Most of our team skipped the Consumer Electronics Show this year. Instead of pushing through overcrowded floor exhibits or trying to crash AT&T’s Macklemore bash, our execs were barnstorming the country, visiting more than a dozen new or returning entrants in our core local broadcast media business. We made the strategic decision that this was a better use of our time. And as it turns out, we came away from our week on the road with more enthusiasm than one usually experiences after a big industry event like CES.
It’s easy to get excited about what’s new. But I’m convinced that the top media start-up sector in 2014 is, believe it or not, radio.
There’s no denying that radio assets are hot right now. Seasoned media entrepreneurs such as Larry Wilson, Dean Goodman and Steven Price have in past months been quietly reshaping the landscape, snapping up properties to create a new breed of company focused on radio as a gateway to a vibrant local audience. And these entrepreneurs have nearly $1 billion of committed capital behind them.
So, what’s driving these moves? Let’s be blunt: The radio business had some over-leveraged players going into the recession of 2008. When Steven Price and Stuart Rosenstein, cofounders of private equity firm FiveWire Media Ventures took over Regent Communications in early 2010, for example, the company—made up of roughly 62 radio stations in 13 midsized markets—was bankrupt. The privatized company, renamed Townsquare Media, took on additional investment from Oaktree Capital Management and has since expanded to 312 radio properties across the U.S.
Similarly, veteran radio executive Larry Wilson, former CEO of Citadel Broadcasting, in October acquired eight radio stations in the San Antonio, Texas market out of receivership for L&L Broadcasting, adding to the 35 other stations acquired at favorable prices since the company’s founding in 2012. The same story goes for Dean Goodman, who purchased 33 radio stations in eight markets from NextMedia to form Digity, with the help of Garrison Investment Group.
But there’s more to the story than just bargain hunting. The interest of these seasoned radio entrepreneurs and private equity investors is a vote of confidence for undervalued yet highly resilient radio assets in today’s multichannel world.
Radio remains the straightforward, reliable friend amid a sea of digital choices, activated at the push of a button with free content delivered on more than 200 channels. You don’t have to toggle up or down, enter a password, pay a fee, check your wifi connection or get past a firewall. Nor do you have to input your favorite reggae/hip hop/acoustic artist to get similar suggestions. That’s fine when you want to curate your content but nothing delivers like local broadcast for those moments when you want instant information and entertainment.
More than 90% of listeners still tune into radio—roughly matching the same percentage rates as they did 40 years ago, with radio consistently reaching more than 9 out of 10 persons in the 12+ population base. Time spent listening also remains strong at nearly 2 hours per day for all persons, according to the Radio Advertising Bureau.
The Value of Local
After years of huge consolidations, these entrepreneurs clearly recognize the value of local radio audiences. Goodman, for example, plans to focus Digity on “hyper-local” markets. And Wilson recently praised the quality of the radio personnel at stations he had acquired and how they had maintained the stations in tough times. “I’ve never seen a better performance under the circumstances than what these guys have done,” Wilson told reporters after his most recent set of acquisitions.
But these guys aren’t just turning back to old business models. In many cases, radio assets are being wrapped in with other new media to create interesting new hybrids. Townsquare Media, for example, also operates more than 300 websites and has a live music events arm while Digity plans to offer local communities not only on-air products but also innovative digital strategies.
Companies such as Townsquare, Digity and L&L are a new breed of multichannel media that will seek to leverage loyal local radio audiences wherever they are, whether it’s on Facebook or Twitter, on smartphones or listening to AM/FM radio in the car. Brands that want to reach and engage these audiences should be listening as well.
Haley is a former president and CEO of the Radio Advertising Bureau. Marketron specializes in revenue management and audience engagement software that serves more than 7,000 media organizations.