Quick Question on Radio

[Just Me Here]

I must admit my ignorance on how the radio business works and this recent stuff about AA is really confusing.

Is it normal for radio networks to pay for air time or is this just a way of ‘getting a foot’ in the national radio market?

Do other networks like EIB pay radio stations for air time?

Thanks,

[liberalpress]

1. It is called "compensation"

First, a station is required to air the commercials a network offers. Then, to "compensate" the station for the revenue it has lost by not being able to sell that time locally, a network agrees to send a portion of that revenue to the affiliate. This can be done in a number of ways contractually, guaranteed minimums, etc. The amount in question is, as I understand it, the bone of contention in the Chicago and LA cases. The stations there, I believe are owned by the same individual.

[lapfog_1]

2. It can work both ways...

Sometimes "content providers" pay media distributors to carry their
content, and sometimes the media distributors pay the content providers.
It all has to do with whoever wants to collect the advertising revenue
or other sources of funds ( viewer fees, government funding, etc).

Of course, with the new FCC, you are starting to see vertical
integration, which means one company owns both the content and the
means of distribution... and when that happens, you get less and
less choice over what consumers hear or see. So you will have 4
channels of 24 hour news and they will all have the same POV...
oh wait... damn!

I hope Air America makes it... but it's having a lot of birthing
problems right now (I know $1M is a lot... and all they wanted to
do was renegotiate for the air time they didn't use and which Liu??
sold again - in breach of contract... but damn, it's generated some
bad publicity. Not going to attract advertisers with stories of
bounced checks and such - even if the stories are false.

[LTR]

3. Here's a thread about just that from yesterday

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x1414795

And my post:

Syndicated programming can take quite a few forms.

The most common is a pure barter system. This is where a show is offered for free, provided they keep, say, six minutes per hour for national ads. They would also provide local ad time for the affiliate.

Some of the more popular ones may use a barter/pay type of system. I've heard that affiliates pay Rush a ton, yet they run a lot of national ads for air mattresses and cheap steel buildings.

And then there's the elite, like Howard Stern, who go for straight cash (lots of it), and allow local affiliates to sell all the ad time.

A popular method is the leasing concept. This is done by smaller, less successful stations. They simply lease out time (usually by blocks) to mostly ethnic and religious broadcasters, as well as infomercial entrepreneurs) and the one leasing the time from the owner controls all content and can sell the ad time. The owner pays the electric bill and the FCC license fees. Kinda like renting an apartment.

This works somewhat for what AAR wants to do. Sure, they could just syndicate all the shows in a very crowded marketplace, but then they'd be fighting it out with the Medveds and Ingrahams of the world. But they are intent on presenting the entire schedule as a whole, not in pieces. And lord knows there are plenty of struggling stations that could use the money. So AAR basically controls the station (to an extent) but do not own it. They make the money back by selling ad time and swag. And they don't have to fight it out in the world of syndication (where they'll surely sink). Simple as that.

Of course, the conservative types ridicule AAR for paying to broadcast their shows, but that is not necessarily true. It is widely known that Westwood One paid some huge sums to get Bill O'Really on in some choice markets. They should pay more, since Bill is stinking it up in the ratings (the Sacramento station just dumped him). Clear Channel continually dumps their hosts on their local stations. Dr. Laura was a notorious example, and even forced Rush affiliates to carry her. This has subsided, since station managers complained about her terrible ratings. So Laura was kicked to the curb, and now they are trying to force Glen Beck's awful show on the public via CC airwaves. Not sure if anyone really cares, though.

And don't forget all the RW religious groups paying obscene amounts to lease time for shows nobody listens to. Some even go on wild buying sprees. Starboard is a Catholic broadcaster buying up every decrepit radio property in the middle of nowhere to broadcast their national format. Not sure where they get the money for all this, nor why they would go through all this trouble. They even bought up several AM stations in the Minneapolis area to broadcast the same format (never mind they overlap like crazy). Salem is a big commercial broadcaster that also buys obscure stations, but unlike Starboard they sell ad time.

So what AAR is doing is nothing to be ashamed of, nor is it unethical or illegal. They are simply renting property and keeping the profits.

[KharmaTrain]

4. Attempt At Clearing This Up...For The Last Time

First answer: Yes...it's very common for broadcasters to sell blocks of airtime to third parties. It's called brokering and has been a staple of the industry since its earliest days. You see this on your television when you pop on those infomercials...the advertiser pays for 30 minutes of airtime at a bulk/reduced rate.

Brokering is generally the way of life for small major market AM radio stations. They can't survive on ratings and their limited signals prevent them from competing with the larger signals, thus selling airtime...generally to foreign language groups, is common. These buyers then set up their own "station within a station"...selling their own commercial time to pay the station owner for their airtime. A good broker can make a very nice living this way, many fail, but there's always another broker ready to walk in the door.

Brokering also is prevelent in religious radio. Many of those obnoxious preachers you scan past are paying companies like Salem for airtime...many "non-profit" and "non-commercial" religious license holders make money this way, but that's a topic for only those who really care.

EIB is NOT a network...it's a Program Provider/Syndicator. They don't own stations or even the means to distribute Rush's show. He was the "brainchild" of Edward McLauglin and his EFM company...that sold Rush's show to various stations at first and then Premier radio networks...who now own Rush's show as well as others...EIB is a "subsidiary" of Premier...who inturn is owned by Clear Channel. It's a totally different world than what AA is dealing with.

Also, Rush is a "money maker"...his affiliates can do well with his show, thus Premier charges affiliates a "rights fee" for "market exculsivity" on his show. This keeps Rush on WABC and not another station, and more money for Clear Channel (perish the thought they'd put it on one of their stations).

AA is new, has no track record or ratings and is starting on a very small scale. It's survival for 90 days, yet 9 years is not assured and thus would be a major risk for a large company to invest in at this time. Several broadcasters have thrown some nuggets (and very welcome ones) AA's way...XM, KPOJ, KCAA & KMMM...if the network survives, I expect other stations to join in for bits and pieces as well, but that's not the same thing as operating a 24/7 radio network/operation and the current problems AA is facing.

A lot of what happened to AAR is embarassing and I hope isn't a fatal wound as advertisers or investors may shy away due to the quick "shutdown" that appears to happened.

Well, enough from me on this topic. Takes too much time to write this out and then I see the speculating and tin hats go nuts around here.

Cheers.