Radio's Salary Cap

Radio groups that have been chopping away at expenses are beginning to see the ratings repercussions of their actions.

Morning shows -- down and in some cases out.

Total ratings down (especially with a weakened morning show).

The decision makers decided they had to cut to the bone and their companies are getting ready to pay the price. You can't get top rates for declining shares. The economic downturn is prompting some advertisers not to buy as deeply in the top ranked stations for their desired demographics. Where they might have bought four or five deep, soon it will be three. After all, these are hard times for the media business.

Lower revenues mean the necessity of lower expenses. And, I guess you could understand how the many radio groups that have been forced to lay off people and drastically cut budgets had to do something.

But they are going about it in the wrong way.

Just as in many professional sports, the radio industry now has a de facto salary cap.

And while some CEOs are trying to be the Billy Bean of radio (Billy Bean, the Oakland A's GM who fields a competitive team on a shoestring budget), the answer is in capology.

Capology in football and other sports such as hockey requires executives to look at the total amount of revenue -- in their case -- that the league will allow them to spend on players. The teams then have to decide whether locking in a long-term contract for, say New England Patriot's quarterback Tom Brady, is a strategy they can build upon.

That's an easy one, right?

Obviously these teams don't have the money to pay whatever they want for whatever they need.

Nowadays, neither does radio.

Except radio managers are letting their Tom Bradys go (morning personalities) and replacing them with cheaper second or third string talent. This is why you won't have to look too closely to see their pain as the ratings continue to reflect such reckless moves.

If the group mandates a budget cut, then the manager must be responsible for making the right decision or -- as I'd like to put it -- assembling the best talent within the dictated salary cap.

Here's where managers have been failing.

They are rightfully nervous that the next axing will be their job so they are dutifully making the cuts that they are being forced to make.

The problem is -- they are making the wrong cuts.

Example: look at the stations that fired morning personalities in the last six to eight months. It's hard to find many that have maintained the fired personality's numbers. Worse yet, the overall station ratings are declining and they have made it more difficult for their salespeople to get their best advertising rates.

The result: financial disaster -- the opposite of what group managers wanted.

So, where to begin?

The GM is the general manager as well as head coach.

He or she is directly responsible to corporate for the stations profitability, ratings and operation. They must fight harder for the budgets they need -- that is, the top limit of the de facto salary cap. I think a lot of managers -- not all -- have been wimpy about fighting for the money necessary to deliver results. Ironically, in the end, they could pay with their jobs.

The morning show is a number one priority because it typically can generate 40 or 50 percent of the stations total revenues. This is where panicked managers are cutting first because of the high salary expense, but because the first cut is the deepest doesn't necessarily mean it is the most prudent.

Instead, the morning show should be fully funded and performing talent locked into long-term contracts. I'll write more about this separately because I think there are innovative ways to pay less for morning talent by giving them the one thing station's either overlook or refuse to do.

The program director is a critical component to ratings success. Put him or her on the air to save money if necessary, but pay for the best you can find. The PD is your wide receiver -- without whom your quarterback is useless. You must have a morning show upon which the PD can build the station's ratings all day.

Sales managers shouldn't see cutbacks -- they should see more sales incentives. Instead of forcing them to take accounts away from successful salespeople or upping the ante on commission rates after salespeople have achieved some success, help them get filthy rich as they make you filthy rich.

I read recently that my old buddy Randy Michaels was critical of print salesmen in his new job at Tribune for leaving money on the table. He was calling for the extra effort to bring in the extra revenue. He is right, but the rewards system needs to be tied directly and fairly to the production of the sales staff.

There are lesser players at most stations these days. Where once the afternoon drive show was highly personality based, many stations have gone bland to -- repeat after me, please -- save money. Afternoons are a great place to develop talent (refer back to a good PD). It obviously won't cost what a morning personality will cost, but it will cost more than voice tracking or paying a rent-a-jock to attempt to play personality radio.

Each team needs as much talent as it can bring in -- under the salary cap.

So, as you're shaking your head at the ratings that are now coming out wondering -- how did we get ourselves into this fine mess -- remember, this --

Budgets are one thing, but good judgment is then again something totally different.

From now on if radio groups would embrace capology when taking into account budget cuts necessitated by declining revenue, then their managers wouldn't have to give away the franchise in order to save their own jobs.

I'm just sayin'.

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