Radio: Lee & Bain vs. Jerry Lee

Thomas Lee Partners out of Boston and Bain Capital, the buyout firms behind the Clear Channel privatization (and many other buyouts) have one way of doing radio.

They buy a large established industry leader, cut expenses to the bone, operate it until the market allows them to -- sell it for a greater profit than what they paid.

That's the Lee & Bain way -- nothing wrong with it -- if you're an investor.

But for operators, there is another way.

Last week, Jerry Lee, the owner for life of WBEB (B-101), Philadelphia showed the industry what operators do when they want to actually keep the stations and make lots of money.

Lee along with his former partner, the late engineer David Kurtz, have been milking 101.1 for fun and profit for forty years and for some reason -- maybe because they only owned the one station -- few people went to school on them. That has to change -- now.

B-101 is near or at number one no matter whether you consider Arbitron diaries or the People Meter. It is a franchise aimed at women -- women and more women.

Lee, a general manager type, teaches us a lot of lessons, but let's start with the latest:

B-101 is going directly to advertisers in the interests of not just Lee's station, but all Philadelphia radio stations to make better commercials than the ones advertisers may be running on, say -- television.

And, Lee, a research addict, is going to pay for the research himself. Lee has had a long history of fully employing researchers -- something that most consolidators have long ago dispensed with due to the costs. Bill Moyes, the Research Group founder, has had a long prosperous relationship with Jerry Lee -- and you can see his fingerprints on this latest move.

So B-101 will pitch advertisers on making better commercials -- using excellent research -- with the goal of creating a stronger emotional connection with listeners.

B-101 will pitch clients on behalf of the entire market -- not just the station. That means Clear Channel, CBS, Beasley -- everyone.

Now this is the way radio should be.

Lee will pay copywriters and will test the spots using his station's research experience. B-101 has been testing its advertisers spots for free for years now. Lee estimates his costs will be between $30-70,000 per commercial. He's fronting the money and relying on other stations that benefit from this strategy to pay 15% to him to underwrite the costs.

It's like a tip jar. It's voluntary. Let's hope he doesn't get stiffed.

Lee is also taking his pitch to national advertisers this week -- again, with the goal of producing better, more effective radio commercials so that radio can close the gap with TV. Radio only gets on average one-third of the rate that TV commercials get. So you can see where Jerry Lee is going with this. There's lots of room for more radio revenue by focusing on more effective radio ads.

(There's a great piece in Friday's Inside Radio -- June 20 -- about what Lee considers a great spot and what the goals of better commercials should be -- I recommend it for those interested).

This is all well and good but Lee's commercial testing initiative raises a bigger question.

What is the best way to grow the radio business knowing that the next generation is defecting from the radio dial at a record pace?

Is it running more ads? Cheaper ads -- believe me, some markets have operators that are being killed by competitors whoring out their rates -- or put another way my definition of a lack of sales skills.

Radio can still be a good business, but not with cheap spots -- and no next generation -- and too many ineffective commercials.

If you're looking for good news about radio's future -- you just got it from Jerry Lee.

For years a radio spot was copy that was, say - 45 seconds of commercial content jammed into 30 seconds. Written by a salesman, a client, a clueless agency or worse yet -- a production person.

Add music to distract from the message-less commercial and you've got -- 30 seconds of wasted time and money.

Here's what I like about Lee's approach.

1. It is being done for the good of all radio -- not just one station or company. When an industry prospers, all its members have a better chance to prosper (and vice versa, by the way -- look what happened to the industry when leader Clear Channel put its own interests ahead of the industry).

2. It cooperates with the inevitable -- that is, it's aimed at available radio listeners who are already listening and presumably still like radio.

3. It is a long overdue makeover of a lazy industry that for decades got away with running any old noise and calling it a commercial. Stations were less interested in whether it worked and more interested in how many of these awful things they could cram into an hour. Now, the focus is where it should be -- how to make it work. In other words, the industry obsession with less is more should have been better means more (money).

4. It emphasizes the importance's of ongoing research at radio stations. I know I've committed a mortal sin in the world of consolidation by saying that, but even Mark Mays, Farid, and David Field need someone to help them see the future. Look at their stock prices and see where their vision has gotten them without this help.

I don't want to sound like a politician here because I have already been swift boated in the past, but let me take a chance.

For the first time (in a long time) I am proud to be in radio as I watch a proven leader do something very important not just for himself but for the entire industry.

There are two Lee's in the news lately, but this one is in it to make the entire industry more profitable.

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