Radio daze
Giants struggling as smaller owners hold their own
These aren't the easiest of times for radio executives.
New devices such as MP3 players have changed how many people listen to music. A depressed market has forced some industry giants to declare bankruptcy.
"We're going through the biggest change in the history of the radio, and like everyone else, it's the Internet and iPods that is affecting us," said Bob Pettit, general manager for two family-owned AM talk and sports stations in Baltimore, 680 WCBM-AM and 1370 WVIE-AM.
The stations are owned by Mangione Family Enterprises of Baltimore, two of just a handful of stations still owned by a Maryland family after more than a decade of national consolidation in the industry.
No sales growth since '07
The radio industry saw its last quarterly sales growth in 2007. Then the recession spurred many advertisers to slash their marketing budgets at the same time that more of the audience began listening to music on MP3 players such as iPods, as well as on their cell phones, radio executives said.
Citadel Broadcasting of Las Vegas, owner of 224 stations, filed for bankruptcy protection in December. Clear Channel Communications of San Antonio, with 14 stations in Maryland, continues to struggle to sell off radio stations as its stock has fallen. Satellite radio was supposed to be the big threat, but after a consolidation of XM Radio and Sirius, the two satellite radio giants, their stock trades for pennies per share.
Under the bankruptcy reorganization plan it filed Wednesday, Citadel will seek to move from $1.4 billion in debt to $762 million. Like Clear Channel, which is estimated to have more than $2 billion in debt, the media giants accrued the large debt as they bought up stations throughout the past decade.
Where the giants are weakening, smaller stations are reporting growth and opportunity.
"We're doing quite well in this market," said Warren Orey, general sales manager for Nassau Broadcasting Partners' three Maryland stations, 103.1 WAFY-FM, an easy listening station in Frederick; 106.9 WWEG-FM, a classic rock station in Hagerstown; and 1490 WARK-AM, an AM talk station in Hagerstown.
Nassau Broadcasting of Princeton, N.J., is a national chain that owns 51 radio stations.
That smaller size allows the company to operate more responsively to local markets than its giant, national competitors, Orey said.
"We're a far cry from the 1,100 owned by Clear Channel," Orey said. "We're not dictated to by the pundits on Wall Street what we do. If we need something, we can call the chairman of the company. In fact, he was just here last week for a meeting with us."
Unlike the "mega-corporations," Nassau did not overextend and overpay for radio stations during the past decade, he said.
"The companies that bought a lot of stations in 2004 through 2006 paid what they were worth at the time, and then the bottom dropped out," Orey said. "They may have paid $20 million and now paying debt on that, but it's now worth $9 million."
Internet could be knockout to local radio'
Many of the national chains are finding it hard to compete against people listening to music on other devices and podcasts, Orey said. Clear Channel would buy stations and then use one on-air personality to broadcast across hundreds of stations.
The consolidation of the radio industry also led to openings for new competitors, such as satellite radio, and competing devices, such as MP3 players, said broadcast expert David Hughes, who tracks the local radio and television stations as founder of Web site DCRTV.com. To pay for all of the acquisitions, many of the large radio giants increased the amount of commercials, in some cases running 28 minutes of ads per hour, Hughes said.
"They literally wrung every dime out of the stations," Hughes said.
That led many listeners to turn off their radios and search for alternatives for their music, he said.
"Stations that do local news and talk will survive, but music stations are getting more competition," Hughes said. "When [commuters] can get Internet easily to cars and can do that cheaply and commuters can just listen to music, that's really going to deliver a knockout to local radio."
Orey agreed that once the Internet is readily accessible in cars, it will be a challenge for music stations, but the stations will find ways to compete.
By keeping local disc jockeys who are accessible to listeners and offering local news and traffic, Orey said his stations are able to offer listeners something they cannot get from their portable devices and will not be able to get off streaming Internet stations.
Holding onto its audiences Nassau Broadcasting's classic rock station in Hagerstown delivers strong ratings among men and women 35- to 49-years-old, while its easy listening station in Frederick provides a loyal audience of female listeners has allowed the stations to benefit as the economy begins to show signs of reviving, Orey said.
"We've seen an uptick in some local businesses since the fourth quarter of 2009," Orey said. "There's a lot of optimism out there with the businesses we deal with."