Business Columns & Blogs

KING-FM’s new model looks a little familiar

For veterans of the daily fishwrap business who have long lamented the newspaper industry’s attempts to do itself in, one of the more irritating arguments in favor of abandoning its financial model has been, “Well, why can’t you just give away your content? Radio has been doing it for decades.”

The counter-arguments to this reasoning include history (radio never had subscription revenue as part of its model), advertiser preferences (a subscription base gives them a much better sense of who their ads are reaching), finances (news-gathering done well is an expensive proposition) and scarcity value for the radio model (in terms of hours in the day and the number of broadcast licenses in a market).

To those arguments may be added one more, one that may prove even more powerful for radio than the others combined: The free-content, ad-supported model might not work any better for radio than it does for print.

Like the dead-tree division of the media spectrum, traditional “terrestrial” radio has been beset by a recession that has slashed advertising spending, especially in categories such as car sales that once provided substantial revenue.

More ominous, though, are long-term demographic and technological trends. You’re no longer limited to the local radio signals you can pick up in your car or home. With Internet streaming you can tune in radio stations from around the globe.

That is, if you’re bothering with radio at all.

Individual and portable music players as well as the wealth of video diversions delivered via cable and the Internet are carving out huge chunks of time once commanded by radio. Increasingly radio, like newspapers, is seen as an old-person’s medium.

Which makes a recent decision by venerable radio station KING-FM (98.1) fascinating to watch for what it says about the state of all types of media today – at least it’s fascinating to your business columnist, who, for 10 years, wrote a weekly column covering the local radio scene for a now-defunct Seattle newspaper. It’s a harbinger of what might be to come.

KING-FM is a rarity in several respects, a locally owned, stand-alone radio property and a commercial classical-music station when most in that format are either in the nonprofit, public-radio sector or have switched to another format.

KING-FM isn’t abandoning classical music, but it is switching to a nonprofit status, relying on listener support and commercial underwriting in much the same way that Pacific Lutheran University’s KPLU-FM (88.5) does with jazz – another niche-music format. It hopes to complete the transition by July 2011.

Why? Chris Bayley, chairman of the entity that owns KING-FM, put it bluntly in the initial announcement: “With all the changes in media in the United States, commercial advertising is no longer a fit for KING.”

The problem, program director Bryan Lowe said, is that revenues have been declining, a trend line that can’t be blamed solely on the recession.

“Businesses are consolidating, industries are changing, and ad agencies continue to seek broad-based audiences that fit neatly into the general population,” he writes. “When I started at KING-FM, we had lots of airline spots. Now those are a rarity in this consolidated/Priceline.com-centered world. And the other stations are all owned by a handful of companies across the entire country.”

Lowe says conversations with other public-radio classical stations indicate that listener support generates about 70 percent of their revenues.

Another source would be underwriting by corporations; if you’ve listened to the National Public Radio-affiliated stations in this market (KPLU and KUOW-FM) you know that the sponsorship announcements are nearly as elaborate as commercial-media advertisements. Those sponsorships might actually prove to be more valuable if the advertisers – sorry, underwriters – sense they’re free from the clutter of commercial radio and thus gett- ing more audience mindshare.

That KING is more than considering such a radical restructuring is indicative of radio’s challenges and the lack of definitive answers to them. Radio stations have been slashing costs by laying off long-tenured hosts, debating whether hyper-local and personality driven radio is the answer to iPods (or whether people just want announcers to get out of the way of the music) and trying to figure out if there are listeners or revenue to be found in technologies such as HD radio and streaming radio.

KING-FM has been among the most ambitious in this market in developing second and even third channels of programming using Internet streams and HD technology (it has already done “pledge drives” to support the Internet programming, experience that it can draw upon when it converts its main signal to a listener-supported model).

Lowe says KING-FM already gets several thousand listeners a day via the Internet, and believes that “once wireless Internet becomes ubiquitous, Internet radio is really going to take off.” But the radio industry should be wary of counting on technology to give audience and revenue just as it has taken away. Despite massive promotion by the radio industry, HD has yet to gain much traction with the listening public. And satellite radio, once feared as another devastating blow to terrestrial radio, proved so successful that the two companies granted national licenses had to be merged in an effort to form one viable company.

KING-FM plays in a music niche that is much smaller than other genres, which is a disadvantage. But it’s also an advantage in that devotees of classical music are, well, more devoted and more likely to support a local station than fans of larger music segments such as country or rock-pop.

It won’t be alone in trying to find a new financial model to support a media venture. More news outlets are considering moving to a pay-wall model similar to what the Wall Street Journal has successfully employed for years. Some news ventures are looking at the nonprofit, reader-supported approach. Whatever the medium, market or model, the motivating concern is that the advertising market is now so fragmented that an ad-only model may not work financially for anyone.

It could well turn out that what KING-FM and others are attempting, to essentially charge for content (even if it’s voluntary), isn’t so radical or even new a step.

It wasn’t that long ago, after all, that the notion of paying for TV content was considered unthinkably radical. Anything ever come of that?

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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