BIA Perspectives

Posted by Michael Hackmer
BIA Financial Network Marketing and Author of HackBlog

A lot of buzz recently has been how Twitter was faster to alert people around the recent earth quakes in California than news organizations. This has led to some conversation about Twitter’s business model and potential applications for businesses.

A few weeks ago I had some thoughts about Twitter and its possible development of an emergency alerting tool (I’ll post sometime soon - though I may back-date it) – among other things. However, in reading some recent blog posts, I see Twitter’s ability as a Web 2.0 news and information aggregator as being the immediate advantage because unlike many news organizations – people consider Twitter “faster, unspun” with the negative of news organizations being that they are not participatory or focused on sharing.

WAIT A SECOND! HOLD THE PHONE!

No sooner had the statement about news organizations not being “focused on sharing” sprung forth and into this blog post, than I discovered a news organization mentioned in a blog post that IS using Twitter to reach out to its specific communities and engage people in conversations (I am sure there are many more, btw).

NBCi4 - MIDWEST

Using Twitter allows reporters, editors and columnists the ability to get real-time stories from people on the ground as well as drive content to people via Twitter, and get specific feeds mentioning their news organization in the different Twitter search engines. So, Twitter is a natural fit for every kind of mass media.

See page where I got the above screen shot at: http://www.nbc4i.com/midwest/cmh/news/nbc4now.html.

The value for radio, tv and newspaper is clear… engage your audience, expand your coverage, grow your audience, and help drive people back to your web properties (where monetization can in many instances occur).

From a marketing perspective, I think a key development strategy (for companies involved in the widget / desktop application space) is integrating Twitter with social communicators / desktop applications / widgets. Doing so would create a “must have” application for news organizations (as well as other markets). Direct Twitter conversations could fuel traffic to radio contests, news / network events, broaden community activism, and much, much more.

As far as emergency managers are concerned, using Twitter within a desktop application or somehow finding a way to convert the Twitter feed (this would take some technical experience with the Twitter API to determine if such an approach were possible) into a CAP (common alerting protocol) message, would create another inbound and outbound communication stream. Alert managers could receive real-time information that could be shared with first responders and others. Likewise, alert managers also could distribute messages via a CAP-based system to Twitter, and thereby reaching their constituents through another touch point. Such an option, for example, would prove enormously useful on a college campus.

In the end, I think the technical and business applications for a simple micro-blogging platform, like Twitter, are starting to come to the head. The question on my mind now is… is Twitter already working with a company on integrating its system with an emergency alert solution, and how many other widget / desktop application / social communicators out there will heed the call and integrate Twitter functionality into their products for the benefit of their customers.

Posted by Mark Fratrik

After many years the transition to digital television is being realized. HD Radio service is now available at many radio stations with receivers also available. Conversion to these digital transmission technologies provides incredible opportunities for broadcasters to expand their services, brand and presence in their local markets. Yet, to take full advantage of these opportunities, there is still much to be accomplished. Local radio and television broadcasters must broaden their thinking to allow their operations to enter into new areas and new ways of generating revenues. By taking advantage of their reputation, brand name, and presence in their local markets, broadcasters can increase revenues and values for their stations.

Many television broadcasters are doing just that. They are expanding their avenues of pathways to their local audiences through different transmission channels. According to BIAfn’s Media Access Pro™ database, there are now more than 350 different local television stations providing multicast signals. These multicast signals are providing programming from not only the smaller networks such as CW and My Network, but also expanding the programming from newer networks such as LATV, RTN, Ion’s QUBE Children’s network, and expansion of local news programming.

At the same time, the radio industry is also expanding the programming it is offering through HD Radio technology. There are more than 800 different multicast signals provided by local radio broadcasters offering a tremendous number of new programming services. These multicast signals are expanding the services provided by local broadcasters, bringing diverse programming into local markets. For example, of the 46 markets with new Classical multicast signals, 14 previously had no other Classical stations in the market.

In addition to providing new programming through more efficient usage of their allotted spectrum, local broadcasters are reaching audiences through other means. Radio stations are delivering via Internet streaming their main signal and/or their HD Radio multicast programming to people without HD Radio receivers and are also offering downloads of already aired programming (i.e., podcasts). Television stations are also providing downloads of news stories on their websites. Concurrently, national networks are utilizing the Internet through delivery of their programming through downloads of episodes. Allowing audiences to choose when they view and listen to programming is just one step in the broadcasters rethinking of their roles.

