Headlines I Hope To See in 2013

It was so nice to spot this headline in yesterday’s Wall Street Journal.

.. which got me to thinking of other headlines it would be wonderful to see in the coming year:

THAT's when I woke up! 

Those first four might possibly happen some day in my wildest imagination, but - when I read that final one - I knew I was visualizing the totally absurd.

I Can Dream, Can't I?

It's been almost four years since Interep cashed in its chips, making Katz the sole remaining rep company for most of radio at the national level.

Before that, media buyers complained that it was too complicated to buy radio and asked the medium to speak with one voice.

Now that we do, how's it going?

What I know about the national rep business can fit into a thimble other than the financial crash of 2008 seemingly took it down, only the strongest one survived and if David Kennedy ever writes a book, I'll snap up one of the first copies.

My perspective is formed primarily from what I hear from regular communication with Market Managers and National Sales Managers at client stations.  Judging from the cost per point levels of today's national buys, it seems like our voice is coming out as a whisper, pretty much dictating to radio stations what they need to do to get on the buy in a take it or leave it fashion.

Share of media day charts 2012

View more PowerPoint from PaulBarnes16

Those lovely stats are from England, but it's the same here. 

RAB on this side of the pond also convincingly demonstrates that radio's rates, based on time spent with media, ought by rights to be almost five-seven times higher than newspaper rates today, second only to television!

Wouldn't it be forward-thinking if each group of stations had its own advocate at the national level pushing back against media buyers cram downs, actually SELLING our medium to decision-makers based on value and results, working to justify higher rates and growth of our piece of the advertising pie?

Say WHAT?

• “Quarter hour ratings are compressed, advertisers and agencies are setting cost-per-points and a lot of companies are responding to those avail requests at lower cost-per-points.  It’s a dive to the bottom of the barrel market right now and it won’t  stop until you see more consolidation and stronger balance sheets.”  - Cumulus Media COO John Dickey at this week's Morning Show Boot Camp
  
  
• "I think ESPN is a fine product. I think we can put a very competitive product on the field. There is choice now. I think for the first time, there is going to be real choice for not only updates, but a 24-hour network, expert analysis, and features. There is going to be a legitimate competitive offering out there, to offer real choice. I think choice makes everybody better. I think the broadcasters will benefit from this. We have a lot of respect for ESPN and what they've done. I think they have sort of had it to themselves, and this is a real opportunity to offer real choice to both the broadcasters and the advertisers." - Cumulus Media Chairman/CEO Lew Dickey in Radio Ink
  
  
• "The Department of Justice still sees its role as a way to promote competition and editorial diversity.  The DOJ remains focused on practices that lessen competition, raise price, or reduce quality of service.  A practice that reduces competition in a media market can dull incentives for participants to develop and bring to market new information or new and creative content,"  - Antitrust Division’s chief counsel on competition policy Gene Kimmelman at the American Antitrust Institute conference also this week in Washington

For what it's worth, I agree with the senior Dickey brother and Kimmelman, while scratching my head over why the younger Dickey brother and company programming chief feels that allowing Cumulus - or any company - to own more than their fair share of radio markets will improve anything in terms of top line growth for all of radio combined.

If owning one third of the radio stations can't keep a company from holding rate, I don't think letting them own more will suddenly give them pricing power or the courage to ask for better rates.

My hope is that the emerging "frenemies" relationship between CBS Radio and Cumulus ultimately results in a new national rep firm to give Clear Channel-owned Katz Radio and its subsidiaries some aggressive competition in presenting local radio  companies of all sizes to national advertisers, which would greatly help increase confidence of being repped fairly, not just getting leftover dollars in line behind Clear Channel stations who just might possibly get presented first.

The more competition the better for all of us who want to be sure radio's prices in the coming years represent the medium's proven ability to drive results for advertisers, based on our equitable share of the total media day.

Probing The Presidents

This Friday in Vancouver, I am moderating "The President's Panel" at the 65th meeting of the British Columbia Association Of Broadcasters.  Again this year, they have an amazing slate of impressive speakers and presentations.

Further proof of the pace of change affecting the media business:

A month ago I figured that most of our discussions would center around Bell Media's multi-billion dollar (just the RADIO assets are valued at more than a billion dollars) acquisition of Astral Communications which was announced as a continuation of the company's "four screen strategy."

I had been planning to talk to the executives about what their companies plan to do in the wake of that.

Then came the even more recent news that Vista Radio, with new backing from Westerkirk, is buying the Haliburton group, adding Haliburton’s 24 Ontario stations to fill in a geographic hole for Vista, which owns 38 stations in British Columbia, Alberta and the Northwest Territories.

