Midwest Exec Makes His Case For FCC Radio Rule Relaxation

0

On April 19, an RBR+TVBR OBSERVATION offered an editorial opinion on the hotly debated topic of further deregulation of local radio ownership rules.


Michael Wright, COO of Midwest Communications, believes relaxing local radio ownership restrictions is overdue.

As RBR+TVBR welcomes all viewpoints in its publications, Wright was invited to pen a column that illustrated why changes championed by the NAB and at the Commission by Republican Mike O’Rielly are needed.

The column was edited solely for grammar and spelling.


By Michael Wright

Relaxing local radio ownership restrictions is a proposal whose time has come.

Change is needed to allow local radio companies to level the playing field with tech-based global competitors.  These Silicon Valley companies have taken advertising dollars out of the local economies, without contributing to local service.

A splintered radio industry competing over shrinking radio-only advertising dollars, while these tech giants divert more and more local revenue to their international coffers, will not allow radio to continue to provide the local programming and local service for which it has historically been known. In smaller markets where the biggest changes would occur under the NAB’s proposal for changing the local ownership rules, new freedom for broadcasters to create bigger local groups would be beneficial to local communities, keeping radio relevant and competitive.


“A splintered radio industry competing over shrinking radio-only advertising dollars, while these tech giants divert more and more local revenue to their international coffers, will not allow radio to continue to provide the local programming and local service for which it has historically been known.”


 

The case against deregulation is presented with a complete lack of insight into how the radio business works in the 21st century.  We no longer compete solely, or even predominantly, against other in-market radio companies.  The business landscape in broadcast is much different than it was in 1996; in fact, it is much different than it was even a decade ago.  We still play by rules created 23 years ago when streaming audio was a quaint curiosity.  The companies we now compete with, even in the smallest markets, such as Facebook, Pandora and Google, operate under no rules at all, except those set out by their hedge fund managing investors.  Their actions are designed only to increase their stock prices and make money for global investors.  Like other industries, such as taxi service and newspaper, radio has been targeted for ‘disruption’ by tech giants.  This means dollars leaving the local economy and less local jobs unless something is done to allow us to compete with these colossal companies, each of which is far bigger than the entire radio industry.

In 2006, 10 years after deregulation, the broadcast radio industry brought in $18.1 billion in revenue.  In 2018, over-the-air revenue was down to $13.3 billion.  Digital revenues for radio operators only amounted to an additional $963 million industry-wide.  This means that while on-air revenue declined by $4.8 billion, our digital efforts brought back a mere 20% of that lost revenue.

At one time radio brought in 8% of the total ad dollar combined, that number has slipped to 6%.  Where did this revenue go?  Consider that online advertising has increased to over 50% of the ad dollar, when it was nearly non-existent in 1996 the last time significant changes were made to the radio ownership rules.  Spotify alone, a major competitor to whom local radio groups have lost ad dollars and listeners, had more revenue last year, ($6.1 Billion) than the biggest radio group in the United States, iHeartRadio.

The notion that having a myriad of ownership groups in a market gives more choices to local radio listeners is also misguided.  Allowing for greater common ownership of stations in a community would instead create more programming diversity.  Some markets currently have three or four Country and Top 40 stations.  Groups compete for the advertising dollars found in these most popular formats.  Right now, with every radio group chasing the same audiences in the same popular formats, smaller audience groups in our markets are often left unserved.

These audiences are turning to digital services to meet their interests. In markets where there are fewer radio groups fighting with each other for the already limited broadcast radio ad dollars, rather than creating stations that play the same formats to compete with each other, we can experiment with radio formats that might appeal to these smaller audiences, and help to bring these now abandoned listeners back to radio.

Opponents of deregulation have cited the fictional cabal of “Big Radio” as being behind our efforts.  Instead, the move to change the rules is one spearheaded by smaller radio groups who recognize the need to grow in their markets to compete against the huge tech companies who are now our biggest competitors for audience and advertising.

Note, in the comments filed in the FCC’s Quadrennial Review last week, the biggest radio companies were silent or opposed most ownership deregulation.  Support came from those companies dedicated to local service.  They are not looking to be national giants – but instead they are looking to have the scale to effectively compete in their own markets.

Having healthy local radio owners will allow for innovation and investment to compete for digital dollars to keep those dollars in local markets, rather than allowing them to escape to the big tech companies.

Deregulation would allow radio companies to compete against the global giants who pose a real threat to local economies.  Being honest, most radio owners will recognize that in any of their markets, there are stations that are not serving the public interest, and not advancing radio’s brand, but instead are hanging on hoping to find a way to meet their debt service until they can figure out an exit strategy.  Continuing the status quo will lead to more radio groups being unable to stay competitive in the 21st century advertising landscape and will lead to more money leaving the local economy as you see more small and mid-sized radio groups fail.

Supporting deregulation isn’t a vote for some large corporation concerned more about their stock price than serving the local community – it is the exact opposite.  Deregulation will create better radio environments for local listeners, more local jobs and put more money at a local level into the economy.

It is time for a change, and we urge the FCC to take action soon.

 

Michael Wright has served as COO of family-owned Midwest Communications since 2013. He joined the company in 2004 as VP/Operations and in 2007 rose to SVP.