Does Radio Need More Deregulation (Part 1)?

Story by Radio Ink

All week long we’ll be interviewing radio CEO’s to get their thoughts on whether or not they believe ownership caps at The FCC need to be changed, eliminated or whether they are fine as they are now. The NAB is working with broadcasters to come up with a plan to present to The Commission next month. Our first interview is with Galaxy CEO Ed Levine.

Radio Ink: Where does deregulation at the FCC stand?
Ed Levine: It’s part of the 2018 quadrennial review that the commission is required by statute to undertake to review the current media rules. I have had some meetings with officials there directly, and indirectly with some of the commissioners and aides to the commissioners. They understand the radio business is completely different today than when these rules were instituted over 20 years ago. We have major competitors now that did not exist back then that are completely unregulated by the federal government. It puts us at a real disadvantage.

Radio Ink: Is there a process for when this will come up for a vote?
Ed Levine: Chairman Pai has indicated that it is a top priority. We are very fortunate to have someone like him who is a dedicated radio listener. He knows the value of local radio in the local community and understands what we are up against. I have spoken directly to commissioner O’Rielly and he shares the Chairman’s view on that too. We have an opportunity here with some folks who are not government bureaucrats but real-world empathetic to broadcasters to take some corrective steps here and at least level the playing field a little bit.

Radio Ink: Is there any consensus with broadcasters on what they are lobbying for?
Ed Levine: I think most folks agree that we need relief in these rules. The discussion going on amongst fellow broadcasters like myself is how far and how much. I don’t have my feet in the sand on that. Right now I could only own four FMs and three AMs in the Syracuse and Utica markets. Does that number go from seven to 11 or 12 or 13, I don’t know what the right number is. I did a transaction where I had to jump through all kinds of crazy hoops a few years ago just to keep one of my FM stations on, that’s being simulcasted, which is technically in the Syracuse market. I had to move the tower outside the Syracuse market so it wouldn’t count in the Syracuse count. It’s a Class A that adds maybe a point to the ratings of one of my rock stations. It was ridiculous.

Radio Ink: That’s an outlier compared to what you guys are looking for?
Ed Levine: The way it counts in Syracuse right now I can’t buy anymore radio stations. I’m at my limit and that’s crazy. I have four Class A FMs that are simulcasting two products because they are Class A’s, so I can’t cover the whole market by themselves. I really only have two products on those four FMs, but that enables me to compete with iHeart, Cumulus, Class B radio stations. Luckily, we’ve been able to compete quite successfully with them. If there was an opportunity to own more, that is certainly something we would take a look at.

Radio Ink: Are we looking at some broadcasters who want to lift the caps completely and be able to own as many as possible?
Ed Levine: I think the smaller the market the more flexible it may be. Allen Bishop does a great job of running radio stations in the Finger Lakes Region. He basically owns all the radio stations in the Finger Lakes. He’s doing quite well because he can focus on the communities he’s in. He doesn’t have somebody coming in trying to undercut his rate structure. He’s able to provide a fair rate for the customers. I think he’s doing better than the Syracuse market is overall. When you can have greater mass you can do more. He’s doing more events than he ever has. He just told me he bought a back-up transmitter which he couldn’t have done 5-10 years ago. The Commission in the past operated in a bubble, and this current Commission seems to be much more real-world based. They understand the economic pressures we’re under. The reality is if you are all having a hard time economically, you can’t provide proper service to the community.

Radio Ink: How is Allen able to own every station in one market?
Ed Levine: Over the years he’s been able to buy out some of his competitors. They use a different metric out there. They use the contour method because it’s an unrated market. You might see in unrated markets that you can own as many as you want. The Utica market is a good example. In my opinion it is healthier than Syracuse. I am in both markets. There are two primary competitors: Galaxy and Townsquare. In the Syracuse market there are three: Galaxy, iHeart, and Cumulus. When we started we were that guy selling it cheaper. It’s almost one player too many per market. In this market if you have two viable competitors, that’s plenty. A third takes it to a point where nobody can make a good living. The circumstances now from ’96 couldn’t be more different. I don’t agree with everything that happened in 1996 but you can’t roll back the clock. We have to deal with the modern-day realties of how to operate, survive and thrive in this media landscape. It’s being totally disrupted, and to be handcuffed by rules from another era is crazy. I’m not saying I would go out and buy seven radio stations in Syracuse if that happened, but I would like the option. It would increase investor interest and banking interest in radio which is very important. Right now, there is very little of either. We are the red-headed stepchild of media right now. It’s not fair and we’ve been painted with a bad brush, but that is the reality we all have to deal with now.

Radio Ink: What happens if caps are lifted and you are in a market with 12 stations and one guy is able to buy four giving him seven or eight and you only have three? You could get crushed.
Ed Levine: I’ve heard that theory but I don’t buy it. On a national level, yes, but to be frank with the national business being as insignificant as it is to me right now that’s not a major concern. What you are saying is correct for national business and that certainly has been the case. It’s a rigged business anyway because iHheart controls the rep firm. If you’re counting on national business to save your bacon you are really delusional. I’m not saying a stand-alone can make it but if you have a couple of really good stations in a market, you don’t necessarily need to have five. It’s great to have it if you need it but you don’t need four or five to survive. In TV you need great mass because you have to buy the syndicated programming. In radio, if you have the Syracuse University contract, if you have ESPN, heritage morning shows, if you have clear market positions, it doesn’t matter if you own 10 or 1000 stations in that market, you are as significant as the other guy. That is a big difference between radio and TV.

Radio Ink: Is it true that iHeart is pretty much the only company not on board with any more deregulation?
Ed Levine: iHeart has been a large part of the reason why radio has had trouble in the last 20 years. Remember the brilliant John Hogan campaign “less is more,” which was going to solve all of radio’s problems? That’s now why you’re hearing 16-18 units a day on radio stations. The litany of their sins against the radio industry are long and they have to live with that. I’m not surprised they’re not in favor of it. They have not been in favor of most things that would benefit the radio industry. We have ours so the hell with everybody else. To be fair, their business model and a company like mine we are almost in different businesses. If I had that kind of reach I might look at the world the same way, but that type of local radio and the type of radio many locally owned companies are doing is very different. We are not a command and control place. They are and owning that many stations I understand that.

Radio Ink: Is there any indication which way Cumulus goes or does that not matter?
Ed Levine: These are more questions for the NAB. The feeling I get from folks I talk to at the Commission is they feel our pain and want to do something. Even if we can’t speak with one voice, that will be a shame, but unfortunately that has happened too often in the last 20 years. The TV industry speaks with one voice. We do not. They are looking for some guidance on what to do and shame on us if we can’t come up with a plan that works for everybody.

Radio Ink: What can we expect as a timeline?
Ed Levine: I have been told calendar 2018 whatever that means. I don’t want to talk for the NAB but I think over the summer they will put out a proposal, a recommendation and comments on their quadrennial review. I think the FCC will take a long hard look at that and try to follow those guidelines closely.