August 2, 2011
Like Kenny Roger's mega-hit "The Gambler," Tim Moore knew "when to hold 'em and when to fold 'em," selling the radio station he owns to start a consultancy that specialized in multi-format cluster programming and marketing strategy - right before the consolidation boom, which made Audience Development Group successful and integral in the continued growth of radio. Here, Moore offers his insight into radio's past, present and future.
What made you decide to leave radio ownership to form Audience Development ... could you see what was on the horizon with the Telecom bill and consolidation?
Audience Development Group formally started in 1993. The Telecom bill came later; still, it was a very interesting time to do what we did, because we had just come through the LMA (80-90) docket period where while you couldn't own more than one FM; you could manage another, which opened the door. You had that weighted by a recession that, while didn't rival the current one; still put a lot of poorly financed private groups into bankruptcy. We would come out of that into a new renaissance after the Telecom bill was passed in 1996.
We looked ahead; we'd have been bored to death doing just one format. What we were trying to do with ADG was a "Mayo Clinic" approach. Alan Mason and I felt that we could succeed by consulting more than one format, which turned out to be great luck when the Telecom bill passed. All of a sudden, for example, Susquehanna had three FMs in Cincinnati. Upon realizing ADG could provide cluster-wide programming wrapped in a single culture, it worked for them and countless others. We had already established a perfect hand-in-glove model; we attribute our success to having a business plan that fit where radio was going as opposed to where it had been.
Have you tweaked company at all as radio evolved in the consolidation era?
Sure, in the sense that we grew in terms of the number of people who worked with us and formed very respectful bonds with leading research companies like Coleman and Mark Ramsey. Of course, the price of admission for anyone who blessed us with their presence on staff would be to understand multiple formats -- both mainstream and niche formats -- and had successfully done them. Secondly, as a company we would work with the PD first and the firm second. If we go in and improve the culture just by helping them to understand their company's business plan, we could work with them like an offensive coordinator functions for a football team -- then things get a lot better. For a cluster client, our unbridled enthusiasm for multiple formats meant that we didn't have four different cultures in conference calls ... just one programming culture for a consolidated fee.
We have since seen the downsizing of the biggest groups (ie: Clear Channel and CBS); does that mean they got too big?
Consolidation is like any other business strategy; it's not much different than what happened in banking. Consolidation was a great idea when the Telecom bill passed, but once the buying began, and station prices went from 10 to 20 times trailing cash flow, which is when I got out of ownership and fully immersed myself in consulting. I said to myself, "Either I missed a Wharton weekend seminar, or they may not be able to produce the kind of business to maintain that debt load."
This was no fault of the talent or the PD; it was a flawed business plan where radio buyers went too far. They bought beach-front property at a premium assuming a rising tide would indeed lift all boats. Well, when the tide goes out, we find out who's wearing a bathing suit.
I'm so fortunate that at 32, I bought my first station in a very large FM facility in Michigan. I think history would record that I was a pretty good owner who was just smart enough to collect great people. I ran expensively, hiring experience and talent. My operating statement reflected it, yet I still saw 34% cash-flow-to-net-sales results and ranked first in most significant demos. I wanted to keep people for a long time; my whole model espouses the only way to do great radio is start with a small group of really talented people, provide them a blueprint, then get the hell out of the way.
Media is currently ending a very bad recession; radio's condition is symptomatic of it. The good news is that we have a tremendous product. I feel like a shop steward for the listeners' union; the business has done some ham-handed things yet still listeners love our product. I really think radio's in a very good state; it's on the precipice of an entrepreneurial renaissance.
Several radio analysts have lowered their growth estimates for radio because of the lingering effects of the economy, yet you see a comeback. Why do you see radio making a significant comeback?
When someone like Larry Wilson, who doesn't need a dime, decides that his intense love for the business and his unfailing competitiveness prompts to him to buy new stations, that's a good sign. ADG is honored to do some work with Larry's team in Portland. And it's not just Larry; other people are poised to come back in right now. Look at Randy Michaels. Hubbard recently bought stations from an equally great company in Bonneville.
What's more, they have to deal with the gridlock of economics. If someone puts a lot of equity into a large group and is forced to sell at a reduced price, they're locked in at a loss - and no one wants to lose on a deal. So you have everyone staring across the table at each other. That's why you're going to see more experienced owners making the deals, which is a terrific thing. It may take a while, but you're going to see the subway train pick up lot of speed as long as we cume like we do - unlike newspapers. It's more of an economic issue than a product issue. If you just program and sell a good radio station, you should do fine. The #1 station in any market is really the #1 biller.
What's your take on the migration of News/Talk/Sports stations to FM?
You could see this coming like a hurricane on radar. The reason for the move is obvious. An FM Spoken Word audience doesn't carry perceptual barriers with females. At the same time, I do not subscribe to the notion that an AM station is your father's Oldsmobile and can't appeal to anyone under 50. You look at KFI/Los Angeles and WLW/Cincinnati which enjoy generational success as AM icons.
The thing is ... you can't just run a News-Talk or Personality-Talk FM as if it's a carbon copy of an AM. An FM Spoken Word brand needs a different energy. You have to take the essence of AM success, and then translate it to FM, which is far more complicated than one would think. You've got a lot of guys in outstanding companies such as Cox that are simulcasting AMs in markets such as Jacksonville and Dayton. Soon there won't be a top-75 market without a Spoken Word FM (News-Talk, Personality-Talk or Sports). If an AM station is well managed and conceived, I'd be happy to duplicate it on FM, but if I'm going package the WLW/Cincinnati model on an FM, even if I could get WLW's talent lineup, I wouldn't present it in the same way.
