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November 29, 2014

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Susquehanna’s David Kennedy: “Radio Is A Business Of Ideas” (09/20/04)


By Reed Bunzel, Editor-in-Chief

“Radio must be relentlessly relevant — to our listeners' lifestyles and to our advertisers' business plans — if we want to grow as a medium. To do this, as an industry, we must look beyond the short term and make decisions accordingly.”

That’s what Susquehanna Radio President/COO David Kennedy told Radio Ink back in July when he was profiled as one of the “40 Most Powerful People in Radio.” Now, just 10 weeks later, he says he is encouraged that the industry collectively is beginning to look beyond the near term and take charge of its own destiny.

“Over the past several months, we’re read and heard about a new sense of industry focus and cooperation at the highest levels,” Kennedy says. “This is something that a number of us have been calling for over the past few years. If there has ever been a time for leaders of our industry to lead, it is now. For awhile in our business, leaders weren’t leading the way they should have.”

Fortunately, Kennedy continues, “We’re seeing some of that happening now, and that gives me tremendous optimism for our business. Leaders are rising to the occasion. Such people as Jeff Smulyan, David Field, Joel Hollander, John Hogan, Bruce Reese, Peter Smyth, Mac Tichenor, Lew Dickey and Farid Suleman are recognizing that some things affect all of us and transcend our internecine competition, which we must address.”

A 1975 graduate of the University of Toledo, Kennedy earned a master’s degree from Bowling Green State University in 1976 and a Ph.D. from Bowling Green in 1981. He began his radio career as a staff announcer at WMHE-Toledo in 1971, and two years later — while still an undergraduate — he joined Susquehanna at WLQR-Toledo and held a variety of on-air, programming, and operations positions. He was promoted to director of program research for the company in 1979 and was named vice president of planning and research in 1983. In August 1989, Kennedy became senior vice president and assumed direct responsibility for WFMS-Indianapolis and WRRM-Cincinnati. Six years later, in January 1995, he was named president and chief operating officer of Susquehanna Radio.

A former board chairman of the National Association of Broadcasters, Kennedy this week is finishing his term as chairman of the Radio Advertising Bureau’s board of directors. He is a member of the International Radio & Television Society Foundation, Broadcast Education Association, and American Management Association. In 2000, the Pennsylvania Association of Broadcasters named him Broadcaster of the Year, and this past February, Radio Ink presented him with the Radio Wayne Award for Broadcaster of the Year.
As Kennedy prepares to step down from his post as RAB Board chairman, Radio Ink took the opportunity to sit down and talk with him about accountability, leadership, lab experiments, and the future of the radio industry.

National ad dollars in the second and third quarters have been significantly weaker than many analysts expected. Is this a cause for worry or just part of the natural economic cycle for the radio business?
I’m very reluctant to draw dire long-term conclusions about the short-term revenue trends we see in our business. True, national is down slightly — year-to-date, it’s down about two percent through July, and July was a tough month for national advertising. But if you look at the revenue index that the RAB prepares each month, you’ll find that local growth and national growth have been nearly identical since 1998, which is the base year for that index. I believe what we’re seeing now is exemplary of the cyclical nature of our business, and not indicative of a secular or long-term condition. Radio’s challenge is to keep that long-term perspective while addressing the short-term issues as they arise. As long as we focus on serving our customers, we’ll do fine.

You’ve just finished your term as chairman of the Radio Advertising Bureau’s board of directors. During that time, what has the RAB done to strengthen its relationship with the national advertising and agency community?
The RAB in many ways is the envy of, and a model for, many other advertising-focused media trade associations because of what it does — its innovation — and how effective it can be. It’s staffed with some outstanding radio professionals whose mission is to promote the value and effectiveness of radio as the final element of the marketing mix. One thing the RAB does is to look for alternative approaches and different sources of revenue for our industry.

In an effort to further enhance the impact of the RAB, Gary Fries and Mary Bennett have significantly increased the size of the national marketing staff. These six new employees have an exciting task: to get close to, and to serve as radio marketing consultants for, clients and agencies. In an effort to uncover sources of dollars for this industry, their job is to penetrate to the deepest levels possible and demonstrate radio’s many successes and capabilities. This, combined with the incredible new research projects under way at the Radio Ad Effectiveness Lab — as well as a concerted, focused industry advertising initiative — will make a powerful statement on behalf of radio to the national marketing arena.

