Rick Cummings and Emmis Communications have been inseparable for thirty years. Rick’s been quite the success story at Emmis as evidienced by the rapid promotions he’s received over the years. As Predsident of Progamming Cummings offers some keen insight into the challenges facing radio groups of all sizes these days, from digital and social network platforms to granular consumer research to PPM’s impact on minority targeted stations and much more.
Rick Cummings
Rick Cummings continues to be an Emmis radio lifer as the company extended his deal earlier this year. That makes 30+ years at Emmis and a mutual commitment that’s in rare space in our industry. It all started in 1981 as Emmis launched its first radio station at WENS in Indianapolis, and (CEO) Jeff Smulyan awarded Cummings the programming duties. After subsequent years of expansion into other markets, and several promotions later, Cummings and Emmis are now operating 22 radio assets nationally in markets including New York, Chicago, Los Angles, St. Louis, Austin and Indianapolis.
Cummings has always been noted for his sincere and direct approach to the issues that constantly beset radio groups. In this candid interview Rick addresses some sensitive topics as he’s determined to confront some marketplace challenges and industry obstacles that today’s realities offer a smaller radio outfit going up against some of the bigger groups.
You recently re-upped with Emmis for another year of duty marking 30 years with the company. What makes Emmis such a tough place to leave?
I believe the 11 commandments of Emmis (link here) that CEO Jeff Smulyan created in the late 80’s still apply today and separate us from many companies. That is largely due to the leadership of Jeff and the values he instilled in a media company, values that he perceived, even then, as being different, but very important. One of the things that has made us successful for such a long period of time is we don’t punish failure. Jeff recently did an article where he talked about risk and he pointed out that those who have had few failures generally have not had many successes either.
Pat Walsh has also been an influential force inside the company. Pat was CFO until the end of 2009 when he became COO/CFO. I had been running the group and stepped aside to focus on overseeing programming again, with the new PPM challenges. Pat has done a phenomenal job, all while wearing two hats. It’s the kind of thing you see a lot of at Emmis.
What has been the most significant change you’ve witnessed inside of Emmis over the past ten years?
The programmers and managers who have been around the company for awhile will at times quote some of my pieces of advice or wisdom, and one of them was “Choice Kills.” I started saying that about 15 years ago and the point was that most of your ratings success comes from a very small group of very passionate listeners and when similar products are introduced in the marketplace it kills your ability to maintain your ratings levels. At the time it was a comment aimed strictly at radio, and the way things have changed most notably in the last ten years is the proliferation of choice. If we thought choice was significant and challenging 10-15 years ago, now given the digital offerings, it’s even more of an issue. There’s been an explosion of choice for listeners’ time and attention when it comes to what they want to spend their money on and how much time they want to dedicate listening to your brand. It’s just been dramatic.
Where do you think radio stands in the push/pull consumer business these days?
I don’t think the latter is a choice for us. We have to be where and know how our audience has chosen to consume us. Some may stream us, others via Smart phones, and some on good old fashion radios. I would be concerned about taking the approach of just being good over the air is going to cut it, which is a recipe for the newspaper model, a very challenging model these days. We have to make the effort to have intimate knowledge about how our consumers want to consume us today in order to stay viable.
Is there anything unique that Emmis is doing in its efforts to attract consumers outside of the on-air product?
In terms of platforms, in the early 2000’s we were one of the first to step out and wisely invest in the interactive space. We began to make that investment before most broadcasters did and as a result we have a separate company, Emmis Interacitve, which is founded on the principle of data rich information about our listeners. We can data mine through Emmis Interactive more deeply than most companies can which makes us more relevant to our listeners and advertisers. Emmis Interactive now has over 200 radio station customers and continues to grow.
We also have our separate digital business for the radio division. We’re applying a lot of attention to social networking strategy, an area that’s simply exploding. It’s mandatory these days and all of our stations are involved with it, but we also need training there because it’s such a quickly evolving space. I just finished a 60 minute webinar along with Angie May-Cook, our head of Emmis Digital, laying out our plan, the strategy and the training areas we want to focus on for Facebook, Twitter and some of the other social media platforms, which are all becoming more and more important relative to deeper conversations with listeners.
