Recueing Radio

If your stations are like mine, sales are horrible. We’re down for the year and it’s getting worse, with the average sale WAY down.

The problem is not store closures or empty strip centers. It is confidence and spending.

I think Radio as a whole is fine. The latest RADAR study shows 92% of the population listens weekly.

We just somehow have to get clients back to previous spending levels.

I think Radio will eventually shake out okay. The few group owners that survive will be financially sound with manageable debt. There will be some public companies but mostly with large market holdings. Medium and small markets are not suitable for public ownership. Maybe no Radio is.

A business with a limited market area and limited inventory at some point has to rely only on price. You cannot do that in Radio because of market dynamics. Price cannot go up forever and the Big Radio myth is that if you raise your price advertisers will raise their investment. Most advertisers keep investment the same and run fewer ads driving down results. Then the stations have to find even more advertisers but now the advertisers have to be willing to pay higher prices. This is why Radio stations go through cycles.

So, large companies–especially public–that have a never-ending appetite for more profit will eventually hit a dead end with Radio. Many already have. Even if they grow by expansion–as all of them did in the 90’s–that road will eventually end.

We can add “products” like interactive, but that only takes you so far. It’s also a big time distraction to selling the core.

Radio is far better suited for a local owner who wants to make really good money and knows that every now and then he is going to have a down year. The competitor is going to surge. The unexpected is going to happen. And he will have to learn to live that year on $300,000 instead of $500,000.

A return to sanity can be reached if Radio sales prices are low. Six times multiple; eight times max, with a manageable debt load. The difficult eccentric local owner will replace the difficult eccentric corporate management team and it will be back to the future.

In middle and small markets there will be a return to more things like news and local coverage. Newspapers are dying. There is simply not enough local news in these smaller markets to justify an hour a day on five local TV stations. But there is plenty for a three-minute newscast on the hour via the local Radio station. Like it used to be. The Internet is a factor, but not so much for local news.

The future of the Radio business will be more like the past, albeit with a better eye towards quality. Listenership will decline some as will revenues, but as long as we remain the only really viable commercial advertising source that allows a listener to totally multitask while consuming it, we will have a place.

This fall, I complete 35 years in Radio. I think that qualifies me for an opinion liks this. I am now–officially–the old man.

Although the “experts” still never listen.

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“Anonymous” is a skilled Radio executive with extensive experience in sales, marketing and management in small, medium, and large markets. He started “on the street” selling Radio over 35 years ago and has trained hundreds of Radio salespeople in how to get results for their clients. He currently manages a multi-station cluster for a major broadcast company.