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Local Focus
Thursday, June 5, 2014 Volume 3   |   Issue 110
Who will pay the piper?
Money NoteKiller fight brewing over music licensing fees - in Congress, the DOJ and beyond.

You might even (pun alert) call it “opening Pandora’s Box.” in terms of the trouble this will unleash. We’re finally going to have an all-out debate about who pays what for music in America. The forces that include the music-biz folks (no big fans of Pandora) are finally sparking hearings in the House (starting next Wednesday) and a formal review by the Department of Justice (announced yesterday). GigaOm’s Jeff John Roberts says the DOJ review of anti-trust rules “sounds reasonable enough, but make no mistake: the process is less about modernizing music rules than it is about helping industry incumbents bash Internet radio services like Pandora.” The decades-old box being opened is the set of consent decrees that keep the not-for-profit performing rights organizations ASCAP and BMI perpetually in what’s called “rate court.” Among other things, they’re required to license anybody who asks to use their stuff. You’ve been reading here that music publishers Universal and Sony/ATV tried to pull their digital catalog rights out of ASCAP and BMI – and got smacked down. SiriusXM is in this, too, having opposed the publishers’ attempts to force separate negotiations (it was one of Mel Karmazin’s last battles there). That’s what the big guys like Universal want, to potentially squeeze higher rates out of various users.

Will the music publishers bolt from ASCAP and BMI?

The New York Times says they’ve “begun to openly discuss” that option – which “would would weaken the performing rights groups and further complicate the licensing process.” Heaven knows, it doesn’t need more complications. In one sense, this flows from the implosion of the record industry’s business model. Napster happened 15 years ago, if you memory goes back that far, and it was the beginning of the music biz ineptly playing defense against the Internet. The industry has shriveled since then and the number of prominent artists feuding with Pandora, Spotify and the rest continues to rise. But streaming is an inescapable reality –

Digital Music Streaming on the rise“Music streaming explodes” through 2018.“Music streaming explodes” through 2018.

A new infographic on “The future of the music industry” from PricewaterhouseCoopers shows you all you need to know about the panic in the music industry – a 14.5% CGAR (compound annual growth rate) over the next five years for streaming, versus a measly 0.1% rate for digital downloads. PwC says “by 2018, streaming will account for 37% of total digital recorded music revenues, up from 23%” last year. Kurt Hanson’s RAIN Newsletter unearths the study from PwC’s “Global Entertainment and Media Outlook” and headlines its story “streaming and concerts will fuel music business for five years.” And indeed, concert ticket sales are estimated to grow at 3.7% a year, while live music sponsorship should grow at a nearly 3% clip. And to further add to the picture, PwC says “digital recorded music revenue blew past physical record revenue in 2012 and continues to climb.” (Study the PwC infographic here. Bottom line – Americans are increasingly comfortable with renting or borrowing their music, not actually owning it. What’s left of the music business has to find a workable model in there somewhere – and going after Pandora and its ilk looks like a good short-term strategy. Though Pandora has its own issues, struggling to grow advertising enough to get its head above water on content costs.

Point To Point
Pandora stock rallied after the early flak on music fees, and its own monthly numbers.

The stock fell $1 a share at yesterday’s market open, as Wall Street worried about the omnibus review of music licensing rules. But the “P” stock began recovering pretty quickly and spurted again toward the close, for an eventual loss of just 9 cents, closing at $24.52. That’s a drop of only about one-third of one percent, on slightly heavier-than-usual volume. Another thing for investors to kick around was the meaning of Pandora’s latest monthly metrics for listener hours, active listeners and its internally-generated “share of total U.S. radio listening.” Here’s the two-year story for each category – In May 2012, listener hours were reported as 1.1 billion. That rose to 1.35 billion a year ago, 1.7 billion in April of this year, and 1.73 billion now. It’s been a while since Pandora defined “active listeners,” but it once said they were registered users who’d been active in the past month. Two years ago, that number was 53.3 million and last year it had risen to 70.8 million. In April of this year it stood at 76 million – and now it’s at 77 million. As for “share of total U.S. radio listening, Pandora claimed a 5.8% share in May 2012, 7.29% in May 2013, 9.28% in April of this year, and now 9.13% - down slightly. This monthly comparison game is ending, because Pandora is pulling to back releasing numbers on a quarterly basis. We won’t see anything new for three months – but no doubt Pandora will stay active in talking with Wall Street, under CEO Brian McAndrews and CFO Mike Herring.