Another potentially lucrative opportunity soon to be available to local television broadcasters is Mobile Handheld DTV (M/H DTV) services. Through use of their digital spectrum, local television broadcasters will shortly be able to reach local consumers through other devices such as their mobile phones, portable computers, or some other handheld video devices. According to a recent study sponsored by the NAB, BIAfn estimated that the potential advertising revenues associated with these services for local stations may be as high as $2 billion by 2012. At first, this programming may likely be simulcasting their main programming (or one of their multicast channels), but over time, this delivery mechanism may lead to specialized programming suited for these types of devices. Once again, another way broadcasters are rethinking the way that they provide services to their local audiences.

Another “rethinking” of broadcasters adapting to new possibilities are television broadcasters utilizing some of their spectrum for emergency alerting purposes. Many public television broadcasters are part of the new Digital Emergency Alerting System (DEAS) under a program administered by SpectraRep – a division of BIAfn. Other public broadcasters, also with the help of SpectraRep, are working with their local police and first responder agencies, such as the Clark County (Las Vegas) School District Police Department, to utilize the digital spectrum for distributing information directly to the incident scene in emergency situations.

Radio and television stations implementing these multicasting and emergency alert applications highlight the tremendous revenue opportunities now available to local broadcasters. By capitalizing on their reputation, brand name, and presence in their local markets, broadcasters are expanding the services. It is no longer the case that broadcasters just send one signal to their transmitter tower and sell access to viewers and listeners. Now they are challenged to fully utilize their technical facilities, as well as their marketing capabilities, to expand into areas previously unimaginable. Creative out-of-the-box thinking and dynamic local managing will be a must to maximize the profitability and values of these stations.

Written by Omar Wardak
Financial Analyst
BIA Capital Strategies, LLC and BIA Digital Partners

Chuck Wiebe and I were doing some research a few weeks ago focusing on the Cost of Debt over time. Interestingly we noticed that the spread above benchmark borrowing rates was increasing. We figured it was due to the perceived risk in the market right now and to debt issuers being extra cautious. But there is also another reason: the direct link between stock market volatility and cost of debt.

According to a recent Barron’s article (“The Numbers Speak for Themselves” by Bill Alpert), thanks to Quant Hedge funds, now as volatility goes up in the stock market, so does the cost of debt for companies in unison. Quantitative hedge funds use computer-driven models to link as many securities together as possible. Since 2001 the cost of debt has started to move directly with the volatility indicators used to price options.

The link between stock volatility and the cost of debt comes most directly from the way the hedge funds price convertible debt. Convertibles have an option component that is directly affected by stock market volatility. Changes in the cost of convertibles affect the cost of other forms of debt. In short, if the stock market becomes volatile - debt costs go up.

Implications for Mezzanine Capital

During times of higher stock market volatility, as the cost of other debt forms goes up , mezzanine capital becomes a more compelling and attractive financing choice for companies even outside of the traditional middle market sweet spot. This phenomenon appears to be happening in the market place right now - recently $600 million of Mezzanine was used in the Weather Channel purchase.

Nature of the Current “Credit Crunch”

The so called “credit crunch” is rooted in the stock market volatility caused by the real estate market upheaval. The cost of debt has gone up, but debt is still available to average healthy companies. The real “crunch” in credit only applies to LBO shops, whose highly levered companies can’t afford the currently higher cost of the debt. As a result LBO deal activity has dropped 70% since last year. However, I think there has been a misuse of the term “credit crunch.” For most companies the problem is not access to credit but access to equity - it becomes very hard to raise any in a down market.

The Fed to the Rescue

To bring down spreads and the cost of debt, the Federal Reserve has made it their primary objective to calm down financial market volatility. However, stability in the markets will not be achievable until real estate prices bottom out. Hopefully that will happen within the next 12 months.

Written by Rick Ducey
Chief Strategy Officer

My wife’s into quilting. Having seen her work and visited shows and exhibitions, some of it has rubbed off. The pattern, material and method of joining it all together is integral both to artistic form and actual function. An excellent management team also must have some structural and design elements going for it in order to achieve long running success. I’ve seen a lot of quilts that didn’t quite pull it off…and as for management teams, well, you know. Management teams, like quilts, are best built when you use the right ingredients and create the right structure.