Has radio dropped the ball in working with advertisers and agencies to ensure that this medium can provide accurate invoicing information, accountability, and a significant return on investment from their ad dollars?
I don’t know that radio in its past has done as good a job as it could have in focusing on accountability and return on investment, but I can tell you that the RAB has long recognized the growing importance of accountability and ROI to our advertisers. To this end, the RAB has informed its members of the need to address these concerns, urging them to develop systems and processes that ensure that they do what they say they will do, and that they document it to the advertiser. Examples of this approach are the industry push toward electronic invoicing — which is well under way at many levels and should become standard for us — as well as the joint RAB-AAAA project on standardization of common radio-industry buying and selling terms. The standardization was designed to foster improved communications and clear expectations at all levels of the transaction process.

Recently, the Radio Ad Effectiveness Lab released the Wirthlin study. What does this report tell us, and how do we incorporate it into our sales process?
To me, the Wirthlin study was particularly insightful because it demonstrated clearly that radio listening is a very personal, emotion-driven experience — far more so than television and newspapers. As a result, advertisers can reach customers in an exceptionally powerful way. The connections that an advertiser can make by using radio are deeper and more meaningful than with other media. That’s a terrific story to tell, and this research is already being presented to national advertisers by the RAB national marketing force.

Since the Wirthlin study was commissioned by a subsidiary of a radio trade organization, might some advertisers and agencies view it as presenting biased information?
I suppose some may be skeptical, but I believe that the information is so powerful and so persuasive that it would convince even the harshest skeptics that there is value in that information. Furthermore, if the New York audience at the launch of the research results was any indicator, those members of the buying community who pay attention to these matters will find this to be valuable information and will also find it actionable as they think through the use of radio in their advertising plans.

What actionable information in the study can account executives take to their clients and incorporate immediately into their sales presentations?
There were a couple of interesting points in that study. One of them dealt with the subject of environmental compatibility, which strongly suggests that an advertiser’s spot should not clash with the programming or with the listeners’ expectations for that radio station. A station can clearly design and execute ads with those factors in mind.

Another issue dealt with the notion of emotional level — how the most effective ads are those that reach people at that personal level. It suggests that broadcasters should ideally create spots that are not designed just for generic or mass audiences but should recognize the unique nature of their listeners and do the best job of hitting the hot buttons of those listeners. Those ads will be the most effective.

That’s why Paul Harvey has been so effective.
In hindsight, when we see a study like this and look back at what Paul Harvey has done, it explains a lot.

After eight years of consolidation, has the radio industry taken advantage of the positive aspects of market clustering that were promised — or at least anticipated — when the Telecom Act was passed in 1996?
Despite the consolidation that has taken place, don’t forget that radio remains one of the least-consolidated industries of all media. I believe that the overall impact of consolidation has been positive, and I also believe that we’re learning each day how we can make it more so. Remember that this kind of fundamental change in the structure of our business presented challenges that none of us had ever faced, such as how to effectively manage clusters of four, six, or eight stations in a market.
There’s a learning curve involved, and mistakes have been made along the way. Fortunately, however, we’re able to apply these experiences to improve our operations and to establish sound practices for the future.

Are some companies still making it up as they go?
In some ways, what happened in our business in the last several years is analogous to a lab experiment, with different companies trying different approaches to address the same issue. Some have been more effective than others, but those that have been most effective have put the needs of the clients first. Those that have done otherwise frankly have fallen short of their promise.

How should radio salespeople and managers distinguish between selling against radio’s real competitors — particularly newspapers and cable — and engaging in intramural competition against other radio stations in the market?
I agree that real competition is, indeed, other media. Because radio is so intensely competitive at the local level, however, there can be this tendency to focus on your radio competitors, losing sight of the real objective, which, again, is to serve the customer. If all you do is focus on other media, meaning television or cable or newspaper, or if you just focus on your radio competitors, you will fail. No other focus will pay greater dividends or grow our business faster and with a more solid foundation than a focus on the customer. That’s what we try to convey to our account managers in Susquehanna Radio, and that really is the basis for the sale performance guarantee we launched in all of our markets.

