Does Radio Need More Deregulation (Part 3)?

Story by Radio Ink

All week long we’ve been interviewing radio CEOs 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 third interview is with Neuhoff Media CEO Beth Neuhoff.

Radio Ink: Are you in favor or against lifting ownership caps?
Beth Neuhoff: I am in favor of lifting ownership caps.

Radio Ink: Why is that, and do you have a specific number in mind?
Beth Neuhoff: I would like to see ALL caps lifted in market 100+. I can’t address the top 100 situation as that is not where we play but I feel that in mid- to smaller-sized markets, there is simply too much competition for more than two groups to truly be healthy. As controversial as this will be, I actually feel the local markets might be better served with fewer stations altogether. So many stations are now just network jukeboxes on to flank market leaders and potentially eek out some HD 2 revenue thanks to low-power analog translators. I say this knowing we, too, are guilty. Do we lose our ability to be truly local and serve our communities with so many non-viable stations in the mix?

Radio Ink: What are you hearing? Is there a consensus among broadcasters about a final solution?
Beth Neuhoff: I am very encouraged by the rumblings I hear from the NAB Ownership Committee. Though I don’t know their final result, as I am not in that working group, I know they took many divergent opinions and interests and were able to come up with something palatable to most. Getting our industry to agree on the color blue would be a challenge, so my hat is off to them.

Radio Ink: What do you say to the broadcasters who say the first round of deregulation ruined radio?
Beth Neuhoff: I disagree. I think some extremely innovative initiatives have come from deregulation. Deregulation didn’t hurt radio, the strategic move away from local and the rapid proliferation of media choices have been far more detrimental. And frankly, going without any meaningful deregulation since 1996 has done far more to set us back as an industry than the actions of any one consolidated group.

Radio Ink: We’ve heard the argument that caps need to be lifted in order to compete with FB and Google, etc. True they are getting more and more ad money, but do you really think that argument is going to fly? Radio stations in nearly every market are playing so many commercials every hour, yet the revenue never grows. Isn’t the issue really a rate issue?
Beth Neuhoff: I absolutely believe that argument should fly. Forget the prediction that FB and Google will be taking 50% of the ad revenue by 2020 — it’s happening now in many markets across the country. And yet, they are not considered part of our competitive universe. We have long since ceased competing with the station across the street. I understand why the rate game happens — everyone needs to eat, but our pie is getting smaller. The rate issue, in my opinion, is a direct result of too much competition, too many signals, and too much inventory.

Radio Ink: How is more deregulation not a plan for fewer people to take over more stations?
Beth Neuhoff: That could be the end result. Again, let’s let the markets decide. My main concern is that even if we end up with fewer owners, localism and diversity of ownership are preserved.

Radio Ink: Right now, in a lot of markets, owners that have multiple stations throw in the weak ones at no charge, killing the average unit rate and devaluing the product. How would being able to own more stations make that better and not worse?
Beth Neuhoff: Again, completely controversial, but maybe we don’t need all the weak stations. In 1996 there was no Pandora, no Spotify, no Apple music, and Sirius and XM were independent and barely on the radar. It’s the paradox of choice. In five years, if I can find country anywhere — and I certainly will be able to find anything I want on my phone — and I have 50 choices for country in my new car’s dash, why should I choose something that perhaps is no more “local” than its signal? No local personalities, no local events. I personally think the “flanking” business model will kill itself off.

Radio Ink: If deregulation is granted, what or how is the guarantee that what could be a sole owner in a market – no matter the size – will actually better serve the local community?
Beth Neuhoff: There is no guarantee there won’t be bad actors. I can almost assure you there will be those that are only in it for the money and don’t walk the talk. The optimist in me, however, believes the majority of owners will be able to run a business with a healthy bottom line that could be reinvested for growth. The business we are in now – little growth, constantly evaluating expense and staffing – is not economically poised for the future. How can we contemplate greater investment in our properties and communities when, in many cases it seems impossible for owners to make it a profitable venture?

Though our inner cynic may say scale is bad, there are great examples of owners, who through scale, have done great things. We really need look no further than the Alan Bishop example Ed Levine gave Monday. Because Alan “owns” the market, he can do really great local radio AND make a good living. Alan can afford to reinvest in local staff, growing new events and upgrading his equipment to withstand weather events and anything else that comes their way. That’s my hope for our industry’s future.

Radio Ink: Is it true iHeart is basically the only holdout against lifting caps?
Beth Neuhoff: I’m sure they aren’t the only holdout. To iHeart’s credit, they espouse a different business model. Deregulation does very little for them so I get it. I think some smaller, diverse, and perhaps stand-alone interests worry they won’t be able to compete in a consolidated marketplace, but I’m hopeful the NAB committee has suggestions that ameliorate that concern. I welcome different perspectives and know we don’t all see the world the same way. At the end of the day, no one wants to be in the buggy-whip business and no one wants their life’s work to be for naught.

Radio Ink: Look into your crystal ball. What do you think will happen in June?
Beth Neuhoff: I see relief that is very late in coming but welcome all the same. Our industry needs something to help drive up values and spur M&A. Economics 101 says mature industries must consolidate to survive. It’s our time.