TwitterTwitter has pondered making bids for Pandora, Spotify and SoundCloud.

True, Twitter shut down its own “Twitter Music” service in March – but the Financial Times says the company’s still interested in the space. Pursuing any of those companies in the headline would involve a massive commitment of money, but Twitter’s got it. Adding them would also bring more sex appeal to Twitter – and you can imagine the “synergy” word being thrown around with abandon, in some future press conference announcing a deal. But there’s no indication that Pandora’s for sale (yet), and Spotify’s just entering many more countries in what founder Daniel Ek hopes will be a new growth phase. The Financial Times says Twitter COO Ali Rowghani never got to the stage of actual negotiations – but with interest rates still relatively low, M&A continues to look attractive. That’s the same business environment that Tuesday’s SNL Kagan panelists were talking about. Low interest rates really help dealmaking. Though radio stations and (until the FCC challenges to JSAs get worked out) TV stations are going to be slower-growth plays than Pandora.

The Reynolds Group
Appeal over television JSAs and radio/TV cross-ownership will be heard in a D.C. court

That’s good news for the NAB, and not so welcome news for Philly-based Prometheus Radio Project, which might ask the D.C Circuit Court of Appeals to forward the case to Philadelphia. The Third Circuit has been markedly more friendly to public interest groups than the D.C. Court, which is accustomed to riding herd over the FCC. The D.C. court may just decide to keep this one, and move quickly on it. Again, that would be good for the NAB and the TV broadcasters objecting to FCC Chairman Wheeler’s tough love on the ownership rules for television. A lot of Republicans in Congress would like the D.C. Circuit to curb Wheeler, too. (So would the two Republican members of the Commission itself.) The NAB’s filing covers cross-ownership for newspaper and broadcast properties. At the NAB Show in Las Vegas, several attorneys and dealmakers said they have newspaper clients who’d be interested in buying local radio stations – something they’re prohibited from doing now.

Radio Mercury Awards 2014$50,000 “Best in Show” Radio Mercury Award goes to Old Spice agency Wieden+Kennedy.

Chief Judge Matt Eastwood (his day job is worldwide chief creative officer at JWT) says “MomSong for Old Spice was the clear choice, and the most engaging spot we heard.” The picture here shows Eastwood, Justine Armour of W+K and RAB/Radio Creative Fund exec Erica Farber, and Farber says the winning entries in various categories “are true testaments to radio’s ability to engage consumers, build brands, and inspire the next generation of creative minds.” This year’s ceremony was held at Manhattan’s hip Le Poisson Rouge club, and were emceed by Eric & Kathy of Hubbard Radio’s WTMX Chicago. So Wieden+Kennedy scored the $50,000 top prize, and Marketer of the Year was...GEICO. Hubbard’s Bruce Reese presented that award to GEICO’s broadcast marketing manager, Amy Hooks. The $6,000 prize for Radio Station Produced spot went to “Buy Doors Direct” from the Clear Channel Creative Services Group. The $1,500 Student award was won by The Portfolio Center for “The Humane Society.” See more pictures and check all the Radio Mercury winners here.

WGN (720) explored offering the Chicago Cubs a piece of the station, but finally said “Bye- Bye.”

