Commercial radio’s health is tied to Main Street. The better a station’s host community is doing financially, the better revenues the station will enjoy.
According to Tom Taylor, inset, a one-time DJ and producer at Princeton’s WPST who is the executive news editor for radio industry news website www.radio-info.com, central New Jersey’s radio health is tied to that of Route 1. “If you look at car dealers and retail, commercial radio is tied to what happens in these sectors,” Taylor says. The Route 1 corridor, flush with both, largely has provided regional stations with a steady income through advertising. Car dealers alone traditionally have accounted for one of every six ads on the radio.
But with Detroit in shambles, car dealerships closing at record pace, and General Motors going broke the paradigm will change. Radio stations will be forced to redraw their lines and live with levels of staff and income lower than it enjoyed as recently as 12 months ago. This realignment in radio industry parlance is called “the new normal.”
In the new normal there will be a return to normalcy. Advertising will return, as will “owners who want to be in the business long-term,” writes Taylor in his blog. Staff sizes will dip but level off. Organizational structures and old habits will be rethought and attitudes will change, but radio will continue, and continue strongly.
“Things are going to get better,” Taylor writes. “But they’re never going to be the way they were.”
A native of North Carolina and second-generation broadcaster, Taylor was a Morehead Scholar at UNC-Chapel Hill, where he programmed the first radio station there, at WCHL). He came to Princeton when WHWH/WPST owner Herbert Hobler hired Phil Geiger to manage WPST and try to make it profitable. “Geiger had been my general manager at WCHL — and he did indeed make it profitable,” Taylor says.
Taylor programmed WPST for 12 years and later added programming oversight of WHWH as vice president of operations and programming for Nassau Broadcasting. “I had the enormous pleasure of being associated with WPST when we changed the format to its present Top 40 music with community involvement and promotions,” he says. “The stations helped raise more than $1 million for charities in several of those years.”
He eventually left Nassau to join the Cherry Hill-based Friday Morning Quarterback as an editor and then Inside Radio, before joining Chicago-based Radio-Info.com in 2007 as executive news editor and writer of the daily T-R-I newsletter about the radio industry.
Despite what might sound like bad news, Taylor says, radio remains a profitable business, if you look at profit margins. WPST and New Brunswick’s WMGK have shown profit margins of 35 to 50 percent, which is well within normal range for commercial stations. The average profit margin for most businesses is about 8 percent.
But this is not the whole picture. Commercial stations are running into financial trouble. Nassau Broadcasting of Alexander Road, owner of WPST, recently was forced to trade debt for equity and sell 85 percent of its shares to lender Goldman Sachs. In New York, classical station WQXR is in such bad shape that it could be sold by the New York Times to ESPN before year’s end.
The problem? Debt due to expansion.
In 1996 federal lawmakers passed what was colloquially known as the Telecom Act — a sweeping rewrite of the rules of ownership for media outlets. Thanks to the act, owners can now hold up to eight stations in one market, as many as five in one band (AM or FM). With longtime, stringent limits on ownership brushed aside, buyers were free to gobble up stations and building networks. And they wasted little time. Local stations quickly became affiliates of networks, and the frenzy shot selling prices for stations into the ionosphere — as much as 20 times their pre-Telecom Act values.
It was a lot like what happened in the housing market. And, like what happened in the housing market, the gold rush has ended. “Stations today are usually going for seven, maybe eight times the price,” Taylor says. Networks grew too far too fast and incurred debts in the millions.
Though it did not release its debt figures, Nassau Broadcasting expanded through New England and straight into a major financial crisis. The deal with Goldman Sachs, announced in April, gives the lender an 85 percent equity stake in exchange for 60 percent of its debt. As part of the deal, Nassau must divest three stations in New England, though it will continue to operate them.
A May 9 Trenton Times article quotes Nassau Broadcasting CEO Lou Mercatanti as saying, “We acquired quite a few stations in the last few years, and if there was a wrong time to do it, that was it.”
In an internal memo, Mercatanti spells out the terms of the Goldman Sachs deal and assures the staff that the transaction “puts the company on solid financial footing during these recessionary times and will provide us with the financial strength to take advantage of an improving economy in all of our markets.”
Taylor says the move was a smart one for Nassau and that it is representative of the new normal. Such deals, he says, will likely become more common as stations get their footing back now that the economic dust is beginning to settle.
What Taylor hopes is that with all this business talk and restructuring commercial radio will not lose its soul. “Perhaps the hardest mental re-set trick of all will be to remember what makes radio special — connecting with the listener, one on one,” he writes. He does not believe that radio stations have lost their local appeal — he recently walked into an AT&T store to find WPST doing a live broadcast from inside — but he does admit that stations have become more specialized over the past couple decades.
Trenton’s WKXW, better known as Jersey 101.5, for example, is a talk station that focuses entirely on New Jersey.
With two exceptions, this is the best deal New Jersey stations offer to anyone looking for targeted local news. There are nearly 100 unique radio stations in New Jersey; only WGHT in Pompton Lakes and WNJP in Sussex offer local news coverage as part of their regular broadcasting day.
But 101.5 also can be classified a specialty station, since its format is talk, news, and discussion. Other stations in the region are decidedly more narrow in their programming, offering such specific content as south Asian music and talk (WTTM in Princeton), Christian contemporary (WIFI in Florence), and business news (WHWH, also a member of Nassau Broadcasting).
Many stations, such as WPST or Mercer WWFM (see story on page 10), are staffed by people from the community, Taylor says. But even these stations use pre-recorded content, even if it is generated in-house. Usually it is used to cover overnight and weekend shifts, but Taylor says things could change. “The FCC is playing around with 24/7 staffing,” he says. The idea is to make sure radio stays in touch with its community, but if this flies, Taylor says “it would be a real hardship for radio stations.”