I have been in radio for eighteen years. I have seen a lot of things happen in my nearly two decades in the business. I've seen a lot of good things. I've seen a lot of bad things. I've watched managers make good decisions, and I've also watched managers make bad decisions. I never thought I'd see what I saw yesterday.
Before we go any further. This is the drill. There are three radio 24/7 sports radio networks. ESPN Radio, FOX Sports Radio, and Sporting News Radio. I am one of the few people that have worked at all three. I was a behind the scenes guy for ESPN Radio from 1995-1997. I spent six years at Sporting News Radio from 1999-2005. And I have done fill in work at FSR as well (2005).
If a station wants to become an affiliate of any of the three networks, they normally just have to run the network commercials. That's usually all it takes. Sometimes stations have to promise that they will air a certain amount of network programming every weekday to become an affiliate. Usually no money changes hands. That's why network programming has become more prevalent in recent months. Stations (and their parent companies) have been hit hard by the economic downturn. Ad revenue is down. Cuts have to be made. That's why local shows are disappearing while national acts like Colin Cowherd, Dan Patrick, Jim Rome, and Tony Bruno are taking their place.
And then came this bit of news yesterday. In a nutshell, ESPN Radio is thinking of charging affiliates in Top 30 markets $100K a year for the right to air their shows. Stations in smaller markets would be charged less.
My first reaction was one of surprise and disbelief. This couldn't possibly be true. But, I was able to confirm that it is indeed the case.
Look, I am not going to sit here and rip on ESPN Radio for doing this. I don't believe they deserve it. What they are doing makes a lot of sense from one standpoint. The bottom line.
Radio isn't about ratings as much as it is about revenues. Sports radio, in most cases, is not a big ratings winner. What it is, though, is a winner in advertising dollars. Advertisers love reaching out to men between the ages of 25 and 54. Research has shown that most listeners to sports radio fall into that category. The studies also show that many sports radio listeners have an average income of over $75,000 a year. Those are the people that advertisers want to reach.
Up until the recession that we're currently going through, most sports radio stations (despite high ratings) made plenty of money through their advertising. The networks also benefited from that. Listen to any of the three networks for a half an hour and you are likely to hear spots from some of the biggest companies in the nation.
The recession has changed things a little bit, though. Revenues are down. Down big. That has forced station operators (like Clear Channel, Entercom, Cumulus, etc.) to cut back. That's why hosts like myself, Dan McNeil (formerly of ESPN 1000 in Chicago), Lee 'Hacksaw' Hamilton, and FSR's Ben Maller are among those currently looking for work. That's why stations are being forced to make do with less.
Those stations are turning to network programming. ESPN sees this, and realizes there is a money making opportunity that has opened itself up. Stations need the networks, and let's face it, ESPN is the leading name in sports television, one of the leading names in sports internet sites, and the largest sports radio network in the country (they can claim more affiliates than FSR and SNR). ESPN Radio sees that there is a need for their product (maybe now more than ever), and they believe they can make some money based on that fact.
Again, this isn't to take ESPN Radio to task. They are a business. Businesses need to make money. They need to develop more ways to make money than they ever have had to in the past. Charging affiliates for the right to brand themselves as ESPN was just the next natural step in the evolution of what they do. I suspect FOX and Sporting News will think hard about doing the same thing.
That being said, I believe this is a move that could backfire on ESPN Radio. Here's why.
This news breaks at the worst possible time for ESPN Radio. Few businesses have been hit as hard by the recession as radio has. I don't know of many stations, even in the biggest cities in the country, that have $100K a year just laying around to give to ESPN. In fact, I don't know of any. Stations aren't only laying talented people off. They are being told by their corporate bosses that if someone leaves for a non-recession related reason, that they cannot fill that open position. There simply is no money to do so. Many Program Directors around the country have been frustrated by this.
So, what might the result of ESPN Radio's move be? Well, it could be one of two things. Stations who have the ability to turn to either FOX or SNR (if no other station in their market is airing them) will do so. Why pay for Colin Cowherd when you can air Dan Patrick's show (if available) for free?
That's one scenario. The other way it could play out is this. Stations who do not have the ability to turn to FSR or SNR (because someone else in the market is airing them) will have to choose between paying ESPN their rights fee and hiring local talent.
I believe more stations will choose to hire local talent before they pay the rights fee to Birstol. The local talent (because of the economy) is very likely to cost less than ESPN Radio's rights fee. And, it's easier for salespeople to go out and sell a local show as opposed to Mike & Mike, or The Herd, or Tirico and Van Pelt.
ESPN Radio has a right to do this. It's their product. It's their ball, and they can choose to go somewhere else and play if they want to. But, ultimately, this move could force operators into doing something they've tried to get away from. Investing in local talent.
As a radio guy, that's the best thing that could happen to this business.
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