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Up Close with NAB President and CEO David Rehr

For our first eQB Cover Story of 2007, FMQB picked the brain of NAB President and CEO David Rehr one year after the former Beer Wholesalers Association President was selected to replace outgoing NAB chief Eddie Fritts. His lobbying credentials and successful track record made him the perfect candidate to represent over-the-air broadcasting inside the Beltway and in the public arena.
     We sat down with Rehr and quizzed him on his outlook for terrestrial radio in 2007 and beyond, and what must be done to keep the future for radio broadcasters bright.

In a speech in October, you said that broadcasters may have “inadvertently relinquished some of the excitement occurring in broadcasting to our competitors, by not being more proactive. That ends today, because we have a very compelling story to tell.” How do you intend to communicate that message to consumers?
The broadcaster culture and identity is about serving consumers. They think about their companies and how to sell advertising or how to promote a remote location, but they don’t think about (in the aggregate) how we can promote our industry better.  That falls upon the NAB and the RAB on the radio side, and the NAB and the TVB on the television side. You’re going to see in the months ahead us working together to tell the story in a much more visible way.
     We have to do a much better job talking about technological innovation in the broadcast industry.  On the radio side we have digital technology: HD radio.  We have 1,000 stations broadcasting in HD.  Hundreds are multicasting.  Seventy percent of America is covered by HD radio.  We haven’t done as good a job as we need educating people on those facts.  Peter Ferrara and the HD Digital Radio Alliance is doing a terrific job getting the Alliance members to run lots of ads promoting HD radio, but this is a Herculean effort.  In fact, it’s the top priority of the Radio Board of the NAB to help and positively assist the roll out of HD radio.  That means more time, more attention, more money, more emphasis, and being almost evangelical about where the industry is going.  So, in my speeches, in our communications, in our work on Capitol Hill at the FCC, we’re trying to talk about it every day, and inspire others to talk about it as well.

What has been done and what more can be done to successfully market and accelerate the rollout of HD Radio?
I don’t want to get ahead of myself, but we need to have greater emphasis, as Peter Ferrara and the group understands, on the car manufacturers, and the NAB is going to be working with them to do that in the months ahead.  We need to continue to hammer away with the message about HD radio.  We need to make sure that those companies and stations involved with side channels are putting a lot of imagination, innovation and excitement into the programming, so when people hear them they’re drawn in and that helps create more buzz.

What message can you send to terrestrial radio regarding a serious commitment to HD side channels?
The first thing we’re going to do is not call it terrestrial radio anymore.  If you think about it, if you walked up to someone at a cocktail party and they said: “What do you do?”  And you replied: “I work in terrestrial radio.”  They’ll look at your like you’re an alien. 
     We’ve got to think about how we re-brand, re-position radio while we’re going through this technological innovation, because when we say terrestrial radio it just kind of puts people off.  I don’t think they get it.  I don’t know maybe we call it “real radio” or  “local radio.”  We need to change that term. It’s a bad brand definition.  We also need to remind people of the disparity between radio and some of our competitors.  The fact that we have 260-million people who listen to us; I tell people that and they look at me and say, “Wow, I never knew that.”

Whereas satellite has upwards of 13 million listeners.
hat’s right, with 500,000 being in cars that haven’t been sold yet and still counting those as subscribers.  So, we position ourselves as the leader in that medium.  We’ve gone through a tremendous period of growth, which if we could, I would want us to return to instantly.  But then things slowed to curtailed, and then we were in the “Well, why is it not continuing?” mode.  We have to break through that. We need to say: “We are great.  We do offer a great value and a great service.  Let’s get back into the mindset of growing, being excited, looking forward.”  Some of it is in our own minds.  I’ll occasionally run into a radio owner or someone who works at a station, and they’ll say, “It used to be so great.” And I’ll say, “You mean it’s not great now?”  “Oh no, it’s great now. The advertising revenue growth isn’t what it was.”  I’ll ask, “What do you think the margin is?”  They’ll say: “Well, you know it was 60 and now it’s 40, maybe it’s 50.”  To that I respond, “Do you know what the margin is in retail sales in this country? One-and-a-half percent.”  There are people on any given day that would trade their whole family to do what you do.  Now I know it can always be better, but I’m not a cup-half-empty kind of guy.  They’re good now. What do we do to make them better? We need to be a lot more enthusiastic, a lot more positive and a lot more forward looking, particularly with all the technological changes and all of the innovation our people do everyday. 

