An Argument For More Deregulation

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Online advertising is sucking away radio’s advertising dollars, and the government needs to step in and do something. That’s the conclusion Galaxy CEO Ed Levine has come to after commissioning a BIA/Kelsey study of the Syracuse market and receiving results that seriously disturbed him. “My position is that either the digital space needs to be regulated (not going to happen) or the local radio caps need to be lifted as this battle for ad dollars is currently not a fair fight and will continue to erode local radio in market after market in this country.”

The BIA/Kelsey study determined that in Syracuse that the advertising revenue captured by Google, Facebook, and Bing was $40.5 million, that’s more than all the Syracuse radio stations combined ($32.5 million). Google took in $29 million of that $40 million and BIA/Kelsey projects that Google will soon take in more ad revenue than all the Syracuse radio stations combined. Levine says advertisers have one ad budget. “The digital spend, whether it’s for search or Facebook, is coming at broadcast radio and TV’s expense. And radio doesn’t have retrans or huge political every other year like TV, so we are in dire need of relief.”

BIA concluded that what’s happening in Syracuse is taking place in every other radio market in the country. “Local radio stations face new and varied competition to attract audiences and to sell access to those audiences to advertisers. As consumers seek additional sources for news, information, and entertainment, local advertisers seeking access to those audiences have increased their advertising spending with these new platforms. As a result, while local radio stations still remain an important part of the local advertising marketplace, in Syracuse and elsewhere, their position has diminished.

Given the growth and new competitive pressures from digital and social media platforms, government policies designed to restrict common ownership of radio stations in local markets like Syracuse should be reexamined.

The BIA/Kelsey report says the data it uncovered in Syracuse demonstrates that relaxation of the local radio ownership rules is warranted not only in the largest markets, but in small and medium markets as well. And the early read by industry experts is that new FCC Chairman Ajit Pai understands the new competitive landscape and may eventually lean toward more deregulation. Time will tell on how Washington will act — or not act — on this issue.

We asked Levine how he would respond to the broadcasters, and others, who say deregulation is what ruined radio in the first place? “No one would ever accuse me of being a fan of ‘corporate radio.’ However, if we continue to look at the challenges the radio industry now faces, through the prism of what was done (or should have been done) 20 years ago, we will still be arguing at the funeral as we bury free local radio. These are completely different times and they require different regulatory actions.”

So what is the correct number of stations any one operator should be allowed to own to be competitive with the Googles and Facebooks of the world? Levine says he’s open to what constitutes “limits.” “Should it be a national cap like TV has? Should it be ‘share of voice’ in a particular market? Should it be ratings based or revenue based? Or should it be like the newspapers where all across Middle America you make one phone call to one person to buy the daily ‘local’ paper which in essence allows a local group to dominate the space? Should Class A stations be counted differently than Class B or C signals like the UHF discount in TV that used to exist? These are details that need to be discussed and negotiated. The need for regulatory relief, however, is undeniable.”

Levine tells a story of having a small radio presence in Utica about 10 years ago when an opportunity to buy stations from Clear Channel came up. He could not own all of them because of the limits so he partnered with another local broadcaster and between them they split up the group. Today, he says all the former Clear Channel stations are doing better by every measurement. More local people are employed and more local events occur weekly if not daily hosted by local radio. He says money is being invested in the local economy as both Galaxy and the other group have built beautiful new facilities in Utica. He says digital is a presence in the Utica market, but not dominating. “By being allowed to consolidate to even that small degree, the players that wanted to be in the market stayed. We were able to gain more mass which helps our ability to serve our advertisers and satisfy their needs.”

The BIA report projects that in 2021 online advertising in Syracuse will jump from $33.7 million to $43.7 million (+29.8%) and mobile’s share will grow from $29 million to $57.6 million (+98.2%). Radio’s share of ad revenue in Syracuse is projected to go from $30.2 million in 2017 to $30.6 million in 2021 (+1.3%). We asked Levine one additional question: What if online advertising is working better than radio advertising and clients are getting better results with clearer R.O.I.? Here’s what he said: “Being able to reach just 10-20% of a given market’s population due to government regulations, when Google and FB have, in effect, created unregulated monopolies, will continue to produce the same results we are seeing. Free, local radio will continue to erode while Silicon Valley based companies will continue to operate without restrictions. I’m all for letting the marketplace decide ‘winners’ and ‘losers.’ Lets unshackle free local radio and make it a fair fight.”

Reach out to Ed Levine by e-mail at [email protected] and leave your comments about deregulation below.

8 COMMENTS

  1. Consolidation was the ‘patch’ on top of Docket 80-90 (look it up). All those new 80-90 classes and stations put over a thousand FM stations on the air at one time. Suddenly the markets with two radio groups had four. Those with 10 groups found themselves with a dozen more including rimshots. By the time consolidation was approved, 50% of all radio stations in the US were losing money. If groups had not been allowed to combine operations for efficiencies of scale, many would have likely gone out of business or ended up with a two-person staff. The end game of consolidation hasn’t been pretty, but some form of consolidation had to happen.

    Ed’s right: Consolidation was a way to repair the damage of a rule that ignored the reality of market supply and demand. Much like the regulations we deal with no longer solve the issues they were implemented to fix. They just make it tougher for us to compete against these unregulated billion-dollar competitors.

