digital is an important way to engage the audience — and the key is unique content. “If listeners can go somewhere else to get what you’re offering, they probably will,” he says. “If you can offer quality content, coupons, or prizes that are exclusive to your digital products, listeners will likely gravitate there as well.”

Asked about the penalty for ignoring digital, Singer puts it very simply: “Ask Blockbuster.” Of course, Blockbuster’s once-ubiquitous stores were wiped off the map by the arrival of Netflix and other on-demand video services.

Singer sees a multiplatform approach becoming the norm. “As happened with TV, I believe that radio will be more about content than about the medium that transmits it,” he says. “People who focus on creating great audio content will win because there will be many different ways to share it — mainly digital. People who focus solely on their specific transmission medium, a.k.a. AM/ FM, will lose because there are so many other options.”

HeyWire’s strategy isn’t so much about establishing a presence on any one platform, says CMO Paul Henderson — it's about establishing a strong bond between a station and its listeners via text messaging. He explains, “This provides a direct, human-to-human link between consumers and companies that helps improve customer service, boost brand loyalty, and lower operational expenses — all while reaching customers within the mobile environment they use most often.”

Henderson points to studies that show texting as a preferred method for fans to contact their favorite station. He also notes that many stations use texts for outgoing messages, but if that’s all there is to the station’s strategy, it’s missing the point. “The keyword is ‘interact,’” he says.

“Listeners want the ability to text back. This can result in much higher overall engagement through contest participation, song requests, and even breaking news alerts, among other important benefits.”

Monetizing texting is an indirect process, says Henderson; it’s all about increasing the engagement of the audience and thereby increasing their value to advertisers.

Stations that opt out of a texting program are likely to see a directly related decline in listener engagement, simply because texting is rapidly gaining in popularity while the use of the telephone to contact a station is going the other way.

According to Vic Media Senior Partner Gary Rozynek, his company primarily works for advertisers and markets, with radio among the many media it includes in the online campaigns it designs. Rozynek sees two simple reasons for radio stations to have a significant digital presence: time and money. The average American is

income from building-supply companies and contractors who found it worth their while to be part of it.

accessing digital media one way or another for 5 1/2 hours a day, and online ad income has risen from $10 billion in 2004 to $460 billion this year — and its share is still rising.

“With the traditional media sector under pressure and limited to no to very low growth, it makes sense to have a digital strategy and offer online solutions to your customers and the marketplace,” says Rozynek. “Traditional media outlets have to be able to tap into a stream of revenue that is growing 15 percent per year. It just makes sense, and that is what their customers want to learn about, talk about, and integrate into their media mix.”

It’s simply something radio stations must engage in. Rozynek observes, “It’s not going away; all you have to do is look at the trends.

Look at what is happening with technology and how fast things are changing. Look at how fast consumers are adapting and the way they are engaged with all things digital. You walk around and see everyone walking around with their mobile devices, just staring into their screens. It is a captive audience for businesses, and they must have some kind of online strategy to monetize that behavior. If businesses don’t evolve and change, they won’t be around long.”

Julie Foley is director of affiliate success for Second Street, a company that helps drive digital traffic via all sorts of online promotions, including “hashtag contests, quizzes, and sports contests that enable media to generate digital revenue, build e-mail databases, and deliver measurable results for their advertisers.”

Foley says the reason stations need to have a digital presence is exceedingly simple: That’s where the audience has gone. But there’s more to it than that. “In order to drive the most engagement with your promotion,” she says, “stations need to find out what works for their market and keep a low barrier of entry, and, most importantly, stations need to leverage every asset they have to promote their promotions — including e-mail, social, web, on-air talent, event — everything. The more effort that is put into promoting the promotion, the better results they’ll achieve.”

The way to monetize the types of things Second Street offers is to get one or more sponsors. Foley cites one recent contest for which the prize was a bathroom makeover — generating

According to Vendasta CMO Jeff Tomlin, his company is all about monetization — it provides sales and marketing automation that sends digital products out to multiple locations via one interface. It’s a way to increase sales while decreasing the cost of customer acquisition.

