August 6, 2013
The corporate radio players may commandeer the majority of headlines today, but that doesn't mean the small radio groups are in danger of being squeezed out altogether. Not only are Gerry Lee and Larry Wilson prospering using the non-corporate approach, but Howard Kalmenson has successfully headed up Lotus Communications for a good 50 years - and not only figured out how to survive the last "Great recession," but in certain cases, even prospered through it. Here, Lotus VP Jim Kalmenson discusses their success and why he's bullish on their future.
Your father started Lotus around 50 years ago. Was it basically preordained that you would get into the business, or did you ever have ideas of doing something else?
Very early on, I knew I wanted to be a broadcaster in radio. I started my career with CNN Radio in Atlanta. From there I became a sales manager of the South Carolina Radio Network.
Growing up in Los Angeles, I was listening to Jamie Jarrin broadcasting the Dodgers. Going to Dodger games and seeing the radio business operate inside Dodger Stadium got me into radio. There was never a question about me becoming a radio broadcaster.
Over the course of those 50 years, radio has changed dramatically. Is it easier or harder to achieve success in business nowadays?
It's easier today than before. It was a lot more difficult when you had 20 different entrepreneurs in a community who owned radio stations and had deep roots in the marketplace, with a very close connection to local businesses - and who were all fighting for their livelihood. Today, you have corporate competition, so local ownership can be more nimble, thus, it's actually easier. With all their debt pressure, the corporate stations spend less on local promotion and marketing than ever before. If you're debt-free and programming for the local community, the competitive challenge is less demanding today than it was back then.
Was it easier for you and other small broadcasters to weather the Great Recession?
We think in terms of generations instead of years. My primary concern is how this company will be prospering for my kids and their kids, rather than how we're going to handle this year or next.
At the height of the last recession, we definitely did have concerns. I can only say that we were really happy we didn't have any debt at that time. The thing that gets you nervous is when business is bad and you owe money. Even though many of our music stations were showing negative growth for a year or two, we didn't have to have conversations with bankers and stockholders. We never had to lay off any employees.
I also have to tell you that our flagship station in L.A., KWKW -- which is ESPN Deportes -- showed year-over-year growth from 2007 all through the recession. It never hurt Spanish sports, which is amazing. I recognize that many of our music stations were challenged in topline revenue, but our Spanish Sports was a growth engine throughout.
Why do you think that was?
The recession caused a shift of emphasis among advertisers from ratings and branding to return on investment. Everybody became focused on ROI when things got tight. Advertises began to look at Sports radio - be it an English or Spanish station - because Sports has always been particularly effective when it comes to direct response results. A ratings point on ESPN Deportes or any Sports radio station is worth more than other formatted-stations' ratings points because Sports listeners don't shop the dial as much. They lock in and hear the commercials in an active listening environment. That's why even though a Sports station is never a market leader, it still drives its audience to local insurance companies and car dealers. Advertisers turn to KWKW because it sells their product effectively. That's why there have been definite shifts of big-reach stations getting into News, Talk and Sports -- because they ensure results.
Frankly, though, I still scratch my head when I look and reflect on the sales growth of KWKW from 2007-2012
What do you expect out of Lotus' music stations?
There's more modest growth now than there was in the old days; nobody's thinking above and beyond single-digit growth. But at least it's back in a positive growth mode. The first quarter was slow, but it really picked up. The rest of the year should come in fine. It's not the sexy, glamorous easy growth that we saw in the '80s and '90s; you have to watch things carefully, avoid getting lost in the maze of ratings data and focus on helping customers.
The good thing that keeps me optimistic about radio is that I cannot point to another medium that can drive results for advertisers as well as radio. I'm sitting here, stuck in traffic, but I don't curse about it because it's a blessing for business.
The other thing that inspires me is the world of change we face when it comes to competition. Ten years ago, we had monstrous and challenging competition in newspapers and The Yellow Pages. Today, you never hear anyone in radio say they're worried about newspapers or Yellow Pages. Now the competition is coming from online sites such as Pandora and other permutations for new music. But none of that has the type of stranglehold on local marketing dollars that newspapers and The Yellow Pages had. Our main struggle is to keep our focus on helping local clients succeed. There's less competition out there that's really effective in doing that.
