CEOs Discuss State Of The Radio Industry, Stress Topline Growth, De-leveraging
September 29, 2010 at 2:30 PM (PT)
CUMULUS' LEW DICKEY, NRG MEDIA's MARY QUASS, ENTERCOM's DAVID FIELD, and HERRY CREEK's JOE SCHWARTZ wrapped up WEDNESDAY's sessions at the NAB/RAB RADIO SHOW by discussing the state of the industry at the annual DICKSTEIN SHAPIRO financial seminar.
Asked by moderator LEW PAPER about the news that the recession officially ended in 2009, DICKEY said "the recession has ended for radio," predicting about 7% growth for the year. He warned that the decline in advertising rates needs to reverse itself, but "we're on the way back up again." He later said 80% of the increase in national revenue is not due to pricing, meaning "there's still a way to go" to increase rates. SCHWARTZ said that the problem with rates comes from the top, with local managers browbeaten into making goals; he said that increasing rates needs to come from the corporate level. QUASS added that now might be the time to review inventory levels and possibly cut them back.
Reminded that he had predicted a year ago that growth would be in the mid-teens this year, FIELD qualified his prediction in retrospect by tying it to the recovery of the general economy. He chalked the lesser growth up to the sluggish general economy, but noted double-digit growth in national sales and predicted the same next year plus "off the chart" growth in digital, leaving local in question, but reiterated that if the economy cooperates, double-digit growth might be attained next year. He said that the "headline" should be that radio has grown 6% this year while the media have grown 3% overall.
SCHWARTZ noted that the national market is where the growth has been but that in his smaller markets, the actual dollar amount of growth is small. SCHWARTZ said that "topline local" is where the revenue needs to be, "and that's my concern." He said that "we need to be far better than we have ever been in our life," warning the industry not to rely too much on national revenue, which, he said, could be "gone tomorrow." He later warned that failure to grow topline numbers could lead the industry into foreclosures.
QUASS said that station owners need to return to being "great operators" and "understand our business in today's environment." She said that "the money will come" to do deals and acquire stations, but PAPER noted the lack of recent deals while FIELD added that "as we get a little more certainty in the marketplace... this industry could use a little more consolidation." DICKEY said that the present rules allow for "dramatically more" consolidation than is presently the case, and said that further consolidation would "improve dramatically" the performance of the industry. He said that the area needing regulatory relief is consolidation of ownership of cross-platform local media.
Asked by PAPER about the availability of equity, SCHWARTZ said "there's plenty of equity, the only problem is they're chasing deals at five- or six-times.... I think it all revolves around the credit market" and the difference between bid and ask, agreeing with FIELD that the industry first needs to de-leverage. QUASS said that the gap between bid and ask "goes across market size... nobody wants to sell at the bottom."
On HD RADIO and news that the format has sold 3 million radios, QUASS said that the number is good news and "the more HD, the better" but that the format doesn't matter to the user as long as the content gets delivered. She expressed surprise that HD has not taken off as quickly as expected. FIELD said "the HD story is terrific," with "scores" of automobiles rolling out with HD radios installed. "It is happening very quickly," he asserted, suggesting that HD is becoming a more important part of the business. He also called the industry's digital assets like Internet streaming and apps "a great reinvention story." SCHWARTZ added that he has not seen any impact from streaming audio services like PANDORA in his markets and called his digital strategy "a work in progress" while digital is "a must" for larger rated markets.
The proposed deal trading a performance royalty for a mandate for FM chips in cell phones would give radio greater distribution, DICKEY said, helping move the medium from being primarily automobile-based to mobile. Consumers want FM in cell phones, DICKEY stated, and "that will drive sales."
Asked whether there are any innovations in programming that radio can introduce, QUASS spoke instead of "packag(ing) things in new and different ways" and cited a manager in SALEM, IL using the station's website as the equivalent of a local newspaper. "Those kinds of innovations are the kinds of things we need to be looking at going forward," QUASS said. She added that she senses that the business has moved beyond the "woe is me... we all suck" attitude to a more positive outlook.
Sorkin: Economy 'Still In Rehab'
Before the panel, financial reporter and UNITED STATIONS RADIO NETWORKS syndicated host ANDREW ROSS SORKIN gave a talk on the economy that described its state as "still in rehab." He said that the economy will feel like a recession "for a really long time," noting that to return to 2007 levels, the economy will have to generate 11 million jobs, but that on a corporate level, he senses that there is more confidence that deals are getting done. He added that he doesn't think it's as hard to get a loan as people think, but rather that there is less demand and people are being "more cautious." "The headlines are being driven by the people having cut back themselves," SORKIN insisted.
"Our economy is in a much better place than we ever give it credit for," SORKIN, said, terming the present conditions "the better normal."