Radio Show 2017 Wednesday: The Financial Outlook For Radio, Digital Strategies, And More

Full Schedule

By PERRY MICHAEL SIMON in AUSTIN: WEDNESDAY is the second day overall and the first full day of sessions at the NAB and RAB's RADIO SHOW 2017 in AUSTIN, with presentations and panels ranging from the financial and regulatory outlook for the industry to artificial intelligence, social media, drones, smart speakers, and more.

The View From, And Of, Wall Street

The annual Broadcast Finance breakfast session of CEOs and investors moderated by PILLSBIURY WINTHROP SHAW PITTMAN's SCOTT R. FLICK was opened with some WALL STREET views and prognostications from WELLS FARGO SECURITIES' DAVIS HEBERT, who noted that while investors, initially buoyed by the election of DONALD TRUMP, remain hopeful for tax reform despite an economy "still stuck in neutral" and "essentially moving sideways."  Citing MAGNA GLOBAL projecting core ad spending to grow at a 2% rate, HEBERT termed the ad outlook "tepid," blamed on the digital disruption, weakness in traditional categories like automotive (especially damaging to radio), audience fragmentation, and the polarized political environment; radio's share of all ad spending is 7%, projected to decline to 5% by 2020, and the money, as it is for all other media, is going to digital in general and mobile in particular.

HEBERT pointed to some positive things for radio -- with the pie growing, time spent with radio remains stable even as use of smartphones is rapidly growing.  He also cited radio's stable majority share of audio listening, but added that radio remains a straggler in mobile use, and stressed the need for radio to extend itself into newer platforms, like mobile, smart speakers, podcasting (which HEBERT termed especially exciting), and event sponsorship.

As for individual companies' revenue performance, iHEARTMEDIA remains ahead of the industry; CUMULUS, he said,. is showing promising growth after underperforming the industry for several years.  His projections is for a 2% decline in radio revenue for this year and a 0-1% decline next year, but those would be ahead of most other traditional media.  While the S&P 500 is up over 9% in 2017 and nearing a record high, HEBERT said that traditional media is underperforing the market, and only BEASLEY has outperformed the market; notably, ENTERCOM has dipped well below average since announcing the CBS RADIO acquisition.  New media stocks, except for TWITTER and PANDORA, have outperformed the S&P 500, and HEBERT attributed that to audience growth figures.

Credit markets, HEBERT said, are open to radio companies which have reduced their leverage to 3-4x, but he warned that iHEARTMEDIA and CUMULUS trading levels show concerns about their capital structures' sustainability, suggesting that both companies may not make it through 2018 without a debt restructuring, whether in court or pre-arranged.

Multiples for radio deals are relatively strong at 8x, slightly below the average public multiple of 8.7x.  Investors, HEBERT said, want to see positive core ad sales, multi-platform extensions, conservative balance sheets with 3x-4x leverage, and more consolidation, especially with deregulation possibly on the horizon and if the ENTERCOM-CBS deal goes well.  On the other hand, investors, he said, are worried about a weak ad environment, audience fragmentation, radio's tenuous place on the digital dashboard, and excessive leverage.

Once HEBERT finished, the panel responded with their reactions, with COX MEDIA GROUP's KIM GUTHRIE noting that her company owns newspapers, a "more scary" business, and defending radio as a medium that does what "PANDORA can't do" like participate in Hurricane Harvey relief efforts; NEUHOFF COMMUNICATIONS' BETH NEUHOFF called for regulatory change in the face of new media competition; CONNOISSEUR MEDIA's JEFF WARSHAW called for the industry to "attack ourselves and challenge ourselves" to address the things the industry has done wrong and need to do better, and agreed with NEUHOFF that deregulation is necessary (calling the present regulatory structure "ridiculous"); BENJAMIN MEDIA INVESTMENTS' DAVID BENJAMIN cited GOOGLE and FACEBOOK's strong transition to mobile and radio's relative failure to do so; and CAPITAL ONE's ROBERT MALONE JR. focused on mobile as "the new normal of how consumers access content."

