November 26, 2015

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Like Father, Like Son: Russell And Kevin Perry Bring Financial Savvy To The Family Business (03/24/08)

“I’m the maverick. If you tell me it can’t be done, I’m gonna try it.” That bold attitude has led Perry Publishing and Broadcasting company founder, Chairman and CEO Russell Perry to try his hand at a variety of businesses, and he’s found success with every one.

Nearly 30 years ago, Perry reached out to an under-served niche in his home state of Oklahoma with the launch of a weekly newspaper, The Black Chronicle, which targeted an African American audience. Building on the success of his publishing business, in 1993 Perry expanded into radio, again focusing on an under-served niche by launching an Urban AM station in Oklahoma City. Ignoring the warnings of radio industry critics, he again found success. From there he built a group with stations in five Oklahoma markets, including Oklahoma City and Tulsa.

“They told me not to buy that first AM,” he recalls. “But I bought it, and it worked.” Today, Perry’s is the largest independently owned and operated radio group in the state. Last year, the company expanded out of Oklahoma with the purchase of a five-station group in Augusta, GA, from Radio One, bringing its station count to 16.

In 2001 Perry expanded his media holdings into cable television with the launch Urban Outlet Television, a vibrant program that highlights news and entertainment stories of interest to an African American audience.

Vice President/COO Kevin Perry works alongside his father in running the company’s diverse group of assets, and has been instrumental in adding digital media initiatives to the station group.

In particular, he says Perry Broadcasting is committed to streaming its signals despite uncertainty surrounding royalty rates, and has also been pleased with the response it’s seen to text messaging campaigns. “It’s an increase in cost, but from an advertising point of view, it’s also making sure that advertisers don’t just shift dollars from terrestrial to your digital platform,” he says. “Trying to get some new dollars while retaining the old has definitely been a juggle.”

It’s just the latest in a line of calculated, strategic moves that the company has made in almost 30 years in business. “We’ve been very, very fortunate,” says Russell Perry. “Kevin and I work beautifully together: I’m more on the business end of things, overseeing the financing and watching budgets. Kevin’s out there trying to turn the table and make money. We work as a tremendous team.”

RadioInk: Proponents of loosening the FCC’s cross-media rules, which were just rewritten, contend that the efficiencies created through cross-ownership of broadcast and newspaper properties benefit both media. As an owner of radio, newspaper, and cable assets, do you agree?
Russell Perry:
Some 16 years ago I started my business with a weekly newspaper. That was our only form of media at the time. Some years later I decided to pursue radio because we didn’t have an Urban radio station in Oklahoma. When I looked into it, you could buy a radio station if you owned a weekly newspaper, but were prohibited if you had a daily newspaper. I was very, very fortunate, and it really enhanced my business because I was able to cross sell. For those who wanted print, I could offer print; for those who wanted radio, I could offer radio. Later it progressed to cable television and more.

RI: Do your properties share resources?
Absolutely, I do it every day. But I’m speaking from a minority aspect; that’s the way I got into this business — a black newspaper, a black radio station. I was trying to get into that niche when no one else would. Now you have everybody doing it. When I started my radio station, there wasn’t anything here. The Citadels and Clear Channels were not playing hip-hop music until it became profitable. Once that dollar started ringing, everybody started playing hip-hop music, and the game changed. I started with a 4.3 share playing hip-hop music on a stand-alone AM daytime in Oklahoma City. Within a year, one of my major competitors started a hip-hop FM, and I went to less than a point. It’s all driven by finance: Who has the bucks? Who can spend it? Today, these stand-alones are in terrible trouble; it’s a monster getting the revenue to run them, not just to purchase them.

RI: You mentioned serving a niche market. Were you concerned when you entered the radio business that the urban audience in Oklahoma wasn’t large enough?
I looked at what I would have to pay for the station to get in here, and after I did my due diligence I found that I could address my financial commitments. At the beginning, my newspaper was supporting me both ways. I had established my worth, and my newspaper was debt free. So I had a certain amount of financial leverage to support the new venture. I also had a very strong relationship with the largest bank in the state at the time, who believed in my product.

RI: Discuss the challenge a small, independent broadcaster faces competing with larger companies.
After our competition flipped one of its FMs to hip-hop, my son was walking up and down the floor: “Dad, what are we gonna do?” I said, “We’re gonna turn it up and make it blacker.” At that time there was some hip-hop music they wouldn’t play, so I said, “We’re gonna play it, and see how far they come across that line.”