Nearly 90 years of partnership between these two Chicago institutions is nice, but as the saying goes, you can’t eat prestige. And under the new Cubs ownership, Tribune-owned talker WGN has been living with a very unfavorable contract that could be costing it as much as $6 million. That’s a sour change from the days when Tribune Company owned the team, and both WGN radio and sister WGN-TV fattened up on sweetheart deals. WGN manager Jimmy de Castro explains it for Windy City media maven Robert Feder - “The economic thing just didn’t make sense for us…So it’s really not us saying we don’t want them any more. It’s the Cubs saying that the economics they need are much greater than what we think they’re worth, or what we’ll pay.” de Castro says “We were prepared to lose a lot of money, as we have over time, to stick with them as they build.” Jimmy’s always been highly entrepreneurial, and he says they cycled through many scenarios with the Cubs – revenue sharing deals with guarantees, and even offering the Cubs partial ownership of the radio station. But ultimately, de Castro and Tribune said “Pass.” Official announcements are due today.

CubsCBS Radio signs the Cubs for all-news WBBM/780 - but not its FM simulcast?

That’s right – the newswatch reportedly won’t stop for Chicago, if listeners are tuned to WCFS at 105.9, even during a Cubs rally in the bottom of the ninth at Wrigley Field. That’s different treatment than the NFL Bears are getting from CBS, where the football games air on both signals. But as we say around here, football is like dating, and baseball, with its 162 games and unpredictable rainouts and impromptu doubleheaders, is like marriage. CBS has signed a seven-year deal with the Cubs for baseball, and there’s in important window that could change things at the end of 2015. CBS-owned all-sports “Score 670” WSCR currently has the American League baseball White Sox. But if they leave after the end of next season, CBS has the right to shift the Cubs over from WBBM to the Score. Ironically, the White Sox could well wind up at – WGN.

Kelly Music Research
Starting “a discussion about ratings compression” in PPM, and ways to help radio.

That compression – stations jammed together in the rankers - “has hurt broadcasters’ pricing and encourages a reverse auction, where the lowest CPP [cost per point] wins.” That’s Charlie Sislen at Research Director Inc., who’s pretty much devoted his recent working life to following PPM and explaining it to non-researchers. He issues what amounts to a researcher’s manifesto, hoping to begin a dialogue among broadcasters and Nielsen. Here’s the situation – “There may be a large quantitative difference between stations with the same reported rating, because ratings are rounded to one decimal place. As an example, a rating of 0.3 could be anywhere from 0.2500 to 0.3499 – that's a 40% difference. One possible solution would be to report ratings to more decimal places, therefore showing that quantitative difference." But there's this to consider – “Reporting the AQH rating to two or more decimal places might be more precise, but it does not improve the reliability of the estimate."

Charlie Sislen• Stay with Charlie Sislen – you really can understand this. Charlie sees another potential option – “Presently, GRPs [gross rating points] are calculated by multiplying the number of spots in the schedule by the station’s AQH rating. For example, 10 spots on a station with a 0.5 rating would yield 5.0 GRPs. What if, instead of using the station’s AQH rating, we calculated a station’s gross impressions (number of spots multiplied by AQH persons) and then divide by the population? Using this method, two stations with a difference of just 100 AQH persons will yield different GRPs. When you compare stations’ AQH persons instead of their rounded ratings, there will be far fewer ties.” Sislen acknowledges “the downside of changing the industry-accepted method.” But he’d like to “continue this discussion” via Twitter. The hashtag is #RatingsCompression, and you should include @ResearchDirector. Read Sislen’s full article here.

Watching the FCC –

• “A history of compliance”? Not exactly a clean record for Kentucky station owner Meade County Communications. It was assessed a $10,000 fine for not having a single quarterly issues/programs list in the public file three years ago, when an FCC inspector dropped by. Meade County admitted the violation but pleaded that #1, there was an inability to pay that steep fine and #2, that it deserved a break because of a history of compliance with the FCC rules. But the FCC dug up a $3,000 fine from back in 2004, handed out for failure to register an antenna structure. That sinks that defense, and the tax returns submitted to buttress a claim of inability to pay don’t make it with the FCC, either. Read the fine against the licensee of WMMG-AM/FM Brandenburg, Kentucky (1140/95.3) here.

