Tuesday, February 17, 2009

The Framework

In my first 3 posts, I tried to inject a lot of reality into our situation:

1) You need to be aware of your surroundings and not bury your head in the sand.
2) You need to expect the worst. The absolute worst. Your listeners are starting to wander off. And rightfully so. Lots of cool options out there.
3) The revenue is starting to wander off. Efficient, measurable options out there, but more importantly, it’s where the people are going, for whatever reason.
4) No magic bullet. Google Audio is adios. Newmark’s supply-side Bid4spots.com is a KILLER model, especially in this economy, but it won’t replace the revenue fast enough.

Is that everything? I’d say we’re only halfway there. You’re already facing major problems in the very near term:

5) You have huge debt that you must service. You borrowed money to purchase your stations @ 16-17x multiples and they are currently valued @, what, 6-7x multiples? You projected the stations’ earnings based on the on a history of success in running radio stations, and you projected upward economic mobility for the country and your industry. Now, things aren’t upwardly mobile. If things continue like they are, one of four things will happen with your company:
A: Break your covenants, pay very significant penalties.
B: Miss a payment, pay very very significant penalties.
C: File bankruptcy; Go through a painful WorkOut session.
D: Sell your company at an undervalued amount. (see multiples above)

These are all of the current problems facing radio stations. We’ve got both short and long term problems and we’ve got to fix them both at the same time.


With this full disclosure, with all of our problems identified, we can now begin to move forward. So, now to the question: How to fix them? More specifically, How to fix them BOTH AT THE SAME TIME. The solutions seem diametrically opposed to one another, don’t they?

- You want to put out a compelling product with excellent content: An innovative format with great talent in touch with the local community, but you need to cut costs.

- You want to grow your sales staff and create opportunity, but you have AEs who are costing you 25%, 35%, 45% of sale and you can’t afford that.

Many of you are in the same boat: You have made changes that, in the long run, will hurt you, but are NECESSARY for short term survival. This is business, and you’ve had to make these difficult decisions.

Since we’re taking stock of liabilities, let’s also take a quick look at your assets:
1) Great, recognizable brands.
2) Portable. Free.
3) Effective marketing solution: Your station moves traffic, sells cars, and puts butts in seats.
4) Terrestrial Radio is a very profitable business. Especially when compared to other media.

This is our landscape. These are your challenges.

And here is the framework of your solutions in its simplest form:

1) Grow Your Mindshare
 a) Become a bigger part of your listeners’ lives.
 b) Other.

2) Grow Your Revenue
a) Become a bigger part of your clients’ marketing needs.
b) Drive revenue from every possible angle.
c) Strategically manage your inventory.
d) Other.

3) Control Your Expenses

This is the framework on which I'll expand. Everything will always come back to this model, to these three major points. Everything we do…short term, long term, offline, online…will get dropped into this outline.

As we build this outline and create a complicated construct of marketing ideas, revenue streams and expense mangement, we will see opportunity and risk and we'll need to go after both to survive and succeed.



  1. Tony - I read in a recent update from Tom Taylor (Radio-Info.com) where he said that he is hearing multiples may be down as low at 4x this year. It's crazy to think that something bought only a few years ago is only worth a fraction of it's purchase cost.


  2. Hey Tony

    Don't forget that your customers are facing their own problems too - reduced head-counts, lower profit-margins, less response from their customers. These are things that are going to impact the amount of money available for you to fight for.

    Good blog. Great to see someone forward thinking enough to face the issues and decide to tackle them truthfully. I look forward to more.

  3. Tony,

    Good stuff.

    Part of the problem is the indutry as a whole and the consolidation that started in '96. This lead to the homogenization of the on-air product. In many cases there is NO compelling reasion to listen. You do address this in your first point.

    Another issue is the lack of big and long-term thinking but that's a another column by itself.

    Its sad the industry has gone this way.

    Keep up the good work.