🔒CT AM radio faces uncertain future

Earlier this year, Texas-based Petrus Holding Co. made a bet on the future of AM radio in Connecticut, when it acquired Westport's Connoisseur Media, which owns 42 radio stations in 12 markets, including WDRC in this state.

Steve Blasnik, Petrus Holding's president, said it made the acquisition, for an undisclosed sum, because it believed in the “enduring importance of radio, which continues to be the media with the greatest reach among adults.”

While that may be true, the future of AM radio is uncertain as the industry grapples with a host of challenges from technology to changing demographics and financial pressures. Experts see it continuing to do well in the short term but its fate in a decade or so remains cloudy.

Rich Hanley, an associate professor of journalism at Quinnipiac University, said terrestrial radio, which includes AM and FM radio, is listened to by 90 percent of the population once a week. “It's still a force,” he said, adding it's not as profitable as it once was and most likely isn't going to grow in listenership.

AM's strength, the professor said, is it is local and can provide advertising services to local advertisers who are not interested in the wide reach of the Internet. They want to focus and build their local identity. Enough people are listening, so it makes sense, Hanley said.

That's one reason the Connecticut Business and Industry Association invested heavily recently in a radio marketing campaign to push Gov. Malloy and the state legislature to cut spending in the state budget. Brian Flaherty, CBIA's senior vice president for public policy, said AM radio still drives the conversation in Connecticut. “AM radio is still like the electronic water cooler where the conversation happens,” he said, declining to disclose how much CBIA spent on the one-week campaign.

“From our perspective, we want to be where the conversations are happening. We've done a significant amount of radio buys,” Flaherty said. A former state representative from Watertown, Flaherty said another target audience for radio ads is politicians. “The one demographic that seems to listen is elected officials. You catch them. They get stuck in traffic just like we do,” he said.

Still a draw

The audience that is listening is predominantly 45 and older, according to Gary Capreol, senior vice president of media and analytics at media-marketing firm Cronin & Co. in Glastonbury. News/talk radio, the staple of AM, is the second most listened to radio format in Connecticut behind country music, he said.

Steve Salhaney, operations manager for CBS' Hartford stations, including WTIC-AM, said that demographic doesn't concern him with regards to the station's ongoing viability. He said as younger listeners' needs mature, they turn to the information provided by news talk radio stations like WTIC.

“We try to be as relevant as we possibly can,” Salhaney said. “Depending on the program we may not be extremely relevant to the younger demographic until somebody's in a certain space in their lives where the news, business and finance, and weather are really important. There comes a point where people grow up so to speak and all of those things are important to them.”

Capreol said AM radio is still valuable to advertisers, particularly with retailers who use it as a critical component of their marketing campaigns. “Radio still reaches a high number of adults on a weekly basis. It's not going away. It's evolving,” Capreol said.

Michael Harrison, editor and publisher of Talkers Magazine, which focuses on the talk-media industry, has a more cautious view of AM radio's future. Based in Longmeadow, Mass., Harrison was a talk-show host on WTIC-AM in the early '90s.

“There are rumblings throughout the industry that some powerful media companies are facing debt and selling off properties,” he said. Buyers of those properties can probably make a go of it. Harrison said it's not that the radio model doesn't work. It doesn't work when a station owner paid too much. “A divestiture could breathe more life into the medium,” he said.

One company that has been doing well, Harrison said, is Connoisseur Media, which took on new ownership in July. Among the Connecticut AM stations it owns are WDRC, WMMW, WWCO and WSNG. It also owns Hartford classic-rock station 102.9 The Whale, among other FM stations.

In an interview with Radio Ink magazine in August 2013, Connoisseur's CEO Jeffrey Warshaw forecast what made Connoisseur and its stable of 42 radio stations attractive to investment by Petrus Holding Co., owned by the Perot Co. “If you don't think this business is going away, now is the best time to buy radio stations,” he said, alluding to cheap financing and the fact that stations are worth six times their annual cash flow. At one point, stations were selling for 18 times cash flow. He said his stations in 2013 were operating at 15 percent margins, according to the article.

Harrison said Connoisseur Media is an example of a company that could extend the life of local radio as a viable media because it's not loaded with debt and has an understanding of local programming. “They seem to be doing a pretty good job. The biggest problem [for some radio owners] is the debt,” he said.

For sale

Companies like CBS, which owns WTIC-AM and other stations locally, would like to get out of midsize markets, industry experts say. (A CBS Radio spokeswoman said no sales are pending.) The Hartford-New Britain market is ranked 52nd in the country. The larger the market, the better stations do in general terms with national advertisers. Also important is how stations rank compared to other stations. A lousy station in a big market isn't going to get advertising while a big station in a smaller market could.

Stations that aren't operating with a crushing debt load can be successful if their programming serves a specific targeted need of a targeted audience, Harrison said. “You have to have indispensable programming that people need,” he explained, like foreign language programming or sports. “Sports work well because fans want to hear the play-by-play.”

Salhaney, who has 27 years of experience in the market, said local programming continues to be the backbone of WTIC-AM's success. It is usually near the top five in overall ratings in the market. “For the most part we are live and local,” he said. “We have very little syndicated programming.” A lot of air time is devoted to UConn sports play-by-play, as well as Red Sox, Giants, and Patriots football.

Harrison and Capreol both acknowledge that satellite radio and streaming radio services like Pandora and iTunes can challenge listenership. About 24 percent of adults use some kind of streaming service, Kapriol said.

While concerned, Salhaney isn't preoccupied by the challenge. “At the end of the day, there is more competition. I think people are using more information and media than they ever had before. But we truly believe that if we do a great local product that people will come to you,” he said, adding that WTIC streams its broadcasts.

The biggest threat to AM radio could come from the smartphone. Kapriol said in the near future more than 30 million smartphones will have FM chips allowing listeners to tune into any FM station in the country. “That could erode the AM listenership,” he said.

Harrison said that's not going to be an insurmountable problem. One technological aspect that could advance AM radio is translator stations that carry their signal on the FM band. The Federal Communications Commission says translator stations that provide service within the primary station's protected service area classify as “fill-in” stations.

Ultimately, said Hanley, the Quinnipiac professor, AM radio may not be around in two generations to come. But, he added, “The demise of radio has been coming next year for 20 years now. I wouldn't count radio out. It is still an efficient way to transmit information and consume it. With a $10 radio and 9-volt battery, you have the world.”

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