November 27, 2015

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First Mediaworks

Bonneville’s Bruce Reese Is Radio’s Local Hero (07/26/04)

By Reed Bunzel, Editor-In-Chief

By anyone’s measure, the challenges facing radio broadcasters this year are many and varied. Whether it’s media ownership rules, broadcast indecency, copyright law, sluggish national ad dollars, Wall Street valuations or emerging technologies, the industry has a full plate.

None of these issues, however, is as pertinent and pressing as remaining relevant to its listeners and advertisers in the local marketplace. “This business has always been about the relationship we have with the people who live in the communities that are covered by our signals — that is the biggest strength we have,” says Bruce Reese, who last month was elected chairman of the National Association of Broadcasters’ Radio Board of Directors. “The system that the government set up in the 1920s and reiterated in the 1934 Communications Act is a system of free, over-the-air local broadcasting. The opportunity to serve local listeners and advertisers is what separates us from satellite, and it is absolutely critical that we remain intensely focused on the communities that we’re serving. That’s what we absolutely need to capitalize on.”

As president and chief executive officer of Bonneville International Corporation, Reese oversees the operations of 35 radio stations, an NBC-affiliated television station, and related operating divisions. He joined Bonneville International Corporation in 1984 and became general counsel in 1985. Reese was named executive vice president of Bonneville in 1991 and was appointed to his current position in 1996. Prior to joining Bonneville, Reese practiced law with firms in Washington and Denver after beginning his legal career with the Antitrust Division of the Justice Department in the nation’s capitol.

“I really believe that consolidation in radio and television since 1996 has improved the quality of management, sales and programming in the industry,” Reese says. “Some policy-makers would differ, but I also think we're doing at least as good a job of serving local communities as we ever have. We need to figure out how to get credit for all we do in our communities, both as providers of news and service and as the vanguard in audio entertainment.”

In addition to being the NAB Radio Board Chairman, Reese also serves on the Associated Press Board of Directors and the Radio Advertising Bureau Board of Directors. Additionally, he serves on the boards of the Primary Children’s Medical Center, United Way of Salt Lake, Salt Lake Chamber of Commerce, Pioneer Theatre Company, Brigham Young University Alumni Association, and Intermountain Health Care, Inc.

Born and raised in West Lafayette, Indiana, Reese attended Brigham Young University, receiving his Bachelor of Arts degree in 1973 and Juris Doctor in 1976. He and his wife, Lu Anne, live in Sandy, Utah, and are the parents of seven children.

Shortly after his election to the Radio Board chairmanship, Reese sat down with Radio Ink and discussed localism, consolidation, competition — and his new role at the NAB.

INK: Congratulations for being elected Radio Board chairman. In your mind, what is the role of the NAB Radio Board Chairman?
: My role is to try to determine — with the help of the terrific radio board — the interests of the radio portion of the broadcasting industry, and to make sure that those interests are represented by the NAB. It’s really important to think of this as the radio portion of an industry, and we are very much linked with our TV brothers and sisters in a lot of ways. We’re free, over-the-air local — that’s what we have in common. And there are many more things that ought to unite us than the few items that over the last couple of years have become bones of contention. Our job is to understand radio’s needs, to figure out how to integrate them with television’s needs, and then move forward in the best interest of the combined broadcasting industry.

What is the relationship between the NAB Board and the NAB staff in Washington? Who’s in charge?
The NAB staff’s job is to carry out the desires of the board, but the NAB staff works in Washington 24 hours a day, seven days a week, and they understand how the town works. Their job is to help us board members, who — while we are very interested in and very much affected by the policy decisions made in Washington — don’t spend all of our time thinking about those things. The staff’s job is to make sure we understand the issues, and then our job is to decide the policy and then not only tell the NAB staff what to do but also help them get those things done. We have to be very proactive in working with the NAB staff, with our own congressional representatives, and with the FCC.

