January 25, 2011
In 30 years, Cathy Hughes has gone from a single-station owner to the leader of the country's largest and most influential African-American radio group, Radio One. She has succeeded and Radio has grown despite being the small fish in a pond of sharks through the consolidation craze and the recent economic downturn. Through it all, she has been an outspoken voice, speaking on behalf of the interests of not only her own company, but of other ethnic stations and all mom-and-pops nationwide. Here, she discusses the major issues of the day.
Recently, Hubbard Broadcasting acquired 17 Bonneville stations in four major markets. Does Radio One have an acquisition strategy, either in the short or long term?
Absolutely, we have long-range acquisition plans because we need to shore up our clusters in some markets. We either need to purchase facilities or intellectual properties. We're in seven of the top-10 markets. The other three are of interest to us. The problem is, unfortunately, is that they are very costly markets ... such as New York and Chicago. Hopefully, radio has seen its darkest hour and as the economy starts to turn around and improve, what seems costly today won't seem quite as costly 12-18 months from now.
It sounds like you are bullish on Radio One's revenue prospects for 2011.
I am bullish. One thing Radio One is known for is the ability to function in a tight economy. We're blessed because in the early days, we didn't have great ratings; for two years of my existence, the prime rate was in the mid-20s and I was paying 2.5 points over that in the quarter -- that's 30% interest -- so a bad economy is nothing new to me.
As regards to the current economy, we haven't seen it as bad as the last 12-18 months, when the entire industry has been down. I've never seen the industry so out of favor -- particularly with the Street. These are tight times -- which is our M.O. so, quite frankly, we're still very bullish about the growth of Radio One.
What do you see to be the key, economically, to spark a resurgence in radio revenue?
The economy is the big issue - particularly in jobs. I have been recently appointed chairperson of a SBA committee, the Council on Underserved Communities. One of the realities is in America, the majority of job creation comes from the small mom-&-pop businesses, and businesses in underserved communities, which usually attract minorities, communities of women, veterans and the disabled.
Everything is focused on job creation. Why would a business advertise to someone who doesn't have disposable income? Why would advertisers go after male consumers when so many men, who previously were the primary breadwinners, are unemployed and have turned into Mr. Moms?
You mentioned earlier that Radio One "is known for its ability to function in a tight economy." What abilities do you need to do that successfully?
You need to be creative. You have to reinvent yourself. "When times get tough, the tough get going" - that's a true adage for us. The last 12 months was a very difficult year for us. The press practically did nothing but report on all of Radio One's challenges in terms of refinancing, yet at same time our sales were increasing and our bottom line was improving. We were not in arrears on any of our bills, yet we were still faced with a terrible challenge with our lenders, which had more to do with the entire sector, than our individual company. Our successes were basically irrelevant when we're being lumped into the problems of others in our industry. So many people assumed we would be forced into bankruptcy, when under no circumstance did we ever even consider it.
The other thing is that we didn't feel the emotional devastation of the economic problems that other broadcasters did. Until this latest recession, so many radio owners had experienced nothing but heydays since the first day they stepped foot into this industry. They have not been challenged or faced with the challenges of the last 24 months. That's why some of them did not survive. When they entered industry, they became accustomed to double-digit growth, so to go from that to negative numbers ... well, it was hard for them to see their way clear to the light at end of the tunnel.
When the PPM was introduced, a lot of Urban and Hispanic broadcasters were quite vocal in their opposition to it. Radio One, on the other hand, was rather muted in its public stance on it. Why?
We took a lot of weight on that one, but you can't resist technology. It was silly, in our opinion, for the industry to resist something that was inevitable. Our position was: Let's try to make it work better. Lord knows PPM hurt Urban and Hispanic radio more than any other genre because people of color have different listening patterns. It has been very challenging for stations of color, but we knew that going in. It happened early on in the diary system, too, which wasn't any more accurate in gauging our audiences, either. In our opinion, it wasn't wise to resist technology because it's advancing in every other industry on the planet. We're becoming a paperless society.
Arbitron has made improvements and adjustments in recruitment and PPM's sample size. Are you content with the current data, or do more improvements need to be made?
Heavens, no! We have a long ways to go, but I am happy with the fact that they're really trying to make it better. I've been dealing with Arbitron for 30 years since I've been at Radio One and for nearly 10 years more when I was at Howard before that - and I can honestly say this is Arbiton's most sincere, focused effort I've ever witnessed. They're trying to engage the community of color in order to be more accurate. I first came into the industry at a time they were the top dog and their attitude was basically, "Take it or leave it." They listened to complaints with deaf ears but that has changed. I see a new commitment by Arbitron to be more accurate and inclusive -- and at the same time not let technology pass them by.
Has Radio One's programmers altered the way they program and do you feel that they've mastered it by now ... or does further tweaking need to be done?
It absolutely changed the way we program, but I do think they got it now. We have a SVP/Programming by the name of Jay Stevens, who is not only a brilliant programmer but also a nerd, which is a great combination in the PPM world. He's been in technology for a long time; he loves his little gadgets. That's a great combo.