Stations simply have to be on the Web. “A web presence is critical for radio stations to engage their audience and advertisers,” says Tomlin. “It amplifies their broadcast presence and provides new ways to market and remarket to their constituents.”

As for attracting web traffic, Tomlin’s suggestion is tried and true: “The best advice I can give to attract users to digital offerings is to offer them something of value for free.

People are always being sold to. They always hear what other people want from them.

Rarely are people offered something with no catch.”

The first penalty for failing to establish a web presence is loss of opportunity — it’s not so much about money lost as money the station will never make. And the problem is compounded, since your loss of opportunity will likely benefit your competitor who is equipped to take advantage.

Stuart Last, GM/Americas for audioBoom, says his company is all about hosting, distribution, and monetization of radio and other media across multiple platforms.

“You shouldn’t think about it simply as a web presence — you need to be in all the digital places that your audience is using: your website, mobile app, social media, audio aggregators like iTunes, in-car audio platforms,” he says. “It’s about being a fully distributed media company.

For dedicated listeners, you’re helping them engage with you with very little effort on their part. For new listeners, you’re helping them bump into your brand — if they like what they hear when they listen to a clip that is shared by a friend in Facebook, they may become a new dedicated listener.”

The interest people have in a station’s website is the station itself, so Last believes the station’s personality must ring true throughout its suite of platforms. He also notes that radio has been one of the last traditional media to feel the effect of digital disruption, but it is happening, and right now. He cautions, “If radio fails to react properly, it need only look at what happened to music and publishing to see where it likely will be headed.”

James Yeh, CEO of UseCode, helps stations earn money from website display advertising. The company’s product simplifies the process for both the audience member and the station, eliminating the need for a “professional web expert” to make it all work. He says its simple-to-use code can “link to an advertiser’s landing page, checkout page, or any particular web page.” It also generates the necessary numbers that lead to earning cash from the advertiser.

Yeh sees a new danger involved with not having an effective digital presence: He believes that at this point, digital is ubiquitous enough that the lack of it will indicate to advertisers that a company is “not capable of providing full service like others.”

S E P T E M B E R 2 0 1 5 · R B R . C O M · 13

RBR september 2015.indd 13

9/10/2015 3:02:30 PM

Station Trading 2015: Midyear Thoughts

By Eddie Esserman, Director, Media Services Group

So the questions I’m most often asked are always the same, in very active markets and during calm periods. They are, in order of frequency: “What are the multiples for deals now?”How do deals flow?”Who are the buyers?”and “Who’s selling?”

Dave Seyler asked me to share a few words on this subject for this year’s Radio Show in Atlanta. The summary answers would be: “Low,” “Slow,” “Not very many,” and, “An interesting collection.” I’ll explain.

Multiples always have a bit of spin on them, sometimes on the same deal, depending on whether it’s viewed from the buyer’s or the seller’s side. And the trades and researchers also seem to have an opinion — something that, unless they were involved in the due diligence, gives me pause. The answer to that first question, though, is relatively easy to state within a range: I believe it to be five to seven times cash flow. No cash flow? Then the multiple of revenue is around 1.25 to 1.5 times revenue. If I’m asked for a stick value for an FM station, the consensus seems to be $3 per person for an FM station. It’s less than a third of that for an AM station.

In this relatively low-multiple environment, I’m finding that the assets have a significant impact in the range of that multiple. The state and age of equipment, updated studios, digital audio chains, and well-maintained transmitter sites matter today in the value equation. And so does the tower. Is it owned, along with the underlying real estate? What shape is it in? What are the terms of the lease, if there is one? We’ve seen some large companies, along with many smaller operators, sell their vertical assets to unlock some value at a higher multiple than the broadcast facility. No doubt about it, the tower sector is trading at multiples not seen in broadcast for almost a decade.

As far as deal flow, it’s down compared to the first half of last year. BIA data for the first half of 2015 versus last year on radio deals over $500,000 would indicate that the dollar volume of those deals is down over 40 percent. That’s a whopping drop. Noted and not included in this calculation are some swaps of large value.