What do you expect to accomplish at the NAB and in Washington over the next year? What are the more pressing issues facing radio broadcasters?
There are a whole bunch of issues. We can start with the decision that the Third Circuit Court made about the ownership rules — whether there are more appeals or a remand of that decision. The FCC presumably is once again opening this issue for comment by the public, including the NAB, as to what the really important issues are. Beyond that, market definition issues are huge, and we have gone on record saying that the Arbitron definition is a bad way to define markets. There are a lot of problems for the radio industry in this one, and there are some big problems for the TV guys, as well.

Besides the ownership issue, what else is on the Radio Board’s plate?
The localism debate will continue, because it seems to reach out and touch almost everything. Whenever you hear the commission talk about regulatory issues, there seems to be a tacked-on “Oh, by the way, what are you doing about your obligations to serve the communities in which you’re licensed?” We’ll have to continue working that issue, to make sure that we (the broadcasters) and they (the regulators) understand what localism means, and also to make sure that we are meeting our obligations.

Most broadcasters agree that the industry should pay special attention to indecency, but they don’t agree how. Should Congress and the FCC get tougher on this issue, or should the industry take charge — and fast?
The process that NAB has begun — trying to come up with some form of self-regulation — is a very important one. The issue won’t go away. I believe this is a problem we built for ourselves by pushing envelopes beyond the edges of public comfort. We broadcasters need to think very carefully about that.
On the other hand, I don’t think any of us — including those who are most conservative in content — are comfortable with the idea of the government’s telling us what we can and can’t say. Responsibility is a price of First Amendment freedoms, but having the government define that responsibility for us is a big issue.

What is Bonneville’s corporate stance on indecency? Do you have a zero-tolerance policy?
Given the ownership of this company, we’ve never bothered to have a policy. Our position has been pretty well understood by everyone who works for us. That’s not to say that folks don’t occasionally try and get a little cute and go places they probably shouldn’t, but we don’t have a policy because it’s so much a part of the company culture.

Is radio paying attention to emerging technologies that could pose a competitive threat?
The whole issue of emerging technologies is critical. The question of satellite radio’s efforts to violate the spirit of the law under which they were authorized by offering local programming is going to be front burner. On the other hand, we can’t spend all of our time trying to resist emerging technologies and preserve the status quo. We need to embrace new technologies and try to take advantage of them. Which gets to some of the other issues: the copyright law and how it in some ways restricts our ability to take advantage of of some new technologies, and to expand the terrific loyalty we have with our audiences over the air to be able to provide them services via the Internet that they would find attractive. Dealing with Congress and with copyright issues is going to be a big issue.

How important is it for radio to embrace HD Radio?
The digital transition for radio is incredibly important. It has been a long and winding road, and I hope we’re nearly at the end of it. The folks at iBiquity and the radio broadcasters with whom they’ve been working have come up with a solution that seems to work from a business perspective. People are still looking at it, but I hope in very short order the entire industry will embrace this technology and make the digital transition. That will present terrific opportunities for us.

Eight years into consolidation, it seems that most major-market activity is over. Has consolidation been a positive force on the radio industry, or have unforeseen things presented ongoing challenges?
The answer to both those questions is “yes.” Consolidation has been a positive thing. Notwithstanding all the hype from other media about the absence of diversity in radio programming, any objective analysis of programming options available to Americans today vs. 1996 shows that we have a lot more product and a lot more variety of product for people to listen to. The quality of competition has improved, our advertising clients are better-served than they were before, and I continue to believe that broadcasters are doing a heck of a lot in their local communities. We just do a pretty bad job of taking credit for it.

What are some of the problems?
Well, we clearly have a PR problem. I’ve made this speech before, and I’ll make it again: Until 1996, radio and TV were, by government fiat, mom-and-pop businesses. In the early 1990s, the biggest radio company in America could own 14 radio stations. In 1996, the cap was lifted, and there was a flurry of acquisitions. Some companies got to be a lot bigger, and some got to be really big in that period of time. Then we faced the problem of how to do it, which will be a fascinating business-school study some day. We had been a business in which the head of the biggest company probably knew every employee. Today, you have 100-200 stations — in one case, 1,200 radio stations — and you have to figure out how to manage them. All of us have made mistakes in doing that, and some of those things have led to public-perception problems that we must face.

