RAIN: Radio And Internet Newsletter: Possible errors of the Rehr era

Possible errors of the Rehr era
·May 11, 01:08 PM
Posted by: Kurt Hanson

While I was in Washington, DC last week, the news broke that NAB CEO David Rehr had resigned after 3-1/2 years in the position.

As you probably know, Rehr’s background was that of a Washington lobbyist for the beer industry with strong Republican connections. Despite having no background in the broadcasting business, he nonetheless inherently became the sort of de facto leader of the radio industry. (Although, to be fair, it should be noted that his job was probably at least 70% TV and at most 30% radio.)

While I admired Rehr’s intelligence, connections, and drive, I believe we’ll eventually look back on “the Rehr era” and see that the position he took was wrong on several key issues. (Although the jury is still out and I admit I am the one who could be proven wrong….)

The satellite radio merger

Trying to block the intended merger of Sirius and XM was a key NAB initiative over the past couple of years.

Yet in fact I believe the merger was one of the best things that could have happened to terrestrial radio groups. Why? Because satellite radio made its success in large part to the great press it got, and that was largely due to the XM-vs.-Sirius story that was the heart of every journalist’s article on the subject.

Journalists love battles. And so do consumers! To wit: When there was a great top 40 battle between WLS and WCFL in Chicago in the ’60s and ’70s, both stations thrived. When WCFL changed format and the “battle” stopped, it was the beginning of the end for WLS as well. The thrill was gone.

The merger is one reason you never hear about Sirius XM anymore (except vis-a-vis their bond refinancing problems) — there’s nothing exciting and interesting about the field anymore.

Rather than fighting the merger — and using up political capital that they should have been saved up for the performance royalty fight that they knew was coming up — the NAB should’ve let it happen (or at most played Br’er Rabbit and objected as a feint).

HD Radio

Ibiquity’s Bob Struble has it exactly right when he says that all other forms of entertainment are going digital and that radio must too.

Unfortunately, it turns out that “going digital” in radio’s case is not going to happen via the distribution method of IBOC (In-Band On-Channel), but rather via the delivery mechanism of the Internet. Already the latter method has tens of millions of weekly listeners on PCs, plus millions more on smartphones (many in cars), while cumulative HD Radio sales are still under a million units. (And the gap is spreading.)

Radio’s effort to contain digitally-delivered radio to their scarce FCC-licensed frequencies has cost radio hundreds of millions of dollars in equipment upgrades — and, worse yet, more than $1 billion in wasted on-air promotion value.

And, meanwhile, most of the great Internet radio opportunities are being grabbed by outsiders (e.g., Pandora).

“Radio Heard Here”

In addition to wasting over $1 billion in airtime on spots for HD Radio, the radio industry has also wasted (in my opinion) hundreds of millions of dollars in airtime on a misguided PR campaign based

on the hypothesis that the radio industry is in great shape, it’s just that consumers need to be reminded how much they love it. (“It plays the music for a teenage love affair under a summer night sky…”)

It’s like if hamburger sales were declining, having a solution that was comprised of posters inside McDonald’s and Burger King and Wendy’s saying “Hamburgers Eaten Here.” Problem solved? I can’t imagine so.

“No Performance Tax!”

The most critical issue affecting radio broadcasters’ future financial performance is that of the encroaching Performance Royalty Act.

Rehr’s approach was to take a hard-as-nails hard line (i.e., “Over my dead body!”) and brook no quarter. Furthermore, in a battle in which there’s plenty of disingenuousness all around — e.g., the record labels positioning this as an effort solely to help the poor struggling musicians — Rehr’s characterizing of this as a “tax” just strikes me the wrong way. (A tax is money collected by the government for its own use. This is no more a “tax” than ASCAP royalties are. In other words, it isn’t.)

The strategy of calling it a tax recalls the classic “Calvin & Hobbes” cartoon in which Calvin yells bold threats to the monsters under his bed, explaining to Hobbes, “They lie. We lie.”

Missed opportunities

The four issues above are things that the NAB is proactively doing. What’s missing from the list are things that the radio industry could’ve done but hasn’t.

For example, the radio industry could have commissioned a rigorous national research study to examine the promotional effect of radio airplay on music sales. (See old RAIN essays about “The Shambala Experiment.”) It could’ve come up with a strong ad campaign for marketing broadcast radio as an advertising medium. It could’ve launched an initiative of adding local musicians on radio stations across America. It could’ve coordinated some kind of major, industry-wide chartiable initiative.

Many or most of these issues will be up for reevaluation when Rehr’s replacement is in place. Fingers crossed!

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Comment

Excellent review of the Rehr Era. A fair and accurate analysis without any unnecessary blog bile.

— Dave · May 11, 10:19 PM · #
Once again Kurt nails it! The NAB’s positioning of the performance royalty as a tax is weak and frankly laughable – almost as bad as the “Democratic Socialist Party”. Sound Exchange is so much more sophisticated and strategic than Radio its remarkable.

— Marconi · May 14, 01:58 PM · #
It is easy to look from outside in and make uninformed assumptions. the issues are far more complex and in fairness it is too early to critique an era that, albeit, is lame-duck still is in place.

— Joseph M. Bilotta · May 15, 01:57 PM · #
I think Kurt is dead on here. His assumptions are in fact, more informed that those of the people who made and supported the key initiatives of the “Rehr era”.

If big changes aren’t conceived and implemented, the recent past may well be seen as the time while Rehr fiddled and radio burned.

— Bob Bellin · May 27, 04:21 PM · #
Who’s feeding iBquity?

— PocketRadio · Jun 2, 11:13 AM · #