Executive of the Year: Cox Radio’s Bob Neil Takes The Long View (01/05/04)
By Reed Bunzel
Let’s face it: 2003 was not a great year for radio. In fact, it was close to dismal. Local and national dollars started moderately strong, only to be tempered by stagnant consumer confidence, worrisome jobless numbers, and nagging “geopolitical” issues that continued to inject uncertainty into an already frustrating economy. Despite a dramatic Q3 reversal of fortune for the overall economy, radio saw continued weakness on the advertising front. By December, most operators were ready to forget the fourth quarter and jump right into 2004.
In a year that lacked any stellar revenue gains, dramatic corporate turnarounds, or noteworthy mergers or acquisitions, the editorial team at Radio Ink> looked at market-by-market operations and cash flow to determine who deserved to be our Executive of the Year. During this exhaustive process, we looked at a number of factors, including net revenues, operating income, EBIDTA, cash flow, and — in the case of public companies — share price. We also spoke with industry analysts and other group executives for their opinions on standouts in this year of lackluster performance.
At the end of our search, we identified several companies that experienced respectable growth, but the company we kept going back to was Cox Radio. Despite a climate of stagnation and uncertainty, Cox continues to be one of the industry’s true bellwether groups, one that can be trusted to produce solid numbers and maintain such value in the marketplace that analysts habitually downgrade their stock, just so it doesn’t get ahead of itself.
Through the first three quarters of 2003, Cox — under the direction of Bob Neil — saw its net revenues increase $6.6 million to $319.1 million, a 2-percent increase, compared to the first nine months of 2002. The company saw strong business in many of its southern markets, although a format flip at WFOX-FM in Atlanta resulted in a $3.3 million revenue dip in that market. Operating income for the first nine months of 2003 increased $2.8 million to $102.9 million vs. 2002, primarily as a result of an increase in net revenues in excess of operating expenses.
Overseeing this slow but sure growth is Bob Neil, Cox Radio’s president and CEO. Neil had been executive VP of Cox Broadcasting from 1992 until he was named to his current position when Cox Radio went public in 1996. From 1989 to 1992, he was VP/GM of WSB-AM/FM in Atlanta, as well as radio regional VP/East for Cox Broadcasting. He also was station manager of WSB from 1986 to 1988, becoming VP/GM of WWRM-FM, a newly acquired Cox station in Tampa, FL, in 1988.
Neil was formerly operations manager of WYAY-FM in Atlanta from December 1984 to 1986. Early in 1986, he assumed additional duties as program consultant to all stations owned by NewCity Broadcasting Company, formerly the Katz Radio Station Group.
Neil spent two pre-Atlanta years in program management posts at WSYR-AM and WYYY-FM in Syracuse, NY, and six years in programming and program management at WFLA-AM/FM in Tampa.
“The only job I’ve ever had was radio,” says Neil. “I’ve been doing this since I was 16. I love it — and so does Cox.” Noting that the company is more than 100 years old, Neil explains that a strong business reputation and family commitment are what keep each of the Cox companies fundamentally strong. “The Cox family got into the radio business in the 1920s, and it’s a business that Cox really enjoys. That gives us the confidence and support that we need to go out and make tough decisions about how we want to run our business and the things we want to do. We have good people working for us, and we have solid support from our majority shareholders.”
Still, Neil insists he doesn’t get caught up in the quarter-by-quarter Wall Street share-price game. “My job for all of our shareholders is to run the company the best way for the long term, so the company is worth a lot more money to shareholders five years or 10 years from now than it is today,” he observes. “If I do the right thing in running the business, none of the short-term things matter. If the analysts downgrade us one day, they’ll upgrade us another day. I know that, at the end of the day, good broadcasting will win; and all of the good things that we want to see — increased revenue and increased cash flow — will come out of that.”
Congratulations, Bob Neil, on being named Radio Ink>’s 2003 Radio Executive of the Year!
INK: For three years, we’ve been waiting for an economic recovery. Given the data released in late 2003, are you optimistic that we’re finally beginning to see signs of a turnaround?
Bob Neil: I believe that we really are at the start of another expansionary period. At the beginning of any such period, the economy looks very cloudy or hazy, and it’s hard to get a direction. I remember specifically coming out of the 1991 recession. In ’92, while not technically in recession, it was not a particularly exciting year. But we came out of that, and the recession was gone. We had a couple of slowdowns in the ’90s that, while not technically recessions, were slower growth periods. The other thing we must remember is that the industry has never faced anything quite like 9/11. I suspect that, when people look back on this from a longer historical perspective, the upheaval generated by those events will be greater than what we’ve seen living through it. It just had a lot of negative impact on the way people and businesses view their future.