We also have the broadcast traffic consortium which our VP of Technology Paul Brenner heads up. It’s live data delivery to the dashboard for traffic which creates the potential for new partnerships with advertisers. These are all necessary things we need to be doing for our business.
Can you elaborate a little more on the focus of Emmis Interactive?
It’s people who sign up to become part of our database through any number of means and (with their permission) we collect a lot of information about them. We believe that at some point having that kind of deep data about our listeners will be something that’s very important to our customers. It’s clear with advertisers that they see the ability to directly target the most important parts of their consumer base and we see it the same way with our listeners. We can say that of the 2.5 million people that Power 106 reaches each week in Southern California, here’s a slice that has a specific target that a specific advertiser may be interested in. You can deliver in a much more productive way a small portion of that 2.5 million people who would be real interested in what an advertiser’s offering, and that’s what they’re looking for more and more today.
That’s the way the world is going. You can see it with Facebook. Out of the 500+ million discreet users they have, something like 40% of all of the people on Facebook are following a brand, and of those 40%, 50% are consuming that brand on a regular basis. It’s one more piece of that puzzle, where 20% of the consumer base gives you 80% of the consumption. It’s no different. What is different is we have a way to get to that 20% much more efficiently and with much more knowledge than we did only a few years ago.
Now that consumers are in the driver’s seat with choice, how important is it to be much more lifestyle driven these days?
Extremely important! It’s essential to get beyond the two or three motivators that any person has for listening to our stations, and through real conversations with listeners via all of our social network platforms we’re learning, beyond the radio station itself, what else is critical to their lives. The more we know about our listeners the better we feel we can be with our product and marketing, leading to a deeper relationship with them, many of whom will evangelize and tell others how much they love our product because we seem to know more about them and their interests, perhaps better than some of the other available choices.
How has this correlated with revisions of your marketing strategy?
A year ago we had a meeting in Indianapolis and we said we were going to start doing what Proctor & Gamble’s been doing for 25 years and that’s relationship marketing. Creating a deeper relationship with the few out of the many that consume our product with passion and who will give us even more consumption if we can make that relationship even deeper. At the time we were talking about text-messaging, streaming web-site upgrades, and social media which was barely on the radar…a year later it’s the leading edge. And given the rate of change in technology, next year it could be something else. But the constant is deeper relationships with the people that matter most.
What are some of the most challenging aspects of social networking strategy?
We’ve had a couple of great sessions as of late about how traditional marketing needs to overlap with the new world of social marketing, and the sweet spot is where the two intersect. It’s different because for decades we’ve been in a push out world where we did multiple messages about things we wanted them to believe about our radio stations, like “Nobody plays more music,” etc. And while there is certainly a place for some of that, with this new world it’s more about legitimate conversations, not trying to push many, many messages on Facebook towards our consumers about what we want them to believe about us, but about true interaction and true conversations. That is a major change in thinking. People are certainly capable of knowing what a good Facebook post looks like and what one doesn’t look like. It’s a change in the way we’ve always done things. Instruct your staff to do one great Facebook post a day instead of six bad ones. That’s a new approach for a medium that has always pushed repetition.
Will radio continue to follow technology regarding consumer needs or do you foresee the day when the industry initiates more proprietary digital initiatives of application?
I certainly don’t think we’re in any kind of leadership role at the moment. If anything we’re still playing catch up. But again, I believe it’s because of where we come from. I’d like to think that if Emmis was a digital technology company we’d be out there with all kinds of new applications and new ideas that would hopefully be industry leading, but we’re not. We’re a radio company and as long as that’s the case that will be our leading edge, and then secondarily we have to figure out how we fit into the various platforms and how we can drive deeper relationships with our customers and listeners using those platforms.
How do assess the ongoing permeation of the various tech companies getting deeper and deeper into radio’s space?