RI: How far did they come?
Pretty soon, they came all the way. As I said, it goes back to dollars and cents.
Kevin Perry: When you’re privately held, your owner is sitting right there. You can make one phone call and talk to him. Dad has an open-door policy. We have been able to move on the dime, and we are very community driven. You hear that all the time — localism, localism, localism — but we are. Our DJs are part of the community. When you have a true urban community radio station, your advertisers get the benefit from the return on their investment, and it’s happened that way for the last 16 years. It’s all about response and return on their dollar. When big corporate chains compete against us, they’re not in the communities, they’re where they need to be to get the dollars, and the listeners know that.
RP: And that is called pride. This newspaper and these radio stations are part of the community; it belongs to them.

RI: How is business across your various markets?
We’re in Oklahoma City, which is market number 48; Tulsa, which is number 64, and Lawton, number 289. We also have rural stations in some not-rated markets. With those stations we try to just make a presence. The economy for radio ad sales seems to be dipping in mid- to large-size markets, but is staying steady or even growing in rural America. I wish Dad and I could take all the credit, but it starts with our general managers and salespeople in those markets. They’re local folks in the community, in the churches, in the commerce meetings. They’re still tuning in to hear their favorite high school football, high school basketball, their favorite trade shows, and that still has not been effected by the big conglomerates or the dark side — satellite radio.

RI: The FCC recently adopted a rule prohibiting stations from accepting advertising contracts that discriminate on the basis of race or gender. This is targeted directly at no-urban dictates. As operators of Urban-formatted stations, have you ever encountered no-urban dictates?
Yes, I have experienced that — from agencies and from local-direct clients. Each one has their reasons: For example, in our rural markets, even though Lawton is 23 percent African American, they’ll say they’d rather be on the Country station because they can reach more, even though my Country station doesn’t have the ratings that my hip-hop station has. It starts with the advertiser, the owner of the company, as well as the agencies. I don’t see that radio stations have a part to play in that.
RP: Here’s my somewhat unorthodox answer: About 20 years ago the banking industry implemented the Community Reinvestment Act. They drew up lines of demarcation that created a trade area for banks, which requires banks to monitor their lending policy to ensure that those local communities were being served by those local banks. That is the law. What would be wrong with the federal government going to agencies that are being paid through the airwaves, which belong to the general public, and demand that that law is implemented — and if they are caught violating the rule, they will be fined severely? If they can do it for the banking industry, why couldn’t they do it to no-urban dictates?

RI: The FCC is also going to host a hearing concerning access to capital for minority-owned businesses. Did you have trouble raising money to build your company?
Yes, I’ve had challenges every day. Thirty years ago, I was the first African American asked to join the board of directors of the largest bank in the state of Oklahoma at that time. That exposed me to capital. What I didn’t realize is that there is a form of sophistication in obtaining local commercial capital in terms of preparation and presentation. For so long, we as African Americans were not — no matter how much schooling we had — introduced to that formula. On the local bank board I had the exposure that prepared me to present my request for commercial borrowing. I learned quickly how they did it, with good ol’ boy networking. Second, I became an expert on leveraging, and still know exactly what I have to leverage; nobody has to tell me that.
I didn’t think I could get this large, but we have leveraged our way up to 16 stations, and I still think I have a lot of equity to address. Number one: I have been blessed; and number two, I was smart enough and astute enough to learn the system.

RI: What’s your advice for the aspiring minority owner?
You have to formulate in your mind that you’re a risk taker. I’m a big risk taker. Radio properties are very, very expensive today, and they’re not going anywhere. There are about 13- or 14,000 radio stations in this country, and they’re really not making any more. Radio basically left the commercial end and went Wall Street. Some of the big boys are trying to get back into privatization, but the cost factor is almost prohibitive for the small man to get in. A lot of people, especially minorities and people with less financial sophistication or exposure, think they have to get into these huge markets, but most people can’t cash flow those things today. I like each unit to stand on its own, but it’s almost impossible for that to happen based on what they pay for stations today. You have to go into smaller markets and work your way up. A lot of people don’t want to hear this, but Oklahoma City is a top 50 market, 48th in the marketplace. Do you have any idea what one unit would cost in Oklahoma City? Astronomical! And not only that, we have a tower company too. We built the tallest tower ever built in this region, a 2,000 footer. Can you imagine what that cost?
KP: As Dad said, these prices are not going down; the stations are still relevant, and people are still able to borrow millions of dollars to purchase them. I saw where two FCC commissioners are looking at whether equity financing has been a negative to our industry. A lot of folks don’t realize how expensive that money is, how that cash flow has to turn around in less than 30 days. Also, after three years, you really have to sell out regardless of how you’re doing so they can get their investment back.
RP: One of the things I discovered in borrowing money on a local level with commercial banks in Oklahoma is that none of them understood radio. They could not understand paying for a license. That’s all you really have in assets worth millions of dollars, and you’re not selling those licenses; you can’t sell them. So, what are you selling, what are you financing? That was the most difficult thing for me to explain to these local bankers to obtain the money. They understood tangible assets like a building or land, but I had to help educate them. I had Kevin go on the Internet each day to pull out sales around the nation and send them to my bankers; that helped educate them about what people are paying in smaller markets. We think we’ve bought our stations right. We didn’t pay that exorbitant cost to get in this business. That’s where you really have to be careful; if you’re too zealous to get into this business, you have a tendency to overpay. So far, thank God, we have not overpaid.