• Timing is everything, says the FCC – reversing a decision it made in the Harrisonburg, Virginia market three years ago. You don’t see this often, but the agency says “we find that Stu-Comm has shown a material error” in the original grant to let Eastern Mennonite University upgrade WEMC (91.7) from Class A to Class B. The problem is that Eastern Mennonite failed to finish building before the construction permit expired, then “re-filed” a minor change application at 3am the morning of the expiration. You’d think that would be the logical thing to do, right? Stu-Comm argued that the Commission usually doesn’t let you re-file until the day after a CP expires. Its WNRN Charlottesville (91.9) seized the fleeting opportunity and filed to upgrade, the very next day. Initially, the FCC granted the re-filed app by WEMC – but Stu-Comm’s argument finally pays off and Eastern Mennonite’s grant is rescinded and returned to “pending status.” Read the decision here.

Tom Kent Radio Network
Doing Business

Sprint and T-Mobile, the #3 and #4 wireless carriers, are discussing a $32 billion merger. The goal would be forming a new company that could compete on a more even footing with Verizon Wireless and AT&T – not to mention Comcast, which is also in the telephone and broadband business, and has a pending $45.2 billion merger with Time Warner Cable. The Wall Street Journal, New York Times and others report talks between Japanese SoftBank-controlled Sprint and Deutsche Telecom-controlled T-Mobile. A merger would give Deutsche Telecom about 20% of the combined company, satisfying its desire to reduce its stake in the U.S. market. Sprint has been the wireless company that’s most interested in playing along with radio via the FM chip – and that attitude could spread to T-Mobile, which Sprint could maintain as a separate brand, as it does with Boost and Virgin Mobile.

Trouble with many Clear Channel websites yesterday – several NOW readers reported that all the sites they tried around midday East coast time were unavailable. One reader says “I haven’t been able to bring up any CC station websites for over an hour.” Another reported that “Z100 New York, KIIS Los Angeles and bunch more were down, when I tried them.” An early-afternoon check found Z100 and Philly’s WIOQ still down, but KIIS, Philly’s WDAS-FM and “Radio 104.5” WRFF back online.

Clear Channel’s parent, CC Media Holdings, stays on the newly re-ranked Fortune 500 list, dropping slightly in position from #407 to #419. More from the San Antonio Journal Business here.

BBC RadioNew cuts at the UK’s BBC Radio could include 75 to 85 jobs – and that’s just a smaller part of the estimated 475 to 500 jobs to be axed at BBC News, says Neil Midgley at Forbes. All told, that would represent about a 6% cut in staffing, of the current 8,000 or so. The Beeb is intent in cutting costs, but Midgley says “the announcement could easily herald another autumn of industrial unrest at the BBC, whose staff are highly unionized.” The priorities are all wrong, says Michelle Stanistreet of the National Union of Journalists – “the place to save money is from the fleshy layers of executive pay and excess at the top of the BBC.” She suggests capping senior salaries at 150,000 pounds (about $250,000 U.S.), which would save an estimated $30,350,000.

On The Block

Sister buys out brother, in the South Sound area of Seattle-Tacoma. The station is talk KLAY at 1180, licensed to Lakewood. It’s licensed to Clay Huntington Legacy LLC, which was named for the original owner. After his death, it passed to his son Ronald Huntington and daughter Cheryl Franco in 2011. Now Cheryl is buying a 1% interest from her brother, giving her 51%. And Cheryl’s husband Michael Franco is acquiring the other 49% of Ronald’s interest. The price is $225,000, in the form of a note held by Ronald. KLAY uses an interesting mixture of shows, including the local Ty Ray in mornings, followed by Dr. Joy Browne, Dennis Miller and progressive talker Thom Hartmann. It also brokers out some of its time. The station website is here. KLAY runs 5,000 watts daytime/1,000 watts nighttime (directional), and Clay put it on the air in 1991. Huntington started in radio in 1941 and eventually owned four stations. As a performer, he was a familiar sportscaster on both radio and TV in Seattle, and KLAY says he was “Tacoma’s all-purpose ambassador and sports treasure.”

