Radio’s Coming Renaissance

The Internet rose to its full height in 2005 and cast a bright shadow across the land. It became our newspaper, our telephone book, our encyclopedia and our primary mailbox.

Whole categories of advertising where swept away by that tsunami.

Radio suffered the least damage of all the major media. She has proven to be far more durable than I had suspected.

In their recent study of annual trends, Audience Insights reported some interesting findings. President Jeff Vidler summarized,

We see absolutely no change in broadcast radio’s share of in-car tuning in the past 5 years. AM/FM radio is still dominant in-car, representing 66.2 percent of in-car listening. The growth of alternatives such as satellite radio and streaming audio appear to be coming at the expense of personal music (iPods, CDs and other libraries,) not broadcast radio.”

Prior to that report I had no data beyond my own observation, but I knew that radio is continuing to reward its regular advertisers with a robust and hearty return-on-investment.

And now I will tell you a story.

Once upon a time, no one could own shares in more than 12 TV stations, 12 FM radio stations and 12 AM radio stations. We called this “the 12/12/12 rule.”

We didn’t want anyone to be able to control the news.

But this good law went “poof” in 1996 and consolidators immediately began gathering up radio stations by the armful. Big-business efficiencies were brought in to what had previously been a Mom’n’Pop category. Profits soared and Wall Street said, “Let’s do this thing. She looks doable, doesn’t she?”

Corporate Radio was born with a full set of teeth but it had no reflection in the mirror.

Investors have their own way of looking at the world. I’m not saying it’s wrong, but you can always be certain you’re talking to The Money when they do something that hurts like hell and then tell you, “It’s just business.”

But Radio has never been “just business.” Radio is music and laughter and opinions and news and discussions and interviews with interesting people. Only a few minutes per hour are “just business,” and when a radio station is run correctly, even those few minutes can be entertaining and valuable and informative.

Investors are a funny breed. They work themselves into a frenzy and then suddenly lose all interest.

CBS announced in March that they plan to sell or spin off their radio assets this year. The goal, according to Les Moonves, is to “unlock value for our shareholders.” He indicated that radio has become “slow-growth” and “a drain on resources” that can be better directed to content production and digital endeavors.

Cumulus pushed out founder Lew Dickey as CEO last autumn but that management shakeup didn’t stop the stock slide. Cumulus shares lost 80 percent of their value in 2015. The Washington Post recently quoted one debt-holder as saying, “The most logical thing is to break it up and sell it.”

And now investors in iHeart (previously known as Clear Channel) are saying the same thing. Add it up and you’ll see that we’re talking about more than 1,400 radio stations possibly hitting the market all at once.

Radio stations have lost their appeal to investors.

But they haven’t lost their effectiveness for advertisers.

In 2001, America Online was worth $226 billion. In 2015, Verizon bought AOL for just $4.4 billion. Somewhere along the way, it lost 98 percent of its value.

In July of 2005, News Corporation, the parent company of FOX Broadcasting, bought Myspace for $580 million. In 2011 they sold it for $35 million, recovering just 6 cents on the dollar. It lost 94 percent of its value in just 6 years.

I have no idea how much money these 1,400 radio stations will bring or even if all of them will be sold. I’m not pretending to be able to predict those numbers. But I definitely smell an opportunity for innovative local ownership of radio stations again.

Do you smell it?

It smells like springtime.

This is good news for listeners,

good news for business owners,

good news for communities,

good news for America.

Roy H. Williams