NAB Show Update: Group Heads On The State Of Radio, PPM Generates Heated Views
September 17, 2008 at 12:05 PM (PT)
The discussions in the panels during the first day of the NAB convention in AUSTIN were lively, pointed and predominantly sobering. While the radio group heads looked at radio's current situation as a positie challenge, analysts were less than optimistic.
In a panel of group heads, CBS RADIO's DAN MASON told the audience that radio's "biggest fastball ... (is) local ... the vision is, we have got to get back to understanding what our fastball really is." To illustrate radio's positive influence, MASON told a story about former PHILADELPHIA EAGLES player and long-time EAGLES radio color commentator MIKE QUICK, who once told advertisers that he wasn't really a star until he got on the radio. He also cited radio's response to hurricane emergencies, noting that CLEAR CHANNEL has a larger response capability in the SOUTHEAST than FEMA.
We need to go back to the basics... I understand that times are tough, but if we don't go back (to basics)... we'll be sitting here next year talking about how bad '09 is.
The move from a public to a private entity had CLEAR CHANNEL's MARK MAYS enthused, as he said that the new private operation is "very refreshing" with investors "focused not necessarily on what SEPTEMBER revenue is or what OCTOBER revenue is. The focus is 'how can we grow radio, and particularly CLEAR CHANNEL revenue, for the long term?'" He said that the company is spending more money on sales, and that "it's not necessarily about cutting costs in this environment." MAYS said that last week's programming meeting in ATLANTA excited him, with the 400-500 attendees "extremely excited ... about being in the (radio) business again."
Offering a smaller radio group perspective was CHERRY CREEK RADIO's JOE SCHWARTZ, who noted that his company's cash flow has doubled since 2004, and that the "small-market business, from what I can tell, is still very strong." He stressed the need for radio sales people to realize that "everybody is a prospect," adding that "we need to go back to the basics ... I understand that times are tough, but if we don't go back (to basics) ... we'll be sitting here next year talking about how bad '09 is."
CUMULUS' LEW DICKEY said that 2009 "is gonna be a challenge," with the global economy down, consumers tapped, and pressure on wages; he said that "we still have a fundamentally sound system." SAGA's ED CHRISTIAN agreed, noting, "we have a lot of naysayers around here, doom and gloom ... I want to punch their lights out. The fundamentals are strong." However, he decried the "failed system of sales training" that he says has plagued the industry.
On the effects of the economic troubles of the past weekend, CHRISTIAN complained that radio is being unfairly singled out for its inability to get financing, noting that all businesses are having the same problems. "Don't look at us" as the only business experiencing troubles, CHRISTIAN said, adding that "the economy always right-sizes itself." MAYS said that "the financial meltdowns don't affect anybody's capital structure. Debt is not a good or a bad thing; it's the structure of the debt."
At a session WEDNESDAY afternoon about the introduction of PPM data to more markets, ARBITRON Pres. PIERRE BOUVARD insisted, "Despite what you read in the trades, there is a lot of good news for Hispanic and Urban stations" in the PPM. BOUVARD outlined the process of rolling out metering in individual markets, including agency education and breakfast sessions introducing the system to local advertisers.
GREATER MEDIA Rock WMMR/PHILADELPHIA PD BILL WESTON added his observations about metering in his market, which has given WMMR strong ratings. WESTON said his station adjusted the logging of the station to cross-reference the meter information with programming changes.
The culture at the station has changed, WESTON said, noting things from explaining the results to talent -- to adding technical redundancy to maintain the encoder at all times. He also noted the relative lack of boost from many features and was able to analyze the 7-midnight daypart to eliminate certain features that weren't performing.
INNER CITY BROADCASTING Urban WBLS/NEW YORK GM DEON LIVINGSTON challenged BOUVARD on issues facing Urban stations with metering and sampling, disputing BOUVARD's assertion that the dropoff in sales in metered markets was purely the result of the economy, and noting that BOUVARD's comment that "we need to move forward" despite problems with the system was a repeat of the same theme BOUVARD has said in the past.
For his part, BOUVARD said that he wishes that the metering had started sooner than it did.
Economics Will 'Get A Bit Nasty'
Elswhere, several financial analysts offered a very sobering perspective. DEUTSCHE BANK SECURITIES' DREW MARCUS told the DICKSTEIN SHAPIRO conference at the NAB RADIO SHOW in AUSTIN WEDNESDAY morning that the current economic "storm" afflicting the radio industry "is going to get a little bit nasty." Noting that radio stocks are down 62% year-to-date and that all media are underperforming the market (radio trailing only directories as the worst-performing medium), MARCUS warned that the next big deal will come in at a single-digit multiple.
