FM Radio’s Resilience Integral To iHeart’s Ownership Views

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“It is beyond dispute that the audio ecosystem in which free, over-the-air, local radio
broadcasting currently operates and competes has changed dramatically since the 1996 Act,” iHeart states in its official comments filed this week with the FCC in response to its 2018 Quadrennial review of its media ownership rules.

Indeed, Internet-based streaming services and the introduction of satellite radio were noted by iHeart, along with how local advertising can now be seen across social media platforms.

Yet, iHeart noted, one thing remains strong regarding radio: its consumption.

It’s a fundamental reason why iHeart is taking a definitive stance on a NAB plan to greatly weaken the Commission’s ownership rules — an opinion many radio broadcasting companies will be talking about for weeks to go.

“More than 90 percent of Americans continue to listen to broadcast radio each week,” Washington, D.C.-based iHeartMedia SVP/Government Affairs Jessica Martevano wrote in the 41-page filing made on the final day comments could be submitted to the FCC.

“Additionally,” Martevano said, “when measured by metrics of audience listening and advertising revenue, FM radio stations show much greater resilience to marketplace changes than do AM stations, which have suffered significant declines in both categories.”

Thus, she continued, “While numbers of AM stations continue to have strong listenership and revenues, the erosion in the vitality of the AM band as a whole as compared to the FM band has continued and in some cases even accelerated in the past several years, notwithstanding the Commission’s praiseworthy initiatives under its AM Revitalization proceeding.”

The consequences of further deterioration in the financial strength of AM radio stations could be very serious, Martevano added, including diminished resources to invest in local community-centric programming, content, talent and innovation.

THREE BROAD PRINCIPLES ON AM HEALTH

In light of the “marketplace realities” Martevano spells out to the Commission, iHeart urges that, in adopting rule changes in this proceeding, the Commission be guided by three broad principles:

  • Do no harm, in particular do not precipitate further deterioration of the AM band or
    undermine the financial incentives for incubating stations embedded in the Incubator Order
  • Provide meaningful regulatory flexibility to remedy specific marketplace problems
    that might be eased by targeted changes in the ownership limits
  • Refrain from overly broad and aggressive rules changes that could harm local radio
    stations’ ability to meet the public interest needs of the 90 percent of Americans who rely on it

“Such targeted reform should improve market valuations of economically struggling AM stations, with benefits for jobs, programming, facilities and community services,” Martevano said.

WHAT’S FUELING iHEART’S FM RULE FOUNDATION?

Based on the principles it outlines for the NAB’s AM radio proposal, iHeart urged the Commission to reject the NAB proposal with respect to FM ownership.

Why? The NAB plan “would exacerbate the competitive disparity between AM and FM stations.”

Further, iHeart argues, “Doing so will avert the very real threat of a mass divestiture of AM stations in favor of FM station purchases and the consequent devaluation of AM assets and attendant listener flight from the AM band.”

Additionally, iHeart believes the financial incentives essential to that program’s success “would be significantly undermined by NAB’s proposal as it relates to FM ownership limits.”

A DISTINCTION FROM OTHER AUDIO SOURCES

Broadcast radio is free to the consumer.

Other sources of audio content aren’t necessarily free, and this characteristic differentiates broadcast radio from these other sources of audio programming, such as satellite radio, Martevano said.

Similarly, internet access and the devices needed to access streaming audio come at a much greater cost than a radio, she argued.

Another big differentiation point Martevano brings to light is how “broadcast radio is local” — a statement that may result in chuckles from many industry readers who have derided iHeart for its extensive use of voicetracking and syndicated programming.

Still, iHeart notes that non-broadcast audio services are designed largely to reach national
audiences; a local focus, if present at all, is secondary. Even with voicetracking from out-of-market sources and syndicated programming, some local element is forefront across iHeart’s radio stations.

Martevano shares, “Broadcast radio provides a completely different listening experience from other audio services. Broadcast radio provides the listener community and companionship. Broadcast radio is a DJ telling you about a new song and why she likes it; it is a group of personalities riding with you in the car, entertaining and informing you on the way to and from work; it is a voice you know providing critical updates in times of emergency; it is members of the same community who show up to cover a local food drive or festival. Consumers listen to radio for a completely different experience than they receive from other platforms like satellite radio, music streaming services, podcasts, etc. These platforms offer listeners a means of escape from the world. Conversely, consumers listen to radio to engage in the world around them.”

She also addresses competitive cross-platform pressures within the audio ecosystem.

For iHeart, these pressures “are not determinative of what is the relevant market.”

Consider the transportation industry as a perfect example of what iHeart sees as the radio industry’s reality.

“When assessing whether there is a competition concern within the commercial airline carrier industry, the market is treated as the airline market, not the transportation market, even though trains, ships and automobiles compete with airlines for traveling consumers,” Martevano said. “The same logic applies here. The relevant market is the broadcast radio
market.”