These are the ingredients behind our new advisory service, “Digital Strategies for Broadcasting.” Technology can drive new workflows; partnerships; revenue streams and in doing so challenge existing management and operational structures and processes. Running a broadcast company with digital media assets is quite different than running a traditional broadcast property.

BIA itself has taken the “digital plunge” with its acquisition of The Kelsey Group which extended our expertise, knowledge and relationship base into digital media. With the launch of DSB we are leveraging those resources along with the expertise, data and services BIA has served the broadcast industry with since 1983.

The explicit goal of DSB is to help our advisory clients develop and execute their digital strategies as successfully as possible. This may mean broadcasters but it can also mean assisting those firms elsewhere the local media ecosystem looking to understand and work more productively with broadcasters as partners, service providers or vendors.

For more information about Digital Strategies for Broadcasting, click here.

Click to register for our free Webinar on Tuesday, March 16, Digital Strategies for Broadcasting: Capitalizing on the Shift to Local and Digital Media.

Seven Philadelphia CBS-TV and radio stations have combined their news resources to create a new Digital Out of Home (DOOH) News Network utilizing 39  CBS Always On “Digital Newsstands.” The Newsstands include HDTVs and a 24 hour news ticker.

The Digital Newsstands have been created in partnership with Center City Direct, a local marketing and technology company. It is a division of Alternative Media Holdings, which also provides DOOH services to retailers, office buildings and other street-level installations.

Stations included in the partnership include KYW-TV (CBS), WPSG-TV (CW), KYW-AM, WOGL-FM, WYSP-FM, WIP-AM and WPHT-AM. In addition to local news and weather, the newsstands will also feature tourist information. Ultimately, more than 120 newsstands are envisioned.

Thanks to TV NewsCheck for the scoop

There are some trends and research data here that should provide perspective to anyone with a interest in the health and vitality of our industry. BIA/Kelsey very much believes that radio will continue to play a critical role moving merchandise and services in local markets in the future from a new digitally enhanced perch. We also think that there are unparalleled opportunities to gain market share in the next few years given the ongoing movement to digital media.

Radio’s megaphone is a distinct advantage in moving consumers to action across multiple platforms and that has recently been demonstrated in a number of markets around the country. The pure play web companies doing business in your markets covet that microphone.
There is some real innovation taking place across markets and groups of all sizes. We hope you find the information in our presentation useful. Please click the following link to access the presentation, along with other resource materials you may find helpful: http://www.bia.com/BIA-NAB-Session/

If you have any questions pertaining to our presentation or services, please feel free to contact me directly at 703-802-2973 or at spasswaiter@bia.com. We look forward to creating the future with all of you in the days to come. Stay tuned for some announcements from us in the coming weeks.

Steve Passwaiter is a Vice President at BIA/Kelsey

You can learn a lot more about this by coming to the Transforming Radio’s Business Model with Multiple Revenue Streams session at NAB 2009, Tuesday, April 21st from 10:30am to 11:45am.

Here’s an example:

Jim Brewer II will be on the panel. He’s got a cluster of radio stations in Chattanooga, TN. He’s not in the “radio business.” He’s in the Radio, Internet, Publishing and Events business! This week, Brewer Media sponsored Chattanooga’s “Eco Expo” and had tremendous success. This one time event drew over 80 vendors, most of whom brought “new money” to Brewer Media between the Eco Expo event and the corresponding web site. The initiative easily pulled in six figures this year and expectations are to double or triple this for next year. The event was promoted with ChattanoogaEcoExpo.com.

The event will serve as a platform to launch a new web vertical for Chattanooga, ChattanoogaLivesGreen.com to support year round web publishing and promotion to generate new ad dollars coming in to Brewer Media. Brewer also has an alternative weekly newspaper in addition to its radio and web platforms.

Is the radio business down in Chattanooga? Who cares, the multiplatform business is going great!

Sirius must run a gauntlet to come out of this mess. We see four critical steps Sirius must achieve to be a viable business.
Sirius will have to:

1. Arrange new financing sources. This will be challenging as it will have to convince others that it will be able to get the other arrangements done under economically feasible terms. The deal with Liberty solves this issue for the time being, though there are still some refinancing challenges ahead.
2. Convince the automobile manufactures (who have ownership interests in Sirius) to lower the marketing costs they charge Sirius for each new subscriber. Given the state of the automobile market, it will be difficult for manufacturers to give up more of their shrinking margin on sales.
3. Convince programming owners (e.g., Major League Baseball, Howard Stern, etc.) to accept lower fees. These owners of programming or talent have no other nationally distributed outlets with available financial resources to go to, so they should be accommodating.
4. Convince subscribers that the resulting programming mix emerging out of these bankruptcy proceedings will still be attractive enough. There is some churn in customers each month, but they have still been able to retain a large percentage of their customers.