How has your public relations and lobbying experience, most recently with the National Beer Wholesalers Association, prepared you for the task at hand, particularly as it relates to terrestrial radio?
We’ve been through one great year at the NAB.  I’ve been in 25 states and state association meetings.  I’ve been in 27 operations around the country, and I’ve learned a lot about the business.  Some of the greatest things that my experience at the Beer Wholesalers taught me was that it’s about positioning and branding.  Also, on any given day, no matter how bad our advertising sales might be or how bad our costs are, in the beer industry you have 38% of America that, on any given day would vote to put you out of business.  That is to have total prohibition.  People love radio.  People talk about their radio stations.  They kind of link with a personality, and that is extremely positive.  Being in an industry that is maybe a little bit more challenging from a PR perspective, it teaches you to look for every opportunity to be positive and to position yourself well.  We’ve done little bit of that here so far at the NAB.  We have new folders that say: Serving Every Local Community.  Why do we have that on the folder? So when a member of Congress looks at it, the first thing they remember in all the clutter of lobbyists and government and bills and regulations, is that we’re everywhere – and people want to be with people who are everywhere.  Over this next year, you’ll see the brand and the visibility of the NAB Hill presence significantly increase above the levels that it has been in prior years. We are their voice in Washington, their advocacy tool. 

What are your thoughts on media ownership reform?
The NAB Board of Directors has a position to support media ownership reform to allow for more flexibility and to ensure that broadcasters can continue to do well when many of them are facing competitors that are not regulated.  It’s a hard road for us because due to the change over in Congress. There are both Republicans and Democrats who are opposed to changes in media ownership, for a whole variety of reasons.  Our adversaries on this issue tend to be more visible and, frankly, more shrill.  If it were only based upon the data and the real world experiences, we would get media ownership relief.  But because it’s become somewhat theatrical, and our opponents are willing to dress up in clown suits and do other things, it’s a little more difficult.
     We do need to get some more flexibility, because the world is changing quickly and it will affect every market in every part of the country differently.  Our strength is localism, and our strength is having the culture in our businesses of being able to do the reporting, the entertaining, the localism, the public service, better than all of our competitors.  What we don’t want is these competitors, who aren’t regulated, to have all of the capital move in their direction and against us at a time when we’re going through HD innovation so we are too capital starved to make improvements and therefore get behind the curve and behind our adversaries.  I know that the FCC recognizes that. The question is: Do they have the will to do the right thing and move forward?  I’m hoping that they will.       

What, if any, long-term effects will there be from larger radio companies such as Clear Channel going private and/or selling off stations in medium and small markets?
We’ve seen continued change in ownership almost daily in this business.  There would be a lot less attention on the sale if it wasn’t Clear Channel because they found them as a particular vehicle by which they could berate radio broadcasters. The positive side is that people want to buy these stations.  For those who argue radio is a dinosaur or the radio business is past its prime, there’s a lot of general interest, and from private equity firms and people of diversity, to get into the radio business which demonstrates we have a bright future. Reducing the amount of publicly held companies is a long-term plus for our business.  Many of our great companies that are publicly traded are living and dying by the daily view of the analyst who may or may not really knowwhat’s going on.  Wall Street is heartless.  Frankly a lot of our business has to do with having a heart.  That’s what makes it great.  If you’re a publicly held company, you’re also living and dying every quarter, every day.  If you’re privately held, sometimes you can make more longer-term investments which will yield great returns, where if somebody on Wall Street hears part of a conversation at a lunchroom near Wall Street then passes a rumor that something may happen, that then adversely affects the stock price.  The information flow isn’t as good as it should be to communicate all the great things all radio is doing.  Then if the local bankers read about what Wall Street’s thinking, and the single station radio operator goes in and wants to borrow money for the HD conversion or to improve their operations, and the person’s reacting: “You know what, I’m hearing there’s not a bright future for you guys.”  We just have to stop that. We also, quite frankly, are going to try to figure out a way to work with the RAB and the TVB, to better educate the analysts and Wall Street about all the dramatic changes taking place, which they would be thrilled by.

Is satellite radio a serious threat to radio listenership in the long run?
We’re open to all competitors.  If you look at the history of radio, it went from television to LPs to eight-track tapes to cassettes, then CDs and satellite radio. The danger with satellite radio is that there are companies run by people who flaunt living underneath regulation and the rules.  Any time you have companies that make a covenant with the government and then do not live up to the covenant, you need to be careful with those people because those people don’t follow the fundamental market axiom of playing by the rules.
     They overstate their subscriber numbers, and some of their subscriber numbers really aren’t subscribers, they’re cars in parking lots.  We learned their FM modulators interfere with authentic radio, and they do nothing about it.  Then we learned that they knew about it but they kept making some of the flawed modulators, but then they’re sorry.  Then we learned some of their translators aren’t within the regulation for power levels, locations and other things.  Then they tell the FCC they can’t be regulated because they’re subscription only, but they’re giving things away free and acting like over-the-air radio while their personalities are horribly, indecently obscene, for which over-the-air is then blamed.  So you have a pattern of (misconduct). It’s certainly not above-the-board, Business 101, following the regulations that every local broadcaster has to everyday to keep their license.  Anytime you deal with people like that, it’s a danger. Are 12-million people subscribing to satellite radio a threat to 260-million people who listen to radio every week?At the margin, maybe. Our mindset at the NAB is that we take every competitor seriously, because you just never know what the future holds and it’s our job to advocate on behalf of our members. We’re going to do that.