  2. Is Mr. Levine wandering around in a lab coat and testing theories in vials and beakers?
    Deregulation is the very means by which greed and avarice was allowed to decimate what was once, primarily, a viable and dynamic industry – made up of locally-owned or locally-operated radio stations.

    While the two main radio ownership groups continue to demonstrate massive incompetencies about how to influence audiences for their own benefit while failing, also to a large degree, to generate any new strategies or methodologies to assist advertisers, any argument for further deregulation makes no sense. “Fairness Doctrine”, my ass.

    However, reason, logic and past experiences may be of little value to the truly committed.
    That the internet is getting a legislative or regulatory “pass” is another, separate matter.

  3. “The need for regulatory relief, however, is undeniable.” So it’s deregulate an industry, unless the regulation of an industry benefits me!

    No place in this article is a quality user experience mentioned, or how radio programming content quality has seriously diminished over 15 years. That’s where radio is getting beat. To claim “great local content” is an abstraction that sounds good but rarely exists.

    When things go South radio just quits publicly reporting what’s bad; Local Spot Sales (2008), TSL (2010), quarterly revenue reports (2013), etc.

    Don’t blame the industry. It’s never been the fault of the stations. Advertisers just haven’t understood radio. Any idea how silly this sounds when talking about a 100 year old media that has decimated its farm team system, limited local talent and hasn’t upgraded programming techniques since the Sports Talk format?

  4. Yes, because relaxing regulations helped radio SO much the last time. We wound up with bloated supercompanies that slaughtered the very concept of local, bought each other up to try and increase reach but only increased debt, and tried to use a hyperlocal medium as a national brand and platform.

    The two largest owners in radio are a combined $22bn-plus in debt. They’re pushing a satellite radio/network TV inspired national rollout to their stations–fewer local personalities, fewer local decision-makers, less local flavor. Of course the numbers aren’t completely in the toilet, because there are only so many options and most people aren’t ready to dump radio for streaming yet. But I think patting yourself on the back for only being so terrible is the “BAKE” step in a recipe for disaster.

    If one of the “good” groups like Beasley, Cromwell, and Alpha Media were to benefit from relaxed regulations, I might not mind as much. But without sharp caps and modifiers, further deregulation would just help the pseudo-rich get richer….with properties they’ll eventually have to shutter or fire-sale.

    We need deregulation like we need to reorder cyanide pills–because the radio industry apparently isn’t killing itself fast enough.

    Sincerely,
    A Radio Lifer Who’s Watching His Life’s Passion Destroy Itself

  5. No one is a bigger fan of local radio than I am! Levine and I roomed together, started in this business together, built radio stations together, defined a format together, followed each other on the air for years and have seen the evolution of this business. Business is clearly more difficult today than ever. There are so many entertainment choices, not to mention spending choices. Dereg was the beginning of radio’s issues…but not today. The audience is spread everywhere.
    Today I am a local advertiser. I regularly use Facebook to promote local band appearances. Whenever I can I try to partner with radio, it’s a much better option for what I do, especially for one0off appearances. But for long-term branding it is too expensive.
    I wonder how the online ad spend happens. My bet is there are thousands of $25 to $50 campaigns. It’s all self-serve. Put in your credit card, pick an audience and click….remember Double Click?! Radio can begin to fight the online guys by creating low-spend solutions.
    When my band tours Central New York this summer Ed Levine will be my first call…actually, I’ve already called!

  6. Good insights! Regulate internet companies the way radio is squashed by regulation and see how the internet will dry up too. Apply ownership and audience reach regulations to internet companies and they would all need to start breaking up their companies. Monopoly should be played with equal rules. Where do I inspect an internet company’s public file for my community? If they are really reaching that many people they are over the “population influence” ownership regulations. When was the last time you saw a “big box internet” company at the local employment fair to meet their local EEOC requirment for having more than 5 emoloyees? Where can I get a copy of all the local events, interviews of local leaders and documentation they are serving our local community AND if they don’t do it they will run the risk of loosing their license to serve our local community at their next license renewal… oh wait!!! They don’t have any annual regulator fees that threatens their ability to serve their LOCAL community!! If things were equal and fair, every internet company would be required to match and pay every local fcc regulator fee. The governement is loosing billions of dollars by not getting their fair share of “big box internet’s” local regulator fees, these fees we allow them to participate in our local economy. Speaking about local economy, “big box internet” should be paying local and state franchise fees, real estate taxes and licenses on every mile of cable they are using to serve the public and they should be required to limit their service area because there is another internet station over 700 miles away on that same frequency!! Ugh! LOL. Reminder: The letter of the law only shows you your sin, it is the spirit of the law that brings life. Eliminate regulations and regain our freedoms!
    And you have just proven that “great content” leads the day. People will find good content where it resides:am, fm, tv, internet, ham, smoke signals, or live events. Convenient is better but they will find great content. So make good content and use every available distribution source we can.
    We all signed up for all the regulations when We bought the station so send your ideas to Mr. Pai and let’s remove the historical and new burdens being brought to light.
    “If you can’t run with the big dogs, don’t get off the porch… don’t worry… your realtor will put the sign out front for you!”
    So get off the porch people and
    “Make Content Great Again!”

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