Just last week,  Rogers Broadcasting announced its intent to acquire Métro14 Montréal (CJNT), enabling Citytv to expand its footprint in Quebec.

Almost immediately Citytv announced an affiliate agreement with the Jim Pattison Broadcast Group that will deliver Citytv programming to new audiences on a long-term basis on all three of Pattison’s television stations in Western Canada.

Is everyone else going to have to get bigger or go home?

I'll try to get your answer to that on Friday.

(Re-read, Re-) Focus

FM radios on cell phones - how to increase usage of them, streaming numbers, up from a year ago, are experiencing the annual summer dip, the impending Cumulus-Citadel buyout deal, among several others rumored to be on the radio business horizon and, meanwhile, Congress seems bent on ignoring the hurting economy in pursuit of political aims in the wake of a soft second quarter for advertising and retail.

And, that's just the start of worrisome headlines that not only create heartburn, but tend to get us all spending time on the wrong things.

Which is why I just went to my bookshelf and reread my copy of the 1996 book "Focus" by Al Ries (Harper Business - 800 331-3761), before tackling their new book on how to be an effective marketing person today.

Here are some highlights from the co-author of "The 22 Immutable Laws of Marketing," "Positioning: The Battle for Your Mind," "Marketing Warfare," "Horse Sense: The Key to Success is Finding a Horse to Ride," and "Bottom Up Marketing:"

Ries' daughter Laura did the research for "Focus," which is filled with fascinating facts, precise prognostications and thought-provoking case histories, beginning with Peter Drucker.

In 1954 Drucker said: "Any business enterprise has two and only two basic functions - marketing and innovation. Marketing is the distinguishing, the unique function of the business. Any organization in which marketing is either absent or incidental is not a business and should never be run as one."

As you read "Focus," you begin to realize how lucky we in radio were that re-regulation of our industry allowing consolidation and crossownership, creating the current need to grow by expansion and acquisition did not start to occur until the mid-1990's. Due to lucky timing, we had plenty of examples to learn from as other industries followed the fast growth path. Ries warns that loss of focus causes business failure. He cites numerous short-term growth strategies over the past two decades that didn't live up to their promise and hypothesizes what went wrong.

Sadly, most of us ignored them and have made them all over again in the last 15 years. He observes that it takes about six years for the typical company to go from optimistic predictions of incredible growth due to potential synchronicity to dour admissions of declining profitability due to loss of focus. Just as radio companies are beginning to search for synergies and expansion, Ries cautions us "whether you call this process 'line extension,' diversification,' or 'synergy,' it's the process itself, the urge to grow, that causes companies to become unfocused.

"When annual sales get in the neighborhood of $10 million a year (give or take a few million) a small company often hits the wall and becomes unfocused," he claims. "Ten million is about the time the founder decides the company is getting too big and delegates operating responsibility to three or four key people. Result: Each person...runs in a different direction. The more products, the more markets, the more alliances and company names, the less money it makes. 'Full speed ahead in all directions' seems to be the call from the corporate bridge. When will companies learn the lesson that line extension ultimately leads to disaster?

"If you want to be successful today, you have to narrow the focus in order to stand for something in the prospect's mind." Ries points to lemming-like trends that businesses often fall prey to. "In the seventies, it was diversification. In the eighties it was synergy. The fad of the 90's was convergence, the notion that digital technologies were all coming together. So naturally companies have to merge or set up alliances in order to take advantage of this powerful trend.

"This isn't just about cable and telephone hopping into bed together. It's about cultures and corporations combining into one mega-industry..."

Ries states: "Convergence is against the laws of nature. In biology, the law of evolution holds that new species are created by the division of a single species. Convergence, on the other hand, would have you believe that species are constantly combining, yielding such curiosities as the catdog."

In "Focus," Ries returns to the theories of Drucker, who maintained "concentration is the key to economic results (which) require that managers concentrate their efforts on the smallest number of activities that will produce the largest amount of revenue.

"What drives success," he feels, "is owning a piece of the prospect's mind" -- one word that is the essence of what you do.

"No brand, no company, no corporation can achieve 100 percent share of a market in the face of competition. Once you accept this reality, finding a word you own in the mind is greatly similified. You don't have to face those demons who keep telling you 'let's not give up any part of the market.'

"The question is, what kind of a niche do you want to own? The quality niche? The price niche? The safety niche? The driving niche?"

And, in case you don't think Ries is talking about our business in the year 2011:

"Vertical convergence is best illustrated by the Walt Disney deal to buy Capital Cities/ABC for $19 billion in stock and cash. It's a merge of content and distribution. 'One plus one equals four,' said Michael Eisner, Disney CEO. His thinking is as faulty as his math. Competition is the driving force in improving the breed, not sweetheart distribution deals. From ABC's point of view, they should be searching for the best content. They should not be forced to take the Disney output." Ries characterizes the Disney deal as follows: "One plus one equals maybe one and a half."