Much of what’s in that guarantee are things that advertisers probably expected all along. How have clients reacted to Susquehanna’s setting it in stone?
The guarantee has been very effective for us, because for some clients, it highlighted what we had been doing all along but in a way that we had never been able to do before. For others, it created a level of expectation, permitting them to focus on our account managers and on the service we provide in a manner that separates us from some of our competitors.
To that extent, we have been very pleased with the results. There were some who said to us, “This is what you should have been doing all along.” We replied by saying, “Yes, and we’re here to reinforce the fact that we will continue to do that.” This is the first phase of the initiative, and we’ll be rolling out additional elements in the coming months.

What do you make of Clear Channel’s announcement that it is cutting spot loads while driving up pricing? Is this a realistic goal, or is on-air clutter a more complex issue?
As a first step, addressing commercial inventory loads and clutter can go a long way toward enhancing the listening experience for our audience, as well as the environment for our advertisers. That clearly is the objective of that initiative. We at Susquehanna join all of those who have commended Clear Channel for its decision.

At the same time, research tells us that other factors are involved and should be examined further — things such as spot length, and spot break length, content and style of the commercials, number of interruptions, and so on. Without question, more work needs to be done, and plans are being made to investigate these additional issues soon.

Does Susquehanna have plans to adopt an initiative similar to Clear Channel’s?
We believe that the commercial inventory loads on our stations are appropriate. At the same time, we constantly review those loads in light of what our listeners tell us, and in light of competitive factors. It’s an ongoing process for us.

So far, 2004 has seen more FCC fines for indecency than any other year. What must the radio industry do to make sure it doesn’t run afoul of legislative or regulatory policy on indecent broadcasts?
The NAB has taken a leadership role in this area, starting with its summit last March on responsible programming. That summit was attended by several hundred people who heard from a number of panels of broadcasting friends and foes. From that summit, it became clear that the broadcasting industry itself must address this issue.

[NAB President/CEO] Eddie Fritts asked me and Gary Chapman of LIN Television to chair an industry task force that is charged with the mission of finding common ground among all relevant constituencies to permit us to police our own actions, while at the same time acknowledging and protecting our cherished First Amendment rights and obligations. That’s an onerous task, but the work is under way, and the industry leaders who’ve been involved are highly qualified and very dedicated to finding a solution.

Several radio groups have a zero-tolerance policy for indecent broadcasting. Has Susquehanna done that?
Susquehanna has long had a tradition of responsible programming, and it has been passed down over the years. This policy is understood and executed by the programming professionals at our stations. We did not have to create a policy as a result of the recent investigations and threats of additional regulations and fines, because this programming philosophy has been in place at our company for years.

Recently, Wall Street and other sectors of the financial community have dumped on radio and radio stocks. Are analysts unfairly maligning the radio business, or has this been an industry wake-up call?
It’s apparent to many of us who have discussed these recent stories that a lot of that has been baseless or clearly indicative of a lack of understanding of the nature of our business. Radio remains a remarkably effective medium, virtually unmatched for its ability to target and serve local communities and listeners. Are we immune to criticism? No. Despite the erroneous nature of many of these reports, I believe we always should take a cold look at what we’re doing in an effort to improve. If we completely dismiss them, we’ll miss an opportunity for introspection and perhaps improvement that could be very valuable to us in the long run.

Given the scrutiny forced on radio by Wall Street, are you happy that you’re running a privately controlled company?
Yes. In the last several years, I have found myself saying that I’m happy we’re private more often than I’m upset that we’re not publicly traded. From my perspective, there have been some benefits to the private nature of our company. At the same time, we have not been able to benefit from some opportunities because we did not have the ability to tap into the public markets.

What can you do at Susquehanna that the heads of larger radio companies can’t? What makes your company unique in the industry?
It’s been 31 years since I worked for another company, so that’s hard to answer, but I believe that many of our operational practices probably are similar to those of other larger companies. Because of our size and our history, however, we may have a culture and nimbleness in some areas that are different from those of larger competitors. If we’re unique in any way, it’s probably because of the people in our company. I am fortunate to be working with the best in the business every day, and they really define our company.

