Sorry, iHeart: Your Competitors Want More Consolidation

As readers of Streamline Publishing’s Radio Ink are well aware of, there has been a flurry of public debate and discussion among some of the leading figures of the radio industry on the topic of loosening subcaps — allowing one company to own even more stations in a local market.

The nation’s largest operator, iHeartMedia, is a holdout against lifting these caps. Now, a coalition of 10 radio broadcasting companies have spoken out in support of more consolidation — and have stated they’re OK with a proposal drafted in June by the NAB.

RBR+TVBR OBSERVATION: Our cousins over at Radio Ink have been offering a multitude of viewpoints on whether or not more industry consolidation is a good thing or is a misguided effort to combat digital media’s assault on local ad dollars. We have an opinion to share on this touchy topic, with full text below.

In a letter distributed to all radio industry trades for publication Monday morning (8/6), a group of 10 leaders collectively voices their support of a “modification” of the FCC’s ownership caps.

The letter is a culmination of group discussions conducted over the last several weeks to collectively voice their support for the NAB’s proposal, as well as to demonstrate unity on the topic.

Those signing the letter to the radio industry are Alpha Media President/CEO Bob Proffitt, Emmis Communications Chairman/CEO Jeff Smulyan, Mid-West Family Stations President Thomas Walker, NRG Media President/CEO Mary Quass, Townsquare Media co-CEOs Dhruv Prasad and Bill Wilson, Connoisseur Media founder and CEO Jeff Warshaw, Midwest Communications COO Michael Wright, Neuhoff Communications President/CEO Beth Neuhoff, Perry Publishing and Broadcasting Chairman Russell Perry and Zimmer Radio of Mid Missouri Inc. President John Zimmer.

A spokesperson representing the radio broadcasters notes that the letter “by no means represents the entire group who voted in favor of the proposal, which as we said was nearly all of the Radio Board and nearly all of the Ownership Committee.”

Townsquare Media volunteered to coordinate the release of the document on behalf of all of the letter’s signatories. “However, this was truly a collaborative effort,” the spokesperson said.

The letter shares how “our industry, working with the National Association of Broadcasters, undertook a project to develop a radio industry proposal that could be presented to the FCC ahead of its 2018 quadrennial ownership review to help frame the next generation of these rules.” The result of this work is the June 15 submission by the NAB to revise local ownership rules — a.k.a. allow for further consolidation.

“To be clear, we are fully supportive of and have endorsed the NAB proposal,” the group heads note.

Their defense of the loosened subcaps is based on emerging technologies and consumer habits that have greatly changed in the last 22 years.

“The current numerical ownership limits were established by the Telecommunications Act of 1996,” they write. “In the twenty-two years since then, the emergence of digital and social media, not to mention the pervasive use of smartphones and other devices, has fundamentally disrupted how information is disseminated locally and nationally. The competitive landscape for information, as well as audio entertainment, has changed dramatically. In radio, our main competitors (Facebook, Google, Spotify, Pandora, YouTube, and SiriusXM, for example) did not even exist in 1996. And yet, our rules are based on that era.”

Perhaps the strongest argument the group heads make is the following: ownership restrictions “limit the ability of local stations to take advantage of economies of scale that could bolster the industry’s financial position at a time of unprecedented competition.”

For radio companies to continue to serve the public interest by providing local news, local sports, local weather, and essential emergency programming, the group heads assert, “these companies need to be economically viable entities, free to compete for assets, capital, and resources on a level playing field with their competitors.”

They also argue that common ownership “will drive more format diversity.” The group heads write, “Companies will use their additional stations to experiment and develop new and micro-targeted formats, rather than compete with their existing stations. These new formats will serve specific communities and demographics in ways that most of commercial radio does not do today. This will help radio serve its audience better by providing greater consumer choice, serve its advertisers better by offering broader audience reach, and help our industry compete with the virtually unlimited channels and micro-targeted audio audiences offered by digital and satellite competitors.”

What about arguments against modification of the ownership rules? They write, “We have heard an argument that the NAB’s proposal will hurt the value of AM radio. As significant owners of AM radio stations, we have an abiding interest in the value of these assets. Nevertheless, our self-interest does not override the fact that media ownership rules were not intended to provide economic subsidies or determine winners and losers, and to use them in that way today, to advance the interest of one class or company in particular, is a perversion of their intent. Rather, the best way to ensure the value of AM stations, and to deliver for the listeners of this service, is to provide essential and important programming, and unique and valuable benefits to advertisers. In that regard, we can point to several AM stations that continue to be successful: Entercom’s WINS and WCBS-AM in New York and WBBM-AM in Chicago, as well as iHeart Media’s KFI in Los Angeles. These were four of the top ten billers in our industry in 2017.”

And, what about arguments that consolidation offers no benefit to advertisers?

“We disagree, and, as noted above, believe that the benefits of common ownership that accrue to the listener in the form of greater format diversity will also benefit the advertiser. Our experience in competition with digital media has been that a key point of differentiation between offline and online advertising is the latter’s ability to micro-target audiences for an advertiser, based on very specific audience characteristics. We know that advertisers value this capability, and that it drives dollar shifting from radio to digital. In conjunction with investment into and development of our own data collection and advanced audience insights, the prospect of being able to offer a greater number of unique formats, along with the localism that is our medium’s hallmark, will enhance radio’s ability to present a competitive advertising solution versus digital and social media. Yes, it is better for our advertisers if we can deliver a better product.”