Despite recent caution exhibited by some financial institutions, has Wall Street been satisfied by the effects of consolidation?
There are probably some issues on Wall Street, where we may have created unreasonable expectations about the efficiencies that consolidation would create. I may be making this up, but I’m pretty sure I remember — back in ’95 or early ‘96 — when someone asked Mel Karmazin why he would want to own four or five radio stations in a big market; Mel said, “Because owning radio stations in big markets is great business.”
It’s not about saving all kinds of money by owning a bunch of radio stations in those markets, although maybe you can save some. It’s about the fact that radio’s a terrific business, and you generally would like to own as many stations as you can own. Each is a terrific business by itself.

Traditionally, it was said that radio was “first in and first out” of a recession, but we aren’t seeing it this time. What’s happening?
Either the rules have changed, or we’re not coming out of the recession, or this is a one-time occurrence. The analysts certainly have been looking at this, and there has been a lot of talk for the last six months about where the growth is coming in radio. This is another of those lessons of consolidation: We’re no longer mom-and-pop businesses. This is a big business, and we need to figure out where the enemies are. We as radio guys still spend too much time trying to take a dime from a radio competitor’s pocket when there are dollars to be taken from other competition.

Does radio have a perception problem among national advertisers?
Yes, and RAB is undertaking that issue. Several years ago, Drew Horowitz, who manages our Chicago stations, and Chuck Tweedle, who manages our San Francisco stations, independently adopted a position with advertisers. They said, “When we make a deal with you as an advertiser, you can be assured that we won’t bump your spots without telling you, we won’t come back to you and raise the rate on the deal, and your spot will run when we said we would run it.” In those markets, advertisers perceived that as “Wow, what an offer!”
At an RAB meeting, I was speaking with David Kennedy about this, since Susquehanna had just made the same kind of announcement in their markets. David and I agreed that it shouldn’t be an amazing event when we tell advertisers that we’re going to meet the terms of the contract we signed. These are things that advertisers ought to expect from us.

Bonneville operates 35 stations in six markets. Are you pleased with the company’s size, or do you want a bigger presence?
We have the hubris that everybody ought to have when they’re running a company this size: We think we’re pretty good at what we do, and we’d love to have more opportunities to show how good we are. There aren’t many opportunities right now.
People look at companies the size of Bonneville and say, “Gee, shouldn’t all you guys get together and form another company? Is there going to be another round of consolidation?” The fact is, most companies our size are standing pat. We’d love to have the good people who work at this company work for us in other places.
Having said all that, we feel very good about the way things are going in the company. We have a lot of hits and a few misses, probably just like everyone else. We have room for improvement, we have opportunities to grow, and we’d love to have more opportunities for our people to show what they can do.

Does consolidation afford you the opportunity for a few “misses” as long as you have plenty of “hits”?
Yes, I think it does. On the other hand, consolidation has generated so much value in these stations that the misses are in some ways more painful. You look around and say: “The conventional wisdom says this radio station is worth X tens of millions of dollars, and I ought to be doing a lot better with it.” But eight years ago, conventional wisdom said it was worth 20 percent of the number you now have. The misses are still painful, but we have great people who are working real hard to try and fix them, and we’re confident they will do it.

What is the greatest factor in providing strong business leadership today?
The biggest factor probably is the integrity of the leader: knowing what you stand for and being prepared to stand up and say it. The second factor is finding the best people to work with you to address the problems you have, knowing how to provide correct direction, and then giving them the opportunity to do the right thing.

There is criticism that radio has lost much of its inventiveness. How does a company that doesn’t have to answer to shareholders differ in this regard from one that is watched constantly on Wall Street?
I’m not sure I agree with the premise that radio has become less inventive. By any objective criteria, there’s greater variety of programming available to listeners than there ever has been. It’s a story that sounds so good that it just gets repeated and the facts are ignored.
Now, do we as a privately held company have some freedom that others might not have? We probably do, because I don’t have to answer on a quarterly call with the analysts.
On the other hand, I have stockholders who expect returns. They have a very long-term view of things, but their patience is not unlimited, and we need to deliver for them as well.
Still, I’m grateful for our ownership, I’m grateful for their patience with us, and I’m very grateful for their long-term perspective. That gives us the ability to care about our communities and care about our people, and the result is a pretty profitable radio group — a group that serves its customers well, both its listeners and its advertisers.

