November 2001
Values versus valuations:
Radio and recession

Money or more than just money

As economic news grows worse and forecasts become gloomier, perhaps it is time to remember that values other than just the balance sheet were in tremendous evidence in September. The importance of those values has not diminished but the pull of the balance sheet is altering the weight they are given. So where do we think radio will go and how will it react?

Clues so far?

To date, we've mainly seen negative reactions, mainly cutbacks in some form or other. It may be a matter of reducing staff or slightly more imaginative fiscal measures such as the move by Emmis to imitate some of the software companies and opt to pay staff in shares rather than cash.

Better than nothing or being on the street, but in fiscal terms we see this as a bit of a fiddle: certainly if Microsoft or Amazon had been forced to put down the value of all the options they issued in the same accountant's columns as "wages" for more conventional companies the comparative boom for their shares compared to many other sectors would have been reduced. We cannot but help think this would have been a fairer and probably sounder accounting of reality.

The staff cutbacks have, of course, been much more easily implemented as a result of consolidation in the industry, a factor that has also meant some forms of automation or wringing more out of staff could be implemented in ways that would not have been possible were ownership more diverse.

And of course the big companies can afford to do more in the way of employing sophisticated systems to mask the fact that they have cut back: One DJ, for example, can be on air in a number of markets but the impression given that he or she is local to them all; stations can carry news that comes from a bulk supplier but enables them to opt out of generating any of their own reports.

Creativity stifled? Radio depressed!

That is rather depressing: To us consolidation has already meant that creativity has become somewhat stifled as focus groups find out what people say they think they want and stations give this to them rather than allowing the kind of gamble that may create the truly great or flop but certainly is likely to make the medium more lively and entice talent into it.

Now advertising is no longer buoyant, the pressures are on even more and our concern grows because good radio to us doesn't come from of a profit maximizing formula on a spreadsheet Even if staff want to try a creative leap, the weight of the balance sheet holds them back or prohibits it. And when people are being laid off all around, you're less likely to go for freewheeling changes that you might try if you knew you could walk to another post.

The demands to extract more money have also moved stations along the play-it-safe middle ground route, with formats in the US being killed not because they do not have a reasonable-sized and loyal audience but because they don't have enough of the right sort of audience to maximize profits. (This has not happened in all countries, partly because in many of them the format is part of the licence: Dump it and you lose all. so you stick with it or have to get into talks that allows other voices to consider whether the change is to the overall public good).

Overall therefore we end up depressed since, even though we fully realize there are no free lunches, we do think that in more areas than just reacting to tragedy and horror, values in a public arena like broadcasting should extend beyond the balance sheet.

We're even more concerned that in the US the current likelihood is of more de-regulation but without counter pressures such as those that could have come from a wide implementation of low-power FM stations. This seemed on the way under the previous administration but the broadcasters lobby killed it pretty effectively -and no we don't think the real concern was about "interference" in technical terms but more about fear of losing audience to the new outlets.

Any positives?

TNot that many we fear in commercial broadcasting, although the cost of radio is so low compared to television that we remain fairly hopeful about public sector radio.

We also hope that the satellite radio companies in the US can weather the storm and in particular that, even in a recession, there are enough Americans who will pay 3 dollars a month extra to do without commercials to make the Sirius model succeed. If it does, then XM will trim its policies. If they both succeed then the pressure will be on for less advertising clutter in commercial radio and the combination of programme content and advertising will have to be re-thought. Where that's done with the "creative accountants" in charge, we can only hope for some real failures.

Where the creative control comes from the programme makers we contrarily hope for success; And if creative programming pulls in the audience in a new environment all the better.

In the meantime the most practical policy to us is to support public broadcasting where you can and push for more community broadcasts-were there enough public pressure for community broadcasting the commercial lobby might have to back off. And with more stations run by widely differing groups, all the more chance of creativity and diversion in the medium. .

Any views? Please comment on the above. For that matter, if you can put the time aside, we'd like your "Guest comment" pages this year to stimulate more feedback and dialogue.

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