Here are some important ingredients for a management team:

• Shared vision and passion for the business
• Complementary knowledge and skills
• Share values
• Willingness to be wrong and move on
• Determination to get it right
• Team spirit

As you stitch this patchwork of ingredients together, here are some critical structural elements:

• Unity of command – everybody has one and only one boss. It is hard to serve multiple masters.
• Chain of command – clear lines of authority, everyone needs to know who they work for.
• Accountability and authority must be in sync – there is a balancing act between making assignments and assigning resources.
• Resourcing – match resources and expectations for the management team
• Honesty – expect and demand honesty from the management team and be prepared to accept it even if it challenges your world view.

Written by Steve Passwaiter
VP Business Development, BIA 

I know how hard it is to find good salespeople in almost any business these days. It’s a common complaint I’ve heard from radio owners and friends of mine who own businesses outside of media.

Having said that, it’s still inexcusable for radio companies to send out unprepared and unknowledgeable sales people into the market. Hasn’t our industry suffered enough from not training our sales people and sales managers on how to effectively make radio advertising work for Clients?

Add in a lousy economy and an industry struggling to maintain its place in the advertising food chain and you’re flirting with disaster. By saddling customers with reps who don’t know their business and have no interest in learning about others, you do a great disservice to an enormously effective advertising medium.

I read industry trades with comments from radio CEOs who assure us that this doesn’t happen any longer and that radio sales reps are as professional, if not more professional, than those of other media sellers. Call me a skeptic if the following incident about which I’m going to tell you is happening out there with any frequency. I don’t want to impugn the entire industry based on one experience but I have to believe that if it’s happening here, it’s going on in other places.

A friend of mine, who knows a little about my former life as a TV/Radio media seller and manager, works for a financial firm in a Top Ten media market. This firm does not have an agency or a freelance buyer working on their behalf and they buy all their media in house. Having some Top Ten market experience on my resume, I’m too aware that there are relatively few direct accounts in markets this large. Those that fit this description should be treated as a pearl of great price for any media sales rep. These accounts are fertile ground for a true sales professional who knows how to use their station’s assets to the benefit of the customer and who can listen to a customer, ask the right questions and turn radio into a lead generation machine. Sadly, my friend got the opposite.

This particular industry representative happens to work for one of the top stations in the market that’s owned by a well known and well respected company that anyone in the business would know without fail. I’ve found myself wanting to pick up the phone and call the gent who runs this station to tell him what happened here but have come to the conclusion that if he’s hired the manager who hired this rep who “serviced” my friend, he probably doesn’t care.

Enough of a primer on this case of malfeasance?

It became abundantly clear that this rep was handed a package by management and was dead set on selling that package whether it found the type of people my friend’s firm needed to reach or not. 65% of the spots in the package were in off times, mostly evenings and weekends. One would think that if this radio station were really interested in this schedule working for this new-to-radio advertiser, they would have managed to find a way to include more of their better inventory in order to help guarantee success, particularly in the early part of this quarter. My friend even used an old trick that I was taught by one of my mentors to ask for a Monday through Wednesday schedule so she could make it easier for this rep to include more 5am-8pm spots during the week by staying out of the heavier retail demand later in the week. This wasn’t something the rep or the manager thought to emphasize. That really demonstrates a sales department that knows its inventory flow.

Further, this rep didn’t even leave the office to see the advertiser in order to have an opportunity to meet the decision makers and/or the influencers and ask the right questions to see how she could accurately deploy the resources available to her based on the feedback she got. Even when it came time for the presentation of her recommended schedule, this rep decided the best course of action was to do that by conference call. My friend’s company is in one of the close in counties in the market and making a trip out there wouldn’t have taken more than forty minutes. Without making a connection or asking the right questions to the right people, the suggested schedule made about as much sense as nothing. When queried by my friend’s boss as to how long the schedule should run, this enterprising rep said two weeks. Two weeks! She also mentioned that the night and weekend spots were really just bonus spots and she also offered a free internet ad on the station’s website. Nice way of selling the value of your audience and interactive elements, eh? Did I also mention that the grass in my yard grew faster than this rep when asked to run Scarborough data to make sure the schedule matched up with the people the company wanted to reach?