Nonetheless, I daresay business was off. A lot.

Exploring further into this year’s first six months of activity shows the surprising dollar volume of the radio deals that were done by only three companies: two buyers and one seller.

Over 55 percent of the first half of 2015’s radio deals were acquisitions by Alpha and EMF, and sales by Radio Disney.

Also to be seen are some strategic acquisitions by in-market or neighboring broadcasters, most notably the Saga and Leighton deals, which accounted for over 10 percent of the remaining dollar volume of activity. The rest were what appeared to be a rather normal spread of deals, although at much lower activity levels, across financially distressed or bankrupt entities, reli-

gious broadcasters, and a balance of commercial and noncommercial smaller deals.

As we entered the summer’s peak heat, there was the normal cooling of deal activity. A slowdown in a slow year is particularly notable. It is worth mentioning, on the regulatory front, that the FCC appears to be acting on transfers at a much slower pace than in years past. One can only speculate as to the reason, but many have noticed and commented that rather typical-looking deals are taking a long time, 70-plus days, to be granted or otherwise acted upon.

I’ve noticed with some concern the lack of desire to acquire by an upcoming new generation of potential owners. They just don’t seem to be coming forward with the desire to acquire, even with owners willing to (or having to) finance a deal. Even with as much as we read about morale being low in our industry, it is surprising that more apparently unhappy employees don’t want to “buy a job” that they already know how to do very well. With this absent set of new entries into ownership, it’s hard to make a call on whether this is an eclipse or a sunset.

Interest rates have been very low for the majority of the past decade, and the fear of rising rates has been present almost since the month they went down. Rates, someday, will go up, and that may further dampen trading somewhat, but I don’t sense that inexpensive borrowing is a factor. The greater dam on cash-flowing deal flow is the retraction within the lending sector toward the industry. One only has to see the activity and multiples being paid in the tower business,

and the active solicitation by equity participants, banks, family books, and individuals to put money to work in the tower sector.

There are more than a few former broadcasters who are, for now, not licensees. I believe many would like to return to ownership in the near term, and I hope they will. More acquisition-minded, experienced broadcasters returning to the field would be a good thing for the industry. Larry Wilson with Alpha was one of those who did just that. Perhaps others are waiting for Alpha to pause and take a breath.

While this is a Radio Show commentary, a couple of TV comments might be worthwhile. On the acquisition side, there’s only one color, and that would be Gray. The Vegas-like activity we saw last year in anticipation of the auction by a concentration of speculative players seems more like the action in Elko. I suspect as the rules get further sorted out, the FCC winds up the roadshows and meetings, and the auction draws very close, there may be another round of action.

Have a great radio show, and enjoy Atlanta!

14 · R B R . C O M · S E P T E M B E R 2 0 1 5

RBR september 2015.indd 14

9/10/2015 3:02:31 PM

Keeping Radio Strong for Our Communities

By Peggy Binzel, The Free Radio Alliance The Free Radio Alliance unites over a thousand local radio stations around the sole mission of keeping radio strong for communities across the nation by opposing a performance tax.

In our globally connected, Internet-dominated, and highly mobile modern world, the primal need for a sense of community has never been stronger.

It’s urban planners’ aim, the secret formula for all successful pubs and bars, and the paean of the farm-to-table movement. Heck, just about everybody wants to create a community around their group, product, or service.

Community is precisely what radio stations have provided their listeners for decades — the best in entertainment, news, and weather and sports — all with a local spin. That’s the power of local radio. It’s what Apple Music hopes to re-create on a national level with its radio clone service, Beats1, featuring iconic DJs and curated music. Back to the future.

And Beats1 is not the only thing in the music industry that’s back to the future. The record labels are hard at work trying to put HumptyDumpty back together again.

A decade ago, the record industry’s business model was upended by the advent of digital distribution. Since then, radio stations have fought back against the labels, whose first instinct was to “find” their missing money in the pockets of radio stations across the nation through the imposition of a performance tax.

