Taking a Look at the NAB


September 20, 2002


BROOKE GLADSTONE: As television unloads its fall schedule, the National Association of Broadcasters reconsiders some conventional wisdom about radio. Radio owners and radio executives cheered the 1996 Telecommunications Act because they believed that deregulation would be a financial windfall both for the small owners who would sell out and the conglomerates that would buy in. Six years since the beginning of radio's consolidation, radio employees and radio owners have less to cheer about. This past week NAB staged its annual radio convention in Seattle, and Todd Spencer was there to gauge the state of radio in the age of deregulation. [CONVENTION CENTER AMBIENCE]

TODD SPENCER: In the crowded halls of the Washington State Convention and Trade Center, radio group executives, general managers and sales directors talked about the general state of the economy and paused to breathe a sigh of relief about satellite radio which doesn't seem as scary now as it once did. Also they complained about consolidation --not consolidation in the radio industry, but in the ad industry which places broadcasters at the pointed end of the consolidation stick. Before consolidation, radio accounted for 7 cents out of every dollar spent on advertising in America. Six years later, it's still only 7 percent. Doug Abernathy is the director of sales for Cox Radio, Houston.

DOUG ABERNATHY: Everyone thought with, with consolidation, you know, the advertising dollars that were going to go to radio would be 10 percent. Well, that hasn't been the case. We just, we're just still fighting over the available dollars in there.

TODD SPENCER: One of the reasons why consolidation hasn't raised revenue share is big radio's struggle to get it's hands around cluster-selling. A cluster sale is when a company that owns several stations in a market offers deals for advertising on many stations at once. According to Jim Boyle, the radio industry analyst for Wachovia Securities, the problem with cluster sales is that clients might not want to pay for all the stations in a market.

JIM BOYLE: When you try to do a cluster package, there is resistance on the part of the advertiser to have lesser-performing stations crammed down their throat.

TODD SPENCER: Which is what Doug Abernathy found in Houston. Currently Abernathy has a dozen cluster deals. Three years ago he had 50. But while clusters haven't generated huge profits, costs have been cut. Doug Abernathy.

DOUG ABERNATHY: The greatest benefit of consolidation is to the bottom line. There's cost reductions with all being in one location-- the sharing of a business department; the sharing of a traffic department; the sharing of sales assistants --has eliminated a great deal of expense.

TODD SPENCER: According to John Nichols and Robert W. McChesney, authors of the book It's the Media, Stupid, 10,000 radio-related jobs have been lost since 1996 when the deregulation bill was signed. John Sandifer is the executive director of the Seattle local of the radio union AFTRA.

JOHN SANDIFER: More and more radio stations have been able to broadcast without great numbers of staff. Those who do not have a live news presence don't have the need to hire news reporters or editors or writers. They may not need a disk jockey because they're only punching at a tape and playing it. In Seattle anyway, we have found that while we once represented 10 stations, we now represent 4.

TODD SPENCER: Industry analyst Jim Boyle says that too much is being made of cost-cutting as a financial boon for big radio.

JIM BOYLE: Cost-cutting is a one-time event, and probably 80 percent of radio's growth since 1996 has not been cost-cutting; hasn't even been selling more inventory; it's been the ability to raise rates. Cause radio was always extremely cheap back in the '60s and '70s when newspapers and mom and pops owned most of the business and rarely raised rates above the rate of inflation. So it's raising rates. It's not cutting costs.

TODD SPENCER: Despite recent stock fluctuations, Wall Street has become enamored with radio's potential, according to Boyle. The romance though, has had its effect on executives at publicly traded radio companies who now find themselves under pressure to meet quarterly estimates. But Doug Abernathy says what big radio needs most is patience. Consolidation has not delivered on some promises, but he believes it's still early.

DOUG ABERNATHY: You gotta take a look at this model. I mean since 1996 to 2002 I mean we're talking, you know, 6 years; radio's been selling advertising for 82 years, so-- you know for, for almost 70 years we were just beating the living daylights out of each other [LAUGHS] as radio stations because we weren't big enough to tackle other mediums. The true opportunity is now to go after other mediums where we are bigger than they are.

TODD SPENCER: Abernathy might just get his wish. On the opening day of the NAB convention the Federal Communications Commission announced in Washington that it would be looking into the idea of further radio deregulation. In the announcement, FCC Chairman Michael Powell called the ownership limits that still remain "anachronistic." For the corporate officers and Wall Street analysts attending the NAB convention, it was music to the ears. [MUSIC UP AND UNDER] For On the Media, I'm Todd Spencer. [MUSIC]

BROOKE GLADSTONE:Coming up, incorrigible American local news, desperate Argentine reality TV, and new voices from an old war. This is On the Media from NPR.