Network radio said to be at a pivot point

Story by Inside Radio

The Radio Advertising Bureau says network business is down 4% so far this year, while Kantar Media sees a decline that’s four-times as big. One thing is certain: It’s been a challenging period for the sector. From deal-marking to downsizing, network executives say a new era is beginning in their business.

“It hasn’t been off the cliff but it’s been a difficult environment,” says Reach Media CEO David Kantor. Several execs point to talk radio, which has been clobbered by expansive no-buy edicts from advertisers seeking to distance themselves from controversial programing in the wake of the Rush Limbaugh dust-up. Talk Radio Network, which has drastically scaled back operations, has been particularly hard hit. Others attribute the decline to networks that slashed rates to maintain market share when demand was down.

But some see brighter days ahead. “I think the pendulum will slowly swing back,” KMG president Gary Krantz says. “There is an opportunity for either the big networks or the independents to come up with new talent and new ideas that can attract listeners and deliver results for advertisers.”

Sun Broadcast Group CEO Jason Bailey says it’s time for talk radio to change its tune. “Entertaining lifestyle talk that’s positive, helpful and not hurtful may be a good direction to head in,” he says. He’d also like to see less in-fighting among networks. “We all need to have a Kumbaya moment and start defending talk radio instead of beating each other up and letting other people redefine us,” he says.

As the network radio business continues to consolidate, a talent shakeout is likely to send some syndicated shows by the wayside — or into self-syndication or to smaller independent networks. Duplication abounds in the pending Cumulus Media purchase of Westwood One with a combined four news networks and just as many overnight country shows. Layoffs and the merging of facilities are all but certain in a streamlining expected to produce $40 million in cost savings. “It will weed out the me-too programming and services and only the stronger ones will survive,” Krantz predicts.

But the elimination of marginal shows with weak revenue or ratings will lead to a healthier industry with less inventory and more demand, network execs say. “This is the beginning of a healthy process,” Kantor predicts. “The shows will get better audiences, pricing and advertisers. The companies that survive this round will be the ones that have the resources going forward.”

That could ultimately lead to more resources for investing in new shows. The network business will soon be dominated by two superpowers, each with a significant distribution platform of its own. Executives point to Dial Global’s lack of in-house distribution for its financial woes and say it can sometimes be difficult for indie networks to get their shows cleared in the major markets. “Westwood One distributes a lot of independent programming,” says Podcast One founder Norm Pattiz who founded the original Westwood One in 1976. “As it becomes part of Cumulus, it will be interesting to see how much of its shows are picked up.”

There’s arguably never been greater acceptance of network programming in the modern era radio industry. Stations have moved from devoting just one daypart to multiple dayparts to syndicated programming. Network leaders say more is on the way. Urban radio has become more reliant on syndication while sports and country stations have more network choices than ever. As network radio audiences grow, the hope among consolidators is that a healthier, stronger network radio industry will attract a new crop of advertisers, beyond those that have traditionally used the medium. “They will have more distribution, an even stronger marketing staff and a very strong offering,” OMD U.S. director of national radio investment Natalie Swed Stone says of Cumulus Media’s purchase of Westwood One. “They’ll do better in this tough, tough marketplace.”

The stronger the networks become, the more competitive they will be to cable networks, Kantor says, especially as they focus more on dominating specific formats. Kantor believes specialization will allow sports networks to compete with ESPN, urban networks to take on BET and news networks to go toe-to-toe with CNN.

But not everyone is convinced. “Consolidators generally consolidate to cut costs but that that doesn’t mean network radio is going to grow,” says Pattiz. “It may mean that it becomes more profitable with less revenue. Radio needs to embrace the areas where it can grow rather than grow by consolidating.” The Westwood One founder believes his on-demand audio company Podcast One “wouldn’t exist” if network radio had wholeheartedly embraced digital technology and online delivery. “On demand audio is the direction that consumers are heading in,” he says.