The Framework

PROBLEMS
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.

  

SOLUTIONS
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.
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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.

Tony

Google Audio and Your Short Term Survival

I loved Google Audio Ads and the initial technology that dMarc created. What an amazing Idea: Technology that allows you to drop in spots after a music log is complete. The value wasn't the tons of money they would bring, the value was that they could fill in the gaps that we couldn't. 

Think of it like a commercial airplane: Once that door is closed, and the plane begins taxiing away from the gate, it's over! No more passengers. An empty seat is a missed opportunity. Not with the Google Audio! Their product was the equivalent to dropping in passengers on the taxiway before the flight took off. In this example:

- The airline gets paid less for those seats, but that's OK, it's 'found money'.
- Those passengers that were ‘dropped in’ at the last minute were OK with it: They knew the terms and conditions and because the rates were so low, they were OK with joining a flight at the last minute. Seemed like a pretty good system!

 But it wasn't. According to Google's Official Blog, “we haven't had the impact we hoped for."

 Now they are turning their eye to the future: They will explore Online Streaming Audio…so let’s talk about TargetSpot.

I love TargetSpot and have for a long time. I especially compliment them on their ability to establish themselves as the standard on the CLIENT side. If you stream Audio, you need to be with TargetSpot.

So, how does this impact them? When Google comes into your space does that make you happy?
- Yahoo would say NO.
- I’m sure MapQuest isn’t a big fan of Google Maps. (Poor MapQuest.)
- Microsoft can't be too excited about ‘Google Documents’.

I’ll tell you who IS happy that Google moved into their space:

-       dMarc.

-       DoubleClick.

-       YouTube.

-       And a whole bunch of other companies that Google Purchased. There’s a list of them here.

This is every VC’s dream or nightmare: Google Moves into your space. We’re all going to witness either a long painful battle between Google & TargetSpot, or we’re going to see a sale. My money’s on the sale. With the work that CEO Doug Perlson's team has done over the last bunch of years, Google HAS to consider making a bid. TargetSpot is too entrenched NOT to make an offer. 
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So, to Terrestrial Radio Station Company owners, what does this mean to you? I'll tell you what it means to me:

1) I'm going to miss all of that Google Audio money. It was nice. Yes it was cheap, but it was different and BECAUSE it was different, I could sleep at night with those rates.

 2) Looming over us was that question: "What happens a year from now when the local car dealer discovers Google Audio and decides to use it as a means to buy my station?" No longer an issue.

3) This is yet another indication of where things are going. I loved the attention we got as an industry when Google bought dMarc. You thought “Wow, Google! The coolest of the cool is interested in Terrestrial Radio! See? We’ve still got it!” It was a little glamorous, wasn’t it?

Now they’re gone and as excited as you were when they started, you should be doubly disappointed now: There is no magic technology that will drive your revenue. Worse yet, there will be none. That was the last train out. You must survive in the short run by driving traffic to local direct business. Period. Control what you can control.

I grew up in Pittsburgh. When the Steel mills went away, many that were laid off were in denial. “Something will come back! This is _____________!” (Fill in your once-vibrant suburb in the Mon Valley) Nothing came around for them, and nothing’s coming around for us.

Consider this: If neither Katz nor Interep nor Google has (have?) developed a simple system to purchase commoditized radio by now, when will they? I can buy an $89 airline ticket online, but there is no system for buying radio spots! Google was the most recent hope for that ‘magic bullet’. Assume it will never happen.

Local direct is how you will make your bank payment and how you will stay within your covenants. Changing your product from a radio station to a brand is the other.