How long must radio be patient before some of this turnaround shows up on the bottom line?
People will want to see some solid growth in their own sales. They’ll want to see solid performance at each of their own businesses, and then as they continue to see that good news — and we’ve seen a mountain of it in the last few weeks in particular — they will get more confident. And again, that’s what drives this economic engine: confidence in the future.
What is your personal opinion of Cox’s revenue picture in 2003? Are you satisfied with your group’s performance, or could you have done better in the second half of the year?
If you look at the first nine months of 2003, I’d say I’m moderately pleased with our performance. We’ve outpaced the growth in all of our markets, and that’s a measure that we look at. If we’re growing faster than the markets, we’re going to be pleased. We all were a little disappointed that the economy wasn’t better this year but, to a large degree, the larger economic issues were things that we can’t control. This year, we tried to focus on things that we can control, and not worry so much about making excuses about the economy. We looked at the performances of our stations vs. our competitors and our markets. You would probably never catch me saying I’m ecstatic, but I’m moderately pleased with what I’m seeing.
Group-wide, what are you expecting for the first quarter of 2004? Are pacings where you want them, or do you still see sluggishness?
It’s too early to answer the question. We don’t have any official guidance for the quarter, which is typical for this time of year. We don’t issue any guidance until we do our first earnings call of the year, which is usually in February. Essentially, that’s our fourth-quarter call for ’03. Typically, you go into January with only about 50 percent of the business booked, which is quite different from the other months of the year. The dollars that are on the books right now are pretty small, but I’ll go out a little bit and say I’m encouraged by some of what I’m seeing so far.
Are you seeing certain regions of growth around the U.S.? Where are the hot spots, and where are the trouble areas?
The Northeast has been particularly slow this year. New York City has not been good, and that’s kind of spilled over to Connecticut and Long Island, at least for us. Generally, the South has been in pretty good shape, and we have a lot of radio stations there. Florida particularly has been in good shape; Tampa, Orlando, and Miami have been okay. Jacksonville and Atlanta have been a little slower, but generally the Northeast has been the trouble spot.
Is your cash flow where you’d like it to be, considering the loss of revenue stemming from your format shift in Atlanta?
Any time you put a format out to pasture and try something new, it will have a revenue impact for the first year. In the case with WFOX in Atlanta, we made a long-term decision there. We didn’t think the Oldies format in that particular market had the kind of longevity that it might have in some other markets, so we looked at other opportunities. As usual, we did a lot of research, and we picked a hot Urban Adult Contemporary format. It’s not as though we said, “Oh, well, we’ll just make all of this up.” We knew what we were doing, and we are on target. The station is more of an 18-34 targeted radio station, which started at about a one share; in the summer book, it was about a four share. There are a lot of Urban stations there, with good competitors from Radio One and Infinity, but when we look at this in the long term, it will be a better format for us.
Still, shifting formats during an economic turndown can be a risky proposition, given the time a strong turnaround often takes.
At some point, we all have to realize that this is not a quarter-by-quarter business. We can measure it quarterly, but things don’t happen on a quarter-by-quarter basis. You have to make decisions that are right for the long term. Again, we’re fortunate because that’s the way all of Cox operates. We’re told to do what we need to do to make these companies a long-term success. If we have to take some short-term bumps in the road, so be it. When I say we’re out-performing our markets in 2003, we’re doing that with that gigantic format change. When you make a format change in Atlanta, you’re not talking about pennies; you’re talking about a lot of money.
Yet you were given the green light…
That’s right. I work for two great guys: Dennis Berry, who’s the COO of Cox Enterprises, and Jim Kennedy, who is the CEO of Cox Enterprises and chairman of our radio board. Both of those guys take a long-term view of business. Business started to slow down in 2000 and 2001, and neither of those guys ever came to me and said, “You’ve got to cut people; you’ve got to cut expenses.” There was none of that kind of stuff. They left it totally up to us to run the business. We didn’t have to go in and fire a lot of people or make wrenching cuts in our marketing budget or other things we need in order to operate our radio stations. We didn’t do it. I’m glad we didn’t; it helped us in a competitive situation. They have a long-term view of how they want all of the Cox companies to operate, and they’ve been terrific.
Have the “cost-efficiencies” promised by consolidation materialized, and are they figured into your balance sheets today? Is there any further room for cost-cutting or savings?
At Cox, we never really talked about cost-cutting as a way to achieve the real upside of the business. We’ve always maintained that it’s on the revenue side — that radio can be more efficient competing against newspapers and television. And that’s proven to be true, because radio’s share of advertising continues to grow.
