Playing Not To Lose

Good Morning!

Thank you for the overwhelming response to the FigFamily Newsletter. I have heard from company CEO's, Trade Association Presidents, The Press (trade & national), record companies and everyone from the GM to the sales assistants. It is my hope that these words cause a dialogue. Only then can we address the real change that is coming to radio. To re-print/publish please ask me. Forward this if you like. Ask to be removed from the list? no problem. Agree or disagree, that's fine. Ok, here we go!

A Story

For the past 10 years, a good friend of mine ran a number one radio station. Oh, he still works there, it's just not #1 anymore. It's like 4th or 5th and dropping fast. For years the radio station had been a top rated, local community minded, full service FM music type station in a top 50 market. Advertisers paid top dollar to be on this station, it had "legendary" status within the industry. Many jox would consider this station the "peak" of their career. Sales people at the station were the best in the market. True, they (along with most of the staff) made really good money, but, considering the amount of billing the station pulled out of the market, no one had any problem paying for the BEST performance. This performance was enhanced by consistent research to stay in touch with audience trends. Every year this station spent money on TV & Outdoor to "play back" on the air, the trends learned from the research. The PD & GM received a free education every time the research results came back. It made them smarter, and more responsive to market changes and station vulnerability.

Despite the 50% plus margin the owners started cutting back the station. Growth! We need growth!. The revenue market was only growing at 4-5%. But the budget called for 11-12% cash flow growth. Despite the begging and pleading of this GM friend of mine, he could not convince the owners that the station was vulnerable to attack. Eventually, it was going to catch up to them. He told me,

- 4 years ago we cut the research & marketing. The station grew at 14-15% (the GM received a nice bonus & a few stock options)

- 3 years ago we cut the staff back. No overnight show, more voice tracking, less promotion staff. The station grew at 9-10% (the GM received 1/2 bonus)

- 2 years ago we split the PD job with someone working 2 other stations. (less time to devote to the product. But no worry - the "corporate PD" called the shots from out of town anyway) ). The station grew at 4-7% (no raise/bonus this year)

Last year, we cut all salaries, froze raises, put more syndicated shows on after 7pm and all weekend. The station grew at 0 to +2% (GM received a salary reduction)

Then, in 2005 the competition showed up. Revenue in the market is now flat, national is down YTD.

- A new station switched format against this number one station. (sensing no investment, knowing the "legendary" station will not respond)

- They took their top rated morning show. (and 40% of the total station billing)

- They spent large amounts of money on the new product. (the "big" station spent none. It can't. it would screw up the year to year expenses)

- They attracted the good (and left the bad) sales people. (good sales people follow the money. Nothing personal)

The "legendary" station response? - Nothing! Business as usual! It's not in the budget. Can't afford it. Pacing is -12 for August, worse in September.

(fill in the ending here. YOU know how this is going to go!)

Ps. The GM was given (in writing) 60 days to turn this around or he will be replaced. (there are 2 sides to every story. Perhaps he deserves it. I'm only getting one side. It's not the point)

How many PD's/GM's are familiar with this story?

Here's The Issue

I wonder if we are NO LONGER PLAYING TO WIN. WE ARE PLAYING TO "NOT LOSE"

Believe me, there is a difference. I think (with a few exceptions) the radio industry is a NO REVENUE GROWTH business in 2005 (and 2006 too) because of it.

We are playing DEFENSE. WE SHOULD BE PLAYING OFFENSE.

(yes, there are exceptions. But overall, I believe this to be true. Otherwise we would be growing our revenue vs. currently flat)

Do you think advertisers have the perception that we are DOING NOTHING about the competition? I do!

And they are voting with their feet.

The Cost of Attracting Listeners

Last week I was listening in on the XM Satellite Radio Q2 earnings call. During the beginning of the call Hugh Panero, XM's CEO was spouting all of the companies latest accomplishments. (the "branding" on the call was very, very good!) One statistic really jumped out at me. It costs XM $98.00 to get ONE subscriber. Yep, the cost to reach, market, and sign up a subscriber is 98 bucks. Why? Because they don't have what we have - distribution. They would kill for our distribution. We are in EVERY car, we have 5 or more radios in EVERY home in America! Would Mr. Panero love that? You bet your addressable receiver he would!