RI: Are you looking to buy more stations?
In December, we closed a deal on five in Augusta. If Augusta treats us well, and if the deal is right, hopefully we’ll be ready to move forward.

RI: Is there any pressure coming from your advertisers about electronic measurement and accountability?
Unfortunately, being the 48th market right now, it has not rolled out anywhere close to us yet. Are we concerned about it? No question. As you have seen in the studies, urban and ethnic radio have been hit hardest.
RP: First of all, Arbitron is too expensive. And normally they buy up their competition. Talk about dictates! They need to hear me say that. I don’t buy their cookies every time they send them. I’m probably the most difficult broadcaster they have to deal with because I think it’s unfair. There’s no way under the sun you’re gonna make me believe that if I got 10 radio stations and old boy down the street got a hundred, and we’re using the same service, that he’s paying as much as I am. I don’t believe that. What they’re getting is never discussed, but just as a business principle, he’s not gonna pay the same.
KP: I’ve always had this feeling that when you’re paying for a service and you only have 16 radio stations and another company is paying for thousands of radio stations, they don’t get some preferential treatment. Business is business, but I’ve just never felt that I was getting my fair shake.

RI: What kinds of digital initiatives do you have under way?
Streaming has been extremely important to our radio stations. Even with the CRB royalties, we are streaming 10 out of 16 stations. I love streaming because there is no perfect radio signal, and streaming allows us to get into every basement, every corner. Second, text messaging has been doing a phenomenal job for us, targeting that young listener people say are not listening to radio anymore. They don’t want to call in for a request, they like to text in or e-mail. All of our stations have e-mail addresses that go directly into the studios, and listeners can chat with the DJs while they’re on the air. We’re making it very, very interactive from the digital platform to terrestrial, and it has gone extremely well. For example, click on our Oklahoma City hip-hop station, and you’ll see a TV commercial for one of our clients. He’s had more hits for his TV commercial on our website than he’s had for an actual cable time buy that he placed. So, he’s taken his cable money and given it to me to run his TV commercial on my websites.
RP: We put ourselves in that position. We built an IT division and hired a full new staff. It will take capital, but we think the investment is worth it. I get a monthly report on sales in every area. I want to see what we’re doing in websites, print, radio, television. I know whether we’re making money or not. I know if it’s profitable or not. I know if we’re gaining, or just sustaining ourselves. It provides a balance. IT is going so fast; I don’t know what’s next, and I don’t know if we can continue to grow like this.

RI: Are questions about accountability affecting your relationship with advertisers?
Going on 16 years, I’ve had some agencies that did hold us accountable. Every book that came out, I got an e-mail or fax saying that we owed them so much based off of the rating system because we did not cover the points that we were supposed to with their advertising schedule. But every time our ratings went up, I never got an e-mail or fax stating that I should get additional money because my ratings went up. It’s a one-way street. Unfortunately in our industry, we’ve allowed customers to pay 60 to 90 days after the invoice hits the office; we’ve allowed individuals to try to dictate to us what they’re willing to pay for and what they’re not willing to pay for. I think we allowed that to happen, and somehow we have to try to stop that. Now we’re falling into this accountability structure with the ratings system with agencies and advertisers, and I truly believe the People Meter as it is right now is death to urban radio. Something has to be changed. Something is not making sense: How can you have top-rated radio stations for years based off the old diary system with Arbitron, yet when this new system comes out, they’re saying that this new number is a true reading of the marketplace? What were all those old numbers prior to now?

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