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Media Monitors
Thursday, November 29, 2012 Volume 1   |   Issue 17
 
When music streaming is a trickle of money
Media Monitors
Patrick Communications
Money Squeeze“In our best years, we do no better than break even in our music webcasting.”
Hubbard CEO Bruce Reese explains how AM/FM operators view something that works great from the consumer end – but which is still developing on the “push” end. At yesterday’s House hearing, Reese says “there is one primary reason for the low adoption rate of Internet streaming by broadcasters – unaffordable royalty rates.” The ad revenue “simply does not cover the streaming costs…and no matter how popular your Internet service becomes, the cost curve never bends in a favorable direction.” So why does Hubbard do it? “We believe our listeners expect us to be there.” Privately-held Hubbard can absorb the costs. But that’s “either a luxury that many of my industry peers do not have, or a risk they are unwilling to take.” (Hello, Jerry Lee at Philadelphia’s B101/WBEB.) Reese goes a step further – the setup keeps local station content “outside the reach of Internet listeners.”

One thing’s clear – Congress is tired of refereeing fights between radio and record labels.
House IP subcommittee members repeatedly showed frustration during the 2-1/2 hour long hearing on the “Internet Radio Fairness Act” introduced by Utah Republican Jason Chaffetz (“CHAY-fetz”). At the opening, there was even exasperation from mild-mannered chairman Bob Goodlatte. Then later from Jim Sensenbrenner, who said “this is the fifth time back at Congress” for various spats over music royalties, in the last 15 years. Everybody recognizes that the issues are complicated, between a record business that’s hurting, a 90-year-old AM/FM broadcasting industry that escaped a performance royalty in the 1930s, and relative upstarts like SiriusXM and Pandora. (Bruce Reese must inwardly cringe when hearing that the U.S. is the only developed country without a performance royalty, putting it in the company of North Korea and Iran.) By the way – lots of admiring Pandora fans on the House committee, with Bob Goodlatte saying he’s “one of the 100 million Americans” who use it, and Florida’s Ted Deutsch saying he probably listens more than anybody else in Congress. But that doesn’t mean they’re not aware of the conflicts -

 
Jacobs Media
 

John Conyers“The huge elephant in the room” is the performance royalty that AM/FM doesn’t pay.
For the record labels, radio’s $14 billion annual revenue is something like the way the ravenous Wile E. Coyote eyes the Roadrunner. The “huge elephant” line comes from SoundExchange President Michael Huppe (“HUP-pee”). He says “you cannot have a meaningful discussion” about music royalties without talking about a performance royalty. A number of folks on the House Intellectual Property subcommittee would agree with ranking member Mel Watt – the single biggest problem in the whole area is the lack of a performance royalty. House lion John Conyers says when conservative tax Grinch Grover Norquist is lined up with the NAACP and the Screen Actors Guild, the idea’s not going away. (Even if its leading proponent, California Democrat Howard Berman, won’t be returning to Congress in January.) Speaking for musicians, the eminent Jimmy Jam says “Congress should close the loophole…before there can be any discussion” about rate fairness. One point that didn’t get raised yesterday – the music fees that radio pays ASCAP, BMI and SESAC. That wouldn’t have mattered. Those dollars go to artists only if they helped write a song and retained their publishing.

Bruce ReeseRadio plays defense on a performance royalty.
“We are more than someone who pushes a button randomly, and music comes out,” says Hubbard Radio’s Bruce Reese. Bruce does believe “we need a solution where everybody thrives.” Rep. Ted Deutsch quizzes him about the analogy to talk radio – owners pay talk hosts, sometimes a lot of money. So why not pay the performers of the music that so many stations depend upon? Reese offers the familiar NAB defense, that radio plays an “important role in promoting the music industry.” Answering House member Darrell Issa, Reese says “free market solutions are starting to appear,” referring to events like Clear Channel cutting direct deals with labels like Big Machine. (Though Big Machine’s Scott Borchetta still desires a performance royalty as a global solution). Yesterday’s House hearing was only “Music Licensing Part One” – more to come, well into 2013 and the next Congress. Finally, Bruce Reese delivers the official NAB position – it opposes an “industry-wide government mandate” and is encouraged by the new crop of private deals. Though House subcommittee member John Conyers questions whether every broadcaster will need to reach out to Beyonce and all the other artists, individually.

