August 20, 2013
Last week, Three Daughters Media owner Gary Burns discussed the letter of protest he sent to Arbitron, the FCC, the Federal Trade Commission and the Dept. of Justice, regarding the ratings giant's announcement that it would make Total Line Reporting available only to subscribers in 2014. During that interview he got a call from Arbitron and days later, the FCC rejected a consolidation complaint he filed against WLNI in Roanoke. Below the first interview, which follows, is Burns offers updates on more recent response to his protest letter, as well as his decision on appealing the FCC ruling.
When and why did you decide to get into station ownership?
I have always been somewhat of an entrepreneur, and I had been a consultant for a number of years. I had a parent who became terminally ill, so I took a year off and helped the parent throughout the last year of her life. As I was coming back into the marketplace, a GM I knew had a project in Washington, D.C. to revamp WRC-A as they were increasing its power from 5,000 to 50,000 watts, which intrigued me, so I went to do the project around '93.
I was burned out on music radio at that point; the rock and Top 40 of the '70s and '80s ... the music changed and I couldn't relate to it. But I was fascinated by Talk radio. As I worked on the project in D.C., the entrepreneurial bug really bit me, so I looked around for some radio stations to acquire - ones that hadn't been rolled up in the initial round of consolidation. I wanted to do a mainstream FM Talk station. I found one to buy that was near bankruptcy in Lynchburg, VA; I bought it in 1997. Later I found two more in Wilmington, NC, and I bought those.
Besides the fact that they were near bankruptcy, making them at least reasonably priced, what other factors led you to purchase these properties?
Again, I was looking for opportunities with stations that hadn't been rolled up in the initial round of consolidation. Then I was looking for stations in markets where there was a very profitable local newspaper and a VHF network affiliate TV station. If the market had those elements, which Lynchburg did, I felt I could turn around a near-bankrupt FM station, with a Talk format on it and do pretty well in the marketplace. I was able to expand my reach when I found the same elements in Wilmington, NC - so I bought two more stations.
Do you still have them?
No; I sold the Lynchburg station in 2005 to Centennial Broadcasting for $4.5 million. I paid $565,000 for it in 1997, so it turned out quite well. I only operated the Wilmington stations for 18 months; I bought two FMs for $1.2 million, flipped one to Talk and the other to Classic Country, A year-and-a-half later, I sold both for $3.4 million. My entire career is basically working with troubled radio stations, starting them up and getting them healthy, then spinning them off. I'm a turnaround guy.
When did you realize that you could do that successfully?
Back when I was consulting. I joined Kent Burkhart, Lee Abrams, Dwight Douglas, Greg Gillispie and Don Benson in Atlanta; we had a lot of clients; we'd tell them what music to play, which announcers to hire, advertising and promotional strategies ... things like that - and we basically did AOR, Top 40 and AC. In the '80s the FCC increased the number of radio stations by 43% via the Docket 80-90 proceeding. This was well before the savings & loan crisis and changes to ownership limits; in the '80s, money was abundant, so lot of people could get financing for developing the FCC licenses in all for 43% more FM stations. However, that didn't mean there were 43% more qualified radio people. That generated a lot of work for consultants at the time.
You say that after you got burned out on music radio, you became fascinated with Talk radio. Are you still fascinated by it - especially now when more and more pundits are complaining that AM Talk's target demos are getting too old and the format too politicized?
I'm into spoken word radio. I don't think Talk radio has been getting enough positive management attention, yet some of the most successful brands still live on the AM dial. That said, Talk radio has become entirely too political.
The problem, to me, is more in management. Talk radio, to Cumulus, is an afterthought; they're basically music broadcasters. Clear Channel does better with Talk syndication than Talk-formatted stations because that format is not their prime business, either. CBS Radio owns many all-News stations, and has now gone all in on Sports -- and that's about it.