Can anyone really promise results to a Client who’s going to run a total of forty spots over a two week period? That’s not enough reach or frequency to do the job. This rep missed a golden opportunity to outline a yearly commitment for this company that would have delivered results and a better than average chance of a renewal contract. Had she done her homework, she could have outlined a schedule based on the business flow of the company with an understanding of how their services are procured by their customers. But, you have to ask the questions first and this rep didn’t bother. All she saw was the promise of a quick commission check and the achievement of a quota. What’s going to get left behind in the wake of this effort will be another advertiser who will state that famous line we all get tired of hearing, “radio doesn’t work.” I guess her managers never thought it was worthwhile to train her how to ask those questions or provide her with some guidance on making the medium work.

Unfortunately, despite the efforts of my friend to convince her superiors otherwise, the company decided to buy the two week schedule and it’ll begin shortly. A sales manager who should have known better, decided to sign the order and I’m sure the rep in question probably got a pat on the back for a good sale. What this station did was steal money from a Client by not adequately training a sales rep and a sales manager missed an opportunity to take a rep aside to give her a much needed lesson on how to sell radio as a solution to this Clients’ needs. Furthermore, the station left a ton of money on the table in pursuit of a quick hit. I just wonder how many other customers are in for this treatment.

We’ve got to do better than this. The margin of error for this type of sales effort is long gone. Our business doesn’t grow organically any longer and the competition has never been fiercer. When I sold radio back in the ‘80’s, this type of “training” by using Client’s money was commonplace. Radio’s come a long way since then and we need to realize that it might be better to have six really good and well trained salespeople on the street than twenty mediocre to bad salespeople. Our business can’t afford the damage to its reputation by continuing to make these kinds of mistakes at the expense of the advertiser. Advertisers have too many choices at their disposal. If you don’t break your neck to deliver results, you’re out of the mix. In a mature business, it’s training and Client relationships that give companies an edge over the competition. It’s certainly not the desire for a fast buck at the expense of a new and valuable Client.

I hope this isn’t happening with your reps and sales managers in your markets but I hope this serves as a reminder to Senior Management at the corporate and cluster level to make sure that you’re doing right by the Client by not hiring managers who are incapable of hiring and training people who are passionate and eager to learn how to make radio work. We’ll never grow our way out of this with these tactics and the damage left in the wake of this nonsense will continue to haunt the business.

Mark Fratrik, VP BIA Financial Network

Remarks to the MMTC Conference Panel

Mark Fratrik, Ph.D., was invited to present at the Minority Media and Telecommunications Council (MMTC) conference in July 21, 2008. In his presentation, Dr. Fratrik offered an overview of the current status of the media and telecom industries and what new entrants need to do to secure financing for acquiring new properties. The following is a transcript of his message.

——————————————————————————————–
I first wish to thank David Honig and the rest of the Minority Media and Telecommunications Council (MMTC) for inviting me again to participate in this conference. I am always heartened to come and meet with many of you who have the true entrepreneurial spirit and desire to enter into these industries.

My role on this panel is to provide some general information on the status of these industries and what new entrants need to do in order to secure the necessary financing – both equity and bank financing – to acquire properties. Specifically, I am first going to talk about general economic and financial market conditions as it affects new entrepreneurs and owners in ratio, television, and the telecom industries. Others on the panels before and after this one will go into more detail. Second, I am going to talk briefly about general radio and television industry conditions also as they also affect new owners’ abilities to raise the needed capital. Finally, I will talk briefly about what these conditions mean – what prospective new owners need to show in light of these conditions to successfully secure financing.

Turning to the first topic – general economic and financial market conditions – whether you call it a recession or just meager economic growth, it provides a tremendous challenge for new entrants into any industry. The immediate potential to increase revenues is severely limited given these economic conditions. I might add, however, that these poor conditions may also offer opportunities to acquire distressed properties whose owners may be forced to sell for prices lower than at other times.

Along with the tough economy, the financial markets are also in “turmoil.” Given the shakeout started by the mortgage crisis of last year, the overall financial market is struggling to find a new equilibrium. During that time, the pricing of loans and the requirements written into the loans are quite burdensome. According to a survey by the Federal Reserve, the funding costs and borrowing standards are at the highest since 1991 and 2001. Part of this turmoil is also seen with the slowdown in activity. According to S&P analysis, the 2nd quarter of 2008 saw the loan volume down 76% from the 2nd quarter of 2007 (the last quarter before the mortgage crisis set in).
As S&P stated in their July 2008 LoanStats newsletter, “arrangers say they are hitting the pause button on new deals until the current turbulence subsides, while investors husband dollars to focus on jut the most compelling situations.” Whenever there are tough times in the financial marketplace, it is important to remember, however, that these equity funds and banks are in the business of loaning money. While it may be tough for a while – both in terms of conditions and rates – that will pass.