Internet radio says it’s stuck with a lousy deal and is “barely hanging on.”
Internet Radio Fairness Act sponsor Jason Chaffetz cites all the companies who’ve tried to make Internet radio work financially, and then dropped out. He claims his bill “levels the field.” Pandora CEO Joe Kennedy testifies that the market-based “willing buyer/willing seller” rule is crippling its growth prospects. It’s a double whammy, he says – unfair rates, and then an “unfair process,” that keeps them from being reviewed. Kennedy says “Pandora will account for 7% of U.S. radio listening [that’s the Pandora claim], yet we pay over a quarter of a billion dollars” to SoundExchange – more than SiriusXM, which has eight times its revenue. Kennedy says in truth, “there is no market” for radio rates, and there’s “evidence the recording industry has tried to keep any such market from developing.” For one thing, there’s the SiriusXM suit against SoundExchange, for alleged interference with the satcaster’s attempt to negotiate directly with music companies. Also on the side of IRFA (pronounced “Erfa”) is venture capitalist David Pakman of Venrock. He’d love to invest in Internet radio, but says “hundreds of millions of dollars of venture capital have been lost.” He blames the record industry for making online radio companies “noninvestable businesses.”

Radiate Media
PandoraCould Pandora fix its own problem?
Navigant Economics managing director Dr. Jeffrey Eisenach says Pandora has the power in its hands – sell more advertising. Another skeptic is Michael Huppe at SoundExchange, who says “Pandora made a conscious decision on growing their audience, their brand, their hype,” and cites the lifting of the previous 40-hour-per month limit for free usage. Huppe contends that “Internet radio is flourishing,” based on the number of companies in the space. Five years ago, there were 855, and today there are 2,000. He gets support from economist Eisenach, who observes that Goldman Sachs and others just invested another $50 million into Spotify. Huppe says “the music community stands in opposition to the so-called Internet Radio Fairness Act” – they don’t want to see Pandora and similar services paying lower rates. And what are those rates? About a tenth of a penny to stream a single song. House lion John Conyers, the Michigan Democrat, grouses that the Internet Radio Fairness Act could be called “the paycheck reduction act,” because it would lower royalties paid to artists by 85%. He says over 125 House members are opposed to the Fairness Act. More hearing coverage from Kurt Hanson’s RAIN newsletter here.

FCC Chairman Genachowski’s an avid poker player – but cautious.
Too cautious? The Washington Post’s Cecelia Kang says that “in a town full of aggressive lobbyists paid to bend the FCC’s positions in their favor…Julius Genachowski has sometimes been seen as a regulatory Hamlet, deliberating over details as powerful companies push impatiently for action.” The Chairman and former Harvard Law Review colleague of President Obama says “One thing I learned from my predecessors is that people don’t remember the day-to-day battles, but they remember you got it done.” Read Kang’s profile of cautious poker player Julius Genachowski here.

If the FCC let radio stations and newspapers buy each other…what might happen?
One way to answer the question is to look at advertising revenue, and The Media Audit took up that challenge following the NOW story about FCC Chairman Genachowski and the cross-ownership rule. Here’s the bottom line from Media Audit’s Phillips Beswick –“media fragmentation has now resulted in erosion of traditional media to the point that a radio station cluster combined with the local newspaper approaches the market penetration of an average Top 4 (ABC, CBS, NBC, Fox) TV station.” In the relative hierarchy of local media, “TV stations remain relatively strong in their penetration of a market because consumers tend to watch programs, and not TV stations. Thus consumers watch several stations, providing large reach penetration numbers for television.”