I believe the future is still very bright with Talk radio, as we see the continuing demise of newspapers. The Tribune just emerged from bankruptcy; the Washington Post was sold to the head of an online retailer; Media General sold its newspaper properties. The Boston Globe sold for a billion-dollar haircut. A couple weeks ago, I went through the Washington Post one day and I saw only seven display ads in the entire paper. With that kind of revenue, you can't afford to pay for the journalists needed to properly cover the biggest issues affecting our country. Talk radio is the last format that can hold our nation's, states' and cities' politicians accountable.
But Talk radio needs the management's attention to local issues and investigative reporting. You can't do that by airing nothing but right-wing programs one after another all the time. Most NPR outlets get high ratings doing Talk with less hype and hyperbole and more representing the mosaic of the communities they're in. We don't need more radio stations programming Beck into Rush into Hannity into Savage into Levin, where every show deals with the same things.
The reason Sports Talk radio is doing so well is that it's a soap opera for guys. Topics change every day from baseball to football to whatever. There are hardly any political points of view, but there are still plenty of opinions, information and entertainment. Talk radio needs to get back to that if it wants thrive and succeed.
There will still be plenty of room for plenty for right-wing conservative opinion, although I happen to believe we're going to see more of that gravitate to a libertarian perspective. But no matter what the political perspective is, each Talk radio station has to represent a mosaic, a reflection of the community, and that includes different local points of view.
Talk radio can be a money machine, but you can't turn off the spigot and be afraid to defend your position to advertisers who are being influenced by protesters. You have to defend your product. There are too many "yes men" in this business who refuse to answer the detractors and give up control of their content for the sake of advertising. That's the basic problem with the business now ... and why Talk radio is being slighted. Nobody is standing up and defending the product -- and many of the stations just sound the same.
Let's talk about the letter you sent to Arbitron, the FCC and the Dept. of Justice.
This is what I wrote: "I take strong exception to the recently announced change in policy by Arbitron as it pertains to Total Line Reporting of radio listening, which as of 2014, will only apply to stations that pay for and subscribe to the Arbitron service. Application of the proposed rule will result in different methodology for stations in the same survey and will change the ranking of stations. The stations most likely to incur damages as a result of this new policy are stations with limited coverage, and stations owned by small business and minorities. Measurement of radio listening in metro markets should be subject to the same methodology and rules for every station qualified to be in the measured market."
"When the FCC designated Arbitron as the 'definer' of radio markets for the purpose of determining how many stations an individual station owner could operate in a given market, it put too much power in the hands of the rating company and subsequently to the stations that subscribe to the service. Arbitron subscribers alone decide which counties are included in the market's definition. A good case in point is the market where I operate, Roanoke-Lynchburg. Roanoke and Lynchburg are separate SMSA's as defined by the government. The cities are 60 miles apart, separated by the Blue Ridge mountains, are in different telephone area codes, are served by different daily newspapers, have over-the-air network affiliated television stations that are licensed to each city, have more than ten radio stations licensed to each city, and they share no government services or elected officials except for one gerrymandered congressional district, two Senators and the common shared benefits of both being in the Commonwealth of Virginia."
I don't think it's fair to smaller broadcasters who are at a disadvantage to the larger radio groups who already have too much power. The FCC has outsourced all the parameters of what radio markets are to BIA and Arbitron, and I don't agree that their subscribers get to dictate not only the radio market, but now are the only beneficiaries of Total Line Reporting - that's unfair. The Arbitron changes are taking a bad situation and making it worse.
Have you gotten a response from Arbitron yet?
No, but the Media Rating Council says they are reviewing my letter. I don't think it's good for the radio industry as a whole to give almost all of the power to one company, Arbitron, which will impact how well we generate revenue. In Roanoke-Lynchburg, we use three AMs stations and an FM station to simulcast ESPN programming, but moving forward, Arbitron will not allow me to combine my numbers, which is grossly unfair. It's going to change the ranking data to advertisers. Arbitron is using it as a means to force you to become a subscriber.