It took my breath away as I read those words written in 1996 as those same "Disney" radio assets are just a month away from being consolidated yet again, with promises of even more "value" being unleashed.

Whether you own, run or work for one of today's fast-growing radio super-duopolies, I'd suggest a RE-read of "Focus" by Al Ries. Then, click on that link in the previous sentence to a presentation of radio consolidation strategy from the 1998 RAB convention and ask yourself how well we did then, and what we need to do differently this time.

Big business, the brokers and the bankers are doing what they always do, but for the majority of us who exert no control over any of that - and often feel like we're just along for the ride - our focus is still best placed on innovating great content that drives listening and sells products.

A Tumultuous 15 Years

In May of 1996, I started to write a weekly newsletter I called "RadioIQ," which was the predecessor to this blog.

I found this item as I was paging through old issues today:

• "It will take $15 billion in trading to complete the consolidation process -- defined as the point at which 75% of radio is in the hands of the top 10 groups." By that measure, the industry has 80% more consolidating to do, said Alex. Brown & Sons Managing Director/Sr. Media Analyst Drew Marcus, who estimated that the process will take at least two years to complete. Fast-growing groups are best positioned for success in the long run. That is especially true of the public companies. "The fastest-gaining [radio] stocks are the consolidators," said Marcus. He pegged consolidators' stock growth at 2.5 times the rate of static companies. "Individual stations are too volatile, and we don't like companies that rely on just a few." He said companies like his, which underwrite many initial public offerings, look for groups that generate no more than 25% of their cash flow from their top two stations and keep debt leverage under 6.5. - Heard at the May 1996 Kagan Future of Radio Acquisitions & Finance Conference
  
  
• "Size -- if you are a public company -- is rewarded, as is diversification," said American Radio Systems Chairman/CEO Steve Dodge. But size for size's sake can be dangerous, Dodge warned. "These are still delicate critters that have to be marketed, programmed, and sold. I don't know that anyone has proven they can effectively run a 100-plus-station radio group."

It's going to be informative to see how many of these statements also apply to Cumulus-Citadel when it closes in September and how the few remaining "small" groups like Hubbard, Emmis, Entercon, Bonneville, Townsquare, Cox et all play out their futures in the face of it.

If you read this blog, your career prospects will be shaped by it.

Wise Words

“You have to make sure you have the right people doing the right jobs and that the entire staff is on the same page. To quote a phrase from the great Woody Hayes, "You Win With People.”

“Visibility in the market for any of your personalities is essential and if you don’t have the marketing tools to tout the virtues of an imported show, syndicated show or even a live and local show, it can adversely affect the adaptor process.”

“Less experienced programmers have a tendency to look at music research and callout and place too much emphasis on songs at the top. Certainly the research helps guide us with what our customers like or want, but sometimes there’s an over reliance of playing those songs over and over. There are a lot of different factors that come into play and should be considered.”

“The sales department has identified the digital platform as a viable area for revenue growth and the onus is also on programming to make sure we’re delivering content and getting our content spread among the platforms, especially the unique content we generate through our personalities.”

-- Rob Morris, OM KDWB/KTLK & PD KDWB, Minneapolis to FMQB's Fred Deane

Et Tu, Tim?

Tim Dubois is the man who put Brooks together with Dunn, developed Alan Jackson and was the fuel behind many other stars (Diamond Rio, Pam Tillis, Brad Paisley, BlackHawk, BR5-49, The Tractors, Carolyn Dawn Johnson, Lee Roy Parnell, Phil Vassar, etc, etc, etc) who are among the most-played names on the radio today. Obviously, he's not an uninformed observer of the state of our business.

You could have knocked me over with a 45 rpm spindle when I saw his letter to the Nashville Tennessean: "Music City would benefit from merger of Sirius, XM." Be sure also to read the excellent responses his advocacy generated too.

Count me in synch with this one:

It is my view that this merger would be bad for the music business in Nashville because it TAKES AWAY one more source to showcase our music and adds NOTHING. AS for what it does for the city...nothing.

Standard Radio Employees Got An Early Christmas Bonus This Year

You have to hand it to Gary and Allan Slaight for a very classy act on Friday as Astral Media transforms into a national broadcaster and formally takes over Standard Radio (purchased for $1.1 billion) to become Canada's largest radio broadcaster.

On the last day of Standard ownership, all employees with a year or more service received bonus checks! If you're going to end an era of radio ownership, this is a wonderful way to do it.

Click to listen to Gary Slaight last Friday on Toronto's CFRB (mp3).