Unlike Radio One's rather quiet stance on the PPM, you in particular have been a very vocal opponent of the performance royalty bill. Why? Do you feel your stations would be damaged the most by such a bill becoming law?
No question about it. Among black-owned radio station owners, we'd be the only soldier left standing. Out of 11,000 stations, only 242 are black-owned ...and of that, 52 belong to us. When John Conyers first mistakenly decided to champion this foolish cause, every black owner in the country went to see him collectively, and at least half them went into that room and told him that if that legislation passes, they go out of business. Furthermore, how foolish is it to propose a tax in the midst of the worst economy in the radio industry's history?
Radio One is basically the only black owner with the resources and ability to fight this legislation, which we have done in an on-air campaign. We've done a whole series of pro-radio activities that our fellow black broadcasters haven't had the ability to do. The other thing, thank God, is that we're based right here in Washington, D.C. We don't have to take a plane to lobby Congress; we just get in our cars and drive to the Hill.
What's your take on the NAB's proposal that would allow some form of a royalty in exchange for FM chips in portable digital devices and other considerations?
I think they have to negotiate in good faith, but they need to do more research on their proposal because it has some big holes in it. That's the sum of my comments for now. In terms of effort, however, I wish the NAB was as proactive as Radio One has been on this issue.
You have also highly critical of artists such as Dionne Warwick, who testified for the performance royalty in Congress. Why does it bother you that she asked to get paid for her performances being played on the radio?
Please ... Dionne Warwick hasn't released a hit song in the last 25 years. The problems of her not getting paid come from the contracts she signed with the record companies. She can't pull the wool over our eyes. The mistakes she made in her history were mistakes made with her record companies, not radio.
Mary Wilson talks about not making money. I agree that she should've been paid, but I disagree that we should pay her. She and Dionne and the others should've been paid by the record companies. The reality is the best way to earn more money is to be on the radio and be friendly to the stations that play their music. But they just cut off that lifeline for an immediate paycheck; it's over now. Because of what they did, they no longer have the support of black radio, which was suicidal.
What immediate paycheck?
Dionne Warwick and Mary Wilson were paid to be lobbyists for the initiative by Music First. They weren't doing it out of the goodness in their hearts. I bet on the next go-round, they won't even be used again. If there is a next go-round, MusicFirst will, probably pay off a different group of old entertainers to lobby their cause.
I'll tell who you didn't see on Capitol Hill - Beyonce ... because she's making money from getting her music played on the radio. Jay Z's airplay makes him money. Did you notice that none of big-name artists showed up for that? Those big artists who also have new artists on their own labels know that if they had signed off on this, they'd be permanently shutting the door on their other acts becoming successful. Why? Because if a station has to pay an extra dollar for a song, are they going to pay for a Beyonce song ... or for a Sue Ellen song, who their listeners have never heard of? That's the reality ... and it's not a good position for anyone - radio, the artists or the record companies -- to be in.
Is Radio One making a concerted effort to enhance its digital properties?
Absolutely. That's the reason we bought Black Planet and Founded Interactive One; it's the largest portal for African-Americans. We're actively involved in it - and it's one of our fastest growing revenue sources. It's already way ahead of our projections. Our goal is to make it the #1 destination for African-Americans.
Again, you can't stop technology and progress. That's one of the problems with the radio industry. We can no longer rest on our laurels; we've got to get in the fast lane - and it's not just young people in the fast lane ... it's everybody. You walk into a senior citizens center and you see the people checking out their e-mails and looking at pictures of their grandchildren on the web.
What's your take on HD radio?
I would like to see it finally come to fruition. I don't know how many years I've been involved with Ibiquity and whoever it was before them. Again, it's new technology that offers better sound quality. Why would I listen to a terrestrial station that doesn't sound as good as the music someone hears from an iPod through earbuds?
You think improved sound quality will drive people to HD?
Listen, perception is everything. The iPod has been marketed brilliantly, but so have many other things. Dr. Dre and Jimmy Iovine have these Beats headphones for over $200 - and they're selling like hotcakes. Why? Because the sound is absolutely phenomenal; it's like listening to a symphonic presentation at the Kennedy Center.
Overall, it sounds like you still have a lot on your plate to accomplish.
Yes, I love this business and have no intention of going anywhere anytime soon. I just had conversation with Michael Jordan about this, and we agreed that it's the saddest thing to be too old to do the thing that you love. But owning the Charlotte Bobcats gives him that gratification. I would've done radio even if I hadn't gotten paid for it, which is what he said about basketball. When you love what you're doing ... it's not work.
I love radio because radio delivers instant gratification and generates near-instant positive results. We can have a family burned out of their home at 10a ... and by noon, be offering assistance to them. We can disseminate information and make a difference in people's lives instantly.
You know what makes this the most exciting industry? Because you can listen to radio and do anything else you want to do! It's the only medium that can let you do anything else you desire -- make love, do your homework, shop, drive a car, be on computer -- and radio will still be right there ... in your ear, your brain and your emotions. That's real power!