In addition to the tough economic and financial conditions, new owners are also confronted with challenging industry conditions in radio and television. The entire radio industry has seen negative overall revenue growth for years running with an expectation of negative growth for next year, though not as bad. This overall national negative growth does mask the better, positive performances of the radio industry in medium and small markets, but those positive growth rates are not overwhelming. Yet, radio is still an important player in the local media markets, providing access to local audiences for local advertisers. There are underperforming stations in these markets that could be turned around providing good cash flows. Additionally, radio stations are increasingly generating revenues from other sources, in particular Internet related revenues, opportunities that were discussed in another panel today.

In the television market, local stations are generally going to do well this year with the impact of political revenues, especially in Presidential battleground states and states with competitive Senate contests. Following this year, 2009 will show a downturn with an upturn expected in the succeeding year. There are some ominous warning signs affecting local television, specifically the tough times facing the automobile market. If those companies and their local dealers cut back on their advertising, this will have a depressing effect on the growth on television advertising revenues.

Yet, much like radio, local television stations are still very important players in the local advertising marketplace offering access to local audiences. Television stations have opportunities to move into other areas to generate additional revenues such as their Internet sites. Some television stations receive as much as 20% of their revenues from their Internet site and related activities. In addition, local television stations have a potential new revenue source associated with mobile/handheld DTV services (M/H DTV). This new technology is progressing through a standard setting process and might be rolled out by late 2009.

What do these challenging economic/financial/industry conditions mean for new owners and companies trying to secure financing? First, and foremost, these new owners need a STRONG story, with grounded research, as to why they will rise above the industry revenue trends. No longer can you just show that you will ride the crest of the industry, it has to be more compelling.

Second, in that STRONG story, you need a digital, other revenue component to insure that your revenue growth and bottom line growth is sufficient to attract the needed equity and bank investors. Without that potential upside, these financing sources will not take the risk.

Third, and finally, you need to be incredibly DILIGENT in assessing and researching opportunities. Through comprehensive examinations of these opportunities, you will either come up with some hidden problems that will make you walk away (and be glad you did), or other information that might lead you to be able to acquire the property at a lower price, making it more likely to secure the necessary financing.

In closing, let me emphasize that while it is challenging to secure the necessary financing in these tough economic and financial market times, there are still opportunities in the market, properties that can be purchased for reasonable prices, to make the effort.

Mark Fratrik, VP BIA Financial Network

Presentation to the FCC En Banc Hearing on Barriers to Communication Financing

Mark Fratrik, Ph.D., was invited to appear at the FCC’s En Banc Hearing on Barriers to Communication Financing at Barnard College in New York City on Tuesday, July 29, 2008. Dr. Fratrik will discuss the current state of capital markets. The following is a transcript of his message.

———————————————————————————- 

Mr. Chairman and fellow commissioners let me first thank you for inviting me to participate in this important hearing. The ability of new entrants into these industries, much like all other industries, provides the competitive and entrepreneurial spirit that leads to new innovation and improved services to the American public at large. Additionally, new entrants have and will continue to provide new diverse voices to our media markets, also leading to the benefits of all Americans.

Others such as Susan Patrick immediately following me, and the two panels following her will provide much more detail on how new entrants can secure financing and at what costs. My charge is to provide a quick overview of the present status of the capital markets and how that status affects the ability of new entrants to secure the necessary equity and debt financing.

I would like to tell you that equity investors and bank lenders are out there abundantly for established and new broadcasters that have good ideas for acquisitions. I would like to tell you that new entrants can easily get financing with sound business plans and good opportunities facing them. I would like to tell you that these financing opportunities are so prevalent that the cost of this financing is reasonable and does not unduly burden these new entrants with extreme borrowing requirements or difficult covenants to comply with.

