It’s 2:26 on Thursday morning. If you listen real hard, you can hear the slow, driving hum of the Borman Expressway a couple of blocks away. Even in the middle of the night, truckers carry loads of oranges and semi-conductors across America. It’s a soothing notion.
What is not soothing is to think about the future of radio. Do you know how many people have laughed in my face in the past couple of years when I say that radio is ready for an insurgence? Literally.
It seems that most people are resigned to the idea that future listeners of audio, whether it’s talk or music or sports or spiritual, will get their fix from the internet. The trend certainly indicates that this will be the case. Every year, more ears travel from the radio to the internet and that’s a cold hard fact that we have to deal with.
I, too, believe that the internet and all of its offerings will take over most audio listening. But there’s a catch. I believe that under the right circumstances radio can become part of what I’ll call, for lack of a better term, the “social media equation.”
The main reason is that after a couple of decades of the internet being around – and the last five years in which the listening shift to the internet has accelerated – there looks to be some common sense coming to the regulation of radio.
As mentioned in my last blog post that the three or four of you read, I once owned two radio stations and got rid of one partly because of the Main Studio Rule. I also mentioned that I got rid of a community newspaper that I owned partly because of the Cross Ownership Rule. These are big parts of the FCC’s arsenal to regulate the airwaves.
In the first instance, we owned AM 1230 WJOB in Hammond, Indiana, and AM 1420 in Michigan City, Indiana. They’re about 40 miles apart around the southern rim of Lake Michigan. I thought from the beginning that if we just ran both stations out of Hammond, we could make money.
But if forced to maintain two locations, we wouldn’t make it. That’s what the FCC requires you to do. You can’t just buy a radio station tower and transmitter somewhere and bring your programming in on the internet or even a phone line and then broadcast it up the tower. You have to have a presence in that community – a main studio.
Now compare this to Facebook with its nearly 2,000,000,000 users. Just think if Facebook was required to have a full-time engineer, a fully-equipped studio, monitoring equipment, a full emergency notification system and so forth in every community in which people log on to Facebook.
Facebook, if this were the case, would be forced to make billions of dollars of investment just to fulfill this requirement. They’d have to have facilities in Turlock, California, and similar facilities in Chevy Chase, Maryland. And everywhere in between.
That sounds ridiculous, right? But, actually, it’s the case with radio. You could actually buy the radio stations in Turlock, California, and Chevy Chase, Maryland, but you would be forced to maintain facilities and a presence in both communities.
Until last week, that is. That’s when the FCC got rid of the “Main Studio Rule.” This is, to me, the beginning of a surge in radio. I won’t go into my theory too far right now because I want to talk about the second part – cross ownership.
In a second version of “I’ve lived several lives already,” I owned a newspaper and a radio station right here in northwest Indiana. Alexis and I own and owned WJOB, and my childhood chump, Billy Baker, and I owned The Calumet Press newspaper. T
WJOB started in 1924. The Calumet Press started in 1946. Both had, when we owned both from 2004-07, loyal followings, including advertisers. The Calumet Press was a free newspaper.
This is a key element – free – because to own WJOB and The Calumet Press, the paper had to be just that – free. You couldn’t, per FCC rules, charge a subscription for the paper. There’s a reason for this but I have long since forgotten it.
And evidently so has the FCC because next week, just as they got rid of the Main Studio Rule, they’re getting ready to get rid of the cross ownership rule. This, too, is huge and had the FCC taken these steps years ago, we might still own two radio stations and a newspaper.
The Calumet Press, like WJOB, had enough loyal followers that we could have charged for it. When we bought it, the circulation was 85,000. That’s huge for a free community newspaper. We felt that we could make money on The Calumet Press if we could charge a subscription rate and start out with a circulation of less than 10% of the free rate. Actually, less than 5%.
This doesn’t make any sense on the surface of things. But then again you have to remember a couple of other regulations that don’t have to do with the FCC but with the state of Indiana. Public notices, at least when Baker and I owned The Calumet Press, had to be published in subscription newspapers. If, say, a local governmental unit published notice of a tax sale in The Calumet Press, with its 85,000 circulation, it wouldn’t count as legal public notice.
But if the local governmental unit were to publish those notices in a 2,000 subscription Calumet Press, then it would be legal notice. You see how regulation affects business, even at the localest of levels?
So fast forward to next week when the FCC considers getting rid of the cross ownership rule. Will I go back into the newspaper business?
This is an interesting question in that if there’s a business that will draw more laughs in your face than radio, it’s newspapers. So the answer is probably “probably not,” but my answer is not “definitely not.”
Another interesting thing to do here is to compare the cross ownership rule to what Facebook does. If I understand it correctly, the main thing that the cross ownership does is to prevent me or any other media scoundrel from controlling both what people listen to and what people read in an area. Further, television stations are also included in the cross ownership. As a matter of fact, it’s television that gets much more attention when it comes to cross ownership, so let’s use that.
According to the FCC, right now you can’t own the local television station and the local paid newspaper in your hometown. You can’t control the flow of what people watch and what people read in the same local area. This is a huge constraint on television and newspaper owners.
It’s also a constraint that Facebook doesn’t have to deal with. In other words, you can go right now onto Facebook and watch a video that a woman down the street from you just made about her cat, and you can read a long diatribe about why there should be a stoplight at the corner of Main Street and Cobblestone Drive.
And you can watch dozens, hundreds, thousands of recent videos by and about your local area. And you can read even more comments and criticisms about what’s going on in your hometown.