Even though successfully negotiating these arrangements will be challenging, the outlook for Sirius would then be positive. A critical mass of consumers already is established who have adopted this source of programming and likely will remain loyal. The other parties discussed earlier who have to come to new terms really have nowhere else to go. While some programming could migrate to terrestrial radio, the business climate facing that medium is so poor that the amounts that would be paid would be small. The largest hurdle is to convince enough creditors and other financial sources that with the cost savings it will have be able to negotiate, Sirius’s revenue stream will be sufficient to meet debt obligations and earn attractive long run returns for its share holders.

It is clear that for the radio industry to prosper in the new media marketplace, it must be more prominent on the Internet. Several radio groups are making quite significant strides, but overall, one can characterize the industry’s approach to the web as still in the early stages of development. What this new arrangement allows the radio industry to accomplish is to grow out of their infancy. The moneys saved under these new royalty fees will allow radio stations to provide training for their sales staffs to learn better how to target appropriately and sell their growing multiplatform advertising opportunities. It will allow radio stations to experiment with different types of programming, to see what works and what doesn’t in streaming. Several radio groups are already streaming very different formatted programming (from their main programming) that is also being sent on their multicast signals, but more experimentation will certainly occur.

Overall, it will allow the radio stations to more closely align their revenues with their costs of providing these additional services. Under the previous rate structure, the royalty costs may have made it too cost prohibitive for many radio stations to stream as their revenues in the early years have not been meaningful. With the added time for training and to figure out what works best, the costs in the early years will be lower while the radio stations are also lower. These costs will only increase at the same time as the radio stations, hopefully, are generating greater revenues.

By allowing these radio stations the time to develop this new business, performers and record companies benefit. Without that time, radio stations may have felt the proposed rates too prohibitive to meaningfully enter into the streaming business, thereby reducing the royalty fees flowing to the performers and record companies. Over the longer term, the fees that these parties will receive could easily be higher even with the reduced rate.

Win-Win?

“Google is facing the same downturn in the economy as the rest of us. It has exited the newspaper advertising sales market, and actually laid off computer programmers,” noted Fratrik. “After three years, Google hasn’t attracted a serious number of radio stations as clients. And the ones that have signed up only want to provide remnant inventory, in less attractive time slots.” Fratrik noted there were big cultural problems to overcome.

“Radio operators were never comfortable getting in bed with Google,” he said. “Among other things, the Google model asked for information that broadcasters thought was confidential. It also required the purchase of equipment. I heard the pitch when it was first launched, and I couldn’t see how this would be successful.”

Why didn’t Google’s entry into the radio advertising market work out? “The initial read three years ago was somewhat positive — they were going to use their core strengths in Internet scalability and transactional efficiencies to attract buyers and sell inventory that local stations were unable to sell. But even with their model and their reach to many more potential advertisers, they could not sell enough to make it a profitable business line.”

Some radio sales professionals have argued that radio ad time cannot be commoditized successfully by a Google-like approach. Local radio stations are also always finding it difficult to sell advertising (BIA estimates a 10 percent revenue decrease forthcoming in 2009). Is there still value in radio sales, generally?

“It is that vital personal connection to the local ad community that may well be broadcasters’ ‘secret sauce’ in ad sales and something that Google’s mighty server farms and sophisticated algorithms haven’t been able to crack,” argued Fratrik. While Google is exiting the selling of advertising time for over-the-air radio broadcasting, it is remaining in the online streaming advertising marketplace.

What does this suggest? “Clearly, online streaming has shown remarkable growth in recent years attracting demographic groups that advertisers want,” said Fratrik. “And not restricting the advertising inventory that Google can sell during those online broadcasts also makes it viable for Google to remain.

“Remaining in online radio advertising sales while exiting over-the-air radio sales is a tremendous market indicator of where radio broadcasting is moving,” added Fratrik. “Several over-the-air broadcasters are already improving their online presence, and this action by Google should only prompt more radio broadcasters to follow suit.”

