Why Radio Won't Die

I was alerted to a story this morning about the death of the radio industry. Since that is my industry, I wanted to see what perspective they were coming from and why.

When I began in this industry, there were strict ownership rules that limited the number of media outlets a company could operate. At one time the limit was one TV Station, one AM Radio Station & One FM Radio station, and perhaps a newspaper too. These were the limits per market. For example when I was in high school and started my radio career, I worked for a man that owned an AM station that played country music and an FM station that played "Soul Music". Later, when I worked in Detroit, the company I worked for had 12 stations in a dozen different cities, because that was the rules.

The easing of those rules is what created large radio station groups such as Clear Channel, or other smaller groups. In Fort Wayne, my company operates 4 stations, another group has 3 stations, and the biggest group has 6 radio stations, all in the same town.

Why does this matter? It is because when broadcasting outlets became publicly traded companies instead of locally owned and operated, they incurred debt. Not little local debt, but big massive debt that needs to be fed.

The big massive debt load that big media companies in radio, tv, or print needs to dealt with. We have already seen a number of newspapers reduce or stop publishing. Radio stations can survive because of the fixed costs and the opportunity to generate revenue through advertising to a loyal audience. Reports are that 80 to 95% of the population still listens to the radio every week in the USA.

So, when you see stories like this one, remember that your local radio station is probably doing just fine, they have listeners and they are probably still a very good medium for you to invest your advertising dollars with.

Wachovia Forecasts Radio Doom In '09

Erik Sass, Feb 17, 2009 08:00 AM

If anyone is still cherishing hopes of a radio turnaround in 2009, Wachovia analyst Marci Ryvicker's latest note to investors should doom that idea. The outlook is overwhelmingly negative, as Ryvicker sees a 9% decline in revenues in 2008 followed by a further 13% decline in 2009. "It's the same depressing story," Ryvicker noted. "Advertisers are cutting back significantly, given rising unemployment and the general state of the economy." The revenue trends would be bad enough. The real problem, Ryvicker said, is the considerable burden of debt carried by many big radio broadcasters, often as a result of mergers and acquisitions over the last decade. Flatly asserting that "it's all about the debt," she warned that "quarterly conference calls will be focused on de-leveraging events"--that is, paying off debt by any possible means, including cost-cutting through layoffs and asset sales. There may be a bright spot: Ryvicker noted that banks would rather not own radio stations, so they are more likely to agree to refinance. Ryvicker's gloomy forecast follows a year of accelerating revenue declines. Although fourth-quarter figures are not yet available, the first three quarters of 2008 were already trending sharply downward, with a -5% decline in the first quarter, a 6% decline in the second and a 9% decline in the third. The losses are the result of big declines in local advertising-traditionally the mainstay of radio revenues--as well as national. Both these trends are likely to accelerate as the economic downturn worsens.

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