Name ONE other appliance that the average American has MORE OF? No special boxes, no dishes, no addressable cards, nada. On, Off, Tune! That's it! Radio! We Americans have PLENTY of them. We broadcasters are spoiled. We are used to 100% distribution. (that will change with HD Radio) Yet, many station owners/operators WILL NOT invest in the marketing of these radio brands available FREE in every home and car. Can you imagine if we spent even $9.80 to convert each new listener?

With all the competition we face today from all sides, why woulden't we want to market our biggest brands, research and nurture our growing stations, and launch new, and local innovative station brands? We have a 90 year head start! And 100% (ok 99.9%) distribution!

Been to a Major League ball park this year? NASCAR race? The stadium/track is awash in Satellite Radio advertising. The local station carrying the race/game? Hmmm, don't know, haven't seen any advertising for them. (yes, there ARE a few exceptions.)

Here's a test - Let's assume you wanted to increase your cume (the number of listeners tuning to your station for 5 minutes or more per week) by 10%. Take your weekly cume, add 10% to the number, then X the number by $98.00. Is that your current marketing budget? I doubt it. Not by a long shot.

If we are to get back on the revenue growth track we are going to have to start playing to WIN!

If we are to change the perception the press (and increasingly, the national advertisers) have of commercial radio, we must stop defending national decisions in radio and start innovating LOCALLY. This means spending money to develop LOCAL STATIONS. It's our NOT SO SECRET weapon! (memo to corporate - if it is being done - it's not being noticed. The bad perception is overwhelming the good)

It's "The Local" Stupid!

How can we spend millions of dollars on a national radio campaigns and never say the word "local"? How is this possible?

Local innovation MUST come from,... uh, local management. This means investing in TRAINING of LOCAL management. Make them accountable, (trust them or lose them) and then RESEARCH/MARKET/BRAND these local community stations.

Everyone seems too busy to focus on this issue. But this is a HUGE advantage! We are NOT exploiting it!

By the way, JUST ABOUT EVERY MARKET ALREADY HAS ONE OR MORE OF THESE STATIONS. Many are owned by the big companies. Some are marketing, many are not! Great LOCAL brands getting lost in noise of the I-Pod, broadband, and satellite, marketing machines.

We already have an advantage. But we are NOT playing to win! WE ARE PLAYING TO NOT LOSE!

Big difference.

The new competition, payola, spot loads, voice tracking, national "jockless" formats, the 18-34 issue, cutbacks, flat revenue, PPM, and "we're not making enough money" format flips have put us in a negative light. It has overshadowed all of the few GOOD things we have done!

It's time to respond. With one voice, and one message. We may have to spend money. Real money. For a long time.

We must identify, develop, and brand talent. Radio talent. We must start to attract new talent to this business. Nationally AND locally.

We must develop local management, local stations, a local sensibility. It's our only edge. (in addition to distribution)

Then we need to locally MARKET these stations and the personalities/programs on them. Local and/or national.

It's time to invest in the local stations. It's time to put the effort into station/people development. (not just one or two cluster stations)

It's time to play offense. It's time to PLAY TO WIN!

Your response is always welcome!

Fig

(Side Bar - Perhaps the "Oldies" format would not be a 50+ dying format if it was researched & marketed over the past 10 years. Remember when soft AC was the Streisand, Diamond, Manilow station? Through research and marketing they slowly "contemporized" it. We never did it to Oldies. We saw this problem 10+ years ago. We band-aided it. We cut it back. we stopped researching & marketing. Now the format is "dead". Perhaps we should have invested in the product before it started to turn blue. (hint - there are a few stations putting in a "fix" for the format. It's not cheap, nor easy. But it is working 25-54. Call me and I'll tell you where, and who is doing it.)

(Side Bar 2 - Bookmark and visit often www.figmedia1.com for other FigFamily Newsletters and Fig's real occupation these days.) Thanks to Dave Michaels for the care and feeding of the FM1 web site. Need art for logos, web sites, sales kits, van wraps, TV? Dave's "The Man"! Go here, (http://www.davemichaelsradioart.com ) Thanks, BF.