It is important to describe the background of BIA to fully appreciate its role in these stations and markets delineations. BIA has been in the business for over twenty-six years analyzing and describing the competitive landscape facing radio and television stations, and recently daily and weekly newspapers. It has been necessary for our consulting and valuation business, as well as for our research products and services to accurately describe the competition in these media. The FCC, when looking for an independent third party, saw that BIA provided those descriptions for all rated radio markets (and television and newspaper markets as well) in the normal course of business and cited BIA as a source for information to show that parties are in compliance with local radio ownership rules.

BIA radio markets, and the stations that are listed as part of these markets, start off with the Arbitron metro areas. These geographic areas are established by Arbitron to estimate audience listening levels. These areas, generally follow previously defined Census Bureau economic areas, previously called MSA (Metropolitan Statistical Areas) and are now called CBSAs (Core Base Statistical Areas), but not always. Also, not all Census Bureau areas are surveyed, just the areas where there are enough interested radio operators who wish to have audience estimates. The interest in having Arbitron survey a particular area is also why the number of these areas changes over time. In 2003, at the time of the latest change in FCC rules, there were 286 Arbitron Metro Areas, where now there are 302.

Stations that are physically located within these designated areas are normally assigned to that market. Stations, however, can ask Arbitron to assign it to another market so as long as they meet an objective minimum level of listening. Stations in smaller markets adjacent to some larger markets, or stations located outside of all Arbitron metros, sometimes find it advantageous to be listed as home to those adjacent markets. Being “above the line” (Arbitron’s term for being listed as home to a particular market) can be very beneficial to radio stations in their efforts to sell advertising time. It is important to note that radio stations can be home to one and only one radio market.

The FCC, in reviewing BIA’s process, stated it very concisely when it said “The BIA database relies on Arbitron’s market definitions and builds upon Arbitron’s data to provide greater detail about the competitive realities in Metro markets.” First, in the BIA database all stations that are physically located within the boundaries of these Metro areas, both commercial and non-commercial radio stations. Second, any station that has successfully requested Arbitron to be home to another market is assigned to that other market.

Finally, in a handful of cases, BIA adds stations that are physically not in a market and have not asked Arbitron to be listed as home to a market, but are yet, still “players” in a particular market. BIA’s rule for those added stations is that they are not listed as home to another market and they are in the top half of all stations in terms of their listening shares in that market. For example, in a market with 15 rated station, a station outside all Arbitron markets but is still ranked fourth in terms of listening levels would be assigned to that market. There is a tremendous incentive for radio stations that receive noticeable shares (e.g., be in the top half of all rated stations) to ask Arbitron to be listed as home to that market (above the line). Consequently, there are relatively few cases that BIA adds to the already comprehensive list of competitive local radio stations in these markets.

The listing of all relevant radio stations and the total number of radio stations in each of the Arbitron metro areas is available to all subscribers to BIA’s Media Access Pro service. Included in that software is a pre-defined search that the user just has to select the market he/she is interested, and the results are generated along with a pre-defined report to quickly print. Included in that list are all of the radio stations listed as home to that particular market, and all the radio stations physically home to that market but have elected to be listed as home to another market. Included in that listing is the date when each station were first listed as home to that market (with the vast majority having July 2003 as that designation date, soon after the FCC issued its new rules). That date is significant if more recently added stations affect the total number of stations in a market affects the maximum number of stations any one company can own, and/or affect the number of stations a particular company owns in the local market. If those changes are necessary for a proposed acquisition complies with the local ownership those changes must have occurred two years earlier, or else that acquisition must wait.

Also included in those listings are any stations that were previously listed as home to that particular market and are now listed as home to another market or are now considered in unrated areas. Like the in-market stations, the date when that change occurred is also listed so as to comply with the two-year waiting period for any changes as designated by the FCC.

Finally, in order for BIA to consistently provide the most-up-to-date information in its research products and services, and also have the most up-to-date information for its consulting and valuation practices, it constantly updates the database as events occur. Monitoring of the FCC database for any new stations and movement of stations occurs every day. Additionally, BIA works closely with Arbitron to learn of any additional stations that are newly listed as home to a particular market and those that are no longer considered home to different markets. Through those efforts, BIA continues to provide the most accurate accounting of the competitive landscape in local radio markets.