Marketing and Media Consultant Mark Maheu offers up some thoughts on relaxing radio regulation to allow fair competition.
Making the case for relaxed Radio regulation to allow fair competition
Once upon a time, Radio was a wonderful, local business with dependable cash flows and significant barriers to entry. The trade off for this franchise included support for the development of Canadian talent in cash and in kind. Each license also required compliance with a regulatory regime designed in a time before the advent of the internet age we now live in.
Clearly in late 2020, Radio in Canada is in trouble. The industry is full of smart, entrepreneurial operators who are prepared to fight for their survival. They can’t do it alone though and need a little help from the CRTC.
How did we get here?
As the world started to change, so did regulations. With the coming of the “New Millennium” came MLO (multiple license ownership) albeit much more limited than what was available in the United States. LMAs (Local marketing agreements), also known as Local Sales Agreements, were also being done throughout Canada with great success. In all cases whether through MLO or LMA, Radio was doing what was necessary to compete in an increasingly competitive media space. In 2005 the CRTC put new rules governing LMAs in effect rendering most of the agreements at that time off-side. The CRTC’s new regulations made them the arbiter of what stations could enter into agreements and under what circumstances. Each agreement would have to be applied for and reviewed on its merits.
Very few LMAs have been approved in the past 15 years. It has been common knowledge to most broadcasters that the CRTC takes a dim view of LMAs in all but the most extreme cases. Also during this time the industry has witnessed massive over-licensing in many markets from 2007-2015, the meteoric rise of Digital Advertising Networks like Google, Double-Click, et al and the sweeping impact of Social Media and Streaming Media offerings.
Radio needs and hand up, not a “hand out”
Today is a perfect time for action that will allow Radio Broadcasters the opportunity to repatriate lost revenues. These revenues lost to foreign owned, unregulated advertising companies were the fuel that supported local news coverage and support for emerging Canadian artists. Then there are the people, thousands of committed professionals who have made serving their local communities through Radio their life’s work.
Here are my suggestions for what can be done quickly to assist Radio now:
1. Change the regulations on Multiple License Ownership by removing the distinction between AM and FM stations. In Major Markets this would mean a Broadcaster could own up to 4 FM stations. Currently their are limited to 2 AM and 2 FM. In smaller markets allow ownership of up to 3 FM stations. In all cases, AM station ownership would be uncapped and not count against any total in any market. For instance, a broadcaster in Toronto with 2AM and 2 FM stations would be able to add an additional 2 FM stations and keep their two existing AM stations for a total of 6 stations.
2. Allow LMAs without prior approval by the CRTC. Broadcasters entering into agreements would be required to file details of the agreement on a Confidential basis. These agreements should only require demonstrable control of programming by each party. Each broadcaster would be responsible for the programming content on its stations regardless of whatever LMA it has entered into.
3. Give Radio broadcasters financial relief on Canadian Content Development (CCD). Raise the revenue threshold for financial contributions to $4.0 million so that small and medium sized stations can stay on the air. Potentially give them the option to provide “in kind” promotion or other value in place of cash contributions.
4. Lower the CCD transfer fee on all Radio transactions from 6% to 3%. This will trickle down to local listeners in the form of higher quality programming after a sale is completed.
Radio has only 7% of the advertising market
Since commercial Radio’s debut in the 1920’s it has faced a plethora of new technologies that threatened its existence. From Television, to recording tape, to satellite Radio and now the internet and a million OTT choices. Each time radio has been able to pivot and stake out its share of revenue that allows it to serve the local community. This time is different though. Local Radio finds itself competing against Global Monopolies like Facebook and Google who have targeted local advertising revenue. Radio revenue in Canada’s top 10 markets in roughly 7% of ALL Advertising. Compare that to Digital Companies that take approximately 56% of ALL advertising in those same markets. Think of it this way – if you owned every Radio station in Toronto, you would still only “control” 7% of the advertising market. Let’s get on with helping Local Radio do what it does best – adding value by serving local communities. All Radio needs is a CRTC that understands things have changed and time is of the essence. I have faith they will act accordingly.
Mark Maheu is Marketing and Media Consultant with 40 years experience at every level of the Radio Industry.