Another point is the FCC is now allowing AM radio stations to have translators to broadcast on the FM dial in order to help save AM radio. Under Arbitron's new policy, the FM translator won't count in the ratings, again, unless you're a subscriber. Arbitron charges hundreds of thousands of dollars for their research.
Are you optimistic that your complaints will prompt some kind of accommodation, or do you believe it'll probably fall on deaf ears?
I don't know, but if you do what I do, you have to make your displeasure public. An individual citizen has as much right to speak out as a corporation. Since I started to voice my displeasure, I've been hearing from a lot of broadcasters who share my sentiments. This thing is getting bigger, like a snowball roiling down a hill.
I'm in a situation where two owners - Clear Channel and Wheeler - already control 93% of the radio revenue in my market. If you want have a viable and vibrant radio business, you have to watch out so the little guys don't get steamrolled by bigger companies, FCC bureaucracy and new Arbitron measures like this. They should treat everyone in the market the same -- non-subscribers and subscribers. If you're qualified to be in a market, you should be able to have your station's audience measured in the same way as the big conglomerates have their stations measured.
You know, there's a reason Nielsen is paying over a billion dollars for Arbitron. Who wouldn't want to own a hugely profitable entity that virtually has no competition? When one company can assume ginormous powers where it can almost monopolize an entire industry, the FTC and Dept. of Justice have a mandate to review their actions and to be sure they are in the public interest.
Do you have a contingency plan in case your efforts here have no effect on Arbitron's business conduct?
No. I will keep speaking out for the smaller market independent broadcaster. And not just them; I've heard from very big broadcasters who share my views regarding these policies. Even if what I did fails, I don't think we've heard the last of this. This is just the beginning. Remember the Total Live Reporting doesn't go into affect until 2014.
If Arbitron is smart, they'd back off on this one and understand the logic of my complaint. I look forward to the opportunity of talking with them about this. As a mater of fact, I'm looking at my cellphone right now - and Arbitron is calling!
Do you want to suspend the interview so you can take the call?
No, I'll get it off of voicemail. It is kind funny to have a call coming from Arbitron at this very moment. But this is not going to be decided in a phone call. Things like this will take time.
So what do you see for your future? Major radio groups are still selling off stations; are you interested in becoming a bigger force in the industry by acquiring more stations?
I don't think so. The market size I'm currently working in makes me a non-factor on a national level; I could buy one or two more stations in this market. But there's always going to be local radio, I just want to see it remain a healthy and vibrant business I'm 63 years old; I'm treading water at this point. Since I own my own company, I don't have the need to be politically correct. I can take a principled stand where I feel it's necessary -- and will, as long as I'm working, doing what I feel is right for the industry and my company.
Interview continuation (August 27, 2013)...
The last time we talked, you said that Arbitron was called you during the interview. Was the call about your complaint about Total Line Reporting?
It was Arbitron and it had something to do with the issue, but they were asking what stations we'll have simulcasting for the Fall book. Remember, the Total Line policy will have no effect until 2014.
Have you heard anything from anyone else regarding the matter?
I've heard from a lot of broadcasters and group owners who support my position. I've also had an hour conversation with an attorney from the FTC, who called to ask me about my concerns. He had a number of questions for me based on my knowledge of the situation. I also heard from Congressman Bob Goodlatte's Chief of Staff, who'll share my letter with members of Judiciary Committee.
I was happy to see some reports that ESPN is also concerned about Arbitron's PPM technology and what happens with that moving forward. This is a very big deal; Arbitron and Nielsen really do have the potential to monopolize all electronic measurement for radio and TV. Most of the popular websites on the Net, the most populated sites, are owned by TV and radio stations, so Arbitron and Nielsen have set itself up to be be pretty good monopoly.
Think about it: Why did Nielsen pay well over a billion dollars for a company who potentially has 15,000 customers? That's the total number of radio stations in the country. Subtract the public stations and the small-market stations that can't afford or don't buy the service, and in reality, Arbitron has around 3,000 customers or 4,000. In that light, Nielsen spent quite a chuck of change for a company with only about 4,000 customers.
