ARNN IN THE NEWS: Why NPR's Implosion Means Opportunity For Commercial Radio

RADIO INK: Eric Rhoads - When can you last remember the biggest story in the consumer press being a radio story? Though the story is about NPR imploding, the bigger story should be that commercial radio is having a giant opportunity placed in its lap at a time when it's more needed than ever.

I shared my thoughts about NPR, which were written before the O'Keefe sting video. NPR exec Ron Schiller was offered $5 million by associates of filmmaker James O'Keefe, pretending to be members of a fictitious group they claimed was associated with the Muslim Brotherhood. In that video, Schiller says NPR doesn't need its government funding. (You can almost hear him finishing the sentence in his mind with "because we only need people like you to fund us, and we'll promote your voice on our 900 stations.")

This brief moment in time revealed the true colors of NPR management and their attitude about middle America. Schiller, who had already given notice of his resignation, departed immediately, and NPR President/CEO Vivian Schiller (no relation to Ron) was forced to resign as well. The story will no doubt result in a lot of offended Americans ending their donations to NPR. And of course it could also result in the complete and immediate defunding of NPR by the federal government.

If you were to look at the audience for NPR's long-form news, you would learn that NPR stations have a significant number of listeners who simply enjoy long-form news and have been willing, until now, to tolerate NPR's bias. But much of this audience will now feel disenfranchised, and will never support NPR again. Though Ron Schiller said NPR could get along without government money, I predict NPR will die faster than a fly next to a can of Raid.

So what's the big story for radio?

Look at the conditions. Months ago, I wrote that the spoken word will become perhaps the most important format in radio. If radio loses the music licensing battle and ends up paying 8 percent of gross revenues to the labels, only one music station per format in each market will be able to survive. The second- and third-tier music stations in each format won't be able to make what could amount to staggering royalties payments. Could it happen? Yes. This issue is still looming and not yet resolved.

Another issue is that radio has aided and abetted its enemy -- by arrogantly ignoring it. "Pandora can never do what radio can do," they say. Though I believe strongly in radio, I also believe Pandora will be the hottest IPO this year aside from Facebook, because people love it, embrace it, and listen to it. It is distributed on every smartphone and is on the way to car radios. I recently saw the BMW in-dash with Pandora, and it works flawlessly. Radio's exclusive in-car audience is being threatened.

The perception is that Pandora is hot, even if its audience numbers compared to radio are still small. But the growth patterns of Pandora and others, like Slacker and TunedIn, are impressive. If someone just wants music, why not pick Pandora, with no commercials and no personalities, and have it customized to their own taste?

In 1999, at our first Convergence conference, I stated onstage, "Radio needs to take advantage of its core strengths of localism and personality. Being a jukebox, segueing music, will only set the table for online music radio, which can do it better. Yet so many of our music stations are no longer offering deep local content, are no longer involved with and reflecting the community, and have little or no personality. That is one of our great strengths. If we don't use it, we will be enabling our new competitors." It appears this is coming true.

Another condition in this perfect storm of opportunity is the state of Talk radio. Talk has become a target of many who wish to squelch its voice. Ask any Talk radio manager about advertiser boycotts and how difficult it is to use a concept sell. This format is not only plagued with the curse of PPM, which is showing its audience to be significantly smaller than previously believed, its revenues are shrinking due to advertiser pressure. It will surely become even more of a target because there are those at the FCC, the White House, and many -- on the left and right -- who find Rush Limbaugh, Sean Hannity, Glenn Beck, Michael Savage, Ed Schultz, and others an irritant that gets in the way of their agenda. The move to silence these voices will likely come at the FCC level, especially if Congress declines to fund the agenda-driven voice of NPR. Can you say "Fairness Doctrine"?

If music audiences are being stolen by Pandora, if Talk can't survive regulation and financial boycotts, and if music stations can't survive high royalty rates, where will radio make its money?

The most profitable stations in America are News stations like WTOP in Washington, which did $51 million in revenues last year. News stations are the top billers in seven of the top 10 markets, even though they don't hold top audience shares. Furthermore, in seven out of the top 10 markets, News stations combine for about $250 million in billing. These stations are typically non-political, so they're not magnets for advertiser boycotts or FCC scrutiny. They are not targets like political Talk radio. In New York, WCBS bills about $43 million, with ratings lower than Talker WABC, which billed about $21 million as the number one Talk station on the East Coast.

With all these potentially deadly conditions, the logical solution to make big money is to stop being the number two or three FM music station in a format or a struggling AM Talker and become a News station. The problem, of course, is that news is horribly expensive to do well -- and 88 percent of all radio stations in America don't have even one news person. News commitment is essentially top-of-the-hour network feeds for many stations. A commitment to big expense in news isn't likely.

This week's NPR stories and the eventual defunding, along with the alienation of many listeners to the 900-plus NPR affiliates,  will result in a giant hole to be filled in America. As it stands, no network other than America's Radio News Network, which yesterday doubled its news segments (talk about perfect timing) offers programming even close to NPR. But the NPR uproar is a huge opportunity for radio, a giant insurance policy for struggling Talk and music stations at a time when non-political spoken word is set to prevail.

I predict that an NPR alternative in your market, offering a format to fill this gaping hole at the most important time in recent radio history, will be the most profitable radio format on the air in every market. A commitment to this direction will be golden for radio, and I see no risk or downside.

While radio continues to shrink programming, while broadcasters instruct News/Talk operations to cut the expensive programming, the time is ripe to fill the void as listeners reject NPR. The first replacement in each market will become the biggest heritage commercial station in town for the next two decades.