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Monday, February 12, 2007

What's Wrong with This Picture?

Have you ever been apprehensive about some piece of information that you assumed was true but hadn't any statistic to confirm it? The fine folks at Inside Radio revealed such a stat during the RAB festivities in Dallas last week.

Many radio industry observers, including myself, have drawn conclusions about the consolidation of the radio business that point to the "C" word being responsible for much of the industry's problems of late. Whether you are a sales person at a radio station or a management expert, one of the arguably key issues facing the industry is the lack of focus that comes with one manager overseeing multiple stations, staffs or budgets.

As I pointed out in a recent missive here, the problem of too much on one's plate could be at the root of the listener death in Sacramento where a station's promotion staff approved what became a deadly promotion that involved the consumption of gallons of water by its listeners all in the name of winning an electronic gaming system. Had the general manager been more aware of what was going on 'down the hall', I believe this promotion would never have made it to air. The GM (and perhaps other managers) just had too much to keep track of.

Now we know just how prevalent is this issue of consolidated management and staff. Inside Radio reports through their analysis that there is one General Sales Manager in our business handling 13 radio stations. Another's doing 12 and another 11. Four GSM's handle 10 stations, 11 oversee 9. 34 have eight stations, 48 have 7 stations.

129 General Sales Managers handle 6 stations, 198 have 5, 325 have four, 509 have 3 and 1359 GSM's have two stations. Interestingly, there are still 2477 GSM's out there that still handle just one station. There are 3921 situations out there where the GM is also the GSM!

All of this to say that pulling back the covers to reveal to the light of day these statistics brings a certain soberness to this whole discussion about whether multiple stations under one manager is truly the most effective way of bringing the radio business out of its doldrums.

According to these stats, of the approximately 10,000 commercial radio stations in the U.S., only 25% are managed by one general sales manager. You do the math: that means that 75% of the country's commercial radio stations either have one GSM overseeing multiple properties or the GM, serving also as the GSM, has other issues on his/her plate.

Operational efficiency (and bottom line improvement) is at the heart of why this development occurred. Perhaps it has helped with the bottom line - at least from a personnel cost perspective - but do you think it has done much for efficiency?

Part of my job involves speaking with many members of station management on a weekly basis. Most of those I speak with tell me they are not being more efficient and there is frustration that these managers can't be more efficient that they just can't be proactive.

I doubt we'll see a change in this strategy on a mass scale any time soon. Along with efficiency problems with station management, consolidation has also brought with it higher purchase multiples and higher debt on one side and Wall Street analysts on the other both squeezing the ability of the radio business to operate effectively. This pressure will likely prevent most broadcast companies from returning to yesteryear's station management structures. They simply can't afford to.

One can only hope that more wisdom enlightens our industry's leaders and a solution to this madness can be found.

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