KWAVPrice for Monterey’s KWAV (96.9) is $2,150,000 cash, based on a purchase agreement just filed for the deal announced last week. Seller is East coast-based Buckley Broadcasting and buyer Mapleton is adding the adult contemporary station to its already bulging cluster that includes CHR “101.7 the Beach” KCDU Carmel. The document indicates that Mapleton will divest its soft AC “B103.9” KBOQ Seaside, and that’s already happening – Saul Levine’s buying it, so Mapleton has the cap-room to add KWAV. Broker is Dick Foreman for seller Buckley.

Cigar Dave

Sure enough, a consent decree and $185,000 “voluntary contribution” allow a year-old deal in Rockford and Eau Claire to proceed to closing. It was just after the 2013 Spring NAB Show when Maverick announced it was selling its clusters in those two markets to Mid-West Family for $15.5 million. There’s an LMA – but until now, no deal closing. That’s presumably because of the investigation of a complaint about the lack of sponsor ID on the “Stateline Showcase” talk show on Rockford’s talk WNTA (1330) and its translator at 100.5. That was finally settled with a nasty-looking $185,000 payment and a consent decree whereby Mid-West agrees to continue the three-year compliance program after it closes on the stations – and now it has. Brokers – CEA Capital Advisors for seller Maverick, and Greg Guy of Patrick Communications for buyer Mid-West Family.

Official closing in Ft. Wayne on the $2.9 million transaction between seller Summit City Radio and buyer Adams Radio Group. You’ve been reading about some format changes as Adams took over last weekend, and those were possible because it now officially owns stations like WGL (1250). Broker – Media Venture Partners. Carlisle, Pennsylvania’s WHYL (960) should finally get back on the air, once Trustworthy Radio trustee Markian Slobodian closes the $30,000 cash sale of the license to local owner WHYL Inc. That company’s being formed by longtime radio operators Harold Zwidler, his son Eric and Terri Warshawsky to acquire WHYL out of Chapter 7 bankruptcy (in other words, liquidation). The September 23 NOW had the story about a troubled station that was dark, and owed creditors like the IRS and its own landlord. Familiar Carlisle broadcaster Ben Barber had been part of keeping it alive last year, and now he sees his onetime employer (WIOO owner Harold Zwidler) take over at WHYL. The station’s licensed for 5,000 watts daytime and 22 watts at night. The Zwidlers and Terri Warshawsky own classic country-and-NASCAR WIOO (1000 AM) and country “Radio 102.3” WCAT-FM, both in Carlisle. Eric has an interest in down-the-road classic country WEEO Shippensburg (1480).

Not everybody plays golf all the time around Hilton Head Island, South Carolina – some work in the radio business there. Tex Meyer is the manager of variety hits “SC 103” WVSC Parris Island, and he’s also been managing Ridgeland-licensed oldies “104.9 the Surf” WLHH. The company he’s working for has just closed on “Surf” in a $682,500 purchase from C.J. Jones’ Low Country Radio. New owner of WLHH is the Pearce family’s Apex Broadcasting.

Tom Kent

Mark HalversonMark Halverson will be taking over management of the Journal Broadcast Group radio cluster in Omaha from interim exec Mark Todd, as of June 16. Halverson’s managed in Tallahassee, Louisville, Des Moines, Savannah, and most recently Lincoln, Nebraska. That was for the former owner there, Triad. Journal says “he's earned his NAB Executive Development certification. ” Iowa State University graduate Halverson has been a president of both the Iowa Broadcasters Association and its counterpart in Nebraska and he’ll report to Journal Executive VP/Radio Steve Wexler.

