As we wrap up 2013 and get set for 2014 I thought it appropriate to look back at the year that was, offer some suggestions for 2014 and make a couple of predictions as I usually do at this time of the year.
The year that was: 2013 was a decent year for radio in Canada. There were a few new FM stations added across the country either via new license approvals or AM to FM conversions. This resulted in more Canadians being exposed to better quality audio, and in some cases, new formats. For example, Toronto got a new Indie format and the 88.1 signal was upgraded from 500 watts to 2 kW, which resulted in a better use of the frequency. The value of radio stations and the amount broadcasters were prepared to pay was also decent with anywhere from 7 to 10 times multiples being paid. The biggest deal approved came in June when Bell was given CRTC approval to spend $4.154 billion to purchase 84 Astral radio stations, 25 speciality television services, and some outdoor across Canada. It remains to be seen if this is a good thing for broadcasters, listeners and advertisers, but it will most likely be a good thing for Bell shareholders. Newcap, Corus and Pattison picked up 11 stations that Bell had to sell and they should get approval for these purchases in early 2014. That will bring new players to Vancouver, Winnipeg, Toronto, and Ottawa and strengthen ownership in Calgary, and the increased competition should be good for all concerned. We may see some new innovation and more radio jobs in these markets which would be a good thing.
Revenue: If you believe the analysts, then 2013 was a “revenue flat” year in most markets and, overall, down about 8% over the previous year. We work with radio clients in a number of markets across the country, and most report seeing some growth in both ratings and revenue, at least on the radio side. The most recent CRTC revenue figures published are from 2012 which showed an overall PBIT of 19.9% which is a healthy return for any industry. English language FM averages a PBIT of 23.7%, and Toronto is the most profitable radio market with a PBIT of 41.1%. What is somewhat concerning is that the small profit increases (less than 1% in many markets) came as a result of lowering costs as opposed to revenue growth. The large companies are making the most money. For example, Corus reports a 30% profit in the radio division. Rogers did slightly better at 33%, and Bell Media look to be operating the media assets at about 26% profit.
I do not believe that 3,700 jobs have disappeared from the radio and television industry over the past 5 years, as reported by the Canadian Media Guild. In fact the CRTC figures do not support this number, at least on the radio side, so unless there have been over 3,000 jobs lost in television there is something wrong with these numbers. For the record, CRTC figures indicate there were 10,423 people employed in radio in 2008 and 10,050 in 2012 which is a reduction of 373 jobs over 5 years. At a time where there is more competition than ever before for listeners, I hate to see any reduction in staff, but I do accept that some of these losses are as a result of consolidation, efficiencies and better use of resources.
Ratings: As you look across the country, it is clear that we have a two tiered system with PPM in the larger markets and the traditional diary system in others and that is not a good thing. PPM has helped those stations with a large cume but has hurt stations in the middle and bottom of the pack. PPM has also proved that there are more people listening across all day-parts than we used to believe. On the downside, the small number of people meters in the field in any given week has resulted in some strange data wobbles. Overall, it looks to have been a softer book for Rock, with AC doing very well and Country up in some markets and down in others. Talk stations got a nice boost because of the “Rob Ford” factor, especially in Toronto. Overall, our clients enjoyed some solid increases in all but one of the markets in which we work. We saw a 21% increase in 12+ numbers when we averaged out the measured markets, and in some markets we had even larger growth in 18-49 and 25-54. One station told us that their national rates were up $30 as a result of the ratings so they are happy. But as you look across the country, there are some stations that look to be struggling, which is a shame, especially in markets where there is lots of elbow room to carve out a position and own a key money demo.
The 3 M’s: I believe this will be more important in 2014 than ever before. In this ever congested media world in which we live, the 3 basics of morning shows, music and marketing are the areas that need a disproportionate amount of effort and resources if your radio station is to stand out from the crowd and rise above all the noise the average listener is exposed to each and every day. Starting the day with a strong morning show that can “read the day” and engage their target audience in such a way as to grow exclusive listening is one of the magic bullets that will help a good radio station become great. The 2nd M is the music. Unless you are an all talk or news station then music will make up 40% or more of any hour. So unless you are playing the right songs and rotating them in such a way as to grow audience, then what happens between the songs will not help you. If you do not have the budget for a music test then there are other options that, while they may not be as good as testing songs in your market against your target audience, they at least should be considered. Take a quick look at BDS or MMR and you can see the stations that are testing music and you can certainly see the stations that are getting it wrong. Once you have the right songs in the right categories then you need to use the power of your scheduling system and allowing it to do most of the heavy lifting. Yes, you need a trained set of eyes to check over the log and make adjustments, but I am surprised at how many databases we looked at in the past 12 months that were so messed up that they could not function properly. Lastly, once you have the morning show and music right, then, and only then, is it time to market the product. Any marketing today needs to include a solid social media marketing plan. That is an article in and of itself, but this will be critical in 2014.