Combining radio and newspapers (hypothetically) would dramatically boost reach.
In Madison, “the newspaper-radio combo would exceed the average Top 4 TV station” in market reach, says The Media Audit’s Phillip Beswick. In Norfolk and Minneapolis, the newspaper-radio combo would do about 85% the reach of a Top 4 TV outlet. Looking just at radio, the major clusters now reach an average 22% of the market in Norfolk, about 27% in Minneapolis, and 42% in Madison. In Norfolk specifically, Media Audit finds the Entercom cluster doing about 28.7%, Max Broadcast Group at 27%, Sinclair Radio at 20.1%, Saga at 16.4% and Clear Channel at 15.5%. The local Virginian-Pilot newspaper does about 40.6%. Put them together, and you'd have some heavy firepower for sales. The average Top 4 TV station there does nearly 66%. Beswick says there’s another factor that’s growing in importance – websites. Adding the online presences of a radio cluster and a newspaper would make such a combination even more attractive. So if the FCC did relax its cross-ownership rules between radio and local daily papers – there could be some compelling combinations. It’s more likely that those would happen in smaller markets, where papers are generally healthier than their big-city compatriots, and might see economies of scale in news and other content costs. Expect some action from the FCC on cross-ownership by year-end.

News and news/talk do well in the Day 2 PPMs – especially public radio news/talkers.
In Washington, DC, American University’s WAMU (8.7-8.4) is #1, followed closely by Hubbard’s WTOP (7.2-8.2). That’s over 16 shares for news/talk, just with those two stations. Cumulus must also be encouraged by the uptick at its WMAL-AM/FM, up 3.4-4.2. All these shares are age 6+ AQH, comparing Arbitron’s “book” month of October to November. Across the continent in Seattle, there’s a new #1 - the University of Washington’s KUOW-FM, run by Puget Sound Public Radio. It’s up 4.6 to 5.5, for its best-ever PPM topline share. Bonneville’s news/talk KIRO-FM saw a drop, 4.6-4.1, though Fisher’s all-news KOMO-AM/FM ticked up 3.6-3.9. Bonneville's talk "Truth" KTTH continues a seemingly-inexorable rally. It bottomed out at a 1.4 share in February and now climbs 3.7-4.2. News/talk also performed well in Boston, where CBS Radio’s WBZ is now tied for third place, up 4.6-5.3-6.1 in the last three books. (It’s tied with Greater Media’s classic hits WROR, 6.2-6.1.) And in Denver, Clear Channel’s news/talk KOA dips slightly in share, 6.2-6.0, but actually takes over first place from Clear Channel’s rhythmic “Party” KPTT, down 6.4-5.4.

Re-visiting the year-to-year trend for news/talk – most Day 2 market stations were up.
Hmmmm...Sometimes the opening-day trend doesn’t hold up as we see markets outside the top 10. Here’s a quick look at November 2011 – a non-election year – compared to this year. Washington DC’s WAMU is up substantially, 5.7 to 8.4. Boston talker WRKO is well ahead of last year, 2.3 to 3.2. Miami’s talk WIOD has its best share in 2-1/2 years, with a 2.6. Detroit’s all-news WWJ improves on last year’s 6.0 with a 6.8 – its best ever in PPM. Detroit talker WJR (4.9-5.9) does its highest PPM number since late 2008. In Phoenix, talk KFYI’s up 3.8 to 5.9, year to year – and is #1 in the market. Down in Tampa, talk WFLA improves 4.8 to 5.1. More analysis of the November PPMs, covering October 11-November 7, in tomorrow's NOW newsletter.

 
Arbitron
 

Mitch Albom RadiothonMitch Albom raises $400,000 in a 15-hour radiothon on Detroit talker WJR (760).
The afternoon host did way more than his usual shift on the Cumulus station – he toiled from 6am Tuesday morning to 9pm that night. The Detroit Free Press says when he finished, Mitch’s voice was still strong but he was “physically spent,” after securing pledges of $401,321.34. It was the first year of Mitch’s S.A.Y. Detroit Radiothon, where the acronym stands for “Super All Year.” Charities like Working Homes/Working Families, 100 Houses and Detroit Dream Scholars will share in the proceeds.

Fisher House got $3 million worth of airtime this month from Clear Channel.
About 850 Clear Channel radio stations supported the public service effort of the non-profit that helps the families of military members receiving medical treatment. Some stations ran a special 30-minute public affairs show or did other projects. The Sacramento-based Armstrong & Getty raised $255,000, to help fund construction of a new Fisher House at Travis Air Force Base near Sacramento. Clear Channel’s Director of Community Engagement Jessica King says “thanks to Fisher House, there’s no need for service members receiving medical care at VA and military hospitals to be separated from their families, during their recuperation.”