On the outlook for AM radio, WARSHAW warned that the future of the industry "should not be sacrificed" to save weak AM stations; GUTHRIE said that AM rule changes is "a ship we need to let sail" in order to get more important changes through the FCC, like changes to the subcap rule.  WARSHAW also decried the way that television has been allowed to air pharmaceutical ads with briefly-flashed fine-print disclaimers but still layers more stringent regulation on radio pharma ads, while NEUHOFF complained that the "obscenity thing" is the most outdated regulation for broadcasters.

On radio content, WARSHAW noted that reaching Millennials is tough when, for example, the top Millennial-reaching station in NEW  YORK, iHEARTMEDIA's Top 40 WHTZ (Z100), featured "phone taps" as a featured comedy element while Millennials don't make phone calls and can't relate.  GUTHRIE complained about radio's tendency to use women as sidekicks, which she termed "so 1970."  And MALONE said that podcasting "would help" diversify radio but remains a niche offering.

The panel also took a whack at predicting what will happen with iHEARTMEDIA and CUMULUS, with MALONE suggesting that a resolution will happen by this time next year, with asset sales a possibility, and would "remove a cloud that's been hanging over the industry."

More Than One Job

Radio's multi-tool players and the issue of one person doing multiple jobs were the focus of a panel moderated by SCRIPPS' ERIKA STORRS with BEASLEY's BUZZ KNIGHT, CONNOISSEUR's SUZANNE MONTOYA, and FORCHT BROADCASTING's AMY STROUD discussing the need to have knowledge of digital media and social media and devote time to the latter, apportioning talents' time to include the additional engagement, and the changes in Account Executive's jobs as they assume marketing consultant duties as well as sales.

Pai For Lunch

FCC Chairman AJIT PAI praised broadcasters' efforts during Hurricane Harvey at the annual Radio Luncheon, citing several examples of radio stations and personnel going above and beyond the call of duty.  He cited CBS RADIO's KIKK-A/HOUSTON asking for permission to stay on the air around the clock to broadcast emergency information, and proudly noted that he approved the request within one hour, joking that those in the room know that such rapid approval is not always the case.

PAI's talk had the theme of connection -- radio's bond with its listeners -- and offered updates on the Commission's efforts to help the radio industry (after first joking that he would address Net Neutrality -- "whoops, wrong speech"), including AM revitalization (including the announcement that a technical order loosening restrictions on directional antenna arrays will be released THURSDAY (9/6) and voted upon at the SEPTEMBER open meeting), deregulation (promising to offer a monthly list of rules he proposes to eliminate as outdated and saying that he has concluded that the main studio rule must be eliminated and plans to propose its abolishment this Fall), and the crackdown on pirate radio operators.

NAB President/CEO GORDON SMITH went off-script in his introduction of PAI, reminiscing about PAI's tenure as a Senatorial staffer and ascendancy to the FCC and praising the Chairman's support of broadcast media.  "I have never met a public servant who was any better than AJIT PAI," SMITH enthused.

Field Of Dreams

ENTERCOM President/CEO DAVID FIELD was presented with the National Radio Award, echoing PAI's praise for radio's efforts during the HOUSTON storm and issuing thanks to the NAB, his wife JAMIE ("I married way, way up 30 years ago").  He said he will share the award with his management team and with his father JOSEPH FIELD, the founder of ENTERCOM.

The talk turned more angry with FIELD criticizing radio's critics and the idea that flat or low growth is the industry's future.  "We are so much better than that.  Because the truth is, radio's competitive position has never been stronger," he insisted, citing radio's claimed 93% reach.  "You can reach more people and achieve beter results using radio than any other medium."  But he called on the industry to be more aggressive in selling itself to advertisers, insisting, "We're a heavyweight medium that punches far below its weight class.... we've been playing defense for far too long.  And it's about time we started playing some offense."  And he promised that the post-CBS merger ENTERCOM will be aggressive in its advocacy of radio.