Take time to listen to your product: Please take a day once a month and actually listen to your radio station. This means trading out a hotel, turning off the cell phone and actually spending the day with a note pad and listening to your station. Give your product 100% of your time for a day (it needs to be 6am till 7pm at least) and I’ll bet you will be amazed with the things that you hear that require some attention.
Predictions for 2014: This is always dangerous to be predicting what will happen in future, but one thing I feel confident of is that we can expect to see more consolidation in our industry, and in business in general. This will mean more radio stations changing hands in the next 12 months, but I expect that to be the smaller groups with 10 or less stations selling out or joining forces. Frequency spectrum on the FM band is getting very scarce in populated areas so expect fewer new FM applications. I think we can expect to see a good number of creative applications filed in 2014 and broadcasters look to maximise the coverage of their existing signals. There will also be fewer AM stations on the air by the end of 2014 as some go dark and others convert to FM.
2014 will be the year that we see smarter technology in the home, the car and in our everyday lives, and that will include at least one of the major smart phone manufacturers, other than Apple sadly, activating FM chips in cell phones. It will happen in the US first and follow in Canada sometime after that. We will also see faster and stronger Wi-Fi technology which will lead to free Wi-Fi in major populated areas. That could open the way for internet radio to become viable. 2014 may also see less regulation than in the past but any major changes in this area, such as a relaxed foreign ownership rules, will be some way off. Still, October 19th 2015 is the next time Canadians go to the polls and often big promises are made in order to woo voters, so 2015 may shape up to be a very interesting year.
I feel confident in predicting that it will continue to become more expensive to run radio stations and the pressure placed upon our industry to improve profits will likely mean fewer people being asked to do more. Those who can do more than two jobs will be more valuable, so if you can sell and perform an air shift, for example, you are more likely to be in the business a year from now than those who can only do an air shift.
Digital matters: Digital will become more important in 2014 than ever before, but the big players such as Google, Facebook, Twitter and perhaps others we have not heard of yet, will continue to refine and expand their digital plans and offer a scale that individual radio stations or clusters cannot compete with. But radio needs to keep looking for ways to grow digital revenue and try new ideas. We have great relationships with local clients so develop your pitch and present local clients with solutions that make sense for both the client and the station. In many Canadian markets the local radio station has one of the most visited websites in the area, so you can help your clients get connected with thousands of potential customers who may be in the market for their product or service. By the way, we are seeing as much as 50% of visits to radio station websites are now coming from mobile devices and the growth over the past 12 months has been staggering. Expect that number to grow in 2014, so it is critical that your website is mobile friendly. Also, if you have not already done so, perhaps 2014 might be the year to develop and roll out a mobile application that does more than play your audio stream. We feel it is important that a radio station be on as many of the platforms as your listeners are or you risk becoming less relevant. Check www.1047.ca and search Heart FM on Android or IOS if you want to see examples of digital sites that are generating local revenue and engaging listeners.
Is flat the new normal: Well I hope not. Revenue growth will likely come from radio attracting away more of the local dollars that are going to newspaper. More and more local retailers are finding that newspaper is not working the way it used to, because the local content is not as it used to be and we are all getting our news sooner electronically. The paywall model is not working and 2014 will see more newspapers closing down or selling out. 2014 will hopefully be the year that more radio stations will have a digital strategy that works, but I think it has to work at a local level for the reasons stated above. Go after the local businesses that have digital budgets and grow your digital revenue. If radio can attract more revenue from newspaper, grow digital and maintain their terrestrial budgets, then perhaps 2014 may be the year that will see some growth.
Conclusion: 2013 was a decent year for the industry. There was more CTD money sent to the various organisations sanctioned by the CRTC than ever before. The Bell Astral deal alone amounted to almost $247 million in tangible benefits over 7 years. Hopefully this means more money will benefit Canadian musicians and organisations that promote Canadian music and also improve the training for tomorrow’s talent. At ByrnesMedia we have been helping radio clients for 13 years and have had the pleasure of working with over 50 radio stations across Canada and offshore. We are excited about the future and look forward to helping more stations be successful in the years to come.