The other thing that has been enormously helpful is that we now have some larger and more experienced companies that have been able to introduce more professional sales systems, and that helps the quality of the radio sales force in general. Whether it’s Cox or any other company, our teams are a lot smarter now, they’re a lot better trained, and they’re in a much better position to help those advertisers vs. 10 years ago, when so many companies had a pretty unprofessional image on the street. To me, the upside has always been top-line. I’ve always thought that the cost-savings part of that equation was vastly overrated.
Critics who are opposed to consolidation claim that deregulation had diminished the number of formats in radio. As a former programmer, what’s your take on this?
You’d have to be a real hypocrite to say that the choices for listeners aren’t vastly superior to what they were 10 years ago. There are so many more format choices, and there are so many broader choices that people can now pick from on the radio dial. Look at the variety of formats now. You have Korean-language stations that didn’t exist at that time, and you have a variety of stations in the African American arena, not just one Urban station in a market that plays everything. You have Urban Oldies, Hip-Hop and everything between. There are many more choices for people. Absolutely no one could sit down, do the math and tell you that consolidation has resulted in fewer format choices. That’s just baloney.
Likewise, there’s a concern among some individuals that consolidation has reduced the number of viable “voices” within the community.
I can only speak for Cox, but from a local-voices standpoint, all of our radio stations work within their formats to serve the specific communities that they target. Radio is nowhere near as consolidated as a vocal minority is making it out to be. It’s been overblown. What can happen is that the noise a minority can make is a lot louder than reality. On the other side of that coin, it’s incumbent on the two largest operators — those that right now have the largest number of radio stations — to take the mantle of responsibility that goes along with that.
Over the past quarter there have been some grumblings about how radio is being used less as a primary advertising medium and more as a “fill-in” buy. Do you think this is true?
I work for a company that owns cable, newspaper, television, and radio; and I know they’ve all had tough times the last few years. It’s not just radio. In fact, radio has done considerably better than some of the other media. What we’ve been seeing is general weakness in advertising, rather than any weakness in radio. Each medium has its strengths and weaknesses, and one of our strengths is that we can react quickly. I’m really not worried.
Is it difficult to find young people who are just entering the job market and who have set their sights on working in radio sales or management?
There are those glamour professions out there, like being a football player or a baseball player or a fireman, but there aren’t too many people out there running around saying, “I want to be an accountant.” There are people who have the talent to do that, and that’s what they end up doing. I actually think radio is so much more dynamic than it was prior to deregulation, because it’s a much more exciting business. It’s so much more full of change than it used to be, and a lot of young people find that an intriguing environment to be in. An environment of change usually creates a lot of opportunity for people who have learned how to bend that change to their world, instead of letting the change impact them. It’s so funny: I talk to a lot of young people who work for us now, and many of them have no experience at all prior to 1992, so they don’t really know much at all about the way radio “used to be.” To them, this is what we are, and this is the way it has been. This is very interesting, compared to the folks who have been around it for a long time.
What do you believe is the greatest factor in providing strong business leadership today?
We try to teach our managers that it really is all about the people and the talent that they’re able to get inside their radio stations. It’s critical to continue to coach and train people in that area. Make them understand that finding and developing good people is where their success lies. Once that culture starts to become ingrained in a company, then other people hear about it, and people who feel the same way will want to be part of that company. As a manager today, you can’t be Superman — you have to be a coach. What a coach does is get the right players and bring them together in a way that wins.
Is radio in danger of losing the ears of Generation X or Y? If so, how can we get them back?
There are a lot more choices for kids now than when I was growing up. Today, the computer, electronic games and all the traditional media compete for time. We must be aware that our share of usage is going to decline in that environment — there’s really no way around it. If I used to have 10 things to do, and now I have 20 things to do, those first 10 things won’t get as much time as they used to get. Still, every piece of evidence I get from our younger-targeted radio stations is that musical tastes are still developed by radio. Sure, there are other things that keep them informed and entertained, but you cannot have a hit record without radio. It’s a fact of life, just as you can’t have a big mass-appeal audience on television without having a network show. It’s only natural that these things have happened because there are more things for kids to do, but I think it’s incumbent on us to realize that these other things are out there and to be more reflective of that in the way we program our radio stations.
Where is the most significant competition for radio over the next decade?