"The next one to two years could be difficult," he said, adding that growth is likely to be down again in 2009, with lenders wary and no analysts covering the industry. MARCUS also warned that a debt crisis in the industry is possible if EBITDA drops another 20%. His suggestions for companies to weather the "storm" included deleveraging and paying down debt rather than buying back stock.
Voicing a positive note, MARCUS added that the industry still commands 19% of media consumption and has long-term resilience.
A Few Rays Of Hope, More Pessimism On NAB Financing Panel
On a panel of largely pessimistic lenders at the DICKSTEIN SHAPIRO conference at the NAB, OAKTREE CAPITAL's ANDREW SALTER took a contrarian view about radio's future, ticking off several features that give radio an edge as media competition continues to grow and the business moves into the digital arena.
SALTER said that radio's branding is much stronger than television's, comparing radio station brands to local TV stations' network identification. He also stressed that radio "far and away has more creativity" than other media, particularly personality radio and News-Talk, which he says will help the medium translate its content to online better than the competition. SALTER later challenged other panelists' views comparing radio's difficulties to newspapers' woes. In his eyes, radio has advantages, as it "hits you out of home," but newspapers don't.
But most panelists took a more negative view, echoing GE COMMERCIAL FINANCE's GARRET KOMJATHY, who worried that "the light at the end of the tunnel is the proverbial train" and warned that "people are going to have to sell radio properties ... they're way too leveraged." JAMES R. KUSTER of RBS GREENWICH CAPITAL noted that the situation this year, with the Olympics and an election coinciding with an advertising recession, is "unprecedented" and said that he, too, is "pessimistic."
CIT Communications' CHARLES DREIFUS said that HD RADIO is a "non-factor" in his analysis of the industry, with the cost of development not translating into revenue at this point. And WACHOVIA's BRUCE LEVY drew laughter and applause when he answered moderator LEW PAPER's question about how a change of administrations in WASHINGTON and a possible change at the FCC will affect the business with a simple "I don't know."
The panel closed with KOJMATHY responding to PAPER's question about the difficulty an enterpreneur would face in getting financing to buy into radio today by saying, "my guts tell me to tell the guy to get his head examined."
Panel Looks At Smaller Markets Not Scheduled For PPM
Some markets aren't getting meters anytime soon, and a panel WEDNESDAY afternoon addressed broadcasters whose markets are too small to expect PPMs to show up in the foreseeable future.
MCC RADIO LLC's MIKE OSTERHOUT asserted that "nothing is more important to the industry than measurement issues," and ARBITRON's TOM O'SULLIVAN said that his company agrees and continues to have a "significant investment in diaries," with 250 of the company's 298 metros having diaries or diary/meter hybrids for "years to come." O'SULLIVAN said that the critical issues for sampling are size and proportionality, and the company is addressing the issues through such pilot programs as payment of incentives to get men 18-24 to return diaries, a program successful enough (24% improvement) to be added to 23 more markets, increasing the total to 140 participating markets. He also noted that the company is looking at web retrieval of diary information as another option to augment phone and diary methods.
KATZ MEDIA's GERRY BOEHME discussed the problem of different methodologies producing different results, a situation being illustrated by the introduction of a new methodology -- metering -- by the same company using the old diary method. He recalled the days of BIRCH RADIO's phone surveys competing with ARBITRON's diaries, and how one study measured the same sample by phone, diary and in person, and got different results -- and even different ethnic identification -- from each.
EASTLAN RESEARCH's MIKE GOULD, an ARBITRON competitor, agreed that the difference in methodologies is a problem and referred to a comment by ARBITRON's STEVE MORRIS that appeared to disparage the diary method, which GOULD noted is also being marketed by ARBITRON. O'SULLIVAN said that the measurement is in a transitional phase ("a transition that's going to happen") that doesn't denigrate diaries, but recognizes that the business is moving towards a new method that allows for more granular analysis of listening. He also noted that NIELSEN has three different methodologies in use to measure television. BOEHME responded that it's true that agencies can and do deal with buying in different markets using different TV ratings methodologies, but he said that having the CEO of the company say that diaries are outmoded was a bad sign and "gives people doubt."