In other words, just what the FCC was trying to prohibit – one entity controlling the distribution of video and words in a local area – is already happening.
Facebook is a genius platform. The way that the code allows people to connect with each other may be the greatest advancement in communication in the last 50 years. I get that part.
But I also put forth the proposition that an equally genius part of Facebook is the recognition along the line that you could bypass all of the regulation that traditional media have to deal with by just going online.
On the other hand, traditional media:
Now don’t get me wrong here. I don’t have anything special against the FCC. They’re just doing their job enforcing the laws that are on the books. The thing that I’m interested in is if this trend toward rolling back regulation of radio (and television) will continue.
Here’s how far I think the rollback should go. Just do an analysis. All of the things that Facebook can do, we should be allowed to do also. And that goes all the way to allowing cuss words.
This, too, is a big constraint on local media. Let the local audience decide if they want a radio station that allows cuss words or not. Don’t have the federal government tell us that we can’t have them.
Personally, I probably wouldn’t allow people to swear on WJOB. But if it happened, why do I have to stay up all night worrying that some construction worker let an F-bomb fly in the middle of a discussion about local corruption?
It’s ludicrous. Do you think that Jeff Zuckerberg lost one minute of sleeping at the thought of some construction worker from Griffith, Indiana, laying an F-bomb on one of his Facebook posts?
Absolutely not. So there’s my analysis of how to level the playing field for local radio and television stations. Let the market decide.
Now speaking of the market, in one of the many lives that I’ve lived, I traded in the pits of the Board of Trade for 18 years. I love the markets. You stand there amidst thousands of screaming men and a few women and the numbers and dollars fly all around at the behest of a simple hand gesture, and, no kidding, a price is discovered for soybeans. It’s an always-moving price, but for a point in time the markets decide what a bushel of soybeans should cost.
It’s a beautiful thing. If you can strip away the political and social discussion, the markets themselves can be beautiful things. I have lived it. I have stopped my trading at times just to stand amidst the chaos to take it all in. And I always came back to the same realization –
I can’t believe that out of all of this chaos comes order. The markets work.
So let’s allow the media markets to work. Let’s allow Facebook and radio and televeision and newspapers to play with the same rules. Right now, it’s not even remotely a level playing field. Not by a long shot. And if you think that a couple of adjustments by the FCC is going to change things in a big way, you are mistaken. To really save radio and television and newspapers, we as a society would have to go full Monty and roll back all of the regulation regarding traditional media. Either that or put the same level of regulation on social media, including guidelines regarding political advertising. Don’t even get me started on this one.
So where in all of this do I get encouragement from the current situation? As mentioned in the last blog post, as far as market caps go, Facebook and Google are bigger than all of the broadcasting companies combined. What does that tell you?
It tells you that there is room for growth among traditional media – as long as we don’t remain traditional. And as the three or four of you know, I strive, if anything, not to be traditional. Every gadget that comes along and new way of streaming, I try it. I’ve spent hundreds of thousands of dollars, if not seven figures, on trying new things. I believe that there are opportunities out there to leverage the localness and genuineness of our local media to the internet. I believe, in the end, that radio can be a part of the social media equation. I’ll explain this more in another post.
For now, I look back to my days at the Chicago Board of Trade. As computer trading moved in and took more and more market share, you could walk out onto LaSalle Street and hear expert after expert shouting at the top of his or her lungs that trading was dead.
“Get out now, while you still can.”
This may have proven to be true for the average pit trader. If you didn’t make the transition to trading on the computer – or couldn’t – then you’re shoveling rock for your bother-in-law’s landscaping company.
But if you did know enough about computers to either trade yourself on them or hire young bucks who could, then you’re probably doing pretty well.
And look at the Chicago Board of Trade itself. It merged with the Chicago Mercantile Exchange and together they took over much of the trading of futures contracts online. They adapted and now thrive.
Is there a model there for radio? Adapt and you can thrive?
The main thing that the Board of Trade doesn’t have to deal with that radio and television and newspapers do is a competitor that doesn’t have to deal with the same level of regulation. There is not a corresponding Facebook for trading. Any newcomer to the game would have to abide by the same level of oversight that the CME has to deal with. In this sense, it’s a level playing field – something that does not exist in media.
With that being said, if you walked down LaSalle Street around the turn of this century, you would have been hard pressed to think of any way that the Board of Trade and the Mercantile Exchange would be able to thrive into the 21st century. Yet here we are. CME is all over the front page of today’s Wall Street Journal with their introduction of a bitcoin futures contract. Just make the playing field level and you never know what can happen.
There’s another thing from my trading days that gives me hope for radio. It’s a simple thing that’s part of the lore of the old Board of Trade.
In the late 1970s and early 80s, interest rate bonds and notes kept going down and down. That meant that interest rates themselves kept going up and up. The three or four of you who read my blog were probably not around when this happened, but you could go into a bank and they would quote you a 12 percent home mortgage rate. I’m not kidding.
Evidently there was a keen floor broker – I don’t remember his name – that got his clients to start buying bonds by using a simple visual.
Take a beach ball and push it underwater… and then push it a little deeper… and even deeper. Eventually, the ball is going to somehow break loose from your grip and come rushing to the surface. That’s what this mystery floor broker told his clients to get them to start buying bonds near the bottom… and that’s what I’m telling the three or four of you.
I don’t know what could possibly make people all of the sudden start turning to radio. It sounds ludicrous to even say it out loud. But I have a gut feeling that it’s going to happen. No shit.