Wade Linder has programmed in Minneapolis for Cumulus at rocker “93X” KXXR – and now he gets the chance to tackle Chicago. Cumulus has a long-term LMA-to-buy with Merlin’s classic rock “Loop” WLUP (97.9) and alt-rock WKQX (101.1), and that will be Wade’s new challenge. He’ll be ops manager of both stations and the direct PD at the Loop. P.J. Kling remains the PD for WKQX. Wade's predecessor at the Loop and WKQX was Jim Richards – now doing duty for the company in San Francisco, at adult alternative KFOG/KFFG (104.5/97.7) and classic rock “107.7 The Bone” KSAN.

Garry “G.” Cobb wins the Republican nomination for New Jersey’s First District Congressional seat, says the Philadelphia Inquirer. Cobb parlayed his prominence playing for the NFL Eagles to a career in sports-talk radio at CBS Radio’s WIP-AM/FM (610/94.1) – which no doubt helped raise his profile among potential voters. In the November general election, he’ll face off against Donald Norcross, the brother of powerful New Jersey political figure George Norcross.

Danny Turner was very, very early into the satellite radio space, working with WorldSpace in the late 1990s, also as he was beginning to consult for the predecessor of XM Satellite Radio. He joined XM fulltime in 2000 and was Senior VP of Programming Operations until Mel Karmazin put XM together with Sirius in 2008 (a time when many folks were shaken off the corporate ladder). Danny started his own Turner Creative Media consultancy and was a senior VP at Toronto-based Mood Media, which creates “consumer experiences” for retail store customers that include “audio, visual, interactive, scent, voice and advertising solutions.” He left Mood Media two years ago – but is now back as Global Senior VP of Programming and Production. Turner continues to consult SiriusXM.

RTK Media, Inc.
You Can't Make This Up

KISW Stripper InvasionThe day Van Halen took over Seattle's KISW - Beau Phillips has written a first-person you-are-there history of rock & roll radio titled "I Killed Pink Floyd's Pig," referring to their giant inflatable porker. Here's one of his yarns - "In 1981, I read that Van Halen was coming to our city," but band manager Noel Monk said they were too busy to drop by the station, on its tenth anniversary. On the day of the group’s first Seattle show, "Our receptionist frantically announced over the speaker, 'Everybody look out the window!' A pack of motorcycle cops roared to a stop in front of our building, lights spinning and sirens blaring. The police were followed by one...two...three...four long, black limousines. The cops hopped off their bikes and stopped traffic as the limos arrived in succession and parked in front of our studios. The driver opened the rear door of the first limo and out popped David Lee Roth, flanked by two sleazy women. In the second car was Eddie Van Halen, accompanied by a third babe who carried a giant birthday cake. Eddie’s brother Alex stepped out of the third limo, holding a case of champagne. Finally, bassist Michael Anthony emerged, armed with a huge box of party whistles, poppers and horns. Van Halen and their ragtag entourage headed straight for the front door like they owned the place. And on this day, they did." They staged a two-hour takeover, beginning when Roth "grabbed the mic from afternoon DJ Gary Crow, and pushed him aside. The other guys in the band presented us with the huge birthday cake. Soon everyone was guzzling straight from their own champagne bottle." More about Beau’s book here. Got your own rock & roll radio story? Share it with the industry and email "You Can't Make This up" - Tom@RTK-Media.com.

“I appreciate that you really try to be fair” to the industry, said a group head (in private conversation) at Tuesday’s SNL Kagan TV & Radio Finance Summit. That’s the idea. And to present the facts with some context and perhaps even to be a wee bit entertaining, in these days of “flat”-ness. Want to reach a highly-engaged audience that cares about radio, as you do? Talk to our Kristy Scott about your marketing situation. She’s at Kristy@RTK-media.com or phone 818-591-6815. See you back first thing tomorrow - Tom

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