Alexa, Help My Station

After lunch, the topics included voice control with a presentation including segments with XAPPmedia's PAT HIGBIE, FUTURI MEDIA's TODD THOMAS, and BEASLEY's JUSTIN CHASE; HIGBIE offered an overview of statistics from a study of smart speaker users and an explanation of what his company offers, while THOMAS addressed the question of whether stations should build their own Alexa skills or outsource it, pointing out that while creating a skill is easy, maximizing the skill's effectiveness is something his company offers that a client can't easily do itself.  CHASE offered examples of his stations' use of Alexa, including Rock WMMR/PHILADELPHIA's skill (presented by morning hosts PRESTON AND STEVE) and the use of Alexa as a "guest DJ" at Adult Hits WBEN-A (95.7 BEN FM)/PHILADELPHIA.

Dashboard Doings, Podcast Pronouncements

A Headliner session featured FRED JACOBS and STEVE GOLDSTEIN in a two-part presentation including JACOBS revealing information from an NAB study on the connected car and GOLDSTEIN discussing radio's opportunities in podcasting with the help of ENTERCOM Sports WEEI-A/BOSTON morning co-host and podcaster KIRK MINIHANE.

JACOBS noted that the car is the top listening location for radio (including for Millennials) and automotive is radio's top advertising category, but, he added, radio needs to sell itself to auto makers to remain a leading part of the digital dashboard.  "One area where broadcasters can have real time immediate impact is in how they appear on the dashboard right here, right now," JACOBS suggested, pointing to PANDORA and SIRIUSXM's consistent car display and ease of use, as opposed to AM/FM stations' displays, which, he said, "vary wildly."  The NAB-sponsored JACOBS MEDIA audit, conducted in GRAND RAPIDS, CHARLOTTE, and PHILADELPHIA, found that "there's much room for improvement" in how radio is displayed, with the caveat that head units themselves vary widely, even within manufacturer's own lines.  But the audit also found wide variations in format definition, use of artwork (or correct artwork), and use of metadata by stations.

The result of the audit was the compilation of "Digital Dashboard Best Practices" for the industry, with highlights including suggesting stations do their own review of how stations -- their own and others -- look on car dashboard screens, standardize the use of data fields (Radio Text and Program Services, or where song titles, host names, and other information are placed), better branding, better identifying personality and program names, improving displays for spoken word stations (like identifying hosts and guests), and fixing format IDs (too many stations identified as "other") and artwork.

GOLDSTEIN opened with a segment noting the challenges facing radio from newer technologies like smartphones (with one out of five minutes of audio consumption being on the devices) and smart speakers and media like podcasts, streaming, and video as well as consumption changes like time-shifting.  Podcasting, he noted, has become mainstream, with one in five Americans listening to podcasts at a median age of 29 (AM/FM is 46, prime time broadcast TV is at 54, cable news is in the mid-60s), but only 1% of podcast listening is to shows originated by commercial radio (with DAVE RAMSEY's podcast being a notable exception, ranking among the most listened-to podcasts overall).  He also pointed out that successful podcasts feature original content and fresh voices and topics.

As for the diferences between radio and podcasts, radio is curated, joined in progress, must grab audience right away, has wide appeal, offers perishable content, and is always on, while podcasts are opt-in, started at the beginning, appointment listening, focuses on narrow-appeal topics, offers evergreen topics because shows are always available, and can be stopped, started, or deleted at will.  The opportunity for radio in podcasting, GOLDSTEIN said, is local, with several examples of local radio hosts doing locally-targeted podcasts.  

MINIHANE, the host of WEEI's "ENOUGH ABOUT ME" podcast, joined GOLDSTEIN for a discussion of his podcasting activities, including how the podcast differs from what he does on the air, cross-promotion (including using material from the podcast on the air, like a contentious interview with LENNY DYKSTRA), and the effect on the radio show's ratings (MINIHANE thinks that the podcast has drawn younger listeners to the radio station).  "I'd like to see more local guys do this kind of stuff," MINIHANE said, "but they have to be passionate about it."

ROBERT EARL KEEN opened the session with a three-song set, followed by the presentation of MENTORING AND INSPIRING WOMEN's FRANCES PRESTON Award to NRG MEDIA's MARY QUASS, who offered the opinion that "there's never been a better time to be in this business than right now," pointing to the multiple platforms available for radio content and urging the industry to "make radio great again."

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