Unfortunately, and probably not surprisingly, I cannot offer those statements on the capital markets. Anyone reading the general press or watching and listening to local television and radio stations know only too well that the capital markets are very tight. These markets are in “turmoil” with uncertainty on the overall economy and the soundness of some groups of loans playing a very significant role in making investors and bankers very hesitant.

One indication of the tightness of these capital markets is the large drop off in the amount of loans being issued. Standard & Poor’s, in their recent midyear recap, stated that second quarter loan volume was down 76% from the previous year’s second quarter. As they point out, that previous year’s 2nd quarter total was a record amount, when the capital market was incredibly active and it was still prior to the onslaught of the mortgage crisis. Still, that large decrease is a clear indicator of the lack of available funding for companies in the telecommunications field and in general.

Why the decrease? Clearly the slowdown in the overall economy has taken its toll. The difficulties in the mortgage area have put tremendous pressures on many financial institutions and banks. Everyone is very apprehensive. Let me quote again from that mid-year S&P report “arrangers say they are hitting the pause button on new deals until the current turbulence subsides, while investors husband dollars to focus on just the most compelling situations.”

A recent Federal Reserve study showed that the funding costs borrowers are paying are exceeding highs seen in 1991 and 2001 when there was a similar type recession. That same study also indicated that borrowing standards are also just shy of their all time highs.

At the same time, credit is tight in global financial markets and industry specific conditions make it even more difficult to obtain financing. Lenders – both equity financing sources and banks – look to business plans for growth opportunities, and regrettably there is a feeling that there are few growth opportunities in radio and television.

These lenders and investors are looking at the recent total radio industry revenues that will probably show, according to our estimates, a 3-5% decrease this year following decreases and anemic growth in previous years. I will point out, and many in the industry also point out, that national percentage masks the better performances in the medium and smaller markets for radio, where there may be opportunities for new entrants. Turning to television, of course, there will be an increase in revenues for local stations this year, due to the elections and the upcoming Olympics, but next year will show a negative change in total revenues. Further, challenges are out there with several of the major advertiser groups for many local television stations; the automobile industry, in particular is facing incredibly tough times. One can see that this industry may cut back on their advertising for a while as they regroup in an era more concerned about energy costs.

With these more challenging industry forces amid the tougher credit market, it is not surprising to see a dramatic downturn in the number of deals occurring in both radio and television. According to the records we keep at BIA Financial Network, the number of radio stations sold through June of this year has decreased by 44% and the number of television stations decreased by 79%. Many stations are available for sale, but the inability to secure enough equity and debt financing is just proving too difficult.

Even in tight conditions, it is important to remember that equity funds, banks, and other financial institutions are still in the business of lending money. This is how these companies make their own money. So, they are looking for opportunities to invest and lend money, though with greater restrictions and possibly higher rates.

One limiting force that would turn around these decreasing numbers and allow for new entrants to secure financing is that some financial institutions that have been lending and investing in the broadcasting industry have cut back on their activity. Some have consolidated their broadcasting lending divisions into larger, broader areas, while some have found it difficult to entice investors to their companies to lend in this area. These companies do not see enough of an upside to the industry to warrant maintaining their large presence.

Yet, there are companies still remaining in this area – some of which are represented in the panels later today. They still see opportunities out there for new entrants and existing broadcasters to take over under-performing stations, change its programming, marketing and other business activities to make those properties more viable in the local marketplace. Having a business plan laying out these changes is essential for new entrants – one cannot just ride the wave of the industry growth anymore. Additionally, any business plan to turn around a particular situation must include some ideas on how to tap into other revenues, for example revenues generated from Internet sites as many broadcasters are now doing. Any equity or bank investor must see some potential for growth, with grounded research, before he/she commits their funds.

And, while the overall national indicators for these industries are not overly promising, there are still valuable prospects. As I mentioned before, medium and small market radio stations are doing noticeably better than their larger market brethren. Television stations, especially in the smaller markets, offer good, sound investments. These are local radio and television stations that are still viable players in their local advertising markets. They are facing incredible challenges to their businesses, forcing them to find of new ways of operating and new avenues of generating revenues.

Many new entrants into these industries have these necessary new ideas. Yet, in order to secure financing, the investors and lenders must be better convinced that those ideas will bear fruit. They will need to be better convinced that the industry does have growth potential. Anything the Commission can do to promote that growth potential, to foster broadcasting as a good business, will pay dividends in freeing up the necessary financing for new entrants.