To be fair, radio stations were not the only target of the record labels’ anger. They spent years suing grandmothers and college students, when they might have been better served to focus on the creation of user-friendly alternatives to illegal downloads. Luckily for the labels, others succeeded in converting the Napster generation to legal music.

Not surprisingly, the big three record labels continue to make artists the face of their performance tax campaign in Washington. But the plain truth remains: The majority of any revenues from a performance tax would go to the labels

themselves. That’s one policy they aren’t trying to change. Nor, by the way, do the labels seem keen on sharing their significant savings from lower digital production and distribution costs with artists — just one more example of the labels’ abuse of the artists they represent.

The performance tax is only one aspect of the labels’ attempt to regain their previous chokehold on music distribution. If the record labels win, consumers lose. That is precisely why the Free Radio Alliance has launched the “Listeners Not Labels” campaign. If you haven’t already, check out the campaign on Twitter and Facebook. Retweet us.

Share our Facebook posts. And if you haven’t joined the Free Radio Alliance, take a minute to join today. Together, we can fight the record labels and musicFIRST. More importantly, we can remind members of Congress that local radio stations are part of the fabric of their communities.

Now more than ever, communities matter.

Despite millions of options competing for consumers’ limited free time, 240 million Americans tune in to local radio stations every week, to hear that favorite DJ or to find out what’s happening around town, to tune in to local sports or get the latest in traffic and weather. When the Internet is down, radio is there to keep local listeners updated. And something more: to make them a part of a shared community experience.

Local radio stands out as the music entertainment offering whose business model is to provide listeners and their communities with the best in entertainment, news, weather, and community affairs — all for free. At the Free Radio Alliance, we think that’s more relevant than ever for policymakers.

Peggy Binzel is spokesperson for the Free Radio Alliance, a coalition advocating to keep radio and other businesses that play recorded music strong for communities across the nation by opposing a performance tax. Follow them on Twitter @Free_Radio and like the Free Radio Alliance on Facebook .

GAO Study Points to Airplay Value

By Dave Seyler In Congress, the radio performance royalty is one of those zombie issues. No matter how deeply it’s buried, it goes all George Romero and digs out, wandering aimlessly on Capitol Hill, searching for votes.

The reason there is no performance royalty is painfully obvious: The mere fact that a song is being played on the air has value for the musicians and labels involved. Indeed, efforts to get airplay have induced music promoters to pay to get songs they were pushing on air, leading to epic payola scandals.

The Government Accountability Office was instructed to study this, and while the variables are so great it’s impossible to pin down a definitive conclusion, the results point strongly to the benefits of airplay.

GAO looked at six albums released between February 1 and February 14, 2010 and compared airplay spins to album sales. Let’s take a look.

Allison Moorer’s Crows came out. It received about 40 spins during the week of January 17, 2010, and picked up 44 during the peak album sales week.

Those sales totaled 1,448. Gil Scott Heron’s I’m New Here didn’t get any spins on January 17, and picked up 56 during its peak sales week, moving 3,679 units.

Massive Attack got 25-30 spins for Hellgoland on January 17, and 98 during peak week, when it sold 18,221 copies. H.I.M.’s Screamworks got about 250 spins January 17, 374 spins during its peak sales week, and sold 25,783 copies.

Lil’ Wayne’s Rebirth got around 1,200 spins January 17, 876 spins at peak week, and sold 175,620 units. Then we get to Sade. She picked up 3,000 spins January 17, got 3,834 when the album peaked, and it moved 501,665 units.

We suspect most of you are able to spot a relationship between the number of spins received and the number of units sold.

We happened to write an article about the release of Sade’s Soldier of Love and its marketing plan, based on a press release issued in December 2009.

Here’s part of the article: “Epic Records, which is part of the Sony Music Entertainment empire, says the song ... ‘is set to hit airwaves December 8th and will kick off the countdown — to the album’s February 2010 release date.’”

We rest our case.

S E P T E M B E R 2 0 1 5 · R B R . C O M · 15

RBR september 2015.indd 15

9/10/2015 3:02:31 PM

RBR september 2015.indd 16

9/10/2015 3:02:32 PM