The Internet has an unlimited array of options for consumers to spend their time. At least people who listen to radio, depending on market size, have only 15-50 radio stations on the dial, as opposed to the 50 zillion choices on the Net. Also audio, as a medium, has the capacity to influence the consumers' purchasing choices. The problem is not in the national dollars, but in local, where there's not as many easy dollars as there used to be. Today, it's more about finding ways to help local advertisers and being proactive. Those who were trained to wait for orders, based on rankers, on a fax machine face the greatest challenges, compared to those who are trained to engage their friends in commerce with solutions and ideas.
You mention the power of being local. Does that go for using local air talent vs. using syndicated or voicetracked shifts?
We use a combination of all three. What we don't have are centralized corporate executives making programming decisions, which seems to be an oddity in this business. We don't have any VPs of Programming, either; we like to make our programming choices locally, thus all of our stations have important, meaningful programming that our listeners can identify with.
Is it harder nowadays to turn up-and-coming air talent, what there are of them, into true radio stars - even on a local level?
It has always been difficult and it's always a great challenge. I don't know if it's harder or easier, but we have developed a national radio show ourselves that's now on 45 stations - and it's still growing. It's a Spanish soccer show called "Supergoal" -- the first soccer show for U.S.-born Latinos. It's done in Spanish and it's growing very rapidly. It's only been on the air for nine months, and already we have 45 affiliated stations. It's in every major market; it's a huge success.
As far as local talent goes, a PPM marketplace seems to be more responsive to change, so it might possibly make it a little bit easier to know if you have something. Being in a diary market requires much more time for people to achieve a high retention level ... a level that can be reflected quicker and easier in PPM markets.
How else has the introduction of PPM impacted your stations' programming?
There has always been a laundry list of things to do to optimize ratings, going back to reinforcing the call letters for diary retention. Now some of those tactics have become lesser priorities under the PPM; otherwise we do what we always to do - and that's entertain the public.
Has anything about radio's evolution surprised you?
There was a time when I thought that advent of online audio might have had a greater impact in listening patterns. I'm a little surprised; I thought that people might have adapted to choose to listen more to non-terrestrial audio. It turns out they do, but you take all of the audio out there outside of terrestrial, and together they add up to the equivalent of a couple stations to the competitive landscape in a market. It hasn't been a game-changer.
Now, the future story is still to be told; we'll see what happens down the road. Despite a lot of negativity about the broadcasting industry, I'm much more optimistic. I have a feeling that if advertisers want to reach the masses -- large numbers of listeners - it's hard to buy 65 different websites just to reach a fraction of the targeted community. Instead you can buy a nice mixture of radio and achieve your primary goal of generating exposure to the masses.
Also, since so much is said today about social media, radio seems to be an activator of it. I always think of the importance of word-of-mouth, and radio is a great place to generate word-of-mouth, which can then be built through social media. So many of the top trending topics on the Net are relayed through radio. What's more, we can help stimulate the momentum of social media, which has been a nice surprise
There still seems to be a disagreement between those who are bullish on digital platforms for radio and those who don't believe digital's ROI is worth the major investment. Where does Lotus stand on that?
All digital platforms are nice extensions of the basic brand and should be used, but like anything, you have to spend within the parameters of what your business can tolerate. We've done some things differently with digital. All of our stations have websites, of course, and we're streaming, texting and doing a wide array of things, but when you add it all up, it's still just a small piece of the overall brand presentation. It's still meaningful; we want to give people all the brand extensions that are available, but in the end, digital is still the tail, not the dog, and it's not driving the business.
Do you see Lotus growing, in terms of station ownership, in the future?
We continue to look for growth opportunities. We prefer to make cash acquisitions; we're looking at some right now, in terms of broadcast properties, to see if they have the right value. As I said before, radio is a great business -- if you're not in debt. We'll continue to look for nice opportunities. We're in the process of working on some acquisitions right now. But we'll be cautious; we won't turn our business upside down just to add stations.
Another area of growth, as part of our digital strategy, is eCommerce. We own Stupid.com, which sells funny and unusual gag gifts - and that we promote on our stations. Radio does wonders in driving eCommerce to Stupid.com and Glow Stars; both have shown nice year-to-year growth. We expect to continue to add to our portfolio for eCommerce.