What is the NAB’s position on satcasters and their over modulation/emissions troubles with receivers?
Actually we sent a letter to both the CEO of XM and Sirius that said, “You know they’re flawed.  You know they’re causing problems for other people.”  Frankly, in my case, I would think they would be morally obligated to switch out those that are flawed with those that work correctly.  That would be the right thing to do.  But, once again, they don’t do the right thing.  They just try to figure out a way to skirt around the law and just pretend nobody’s paying attention.  Well, the jig is up, and we’re going to pay attention.  Interestingly enough, when I talk about this I get e-mails.  When I gave the speech at the radio show, when I returned to Washington I got an e-mail from somebody who said: “This happened to me.  I got Howard Stern on my radio and my child was in the car.  I didn’t know who to blame.  I didn’t know who to talk to about making sure this problem doesn’t happen again.”  When you compete against people who don’t want to follow fundamental good business practices, you just have to keep an eye on them.           

You mentioned broadcasting signals on all devices and platforms is one of your stated goals for the future of broadcast radio and TV. Will this scenario be more of a spending/investing initiative?
We’ve talked a little bit about it.  We put together a Technology Advocacy Committee of this NAB Board of Directors, where we’re trying to figure out what the NAB can do to promote broadcasting in emerging technologies that will make a difference without wasting resources.  They are in the process of meeting with experts and talking with people, and will come up with a report.  We’ll probably look at making some strategic investments, not in any particular technology, but in raising the visibility of the importance of having the broadcast signal get into the device.  What we’re trying to do through the power of competition is to include the broadcast signal as an extra value item for the consumer.  So manufacturers rather than saying: “Ah, no one listens to that, why are we spending money to put it in, will say, “Gotta have it because it gives us a competitive advantage.”

Over the past few months, there have been merger reports surfacing between Sirius and XM. What are your thoughts on a possible merger between the two satellite radio companies?
It’s similar to what the FCC faced years ago on the television side when DirecTV and EchoStar wanted to create a single company, and in effect create a monopoly.  The FCC, Congress and the Justice Department would get involved.  I’m sure the SEC would want to get involved, particularly because of these kind of failures in the reports to file things accurately.  Anyone who thinks that merger would be an easy deal - they’re going to face a Herculean effort to try to make it happen. There will be congressional, regulatory and legal forces, not to mention the specter of consumer groups.  If I were making an investment judgment I would conclude it’s not going to happen. Their money would be better spent trying to improve their business model and their services, as opposed to trying to hype their union while they’re trying to buttress their stock price.  The master of that is Mel Karmazin. So, notwithstanding the fact that you have two dominant personalities whose leadership styles are very different, one of them, if not both of them, would have to go.

Radio has been criticized for not doing an effective enough job of cultivating the next generation of listeners. How would you lobby young consumers and early media adopters to terrestrial radio’s side?
HD radio might allow us to look at side channels that look at younger audiences that might not fit the advertising demographic, but might fit the coolness demographic of the younger listener. Also, this is where we have to work with our allies like the RAB and TVB and come up with what we’re really going to do.  At our forthcoming board meeting we’re bringing in some folks who have spent a lot of time on the Millennials issue. It comes back to bringing the excitement and enthusiasm for radio to our local communities: to our elementary schools, to our junior highs.  I remember when I was growing up in the suburbs of Chicago, occasionally you’d get to do something on local radio or you’d go tour a local radio station or a personality would come in and talk about the business.  Now, for some of our people that might be a pain, but we might need to go out into that community and raise our visibility with more impact so they get excited.  So you get kids who are ten-years-old who say: I want to grow up and be in radio. I view that initially as a guerilla effort.

Where do you foresee terrestrial radio in 2007 and beyond?
I would like to think we’ve kind of hit the bottom of the troth and now we’re moving up.  I don’t want to be pollyannaish, but there’s a bright future for radio.  We’ll look back 20 years from now and say: You know what, that period of time was a turning point for us.  We took hold and we directed our future. Psychologically what we need to do is focus on the future and not rehash or relive the past, because that doesn’t put dollars in the bottom line of members of the NAB. When I first got here, a couple of radio guys said: Well, David, do you have the soul of a radio broadcaster?  I said: Close your eyes.  I’m going to say the following: Demand is flat to declining.  You have new competitors.  You used to have, in effect, a dominant share of the market but now you have to work for it.  And that’s our business!  I said that was the beer business too, so I’ve lived through it.  The experience I brought along is that challenges create opportunity.  We just need to remember that.  

** QB Content by Mike Bacon**


Nikki Nite,
VP of Prog. & Ops,

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