Tango Media failed to build out three FM construction permits on time, and deserved to lose them, says the FCC.
The agency rejects Tango’s petition for reconsideration of last year’s decisions in the cases of KANM, Skyline-Ganipa, New Mexico, KNOS, Albany, Texas and KKUL, Trinity, Texas. Tango offered lots of arguments, but the FCC’s not persuaded, as you can see here.

Katz 360 digital rep adds sales executives in Germany, London, Brazil and Singapore.
The Katz new-media service also names a VP for Global Advertising sales based in San Francisco (Brent Fraser) and three new VPs in New York (Jon Sandak, Ian Ross, John Yang). Katz 360 president Mort Greenberg thus brings over some associates from his former employer, Nokia. He says two of the Katz 360 sales networks just set new records for unique monthly visitors – 100 million for the Digital Display Network and 66.5 million for the Online Audio Network.

“What a classy guy Bill Dalton was…”
One NOW reader responds to yesterday’s “Transitions” story about the death of 80-year-old Bill Dalton - “Upon the sale of WWMG in Charlotte, he called the staff together. He and [wife and business partner] Sue had a formula based on years of service and salary that would distribute hundreds of thousands of dollars from the sale of the station. You could say it was a memorable day.”

 
On The Block

Kevin WagnerKevin Wagner takes a controlling interest in URBan Radio’s 11 stations, with the exit of Goldman Sachs and the 21st Century Fund. Wagner had also secured startup funding from professional athletes like former NBA stars Tim Hardaway and Michael Finley, and former NFL QB Donovan McNabb, and they remain in the ownership group. Wagner now has 50.19% of both the votes and what the FCC calls percentage of total assets. He’d previously held 33.3% of the votes and 10.19% of the assets. Hardaway increases his share to 17.35%, Finley’s at 10.63%, and McNabb’s share rises to 9.15%. Former Clear Channel-Chicago manager Marv Dyson and Kim Dyson are now at 9.43%. Two of Marv’s former associates are also in there – 16-year WGCI VP/Sales Maynard Grossman and Darryll Green. It’s a complicated rearrangement, involving exercise of warrants and preferred membership interests, and the specialized Urban Investment Group of Goldman. The 11 stations include the Florence-Muscle Shoals, Alabama cluster that features local-music flavored WLAY, Muscle Shoals (1450) and country WLAY-FM (103.5). There are also stations in markets like Starkville, Mississippi and Toledo.

Hello, Sacramento - A $45,000 purchase of an unbuilt California AM six months ago leads to a sale worth $700,000. Let’s quickly note that the north-central California facility Tom Huth is selling isn’t the same one he bought. The original construction permit that Carl Auel’s Valley Broadcasters sold to Huth allowed just 350 watts daytime and 250 watts nighttime, on 890 – the WLS, Chicago frequency. And very local to Yuba City-Marysville. Now Tom Huth’s applied to make it a much more powerful station in the daytime – 10,000 watts, with enough mojo to hit Sacramento. Nighttime power would rise a bit, to 480 watts. They’ll need separate day and night transmitter facilities to do it, but the 890 is now desirable to Howard Kalmenson at Lotus Communications. The construction permit is licensed to Olivehurst, an hour north of Sacramento. It’s also near the Beale Air Force Base. Seller Tom Huth retains two other AMs in the area (KMYC, Marysville at 1410 and KOBO Yuba City at 1450). And he’s got interests in both AMs and FMs elsewhere in California, as well as Reno. The $700,000 price to be paid by Lotus is all-cash.

Down near the U.S.-Mexican twin border towns of Nogales, a $465,000 sale closing. It’s for a future FM at 107.9. Seller is Ted Tucker’s Cochise Media Licenses, which bought the CP from Skywest Media two years ago. Now Tucker forwards the construction permit for a new Class A FM licensed to Rio Rico, Arizona to JJS Media, led by Martha Ponce. Broker – Kalil & Company.

WKTLAnother school weighs getting out of the radio business, this time in Youngstown. Though the school district of Struthers, Ohio, has some interesting options. Class B1 WKTL (90.7) is currently simulcasting adult alternative “The Summit” WAPS (91.3), which is 50 miles to the west of Youngstown. What’s still local at WKTL is the ethnic programming it runs on Saturday. The Summit wants to lease WKTL and would keep the Saturday programming. Another option, says the Youngstown Vindicator, comes from an assistant professor at Youngstown State University, who used to work at WKTL when he was a teen. He wants WKTL to become a community radio station, perhaps with the school district raising startup money. Meanwhile, the board’s considering a proposal from Patrick Communications to sell the station outright.