Since the interview, the FCC rejected your challenge to the WLNI deal (NET NEWS, 8/22). Obviously, you're not happy with the ruling. Is there anything about the FCC's reasoning that bothers you?
One line in their decision baffles me; I am still trying to understand just what the hell does "revenue being of decreasing relevance as a barometer of competition" means. ..... Wheeler will have the six FMs with the Top 5 revenue and rated stations; Clear Channel over 40% if the revenue. If that is not concentration, I don't know what is. And one must ask of the Commission thinks that Radio is becoming decreasingly relevant. The last I looked, we still reach 93% of everyone over the age 12. If we are becoming decreasingly irrelevant, decisions like this and outsourcing market definitions to Arbitron and BIA will help it along. And the station count is still below 45. WODI was off-air yesterday and WLVA has been off for quite some time. It seems these guys just turn these stations on and off to skirt the rules. You would think when a market moves from one tier to the next that the FCC would do a little more due diligence.
If the FCC believes that revenue is not a relevant "barometer of competition," did they identify what is a better barometer?
No, which is why I don't understand what that means. If they say that revenue is becoming decreasing relevant in measuring competition, does that mean radio is becoming increasingly irrelevant, too? I believe that when the FCC endorses a policy like that, it's helping radio become decreasing relevant.
Have you come to a decision on whether you'll appeal the FCC ruling?
I have an attorney looking at it, and he has encouraged me to do it. I don't know if my pockets are deep enough or I have the energy to appeal the FCC decision. What's more, there are people who would like to see this ultimately end up in the D.C. Court of Appeals, where the radio market definition could be challenged in court. So I haven't decided.
So no one else was willing to financially support your legal efforts?
Actually, I did have some offers of financial assistance from some very large companies to fight this, but part of me says there's a better way to do it. One alternative is petition the FCC via new rulemaking. If I go the route of appealing the decision, I'll be waiting for the court's decision, and then possibly ask them to reconsider if they turn me down in the court docket. In the meantime, I'm still in the radio business in Roanoke. It's not my intention to hold anybody up from their business plan.
I continue to believe that there isn't 45 stations in the market, and if Wheeler does have six FMs there, the FCC should rule differently. Plus, there are other transactions in the market I have complained about. One has been pending for three years; it brings up the same issues, only in that case it concerns Clear Channel and its Aloha Trust.
You previously expressed strong beliefs on the viability of talk radio. In that light, what do you make of the Cumulus negotiations with Rush Limbaugh and Sean Hannity?
I think Rush wanted to stay on the big, powerful Talk stations that Cumulus has, such as WLS-A/Chicago. I don't think there are any winners or losers in this deal; if anyone could be thought of as a loser it would have to be Hannity. It'll be interesting to see what kind of numbers he gets without Rush as a lead-in. I wouldn't be surprised if his numbers drop 30%.
Finally, there's been a lot of talk of there being a "Do Not Buy" edict against the most controversial political Talk hosts. How pervasive is the "Do Not Buy" mentality?
Like I said before, I don't think there's a strong enough advocacy in the radio industry for Talk radio, probably because Talk radio gets less management attention than it should. Maybe that's because the biggest Talk stations are on the AM; I'm not sure. But if the big radio companies defended the Talk radio format as it should be defended, the "Do Not Buy" lists would be less relevant.
Have your stations had to deal with a "Do Not Buy" edict from advertisers?
No, because my stations are all Sports Talk stations, where there's not a lot of controversy or political content. I do believe a properly programmed Talk radio station should be a mosaic of the community they're in, and the people who manage Talk radio stations should know how to present their format to agencies that don't want to use the product. At that point, they should be talking not to the agency, but to the brand managers at the account, to sell the benefits of Talk radio, which is a powerful format where you can sell products and create demand.