-
Rick Cummings
November 24, 2009
Have an opinion? Add your comment below. -
Emmis Communications occupies a unique place in the corporate radio scene. Historically, it's best known for its iconic hip-hop and Urban stations in New York and Los Angeles, mainly Hot 97 and Power 106. Nevertheless, Emmis' presence is also felt in middle America markets such as Chicago, Indianapolis, St. Louis and Austin. It never went on the station shopping spree that currently loaded rivals such as Clear Channel Citadel and Cumulus with debt, yet Emmis still had to downsize once the economic meltdown hit. Through it all, Emmis Radio President Rick Cummings has maintained a frank and measured perspective on Emmis and the radio industry in general when it comes to turning things around and recapturing its former mojo.
Obviously, 2009 has been a tough year. How long do you feel the slump will last?
We're all asking that question. Things are a tad better than in Q1, when it was absolutely off the cliff, and yet there are predictions from the Federal Reserve that say it's still worse than we thought and it'll last longer than predicted. Even then, they still say the recession ends at the end of the calendar year. Most broadcast groups hope there's enough encouraging news for the back half of the calendar that there will be some improvement.
What's the key to a turnaround -- the economy rebounding overall? Radio placing more emphasis in online revenue? HD growth? Other factors?
We're in both a cyclical and secular kind of thing. Regarding the latter, we continue to have something like 250 million listeners week. There just an unbelievable and jaw-droppingly stupid notion on the part of lots of customers that radio's not effective anymore. It makes you crazy at a time when the reality is completely the opposite. Yet we have to deal with that perception -- and dealing with the secular part will take awhile.
Regarding the cyclical part, we're suffering from what every business in the world is suffering - and it has been particularly tough on media. Our business has been driven by what used to be our leading category -- automotive -- for 40 years, and that's a disaster. Our other big category -- banking and mortgage -- has been hammered, too. You have to say that as soon as we see some recovery in the economy on the account on the recessionary cycle being over, business will come back in a nice way. We're hoping the cyclical part comes to end in the back half of this year
Will the future of radio's revenue renaissance be found online? How will its presence impact the way Emmis and its terrestrial stations do business?
It will be found wherever our listeners and customers want it to be found. That may include not just online but mobile platforms. Online is just one component of where the world is heading -- marketing partnerships for our customers. That means a move AWAY from just traditional "spot" and a move toward a "360-degree world" where our listeners consume us as they choose. That will happen. It has to happen.
Earlier this year, Hot 97 put up its stream and with no on-air promotion, was soon generating more concurrent streamers than all other Emmis streaming stations combined. When the Jay Z "world premiere" debuted two days ahead of "sold out" Summer Jam at Giants' Stadium, that made Hot 97 top-rated in just about every category (search, love, hate, etc) on Twitter. This in just a matter of minutes! I think it's an inescapable conclusion this is where our world is headed.
What's your opinion of HD Radio? Considering how much staff downsizing there has been in radio, how can stations even afford to hire the programmers to take the time and energy to develop compelling content on HD?
I actually do think HD will ultimately succeed, despite the many naysayers. You have to remember that it took HD TV 10 years to take off; it didn't take off like a rocket, it basically ground along with almost no one embracing it for years. Of course, HD-TV had a much more significant technological improvement than radio, so some factors are way different.
We are actually making money with HD, but we've grown increasingly to believe that the answers for HD radio are not more formats and added inventory. The last things we need to do in the industry are add more channels that air spots. I also don't believe there's that much content out there. L.A. has got 80 radio stations now--and now we're going to have 240 with all the side channels? There's not enough content to supply all that.
I'm increasingly skeptical that narrower versions of Rock and AC formats and specialty music channels will drive anything. HD will be driven by different kinds of data, like World Band Media, which we're doing in three markets. Basically, that is ethnic programming where they pay a fee to use the channels. They do 24/7 ethnic programming and are responsible for the content. That brings in some money. Will it be millions of dollars someday? Maybe.
We're also founding members of the Broadcast Traffic Consortium, Paul Brenner is chairing it. We're covered in 75 of the top 100 markets -- soon to be 100 of the top 100 markets. It's a consortium partnership of broadcasters that provides real-time traffic to Nav screen in cars through RCS and HD radio sub-channels. That's ready to go live and has all kinds of possibilities for ramping up HD radio units in cars -- and for being a new source of advertising. Those kinds of things can help HD thrive and eventually profit.