I had an interesting exercise a few weeks ago when all of our managers got together and we spent a week talking about issues like this. We did an exercise where we mapped out what drove Pandora’s consumption, what was important for Pandora and what they needed to do in the future. When you compare the five essentials for the Pandora model with the five essentials of Emmis radio stations, it looks dramatically different. To us it says if these guys are going to truly create deep relationships with their consumer base, they’re going to have to do a lot of things that radio has done for decades, and conversely we’re going to have to offer some of things Pandora is doing if we’re going to remain viable, like customized playlists and the ability to skip songs. I believe those things are doable on the digital platforms and necessary for us to remain viable.
I thought it was really interesting when I spoke to a college class last fall, and at the end of the session I asked how many of them used Pandora. 29 out of 30 hands went up. When I explored it with them further, I didn’t see a lot of passion for the product. What I got was, “Yea I use Pandora and Slacker in my dorm room in the background.” But there was very little passion.
I’m sure Pandora is seeing some of that and trying to improve what they do to become more relevant to the 260 million a week people who use radio. It’s that very thing we’ve been good at for a long time. They have to become locally relevant. While radio must look at all of the things Pandora is doing like finding ways to customize and offer some of our platforms without the traditional on-air spotload. I believe you’ll see both move toward that middle.
How are you measuring ROI with your digital initiatives? Are you seeing much revenue return across any of your properties?
We’ve been on a two year mission to capture the shift with traditional on-air spot dollars to the digital platforms. We’ve said for a number of years that it’s crazy for us to think that we’re going to sell the same limited (or even less in PPM) amount of inventory every year for more and more money. At some point that strategy maxes out and we need to start capturing that shift in digital dollars. We make money in the digital world but it’s still the old analog dollars for digital dimes circumstance. I believe last year that digital was a little over 5% of our total revenue, so we have a long way to go. But just two years ago we felt that streaming was just going to be a marketing cost and we weren’t going to make money with it. We know (especially with our bigger brands) that the cost is going to exceed what we can bring through the door in streaming revenue for the foreseeable future, yet we’ve already changed that tune. We’re not getting rich with streaming but it’s not costing us either. We’re breaking even and maybe a little bit positive. It’s just another indication of how dramatically some of these things change.
The Cumulus deals this year have been seismic in scope commanding everyone’s attention, as the credit market loosens do you foresee more consolidation deals on the horizon?
I believe so. We’ve had discussions over the last number of years to the affect of we either need to get bigger or go home. That hasn’t been an option because of the economy and our ratings challenges with PPM and minority targeted formats. But fundamentally we still believe in growth. Our business in Austin, where we’re fully clustered, is vastly different from our business in Los Angeles. When you’re driving a 40 share of the market revenue and you have a number of stations and they’re all doing pretty well, you have abilities in the marketplace that you don’t have with a single station. For years we were fond of saying that standalones don’t frighten us, we can compete, and we still do. But today you would more often hear us saying, yes we can still compete but it’s a lot harder with one, two or three, than it is with five or six.
Do you sense in the long run that scale is going to be a forced issue to remain competitive with the larger radio groups regarding consumer and advertiser leverage?
It does make some things easier. We’ve kind of been on an organizational kick at Emmis over the last year or so, but we just don’t have as many places to look for efficiencies as you do when you’re larger. Jerry Lee does an amazing job running one radio station (WBEB/B101) and a dominant one. He sets the tone for everything that is radio in Philadelphia. But as a rule it’s tougher to do when it’s one station in one market against a portfolio of radio stations. All mature industries eventually consolidate. This is a mature business and given the recession it’s logical to think that the prices have come down for properties, as has the revenue, but it should still lead to further consolidation ahead.
Are there still advantages of maintaining a smaller more nimble radio outfit?