Aside from your role at Susquehanna, you have also served as board chairman for the NAB and the RAB. What do you believe is the greatest factor in providing strong business leadership today?
Service. I’m a strong believer in servant leadership: the concept that those who lead must realize that they must first serve. We try to ensure that all members of our management team view themselves as resources to our employees, with the hope that the resulting work environment is collaborative and progressive. From this kind of workplace, a strong sense of vision and purpose can emerge, and that in turn can serve as an effective rallying point for all our employees. It’s the employees — the people who work with us — who are really Susquehanna Radio Corp.

In a world where globalization is becoming a reality, can radio maintain its commitment to localism?
To me, localism is our charge, and localism is our future. It is what made us famous, as the saying goes, and we’d best not forget it. Having said that, of course, there is a place for strong popular national talent, and there probably always will be. What radio does best, however, is integrate itself into the lifestyle of its listeners, weaving itself into the fabric of their lives — at the local level. No one does that better, and as long as we remember that, the medium will continue to thrive.

Some critics of consolidation insist that radio has lost its creativity and innovation. Is there any substance to this?
Pointing to consolidation as the source of evil is one of the easiest and cheapest shots that a critic can take, but it doesn’t stop them. The fact is that there are more formats in existence today than before the Telecom Act of 1996. There’s more innovation in product design and execution, and creativity is probably in more demand now than ever before.

That’s certainly the case in our company, and I know it’s true for many others. You should also realize that consolidation has brought changes in execution of station operations, but those operational changes are very different from the charges of stifling innovation and creativity, neither of which I believe has a foundation.

Is it possible that these critics are trapped in those “loosey-goosey” days of the 1960s and ’70s, when FM radio was still experimental?
Very possible. I was deeply involved with radio back in those loosey-goosey days, and yet when I look at radio today — when I listen to our stations and hear the creativity that exists today vs. that which was in existence back then — I marvel at how it has evolved, how professional it has become and how attuned to the times it has become in its own way — the same way the loosey-goosey approach was appropriate from a creative standpoint back in the ’70s.

With so many entertainment media available today, how can radio attract and maintain a younger audience?
Radio remains a primary source of new music for young people. Just ask the record companies about the importance of radio today. Nonetheless, this is an issue that I’ve experienced in my own family.

It’s disturbing, but to me it’s not yet close to being fatal. We need to find ways to become more relevant to young people, and that will take research and creativity — two resources that we have brought to bear on other thorny problems. I’m confident that we will be able to execute on this one as well. However, I believe there’s a sense of urgency here, and the time to act is now.

How do you get them back — or convince them to come to radio in the first place?
By listening to them. We must get inside their heads and learn what it is that they think about radio today, how they feel radio stacks up to the other sources of audio entertainment in their lives, and how it stacks up as a part of their lifestyle. They will guide us. When we learn from them what’s important, I believe we have the creativity in our business to design a product and execute it in a way that will bring them to us.

What is radio’s most significant competitive challenge over the next decade?
While I feel other audio entertainment sources have the potential to erode a little listenership from radio — satellite radio or iPods or wireless broadband — I don’t believe that any of them have the ability to supplant that personal, local connection that radio makes with its listeners. Until something like that emerges, radio should be solid — as long as we recognize our role to serve that local need. If we can maintain and enhance that bond with our listeners and our communities, I feel that our position as a powerful advertising medium likewise will be ensured.

What in your estimation is radio’s greatest strength?
Its personal connection with listeners: That fact makes it possible for us to become an important part of their lives. Also, it makes us one of the most effective advertising vehicles in existence.

Likewise, what is radio’s greatest failing?
Our greatest problem may be our tendency to forget how strong and effective we can be. In the heat of battle, we can lose sight of those strengths. We have to resist that tendency and focus on service instead.

Does radio have one particular challenge that stands above all others?
Our single greatest challenge is to continue to attract and retain the brightest and the best people for our companies. Radio first and foremost is a business of ideas, and we need outstanding people of diverse backgrounds and interests to find a promising future in this business. If we can operate our companies today with an eye on that critical part of our future, then the possibilities for us are endless.


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