RBR+TVBR OBSERVATION: At the very end of the letter “to the members of the radio broadcasting community,” the 10 industry leaders — many of whom we adore and admire — write, “We respect dissenting views on this topic and hope that our thoughts, as expressed in this letter, have added to the public discourse. We know that all opinions are the result of strong feelings about what is in the best future interests of this industry, which we all love.”

Excellent! We respectfully disagree with each and every one of these 10 radio industry leaders.

Sadly, their work with the NAB is filled with flaws. As such, this letter “to the members of the radio broadcasting community” who haven’t signed the letter — sans Entercom, Beasley, iHeartMedia and Saga — have essentially received a “we’re buying or your dying” missive from a bunch of leaders who care more about their own growth limitations as owners of terrestrial radio stations than the continued health of an industry that’s largely oblivious to its own long-term ills.

The signatories include the new head of Alpha Media, a company that has too many damn stations thanks to a poorly designed deal with Digity to get awesome properties like its West Palm Beach cluster but is now saddled with a ton of mutt markets that it can’t monetize. Bob wants more consolidation?! Why, so Alpha can sell its awful revenue-short stations to Beasley Broadcast Group in the Southeast and to Hubbard Radio elsewhere, allowing Dayton to be run from Cincinnati and Portland, Ore., to consolidate with Seattle, resulting in massive layoffs and less overhead?

Now, let’s put on our New York Mets cap and think like a Madison Avenue madman and a Wall Street wizard.

Mid-West Family Stations? Who are they? Midwest Communications is a different company? NRG Media? Mary is super nice. They have no national profile. Jeff Warshaw? He’s the guy up in Connecticut paring down properties, not buying. Beth Neuhoff? Super awesome person and some radio stations somewhere in Midwestern small markets. Perry? Never heard of ’em. Zimmer? That’s in Cabela-land, right? 

Look, all of these leaders are great. They each have local radio stations that are top quality and really serve their local markets. But, to borrow a phrase from an old Clear Channel marketing plan once laughed at and derided at Radio and Records for how ludicrous it was, “Less is More.”

Competition is healthy, both from a content and sales perspective. Why? Having more players in a media sector sends a message to Wall Street and to marketers that a sector is vibrant and worthy of support. Is that true of radio? We question this.

If you control all of the radio stations in one market, this does not allow you to better compete against local digital media, or television, or the dying fishwrapper once called the “daily newspaper.” Why? Because, at the end of the day, it is still radio.

Owning all of the radio stations in one market will not bring dollars away from digital media. Instead, it will allow one company to dominate a media while keeping its piece of the pie — a piece that keeps getting smaller and smaller. Ain’t that right, Dhruv?

If Townsquare Media were, theoretically, to own every radio station in Binghamton, N.Y., would it eclipse Quincy (WBNG-12), Brian Brady’s Northwest Broadcasting (WICZ-40), and Nexstar Media Group, which controls the ABC and NBC stations in the market? What about Gannett Co.’s Press and Sun Bulletin? Or, is that an irrelevant question since Alphabet Inc., Facebook, Spotify, Pandora and other local digital media solutions are the target and they have a different value proposition and better audience targeting?

The solution for winning Binghamton comes through not only top programming, but top marketing of Townsquare’s stations to new and current listeners; to local, regional, and national businesses; and through a savvy promotional effort that puts digital local media in its proper place — as a nice add-on but not as an ineffective tool that advertisers wrongly believe offers the most refined and accurate consumer targeting out there. That’s BS, but the perception war was won because the RAB and our industry leaders were inept in fighting back.

Lastly, we must take issue with the group owners’ argument that common ownership “will drive more format diversity.”

These 10 fine leaders actually believe this pile of loco moco left out in the lanai for a fortnight?

Have any of these leaders heard of a company called iHeartMedia? If not, we invite you to learn more about this amazing industry player, which is presently in Chapter 11 reorganization. Among its finer qualities are homogenized generic station logos and branding; Premium Choice, allowing for greater cluster efficiencies while allowing a voicetracked talent to be heard in a multitude of markets; and favoritism. In one Ohio market we won’t name, it is obvious to the listener — and potential advertiser — that one big FM gets all of the attention because it has the greater revenue potential. As a result, the other stations in this cluster, well, are run on the cheap.

Just this morning RBR+TVBR received a comment on the story “Uncool Emissions Prompt Violation Notice For iHeart FM” from an everyday radio listener named Tyler Kleinle. He writes, “I wish this company would just die already. They took over nice small mom and pop stations and made them cookie cutter no different from market to market.”

When you have this sort of operation and that sort of image in your market, that will combat the assault on radio by local digital media?

Are you loco in the coco?

Our editor-in-chief, Adam R Jacobson, spent the last half of the 2000s working for a marketing and advertising trade publication serving the U.S. Hispanic market. It had one main competitor, and two smaller ones in 2006. One folded, another retargeted its efforts on Latin America. By December 2009, the publication Jacobson worked for was broke and couldn’t make payroll. That left one player left in the space. Has advertising increased for that lone player? No. It’s actually contracted over the last several years.

This has been a lengthy Observation, but one we must offer. The problem with radio’s health has nothing to do with the number of radio stations a company can own in a given market. It has everything to do with how to continue to attract consumers and advertisers in an age when content is available instantaneously. More stations may appear to equal more revenue, but at the end of the day it’s another bandage on a pus-filled sore that’s not properly healing because the elixir lies in Silicon Valley, where not one media company has been smart enough to set up shop and show the denizens of digital what we all seem to know.

Radio reaches 92% of all Americans every day … Blah, blah … the story of radio’s reach and vibrancy has not been told in a meaningful way for a generation. If that’s not going to change, owning all of the radio station in America won’t save this industry from its ultimate demise.