In closing, let me thank you again for allowing me to offer my thoughts on the overall capital markets and how those conditions affect lending to the telecommunications industries. I am sure the upcoming speakers will provide more detail on some of the issues I have raised, as well as discuss other issues that are relevant to the lending market for broadcasters.

In this NAB thought leadership video series, Rick Ducey’s digital technology expertise and financial acumen provides insight into the technologies and business models driving the world of content.

Rick specifically answers the questions during this video session:

1) What technologies will drive innovation in the content world going forward?

2) What industries and players are best positioned to succeed in a world of anywhere/anytime content?

3) How is the traditional broadcast model changing?

4) After DTV, what’s next for television?

5) BIA‘s research focus looking forward?

Click here to watch the video

Posted by Edward Czarnecki
Vice President, SpectraRep

The Federal Communications Commission recently held an Emergency Alert System Summit, ostensibly to foster dialogue between the private sector and the government players and to assess the current state of the Emergency Alert System (EAS) and its future.

EAS was put into place in 1994, replacing the Emergency Broadcast System (EBS). Today, EAS is jointly coordinated by the Federal Communications Commission (FCC), Federal Emergency Managemant Agency (FEMA), and the National Weather Service (NWS). The national EAS is designed to enable the President of the United States to speak to the United States in the event of a national emergency.

As leveraged by state and local authorities, EAS is used for the issuance of civil and AMBER (missing child) alerts, as well as the relay of weather alerts over broadcast radio and television, and cable systems. The vast majority of alerts issued over EAS are weather related, followed by AMBER alerts.

Despite its successful use at the state level, EAS has its challenges. Under existing rules, for example, participation of broadcasters in state and local alerts is voluntary and the system’s technology is outdated. The audio (voice) alert message may not (and often do not) match the text crawl appearing on television screens. EAS does not readily interoperate with other outbound warning channels, such as test messaging, e-mail, etc. What’s more, the current EAS has limitations interfacing with newer communications technologies and issuing alerts in multiple languages.

As bad as that sounds in itself, other fundamental problems plague the system. One EAS consultant at the FCC summit noted that 63% of the 78 broadcast stations recently inspected had malfunctioning EAS decoders.

In its July 12, 2007, “Second Report and Order and Further Notice of Proposed Rulemaking” issued in EB Docket 04-296, the FCC has begun to explore steps towards a “Next Generation EAS“, to help solve some of these challenges. Among actions taken by the Second Report and Order, the Commission ordered that all EAS Participants must be able to receive messages formatted pursuant to the Common Alert Protocol (CAP) within 180 days of the adoption of said protocol by FEMA.

CAP – an XML data format – will be a major step way towards making EAS more useful and powerful. It will hopefully foster greater interoperability between EAS and other warning technologies, and provide greater information and targeting of alerts. It will also pose challenges, as CAP will require the deployment of IP-based systems, in tandem with the current tone/voice based system.

This change to CAP will represent a fundamental shift in how EAS works – from the current decentralized, device-centric, tonal-based system – towards a centralized, network centric, IP-based system. However, such a change will require new network design and configuration, as well as additional deployment, monitoring and maintenance.

In short, the next-generation EAS may resolve many issues in the current Emergency Alert System, but it will also pose other significant issues in terms of funding, management, new vendor choices, and forming a more comprehensive public alert and warning strategy.

It struck me as I was reviewing my plans for the upcoming Internet Retailer Conference and Exhibition in June that there is not a lot of attention on using email to reach one’s customer base in the Conference agenda and session discussions about online marketing. In the not so distant past (which means a year in the new technology era), strategic email marketing was still regarded as the most effective and affordable means to reach an audience and maintain a connection.

So, what has changed?

For starters, people are suffering from email fatigue in a substantial way (Wikipedia actually refers to this as “email bankruptcy”, but I’ve since added the term today). According to some estimates email is a $650 billion drag on the economy, because people engage in too many unnecessary responses and waste time reading messages that they either should not have received in the first place, or simply add no value to their overall productivity (I’ve actually been guilty of that several times as I am writing this blog entry).

