March 2010
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Future of AM radio

It is clear to me that radio is changing, in some ways it is changing for the better, in many ways it is changing for the worse.  In spite of many bad business decisions made by over priced MBAs, large consolidated radio groups seem to be hanging on, if only by their finger nails.  It is very likely that the investment banks, who have the most to loose, are not interested in seeing their loans written off in a bankruptcy proceeding.  As we all know, the consolidators that paid multiples of 15 to 16 times cash flow for stations, way over extended themselves.  There is no hope that values will ever return to those levels, so the banks are now in the radio business.

Sure, the banks are not the owners of record, and the FCC never would consent to transfer all those licenses to so many investment banks. However, they are calling the shots, making “suggestions” on how best to run things.  Offering perhaps a 1/4 percent reduction in an interest rate if the expenses can be reduced below a certain level.  Unfortunately, for the communities like Ellenville, NY, their local radio station means nothing to the banker living in Manhattan.  It is a number, and more than likely, a negative number on a spreadsheet.  It means nothing to the group owner in San Antonio, other than some miscellaneous real estate assets.  Same can be said for all the radio stations in the Hudson Valley if not the entire country.

Why is this important?  I mean, who really cares?  The apparent answer is no one seems to care.  Local news, or what used to be local news such as town board meetings, high school sports scores, police blotter, and all of the many other small town things do not get the hearing they used to.  Town boards; well if no one shows up for the meeting to pass the new zoning laws, so be it.  School boards; sure, raise the taxes, most home owners will just pay the new higher amount and not say anything.  It is for the children, after all.  Seems that the local constabulary is spending more time at the Dunkin Donuts than out walking around checking doors?  Thats the way it goes.  With the demise of local newspapers, detailed in a previous post, who is keeping an eye on things? Who lets the community know when something doesn’t pass the smell test?

Receiver tuned to local AM station playing good sounding music

Receiver tuned to local AM station playing good sounding music

A small AM radio station can be made profitable, just not at the margins expected by the big boys.  There is a niche for perhaps 1 KW or 5 KW non-directional station with it’s own real estate that is not in too bad shape can be turned into a community radio station.  Those type stations are fairly low maintenance, most have some type of PSRA and PSSA to keep them on at least during drive times if they are daytimers.  Others have minimal amounts of night time power.  Almost all of them cover their city of license, even with small night time powers.

I have been looking into good quality AM radio receivers and there are a few out there which are not too expensive.  Most GM car radios and older Chrysler radios have good AM radios.  A group formed to promote AM radio, ensure that auto makers install radios that are at least as good as their older versions, work with manufactures to make better small table top receivers and such would go a long way to improving the unjustly bad reputation that AM broadcasting has received.  Further, working with the ARRL (amateur radio) to reduce and keep noise levels from things like BPL and other noise making technologies that do not comply with current FCC regulations would also help.  It is true that our environment has become electrically noisier, one might not be able to listen to the 50 KW clear channel station 500 miles away, but the local station should come in well enough to enjoy, especially if the programming is good.

FM radio is becoming over crowed with translators, adjacent channel HD radio interference, LPFMs and whatever else can be shoe horned into the band.  The quality of FM is set to decline precipitiously in the next few years.  It seems that with the right combination of good local programming, good receivers and radio station owners/operators that are not looking to get listed on the NASDAQ, small AM stations could survive, if not thrive on the business that the big stations turn away.

There are a number, a small number, of stations already doing this.  As long as there is free local news and free quality programming, people will listen, no matter what band it is being broadcast on.  Free trumps paid any time, any day.

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3 comments to Future of AM radio

  • J. Aegerter

    I have worked in this industry for four years while attending college about 40 years ago. It was basically a gold mine then as just about anybody could make money with little effort. FM air time couldn’t be given away and AM was King Kong. With the myriad of programming sources out there today, AM has been drastically fragmented. I have always believed that AM radio was a local business kind of like One-Way Paging. The big boys usually always screw things up, with the total emphasis on profits. Don’t get me wrong, I love profit, but my profits have come in by “over-performing”. The big boys don’t get this because the stations they own are only a number in a ledger. I believe a local owner can still make a living running an AM station, but it is definitely getting harder. Perhaps an adjunct to another business, like the way the industry started with Jack Poppelle playing Christmas Carols on WOR back in the day. L.Bamberger and company let him put the little station on the air to sell radios in their NYC department store, and it worked real well. He ended up marrying the head of the Housewares department after his radio broadcasts sold an overstock of China plates that weren’t selling. Now that is RADIO BROADCASTING!

  • Your comment “The banks are in the radio business” is very accurate. It pretty well sums up the current problem. the banks wanted to invest and when it bottomed out they found themselves holding the morgages to houses they didn’t want to live in… But now, permanently tethered they’ve become insidiously incompetent landlords.

  • admin

    It’s not just radio either, it’s everyone’s business. Soon, the banks are going to rule the world.

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