From an advertising standpoint, you have to look where the dollars are; and the big dollars are still at the newspaper —disproportionately so in their share of time and penetration. Believe me, they are very powerful organizations, and radio has underestimated just how well-run they are. The typical large newspaper can have anywhere from 80 to 100 sellers, and the average FM radio station has 10 to12. Their depth of contact with advertisers is much better than we’ve ever thought of having. Radio has so much work to do in that area that it’s not funny. Newspapers are much closer to their customers than are radio or television stations. You ask me who can do a better job of it.
For decades, radio broadcasters have complained that radio doesn’t get its fair share of the pie, lamenting the lack of respect from advertisers and agencies. Does the radio industry suffer from a third-world mindset?
Absolutely. I don’t think we’ve begun to ask for what we can get in terms of share and dollars. One of the most interesting phenomena I’ve noticed is that, on some of our radio stations as we’ve launched them, we’ve started with incredibly small commercial loads. When we’ve done that, the salespeople have to ask for a larger break. What happens is that they get it.
A great example is our dance station in Miami, which we launched with only two commercial units per hour. They sold those units out real quickly, and at high rates. Then as we increased that load, up to 8 units, they’re sold out constantly. They’ve been able to increase their rate under that supply-and-demand scenario. What this tells me is, if you ask for it and you believe in it, then you can get it.
Of course, some groups have just blown spot loads right out of the water.
They have. And what happens then is that a smart buyer will say, “If company X is bringing me this rate, I’ll use that as a bludgeon against company Y and Z to get lower rates.” After all, that’s what buyers are paid to do — negotiate lower rates. They’re not paid to generate results for the client. We started to see this turn around during the last busy period in the late ’90s, because there was so much pressure on the inventory that even the people with astronomical commercial loads were raising their rates. That supply and demand caused costs per point to rise and get a lot healthier. The one thing we don’t want is to become like the airline business is now. Once you let yourself become a commodity business, you’re in big trouble.
What is radio’s greatest strength today?
Our greatest strength is that we really can help small businesses turn it around. There are so many stories of local radio that took a small business with maybe one location and turned it completely around. Time after time in some of our markets, businesses literally have told us, “Without you, we could not be what we are today.” Unlike a lot of our cousins in electronic media — television and cable — radio is a very personable medium. It’s always amazing to me the kind of reaction you can get from what someone said on the air. Someone is enraged or divided. With TV, they don’t respond the same way. It affects people more personally.
Likewise, what is radio’s greatest failing?
This could be a multi-part answer, because we have plenty. Probably the biggest [radio failing] is that we don’t realize just how good we can be. At the same time, I’ve seen a disturbing tendency to forget that what makes radio good is the fact that it’s local. We need to remember that we serve local listeners in every individual market. We don’t run an industry; we actually run a number of small businesses in each of these individual towns.
What do you foresee as radio’s greatest challenge over the next 10 years?
Our biggest challenge is continuing to be relevant in a world that has many choices. That’s going to be up to the next generation of inventive programmers and people who are on the air to keep radio relevant in a world where people can get information a lot of different ways. And there are probably a lot of different ways that will happen in the next 10 years that we’re not aware of yet. We want to make sure that the best way for them to get it continues to be radio.
Bob Neil Tells Arbitron:
“Go Back To The Drawing Board”
Cox Radio President/CEO Bob Neil has been an outspoken critic of Arbitron’s Portable People Meter (PPM) for years, and that position is not likely to change unless the technology and methodology change. “How radio is measured is absolutely critical to the future of this business,” he told Radio Ink. “I would prefer for Arbitron, instead of trying to push 20-year-old technology on us, to go back to the drawing board in 2004 and ask themselves the fundamental question: ‘With everything we have available to us today in 2004, technologically what is the best way to measure radio listening?’ If they do that, I don’t think they will default to the 20-year old technology that they have developed. They’ve talked about certain enhancements that they’ve made, but the technology itself is the same old thing.”
The radio industry has found itself wedged between an outdated methodology and one that is on its way to becoming outdated before it’s even implemented, Neil continues. “Everyone agrees that the diary is not the best way to measure radio right now, but fundamentally, Arbitron is going about everything ‘bass-ackwards.’ I just don’t think that, at the end of the day, it is going to be the best way.”
That “best way” involves a two-stage process, Neil insists. “Process number one is to see if there are things they could do now that would enhance or improve the diary. Here’s an example: If I can go online and book an airline ticket, pick my seat, and request an upgrade, why can’t I fill out a diary online? Why should I have to sit down and fill out that piece of paper and mail it back, instead of being able to sit down, have the form right there online, and submit it. That would make things a whole heck of a lot easier for most folks, and it might help improve the response rate, which is dreadfully low. The second part, as I have said, is to re-examine the technology and determine the right way of going forward in terms of measurement.”
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