On the eastern shore of Lake Michigan, a non-commercial FM construction permit sells for $55,000. Buyer is the local Goodrich Radio. The future WXPZ, Clyde Township, Michigan becomes a cousin to Grand Rapids-market variety-programmed “Public Reality Radio” WPRR, Ada (1680), after this sale by Larlen Communications. (Goodrich also uses an FM translator at 95.3, W237CZ). The new WXPZ will be a Class A at 90.1

 
Worth Reading

“Who killed KPOJ,” the progressive talker in Portland, Oregon? The Willamette Week does an autopsy, quoting Oregon Senator Ron Wyden saying that “an important voice has been silenced” with Clear Channel’s decision to drop liberal talk on 620 AM. But the paper says it’s not a clear-cut case of Bain Capital axing the format, and quotes fired morning man Carl Wolfson saying “It’s tough being fired if you’re a Portland liberal…I drove home and shut the garage door, trying to kill myself. After 20 minutes, I realized I have an electric car.”

MPBNAnother pubcaster cuts the percentage of music and adds talk – this time at Maine Public Radio. The Portland Press-Herald says Maine Public Broadcasting Network President/CEO Mark Vogelzang is taking heat from music-lovers – but he says “Public radio news continues to be strong, and continues to be our most-listened-to hours…it is a national trend.” Classical and jazz programming is being trimmed back, along with Toy Leboutillier’s signature “Down Memory Lane” show. (They’re throwing him a party, tomorrow afternoon.) Even so, Mainers can hear more classical music than they’d get on similar stations elsewhere – the 9am-nooon weekday “Morning Classical” continues.

“When artists are responsible for their revenue” – Jennifer Lane writes on her Audio4Cast site about the case of songwriter Ellen Shipley, who feels shortchanged after her song’s been played three million times on Pandora. Jennifer says “the problem is, she’s mad at Pandora, when her gripe is really with SoundExchange and the record companies.”

 
Transitions

Ralph EmeryLegendary country personality Ralph Emery will be seen on the new TNN, Nashville Network, introducing re-packaged shows from the earlier TNN of the 1980s and 1990s. As much as anybody in Nashville (or country radio), Ralph Emery’s responsible for recognizing the talents of the young Reba McEntire, Alan Jackson and many more hopefuls who stopped by his show on WSM (650). In Nashville, the new TNN channel is digital 4.2 and Comcast 230, and it's available nationally to digital TV multicasts and cable companies. Emery show now appears 4pm to 5:30pm Central (Nashville) time.

Anne Doyle “has worn many hats in her 5+ years” with Annapolis-based Research Director Inc., says managing partner Marc Greenspan. She’s been engaged on “a multi-year overhaul of the company’s PPM systems and procedures” and is now promoted to Production Manager.

 
You Can't Make This Up

Opposition Research, Part II - Reading Stan Main's "Can't Make This Up" story about having his researchers go through the trash of a competing station, Steve Apel had a flashback. Steve says "When I was in charge of research at WPEN/WMGK, Philadelphia in the early 80s, we were in the same building as WIFI and WYSP, and it was also the headquarters for group owner Entercom. As a result, part of my job responsibilities were to bring the garbage we generated back to my home in New Jersey. Maybe we were being overly cautious - but WMGK was number one then." Got your own true story? Email Tom@RTK-Media.com and share it with the industry.

“It’s so nice having you back in my morning routine,” says Wayne Campbell of Film House in Nashville. Wayne says “Once again, I feel like I’m getting all the relevant industry news” in one place. That’s the general idea. Thanks for telling a friend or colleague about this month-old NOW newsletter. If you’re reading it as a pass-along, get your own subscription, at no charge, here.

Take 2 - Arbitron’s “ERI” is “Event Retention Index,” not “Recognition Index.” That’s correcting the name behind the acronym in yesterday’s story about baseball flagship stations – and how well they’re indexing compared to the listening of the market’s top-20 stations. See you back tomorrow morning - Tom

 
 
 
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