Since consolidation began in the late ‘90s, radio has been evolving into two completely different businesses: large markets dominated by large corporate players, and smaller markets that remain largely a “mom and pop” industry.
For radio entrepreneurs seeking to become growth companies amidst the new realities of our industry, re-defining the small-market paradigm is the billion-dollar idea waiting to propel a company to the next level. The challenge: Small markets don’t work like large markets, so the roll-up strategy has to be different.
Companies are now on the hunt for a “category-killer” model for small-market radio, and breaking new ground in that effort. Mine is one of them. Here’s a snapshot of what we’re doing at Debut Broadcasting so far and why I think we’re really on to something.
Share the wealth
For just more than a decade, we’ve been a syndication company providing everything from content to suites of revenue, production and Web site tools to more than 1,400 radio stations in the United States and Canada. Our sweet spot has been medium and small markets, where we’ve focused on the need to increase revenue in a low-staff environment.
A major learning we bring to the search for this new paradigm in small markets is our experience with Wal-Mart. Many of our advertisers and sponsors want to sell more of their products at Wal-Mart. To effectively help them do that, we had to understand Wal-Mart and how it works.
And until recently, where was Wal-Mart? Not the big markets. Wal-Mart’s “bread and butter” is small markets. So we watched how Wal-Mart works and took the best of its strategies and applied them to radio.
When we saw corporate radio divesting of smaller markets, we knew they were effectively raising the white flag and saying, “Our system doesn’t work in these markets.” They sold, rather than take the time to figure out how to make these markets work — a simple cost-benefit analysis for them.
But our management team started our careers in small markets and no matter where we’ve gone from there we’ve always had a passion for them. We knew there had to be a way to build a radio company that can be successful owning and operating large numbers of radio stations in small markets.
It is time for more learning from outside the radio industry. Starbucks … Google … FedEx … Southwest Airlines … Marriott … We looked at these and other companies to determine what we could learn from their efforts to get sophisticated logistics right every time, innovate effectively and deliver a consistent product or service over and over again all over the world.
In short, look at what “best in class” companies are doing and apply their formulas for success to radio.
We now believe the new small-market paradigm requires building Super-Regional Clusters.
Everyone understands the idea of a market cluster. A Super-Regional Cluster takes that a step further, chaining together multiple clusters within a tight geography with a regional management structure (one general manager, one engineer, etc.) for three to five clusters.
We also believe in centralization of administration and programming strategy, another synergy from our syndication experience. We’ve become accustomed to moving things back and forth with a large number of radio stations simultaneously. So we’ve been able to centralize functions like traffic and billing, human resources and more.
Programming also is centralized. Roughly 80 percent of all music-based radio stations fall into eight primary formats, with some regional variations. Again, achieving a synergy with our syndication experience, we’ve created those eight formats and we ultimately will deliver music, imaging and online strategy from our Music Row headquarters in Nashville. (But there’s a big extra piece — stay tuned.)
Structured sales strategy
The new paradigm has to concentrate on centralized sales strategy. Small markets typically lack high-powered sales talent. What have we learned so far?
Identify great people (charismatic closers) who have a sequential mindset, meaning they’ll follow the system rather than buck it. Give them a structure for success; for us so far that means laptops loaded with high-tech sales and training tools that are easy to use and look professional. But don’t forget we’re in small towns.
Don’t get me wrong, you’ll still kiss many frogs to find a prince or princess. But when you find that person, he or she will out-perform the level of natural skill and education typically found in small markets.
Here is where the new paradigm for small markets takes a gigantic twist from the norm: We spend a lot of time localizing the stations.
Our goal in centralizing programming strategy is to deliver the best-possible-sounding product. Back to learning from Starbucks; when you manage a Starbucks you don’t have to worry about what the menu is going to be, who’s going to supply the coffee or even how much to order. That’s all done for you. A Starbucks manager concentrates on two things: hiring and training the best possible people for that particular Starbucks location, and making sure customers have the best possible Starbucks experience at that Starbucks location.
It’s simple and it teaches us a lot about how to run a radio station.
We don’t have traditional programming directors. We have a localization manager, whose job it is to take the format (music, imaging, etc.) and localize it, make it super-serve the audience of this radio station (i.e. weather, news and information, lifestyle tie-ins and more). We do it with a proprietary strategic planning process that has yielded fantastic results so far.
We put the overall sound of our stations up against any large markets, and yet they perfectly mirror the local surroundings, becoming vital to the listeners they serve, who listen more and in greater numbers, who subsequently generate more tangible results for our local advertisers, who in turn buy more advertising. We just had to re-think what “local” really means.
Staying faithful to the foundations of what drives local advertiser support — namely, results — we are adding the piece to the puzzle that perhaps our large-market corporate radio brethren lost sight of. In small markets we’re playing the “results game,” not the ratings game. Ratings never walked into an advertiser and bought something.
So, aren’t satellite radio, the iPod and the Internet killing your business? Been asked that a few times? I’m tired of it, frankly, and it reflects how terrible we are as an industry with our own marketing.
Advancements like HD Radio and radio’s leadership in new media go completely unnoticed, and it’s our own fault. We always took for granted that we were sexy; now we’re middle-aged and realizing we have to work out and get our teeth bleached.
But that’s okay. We’re just quietly positioning to become the local new media sales force. After all, do you expect to see Google opening a field office near you anytime soon?
Google believes it can sell anyone anything anywhere anytime. Okay, but transactions are more personal in small markets. I make a point of visiting key clients whenever I’m in our markets because they like to know I know they’re doing business with us — and I learn a lot from them. Our system evolves based on what I learn out on the frontlines with our people dealing with customers and listeners.
XM, Sirius, Google and the rest aren’t going to have a local sales force in small markets anytime soon. So part of the new paradigm is embracing new technology and integrating new media into everything we do. It goes far beyond streaming our on-air signals too. It’s going to have to go much further, and soon.
We’ve begun thinking about radio in two dimensions: on-air and online.
Why embrace new media? Because General Motors can buy Internet advertising from Google and cover the entire United States — but there is no real practical way for your local Chevrolet dealer to do the same. So by embracing new media we become the local new media sales force. And we’re not giving it away as added value, either. We’re selling it in combo, much like the early days of clusters with duopolies (yes, I’m that old).
Our business model is seeing good success but remains a work in progress. We learn more every day, and I suspect it will continue to evolve, including the new challenges it will face as we continue to grow.
We’re not yet claiming victory in the race for a new small-market paradigm, but if it’s a mountain we’re climbing we can see the summit and we’ve got a flag in our back pocket.