Take Over

6/21/1996

It wasn’t long ago that  I wrote an Editorial about the changing face of radio in today’s climate of deregulation and  corporate take-overs.  Whether or not we agree with the political and legal ramifications that these relatively “new” policies cause, the plain fact is that the reality can and probably will directly or indirectly affect you.  And, unfortunately, there is little you can do about it.  You will, however, have to face the consequences.

Welcome to the unfair world of radio in the ‘90s. 

How did all of this happen?  How did the landscape change so drastically and so quickly?

There was a time, in the not so distant past, when the Federal Communications Commission ruled the radio and television industries with an iron fist.  Radio stations weren’t really owned by any person or corporation.  Entities were granted licenses by the FCC to operate.  These licenses were for three years or less in some cases.

If you “owned” a radio station, not only were you under obligation to the FCC for the license to operate, but you also had to follow stringent guidelines set forth by this agency that virtually dictated your operations.  The FCC had specific requirements on almost every area of your operation, from how much news was broadcast, how many public service announcements were required, how much “special” programming would be granted airtime…even to the particular format you chose to broadcast.

Every three years, the licensee had to prove to the FCC that for the past three years, the station had been in total compliance with the requirements set forth at the beginning of the licensing term.  This burden of proof was so great that many companies hired people to do nothing except ensure that the stations in their group were in compliance with FCC requirements.

General Managers, Sales Managers, Public Affairs Directors and Program Directors were required (as executives of the station) to sit through meetings and sift through questionnaires about the station’s requirements and promises.  It was extremely important because every three years, any person or corporation could file against your license.

That meant that not only did you have to prove to the FCC that you were in compliance with the requirements of the license, but that you promised to do even more news and public affairs broadcasting in the future to stave off those who would file against your license.

The FCC was quite particular about who could own and operate a radio station.  Potential ownership groups were scrutinized and it was at the FCC’s sole determination as to whether qualification was merited.  The FCC took into consideration many factors, including broadcasting experience, ability and the monetary backing.  Prospective ownership groups had to prove the ability to operate a station at a loss before ownership was even considered.  Further, once a station was purchased, a group had to own the property at least three years before it could be sold.

Can you imagine?  Three years of required ownership?

Deregulation has opened the floodgates.  Ownership requirements have gone right out the window.  You basically have to prove you’re alive, although some recent acquisitions have seemed to have circumvented that requirement.

Radio stations are now bought and sold pending FCC approval and that is more of a formality than anything really official.  Wait three years? Some companies haven’t waited three hours.  What about that limit on the total number of stations any one entity can own?  That border keeps moving more than a line drawn in the sand in the middle of the Desert Storm operation.

So, what does this hold for all of us?  Will deregulation mean better things for all or is it the first warning of the coming of the Anti-Christ?

Most feel that the operation will eventually be a success, but many will die in the process.

The short-term fallout is bleak. We’re in a virtual nuclear ground zero zone and may remain there for a while.  Radio stations are being bought and sold by companies who have no interest in operating the stations for any length of time.  It’s all about profitability, cash flow and interest.

Programming integrity?

For many companies, it’s irrelevant.

The venture capitalists who purchase radio stations are interested in cutting costs and increasing sales to inflate the overall value to another venture capitalist.

So, how can this current climate possibly benefit those who work in programming and consider their efforts a labor of love?  It ain’t gonna be easy, that’s for sure.  The short-term forecast is gloomy at best and, too often, the light you believe you see at the end of the tunnel is, instead, an oncoming train.

Those PDs who are chosen by the various groups to head their efforts will benefit greatly.  The larger majority of those who are victims of “downsizing” are in serious jeopardy.  The plain truth is that in the coming months, there will be fewer programming jobs.

However, the overall effect of an open market is to reward those with long-term planning and broadcasting expertise.  The true broadcasting entities will grow and profit in the long run.  The companies funded and operated by venture capitalists who see broadcasting properties only as quick turn-arounds are in for a series of surprises.

It’s no secret that many radio stations are being purchased for prices that make the possibility of actually turning a profit after paying the interest on the loans a virtual impossibility.  The debt service these “broadcasting” companies are taking on will turn out to be insurmountable in the future.  Then the true broadcasters, who have purchased wisely and programmed accurately, will once again be in the cat-bird seat.

But, until that time, programming will be squeezed to add more spots to generate more cash.  The result is, of course, lower ratings which means a smaller cash flow.

The reality will be a shock to many and the price of radio stations drop as quickly as they rose.  In time, you and I will be able to pick up a station in the bargain basement or on QVC.