Emmis has been very proactive in dealing with downturn. You were the first to have group-wide salary cuts. Could you tell that this type of drop-off was in the offing ... and could radio have done anything to soften the revenue decline?
I'd love to tell you we were clairvoyant in responding to pacing, but we've been hit by record revenue drops. We've been around for 28 years, and part of the reason we've been around that long is that up to now, we haven't been a company where the balance sheet drove operations. If you can stay out reorganization and keep operating, that eliminates some negative possibilities. We always made sure to stay within the lending covenant, which would get us through any difficulties. But this downturn has been so severe; we've had to take extraordinary actions. We've laid off over 20% of our workforce in the past year-and-a-half and had two pay reductions for those who remain. We've had significant Emmis vets who unfortunately had to take exit packages.
I'd love to say we're absolutely done with this, and so far we are, as we have people who watch this every day, but we may have to do more if necessary. At least we did it in a very "Emmis way." Our lenders gave us generous severance packages to give those who were let go considerable cushions.
If things do turn around, will you staff back up again ... or will "lean and mean" staffing stay with you?
I hope to staff back up because we're running beyond lean and are doing without things, in terms of resources and skilled people, we need. There isn't anybody in this company who isn't doing two or three jobs, with a smile on their face! We have terrific people, willing to make sacrifices, but yes, once this business recovers, it would be great to bring people back or create new positions. Currently, we are beyond lean, and you can say that for almost every radio and TV group.
When Tribune reorganized at the end of last year, I thought Sam Zell was characteristically honest. He said, "Look, we bought this knowing times were tough and the economy, in general, wasn't good. We had been running at a 3% decline in revenues in past years and we planned for 6% down ...but we got 20% down." That's a very direct and honest answer. It's the same with radio; none of our cost structures can support that size of a revenue drop.
Since selling Movin', Emmis is back to a one-station market in L.A.. Since the prices of stations on the block are far more reasonable, do you see Emmis getting back into the acquisition game?
Selling Movin' was a heartbreaking thing, because it was really coming around. We added about a share point to the overall adult ratings over the past eight to nine months; we were seeing some weeklies where the station was near the top 10 in adults. We were confident that we finally had it figured out and station could be successful, but again, this is a time when the balance sheet becomes the primary driver. Jeff Smulyan and Pat Walsh looked at it every way we could in a desire to keep Movin', but considering the economics of the situation, selling it was the right call for the business.
In terms of leaving Power as a stand-alone, I don't think the sale makes it easier or particularly harder for Power. We weren't clustered enough to take advantage of the sales possibilities we certainly see in a market like Austin, where we have six stations.
PPM seems to have shaken up how radio formats its stations (ie: CBS' Now/AMP Top 40 format) How has PPM measurement changed the way Emmis formats and programs stations?
We knew, going back to the first Philly test in 2005, that if you had an Urban radio station with a lot of listenership being black or Hispanic, you'd suffer disproportionately in PPM. We've all heard the 100=70 radio for PPM and the diary, and with the change in measurement, general market stations usually lost 30% of its ratings.
In a diary world, people only write down stations they're loyal to -- that's about two to three stations per listener ...2.5. In the PPM reality, people are listening in shorter bursts of time more often, and have five to six stations they listen to. That washes out the quarter-hour rating of a general market station by 30%, but it for a niche player in the Urban or Spanish world, you're talking about a decline of 45-50%.
The reasons for that are. simply, these: In most markets, African-Americans don't have nearly as many choices as Caucasians do -- maybe 2-3 stations vs. a choice of 20 stations for Caucasians. In diary world those stations got over-reported simply because there weren't as many choices to write down. We're now seeing black, brown and white listeners using radio the same way, which means at least two of the stations in the ethnic listeners' range, are the Caucasian stations.
That has caused a big challenge for Urban stations. The good ones are figuring it out. WBLS/New York is at the top of ratings now; they weren't in the top 10 when PPM started, so they certainly figured out what they needed to do. We had some success at that; Kiss [WKRS] is in the top 5 in NY. Hot 97 is not as close to the top as it was in diary, but it has still been in 2nd. Power Los Angeles has been 1st or 2nd 18-34 in the PPM. We look and continue to maintain its position, although its numbers are not as compelling.