The other factor is SPAM. Heinz Tschabitscher, contributor to About.com, writes that “spam has turned email into a very costly undertaking,” citing the complaints ISPs have to cope with, the struggles of email users who try to manage their accounts, the inaccuracy of SPAM blockers where valuable email is sometimes lost, and marketing professionals and publishers who constantly try to justify it all. Ben Macklin of eMarketer calls spam “the scourge of the Internet” and organizations like Spamhaus are working to identify known spamming operations to help curb the abuse.

This is not to say that email is no longer a productive solution to marketing and lead generation. In fact, Spam exists not because a group of a few thousand people globally have nothing better to do until they get their Nintendo Wii, but rather because it is highly profitable.

As a basic premise - assume a mid-level spammer distributes between several hundred million messages to a billion messages in a month, and just received a .03% or .05% response to those emails, the number of leads would be in the tens of thousands. According to Consumer Reports, in one month last year, approximately 650,000 Americans made purchases in phishing scams initiated by spammers.

I think it is safe to say that the issue surrounding email as a marketing tool is not a question of profitability. Pound for pound, it still remains highly cost effective and can yield positive results. However, the shear mass of data coming through nowadays and the volume of Spam that each of us receives, truly minimizes the ability of email to really inform and engage people in a way that builds positive brand recognition. If anything, people are shying away from email marketing, because there is a growing stigma surrounding it, but also because they are finding that reaching the “Inbox” is no longer the value it once was.

This leads us to the question, “If not email marketing, then what?”

A lot of the buzz lately is around using social media to get your marketing message out to the masses. In fact, the IRCE agenda is filled with sessions on Web 2.0 strategies and social media solutions designed to help eretailers.

In our own experience, we have found using social media, such as blogs and webinars, social networking sites (For example, check out our ParentPower community on Facebook and join me on LinkedIn), Twitter, and the like, to be a very helpful way to both discover new solutions and new ideas as well as get more direct interaction with our customers and content providers, which enables us to hear about the user experience first-hand… sometimes as it is taking place. You simply cannot get that from an email that someone may or may not get a chance to read - assuming you reached the inbox in the first place.

The challenge surrounding social media, however, is often overlooked by its dynamic appeal, uniqueness and the subtle suggestion by the news media that everyone is doing it, and if you are not - you’re missing out. In fact, the challenge with using social media and networking is quite obvious when you think about it: it’s time intensive.

Just ask yourself, “How effective would I be if I walked into a room of 50 or 100 strangers, all engaged in their own conversations, and shouted, “I’m offering a 20% discount on a new product that will mean you never have to clean your kitchen floors again!”? Not only would you annoy a lot of people, there is a strong likelihood that you would discourage the very people who may be interested in such a product under normal circumstances from even approaching you.

The truth behind these strategies is that they are based on building relationships (see Livingston on wooing bloggers), and relationships take time. This whole concept of building relationships is what the new marketing paradigm is built around. In the not so distant past (we all know what that means now, right?)… email campaigns were the quick and easy way to broadcast your brand and offerings to the masses. Today, quick and easy is how you bake a cake or clean a toilet bowl (And yes, I lifted that from Tango and Cash). Is it how you run your marketing?

Right now, as you read this, the masses are worn out from it all, and they want meaning… they want substance. On the one hand, this forces all of us in marketing to take on more responsibility and work. But on the other hand, it gives us a tremendous opportunity to provide meaningful solutions to people (fyi - its the customer’s perception of what is meaningful that you need to address) and establish relationships that go deeper than a name on a message.

Of course, this brings us to another solution to the growing decline in the value of email and online marketing strategies, which are desktop applications.

The benefit of desktop applications, more so than one-dimensional widgets or email, is that they are all-inclusive communications vehicles. Not only do they engage your audience by providing a bridge to relevant web content, they provide a one-stop resource for video, audio / podcasts, flash-based games, and in the case of ActiveAccess, include a built-in RSS reader, interactive weather map and links to other resources. The multi-faceted nature of a desktop application, not to mention that the application is on the desktop all the time a person is on their computer, is more engaging for the user, less fatiguing, and helps build a content relationship between the provider and the user that is unique.

What’s more, desktop applications, as a piece to your Web 2.0 puzzle, are not nearly as time intensive as other social media strategies. In fact, they are used to enhance your existing web strategy by providing a portal for your customers to reach you when they are not browsing the Internet.

For more information on how ActiveAccess can help your company or organization, shoot us an email at: info@activeaccess.com.

Or you can DM us through Twitter at: http://twitter.com/activeaccess.