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.