So how does a FM music station adjust to this new competition, albeit from a different format?
You can't "adjust" to someone going Spoken Word. Your partisans who spend 60 minutes a day with you are not going to leave their format of choice to run to the other side of the dial and listen to Spoken Word in a P-1 context. The worst thing to do is to react with tactical mistakes such as a newscast every hour. In fact, what you may feel is some relief if a format antagonist is being replaced by that FM Talk station. You won't double your audience, but you should see some difference in cume-to-fan conversion.
Are there enough quality Talk talents to staff up a bevy of new FM Talkers?
I would agree that beyond top tier of talent, a lot of people are swimming in the same ocean. We do conservative Talk and love the tier-one hosts, but Mark Ramsay, Jon Coleman and I would likely concur that any predisposition that there exists this automatic cavernous opening for Spoken Word radio, just isn't correct. A lot of it depends on the landscape of the market -- how conservative/liberal and/or how large is the metro? Who's on the air in that market, who's in that format lane, and who you must defeat? Conservative Talk is not going to grow a lot more because a lot of markets already occupy that position ... and we have yet to see a lot of new star personalities coming up the escalator.
So who's doing the talent development?
That's the question of millennium. I do not come down on the side - a perception we fight vigorously -- that "you just can't find and develop talent anymore." Certainly, the role of the PD has changed since deregulation. Here we saddle these poor PDs with millions of dollars of assets, when they're overseeing three, four or even six brands - and they've never had one course in being a PD or been asked to complete a competency curriculum. Try that in the airline industry!
PD and talent development really doesn't exist or has ever been sanctioned to any degree. Few ever really had a true mentor to learn how to balance strategic programming management and talent development. Those fortunate enough to know how to oversee multiple stations are fortunate. Others are all dressed up with no place to go because they don't know how to develop talent; and whose fault is that ... certainly not theirs'.
One disciple of our firm is a relentless belief in talent development. There's no such thing as a small-market farm system anymore, but it's amazing what you can do if you sit down with talent once week and coach -- not necessarily critique - them. If you show them what they can be, people can move from a remedial talent to an advanced level.
One of the biggest regrets I have in the last 10 years is that we -- meaning radio -- allowed that to happen. It doesn't need to be that way. Everywhere we go, we speak of the need to commit to talent development, to set up a system and work with us. In the PPM world it's what's between the songs that really count in terms of making "eye contact" with listeners.
So all of your clients have agreed on the emphasis on talent development?
In some groups, there seems less of an immediate need for talent development, but for most clients, once the belief sets in, they're all for it and can see improvement. There are times when we go into a new station and the walls are stained with failure. Belief starts one day at a time.
I realize that not everyone can become a Ron Chapman or Kidd Kraddick; those types of people are either gifted or creative, but you don't have to be born that way to be successful. As George Johns pointed out, The Monkees were never as gifted as The Beatles, yet they sold a zillion records, too. If you're willing to work hard enough, whether you're in New York or Flagstaff, you can help yourself ride on the Up elevator. All it takes is a desire to emulate and listen to top talent and receive coaching. The common belief that "it's really crowded at the top" is a myth. It's not, simply because relatively few people are willing to do what's required to get there.
Often the main obstacle to success is the fact that the fear of loss is 10 times more powerful than the anticipation of gain. It's a shame, but that's a reality -- not only with managers and VPs but emerging young talent. Then you look at groups like Bonneville, Cox, Saga and Hubbard ... those kinds of groups encourage a culture where their people are improving all the time.
In turn, that commitment creates some amazing stories. Look at The Arch in St. Louis and what Kevin Robinson has accomplished. What's different between The Arch and other Adult Hits stations? Just listen to them for a couple of hours and you'll hear completely different atmospherics between the songs, in addition to their razor sharp music architecture. The difference is that The Arch personifies living in St. Louis and reflects that back to its listeners, as opposed to being a music distribution service.
There seems to be a chasm between those who want to go all-in on digital expansion and those who don't see a ROI worthy of such an investment. Where do you stand on this?
The reality is probably equidistant between the two extremes. We've probably overestimated the positive impact of digital technology in the short term, but I'm afraid we're underestimating its impact in the long term. That said, a lot of companies see a tremendous revenue platform there ... and some are doing it better than others. Eventually it'll be a huge part of the business plan, but you can't put the technology cart in front of the performance horse. Radio is the great incubator.
In the process of building these new platforms, some of us forgot about doing great radio. Some people believe you might as well turn transmitter off and grow onions - since you'll be more profitable by embracing digital. To me that's checking gas tanks with a match and potentially a tremendous strategic mistake. I don't think that can be the mainspring of a company's business plan, even though I've heard a couple companies really say that they bought some stations mainly because they wanted the digital imprint. Well, god bless and good hunting. I tend to think radio can still be a phenomenal product ... and there's a lot left in the tank.
Would you ever consider buying radio stations again?
Yes, I'd like to be an owner again. I headed for exits when it hit 12 to 18-times trailing cash flow because I don't know what banker would have been dull enough to finance me. Things are different now; I would be very open to surface discussions about that because I loved radio ownership. Each of our stations was ranked in the top two in ratings and revenue. But after multiples went in that direction I was perfectly happy to build Audience Development Group. Now, the business has come almost full circle and I would certainly consider it.
Sure sounds like you have no intention of calling it a career and heading for the nearest golf course....
My feet would go to sleep. I live in a gated golf community in Naples and every day I drive by a practice tee and think, "God, I'm lucky to be going to the office to do radio. I hate playing bad golf." It's much more fun being part of a young-thinking, forward-moving firm. It's an exciting time, current economy notwithstanding. Radio has a terrific future ahead!