News accounts last week of CBS Corp.'s decision to shed its radio business couldn't help but point out that an era was ending, one that stretched back nearly 90 years.
Local radio was the foundation of a company that grew into a media giant that's lasted for generations. Getting out of the business is certainly a historic step.
The change coming for the venerable WCCO and other CBS properties in the Twin Cities likely won't be nearly as momentous. CBS wants to exit because radio is going through a long-term decline, but that slide will continue whether CBS owns WCCO or not.
For those of us worrying about what might happen to an important regional institution like WCCO, it's likely we are remembering the WCCO of our youth. We remember a cultural and commercial giant, the Good Neighbor.
That Good Neighbor era was over a long time ago.
CBS has only said it's making plans to exit; chief executive Leslie Moonves told investors last week that the company was reviewing options for its 117 stations. In the Twin Cities, in addition to WCCO on AM, it owns two music stations, one country and the other adult hits, on FM.
It's most likely the stations will be spun off into a separate company or simply sold off market by market, said Mark Fratrik, senior vice president and chief economist for media consultants BIA/Kelsey.
He doubts a single buyer can acquire the entire operation, with what he estimated is about $1.3 billion in annual revenue for 2014. Even if one company wanted them all, he said, it's unclear who would be able to finance the purchase. One of the big radio consolidators of the recent past, iHeartMedia Inc., is already choking on more than $20 billion in debt.
The case for CBS to exit the business is a simple one, as the management team would like to be able to tell investors that the company is putting their capital into growing businesses. The days of growth in radio appear over.
Traditional media companies of all kinds have seen revenue declines. Unlike, say, a cable-TV channel, though, broadcast radio has no paid subscribers to ask to pay more as a way of making up for lost advertising revenue.
Total radio ad revenue declined again last year even though what's called off-air advertising revenue actually increased, according to figures from the Radio Advertising Bureau. The industrywide revenue for traditional spot advertising, like 30-second ads, has declined by about 7 percent since 2012. (Newspaper print ad revenue has fallen even faster, sometimes as much as 7 percent in a single year since 2012.)
Total revenue for the CBS local broadcasting group, which includes local TV stations, also declined last year, by about 5 percent. Operating income in local broadcasting declined 13 percent, despite what the company called "cost-cutting measures" that included lower programming and payroll costs.
Earnings also took a hit when CBS had to write down the carrying value of its radio licenses in 18 markets to fair market value, resulting in a pretax charge of $484 million.
"The role of radio has certainly been changing, and over the last five years it's been dramatic," Fratrik said. "It's competition for audiences and at the same time competition for advertisers. There's been an incredible increase of both."
Fratrik works in the Washington, D.C., area and now before leaving work for home he checks traffic conditions on Google. Not long ago, he would have listened for that information on his radio.
Options for advertisers have also proliferated. An increasing share of ad spending has gone online, to websites and social media platforms. U.S. digital advertising spending is expected to surge to nearly $94 billion in 2019 from $58 billion last year, according to the research firm eMarketer.
Radio remains too useful to advertisers to abandon completely, though, Fratrik says. While advertisers can make specific offers through online channels, radio can be used to simply raise awareness of a product or event, he said.
That an AM station like WCCO has a future is good news, especially for the gray-haired set that forms its core audience. It's probably impossible to convincingly explain to millennials the prominence WCCO had in the lives of boomers and older folks who grew up here.
The big "clear channel" stations like WCCO were market leaders across the U.S. Yet even in the company of giants, WCCO stood out.
WCCO took its name from the Washburn Crosby Co., a forerunner to General Mills. CBS first acquired its interest not long after the company was formed in the late 1920s.
As the station grew in popularity, radio executives from across the country journeyed to the Twin Cities to sit in hotel rooms and listen in, according to an account in the Concise Encyclopedia of American Radio. They came hoping to discover its magic formula, and what they heard baffled them. WCCO had goofy Scandinavian humor, live remote broadcasts from concerts, weather updates, news and farm reports.
In the late 1950s, after beating back its first ratings threat from a rock 'n' roll radio station, WCCO claimed to have a considerably bigger audience than all of the other stations in the market combined.
The share of the audience for what's now News Radio 830 has since shrunk by about 90 percent, with the most recent all-day Nielsen Audio rating of 4.6, about the same as its sister station known as the New BUZ'N Country.
In the hands of a good operator, what's now a niche station focused on news and discussion could have a long and profitable life. A stable WCCO would be a good outcome for its regional listeners.
When severe weather rolls in, we need somebody trusted to let us know what's going on and how people are responding, which is something an app can't do.
lee.schafer@startribune.com • 612-673-4302