Still, there’s been public outcry that radio isn’t nearly as creative as it was before consolidation.
I don’t know that consolidation has eliminated creativity. It has made it scary, because all of a sudden, a radio station that was worth $5 million on the open market now is worth $40 million, without improving its cash flow — and that means your chips just became a lot more valuable. You feel that every time you step up to the plate you need to hit a home run. But the smart companies still try stuff.
At this moment I’m listening online to one of the great radio stations in America, and it certainly doesn’t fit any cookie-cutter mold. It’s not one of mine, by the way, but if you look at what we did with The Drive in Chicago, you’ll find it was an experiment that worked. Look at what we tried at WWZZ in Washington — that was an experiment that didn’t work.

Terrestrial radio is based on localism, but many critics claim that the industry is losing much of that local focus. How critical — really — is remaining local (and live)?
Those are two separate things. They’re not unrelated, but it is absolutely critical that we remain local. We’ve had syndicated programming in radio forever, and it isn’t necessarily bad that some programming originates someplace else. But there has to be a local element.
That’s what we are — this is the system that the government set up in the 1920s and reiterated in the 1934 Communications Act. It is a system of free, over-the-air local broadcasting. The opportunity to serve local listeners and advertisers is what separates us from satellite, and it is absolutely critical that we remain intensely focused on the communities that we’re serving.
Does that mean you don’t voicetrack? No — in some cases, voicetracking is entirely appropriate, but it needs to have a local flare. If all you are is a music box, a hundred channels of sound that we won’t even pretend is CD quality, then it’s tough to compete with the satellite companies.

How concerned are you about radio’s ability — or lack thereof — to attract a teen or 20-something listener who has so many other media choices?
This is a real challenge for us. As radio broadcasters, we need to look at the 18- to 30-year-olds to figure out how to be hip and relevant to them. Many of them sit in dorm rooms with high-speed free Internet connections for their music choices.
We need to think hard about what we can do to become an important source of information and entertainment for those folks. We must not be afraid to try stuff, and we must make the digital move soon. There needs to be some buzz about radio, so we need to make the IBOC transition.

Is that transition moving fast enough?
No, it isn’t, but I’m not sure that, practically, it could have happened any faster. I hope we’re close, but I think this will be a big plus for us.
At the NAB show in Vegas, one of my engineers took me by the Harris booth, and I listened to the 5.1 surround sound. It knocks your socks off. To be able to produce local promos and commercials locally in 5.1 surround, with no cost to the consumer, and for consumers to be able to hear it over their three-speaker system in their Chevelle, that is cool. That’s the kind of thing that will make a big difference.

What will be the most significant competition for radio over the next decade?
Radio will continue to be a good business for the next 10 years, but WiFi is going to be an issue, as is hard-wire and broadband access to computers. Satellite will continue to be an issue, as well. Who knows? Maybe the TV guys will decide to use all their capacity to do audio service.
We need to be aware of all these things, and we need to stay on top of emerging technologies. But of all those things, none will be the thing that gets us; it’ll be something we didn’t even think of as competition.

What is radio’s greatest strength?
I think it’s localism. This business is all about the relationship we have with the people who live in the communities that are covered by our signals — that is our biggest strength. That’s what we absolutely need to capitalize on.

Likewise, what is radio’s greatest shortcoming?
It’s the fact that we spend way too much energy fighting the wrong fights, fighting other radio stations. There are bigger victories to be had. Eight years ago, that was the only battle we knew — there were 45 stations in Salt Lake City, and you could own two of them. We must train a new generation of managers, salespeople and programmers who look at the world with a slightly bigger vision.

What do you foresee as radio’s greatest challenge over the next 10 years?
The 18- to 30-year-old listeners: We must make sure that radio becomes a major source for them in the future. We stand to lose half a generation of listeners if we let that happen — and maybe their kids, too.

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