The Truth About Digital

Let’s get something straight – digital is not the salvation of radio, in fact, it may hurt it – digital is life support for an industry that is hell bent on euthanizing itself.

Digital Delusion:  Almost every radio group is trying to be Townsquare, a company that in 2021 will derive over 50% of its total revenue from non-radio revenue.

  • Radio groups are delving into digital to shore up their lagging revenue numbers – figures that were declining consistently years before the coronavirus even if “digital” is not really income derived from the internet, apps or social media. 
  • Miller Kaplan, provider of the only attempt at measuring radio market revenue, allows for a very liberal definition of digital and permits contributing stations to decide what is and what isn’t. Don’t rely on that.

Townsquare is the envy of radio’s digital future as competitors are falling for the myth that digital revenue is a solution to their radio revenue decline.

  • In a preview of their fourth quarter revenue yesterday in an effort to sell bonds, Townsquare defined itself as “a community-focused digital media, digital marketing solutions and radio company focused outside the Top 50 markets in the U.S.”  Radio was last, digital was the first two descriptors.

  • Townsquare is trying to sell bonds to pay off debt (a good thing) on the strength of its digital future.

Digital revenue is not enough to save radio:  There is not enough coming into radio markets and when it is reported in Miller Kaplan as mentioned above, what is termed digital is defined by the station not by a set of universal standards making it virtually impossible to gauge the real digital future.

  • Third-party digital is all that stations can really sell – digital revenue on a scalable basis is not enough to organically generate digital content to sell. All stations can do is to re-sell third party platforms while paying middlemen for the privilege.  Pay middlemen and commissions with very little profit for their efforts.   

Face to face selling has become a precious commodity as financially-troubled radio groups look for solutions that are cheaper than fielding a large sales staff with the obligation of paying commissions and benefits.

  • Saga relies on local ad sales not digital and it has been surviving the coronavirus economy even though they are feeling the impact that local businesses do.

  • The broader market also perceives Saga as radio since their stock is at $23.51, the highest of all radio companies including digital.

Is digital worth it or not for a radio company?  That’s the question for the year 2021 which will start out in lockdown again and challenge local broadcasters.

  • For Townsquare, yes. They are morphing into a full digital company as the radio industry declines.  Their future is not in radio but in digital and subscriptions in which they generate impressive amounts of money now.  Townsquare is hiring hundreds of people – mostly in digital.

  • For Saga, no. They are skilled at selling local businesses using the model that still works.  Because the company has little debt, they have less pressure to blow off local programming or sales to make debt payments.

  • For iHeart, who knows? They are temporarily in the hands of private equity owners Lee & Bain who are long in the tooth to get out.  iHeart is many things – radio, live events (during non-COVID times) and syndication but not digital.  And podcasting is not digital unless of course they choose to report it as such in Miller Kaplans.

  • Entercom, Beasley, Cumulus – no way in this lifetime. Entercom has a date with a reorganization in 2022, a second Cumulus bankruptcy is baked in, Beasley isn’t big enough to offset radio ad revenue losses with a fictional category that doesn’t really exist except for the third-party reselling business.

In other words, with the exception of Townsquare which is deemphasizing its radio footprint, digital is a distraction not a solution for radio groups that will soon learn the hard way that investing in local ad sales was the better option.

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Jerry Del Colliano is a professor at NYU Steinhardt Department of Music and Performing Arts Professions Music Business Program.  His background includes Clinical Professor of Music Industry at the University of Southern California, TV, radio, program management, publishing and digital media.

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