There are some advantages and we try to work on those. We can certainly go deeper and spend greater time and resources on recruiting and nurturing talent both on the content and revenue sides. We have some of the very best managers in the business and we certainly have a more personal and deeper relationship with our management than I think you can have in a company with hundreds of radio stations. I just don’t think it’s possible to have that kind of interaction with top management given those numbers. I don’t think there’s anyone inside this company that can’t pick up the phone and call the CEO. That’s not humanly possible in a company the size of CBS, Clear Channel or Cumulus.
What dynamics present the biggest challenge to being a smaller operator versus the bigger groups?
It’s all relative to the market you’re in and your holdings within those markets. We’ve been doing great in Austin, and in IndianapolisCharlie Morgan’s been having a renaissance with one of the best year’s they’ve seen in ten years, and in St. Louis John Beck is performing really well this year. Yet in a company of twenty-two stations, you can have one or two outlets in New York or LA and if they’re not performing it threatens the performance of the entire group. I remember years ago taking a flight with (Entercom CEO)David Field and talking about that. We’re doing great here, here and there, but this one station in this one big market is not doing so well and it’s keeping us from outperforming the marketplace as a group. And he said I think I can probably take any one of our markets completely off the air and I don’t think it would significantly impact our performance. My thoughts were wow, that guy’s playing a different game than we are. We have to bat .750 to outperform our markets. It’s nothing new. We’ve been doing it for years, because I can’t make up in Austin or Indy what we lose in NYC. The metrics don’t work. It’s another reason I believe you’ll see the industry look more toward consolidation. A bigger portfolio mitigates the poor performance of any one station or any one market. That’s when it becomes a little more challenging to play with a small company than it used to be.
How has the shift from diary to PPM affected your minority targeted stations in NY and LA?
We’ve gone pretty deep into a PPM doctrine for our radio stations, and have some very sophisticated analysis. It’s obvious with PPM that those very few matter a lot more than the full cumulative audience. Even in big cities with hundreds of zip codes, it’s a matter of 8-10 zips that make all the difference in the world. The more we learn about targeting those folks and pleasing them more, the higher the ratings go. We’re successfully tying PPM measurement into that and improving our ratings. That being said, most of this company was built on minority targeted radio stations in big markets that did really well in diary. Kiss-FM in New York is a great example. It was #1 25-54 in the last diary book and it’s not even in the Top 10 in PPM, it’s been a real struggle. When you’re first with adults in diary and then you fall off the face of the earth it has a big impact pretty quickly. But we’re paid to compete and paid to find the answers and get it back to a competitive position.
We are finding ways to improve that and we are finding ways to improve our LA station which targets English speaking Hispanics. I think it’s a fair statement that if you built those to be successful in diary, you really are challenged in the PPM world. We’ve spent a lot of time, energy and money trying to figure out ways to improve those things and I believe we’ve had some success.
With PPM the rankers are another issue. There could be a twelve way tie for eighth place in a market. You can literally be just a few thousand from the Top 5 and find yourself tied in 13th place. Those kinds of things can happen, that’s how tight these ratings are. It’s a reality we’re dealing with and we’re going to have to find ways to succeed, but it’s always been a case of finding ways to succeed in the measurement system and it still is.
As radio rebounds on the revenue side this year, what are the most important areas of investment the industry needs to embark on?
One of our priorities in the last year has been to get to the position where we can reinvest in our core business, and I believe that reinvestment is not in traditional areas, but in the digital world. I believe at the top of that list (and this may be unpopular to a lot of people) is HD Radio, and for every radio executive in the business who believes in it I can find three who have given up on it. I would remind them that HDTV took twenty-five years, it didn’t happen overnight and HD Radio is still in a nascent stage for us. Our VP of Technology Paul Brenner is involved in an NAB sponsored effort to develop an economical HD chip for Smart phones, and our folks at Emmis Interactive are working on that as well. We need to get into Smart phones and I believe HD is our strongest path to have a presence there. You don’t need to hang around long to see that anyone under the age of 45 is Smart phone centric. The Smart phone is the 21st century device and we need to get in it. We need to continue to find money to get the HD power increase in most of our markets, and we have to stay at that. Going digital is a critical element for radio’s future success.