We're doing a lot of the same things everyone else is doing; we try things one at a time to see what things move the needle and what costs us quarter-hours. It's a constant trial-and-error, a lot of studying data to get our batting average a bit higher. We're learning with PPM that we're not going to change people's listening habits, but if we can get them to listen on one more occasion for three to four minutes at a time ... or even two minutes longer per occasion ... that'll make a make big difference.
What's your take of the FCC probe into PPM over minority bias in its monitoring?
I don't know. I sometimes wonder what FCC thinks its duty is. Apparently they heard enough info that they have concerns that the PPM measurement system doesn't diminish the number of minority-formatted stations or minority ownership. What comes of that is anybody's guess. I have mixed emotions about it; if there really is something there that they find - and I'm skeptical that they will -- then it will have been worthwhile, I do worry that between the attorneys general, the FCC and negativity surrounding this in general, the one thing we're hoping for in the long term becomes that much more difficult -- that being, the world has been saying the radio industry needed digital, passive measurement.
Proctor & Gamble won't buy any medium that measures itself with pencil and paper. So what else do you need to hear? It's important for us to have PPM and get it out there in a timely way. If there are things wrong with it, fix them. And every subscriber would like to have a bigger sample. The bottom line is that the PPM has been embraced more readily by the buying community, who drove the whole process. We have buyers who realize that this is what they asked for because it's needed to make radio measurable and accountable. We're not there yet; we're going through painful period.
The PPM picks up radio stations that are on the PA system of retail stores, which would help mainstream stations who are more often played on stores. Why are advertisers so interested in such passive listening? Do they actually believe that such exposure will sell their product?
Coleman did an exit poll study and found there are three kinds of listening -- engaged listening, incidental listener in a shared listening environment (such as being in a car), and accidental listening, when you're exposed to an AC station in deli when you're picking up a bagel. That contributes very few quarter-hours. The real big one is engaged listening, which comprises 70-80% of total listening comes. So, we pay attention to the 'engaged' listeners who listen to lots of radio and listen to our brands most.
What's your opinion of what Nielsen launching its own electronic measurement for major markets? Can two different electronic radio measuring systems survive?
Right now, we can't afford to pay for one. That's one of the big problems of electronic ratings; they're tremendously more expensive at a time when revenues are diminishing at a record rate. The timing couldn't be worse for PPM in that respect. Every radio company is asking how we can afford to pay for this; I can't conceive of paying for two ratings. There's a philosophical argument that having two or more competitors makes everyone better. That's true, but at what cost?
Although the NAB has rounded up a majority of House members to oppose a performance royalty, how confident are you that the proposed legislation is DOA?
Today, we stand at over 250 representatives who have signed on to House Congressional Resolution 49, the Local Radio Freedom Act, which opposes this performance tax. But we should not assume anything at this point. The RIAA has decided that the means for fixing their failed business is to extract a tax from the very medium that promotes their artists (to the tune of billions in value annually) and sells the overwhelming percentage of their music.
Congress has always seen the unique relationship between free over-the-air radio and the artists that perform music and I'm hopeful they will again. But this fight isn't over yet.
Were you worried about its passage to the point where you considered what kind of steps to take if it became law? One radio exec predicted that 25% of the music stations would flip to Talk. Agree?
I have no idea. I just know passage of this performance tax puts VERY little money in the artists' wallets. The majority of the proposed tax goes to the record labels, three of the four being foreign-owned. This would put many radio stations out of business; put many more people out of work, and have significant impact on our ability to serve our communities as we've done for decades.
It's a bad idea. It was a bad idea in the '70s, it was a bad idea in the '90s, and it's an even worse idea today. I'm hopeful that Congress sees it for what it is: a blatant "money grab" by the RIAA.
A lot of radio stations are running spots to support our position; the industry is coming together very nicely on this. A lot of those Congressmen who supported our industry have been encouraged to talk to those representatives who stayed on fence and ask them for their support. It's good to see the radio industry rise up - and not just on this key issue, but during natural disasters when their communities need help.
It's funny ... we quarrel all time about things like ratings and stuff, but when it comes down to important issues to our audience, the industry all pulls together.
-
-