LONG READ: First Australian Foreigners to own 100% of a USA radio network

 All Access Music Group recently announced the first Australians to take 100% control and ownership of some US radio stations.

Richard and Sharon Burns – and their company Frontier Media – own and operate 15 stations in three US markets, and recently received FCC approval to increase their 20% interest to 100%, marking a first for foreign ownership of US stations.

For any Australians who have ever dreamed of owning radio stations in the US, this will come as significant news.

Radio Today talked to Richard Burns about his radio career and life in US radio.

Richard tell us about your background in radio?

I mostly grew up in Tasmania in Devonport and I remember as a kid winning a phone-in contest on 7AD and winning a 45. So I went to the station to pick it up, and they took me into the on-air studio to see live radio. That made a big impression on me. It’s something we encourage our talent to do today. If there’s a young kid at reception, take a minute, and you’ve got a raving fan.

As a teenager I moved to Brisbane, and that’s when the radio bug really hit me listening to Alan McGirvan, Mike Ahearn, Bruce ‘Wacka’ McCartney, Kevin Hilliar, Gavin ‘Full’Wood, Lee Cornell, Paul J Turner, David Kidd, Ray McGregor, Graham ‘Robbo’ Roberts, and of course let’s not forget Waynee Poo Roberts. Those are the people that really inspired me to get into radio.

Like a lot of people in Brisbane, I did Air Tv with John Knox and Sam Robinson. The service that Air Tv provided the industry in developing talent and future industry leaders is, in my opinion, remarkable.

After I had done Air Tv, I did a few shifts overnight at 4ZZZ and that as it turned out was the one thing that set me apart when I was hired to do afternoons at 4KZ Innisfail. Just having on-air ‘experience’ made the PD and GM choose me.  I still have a soft spot in my heart for 4KZ. If Al Kirton and the guys ever want to sell, you know where to come, haha.

I then, like most jocks, worked everywhere – Longreach, Charleville and then to 3UL in Warragul before moving to 4GY when Wesgo bought it. I did mornings there with someone who helped form me in many ways and may not even be aware of it, and that’s Peter ‘PL’ Little. I then move to 4CD Gladstone when Wesgo bought it and rebranded it as 4CC and was Production  Director and later a took on the PD’s role as well.

I worked for Noel Roberts and with Mike Wass, Graham Mott and Dave Rogerson as consultants. As a PD there was always a tension between the local radio that Noel wanted and the ‘Wesgo’ big city radio and that Wassy in particular really demanded. This was a great experience for me to be able to craft local radio in a way that wasn’t ‘community radio’ but more metro if you know what I mean?

It’s the foundation that I stand on today with all our markets.

I ended up being GM at 4CC after Wesgo sold it – I was 28 and had no real business managing a radio station, but I didn’t know what I didn’t know, and we turned a loss-maker into a huge profit generator – almost $1m per year. I then took on the role of running the group which included 4HI, 4ZR and 4AM. The stations were sold three years later to Rural Press and I was sent to run the RadioWest Network in Bunbury for a couple of years.

Then I came back to run the Rural Press’s east coast stations and then a few months later was made GM of the broadcasting division of Rural Press. We had 39 stations which, at the time, was the largest group of stations under a single group’s control.  Those stations were sold to DMG.  I went with the sale and never wanted to, and I said to Paul Thompson at the time, ‘You have your own guys and don’t need me.’ I stayed for a few months through the acquisition and then Paul fired me which was ok. For young guys I’d say don’t worry about getting fired a time or two; it opens the doors to opportunity which you would not otherwise see.

I went back to Rural Press to start a new radio division for them in a joint venture company. This gave me a lot of experience I could not have gotten any other way. We strung together a bunch of regional stations as best we could, and my main job was to get the Star FM Ipswich license upgraded. That was 3-year process of fighting, lobbying and doing what was an all-consuming job of trying to get the ACMA to improve the station’s signal issues in its own CBD.

Of course, this had the added and not unwanted benefit of coverage into Brisbane’s southern areas, into Toowoomba and into the northern Gold Coast. That station has an awesome signal! A lot of people were against us, but in the end, we got the best result we could, and the station benefitted dramatically. This process taught me a lot about working with regulators and politicians to get the best outcome possible. Again, that is the experience I have used here in the US and use it often. The JV partners had a falling out, and Rural Press brought in a new partner, and I moved out of the Group CEO role into consulting to the group. This gave me the freedom to move in whatever direction I wanted, and I did.

And your background in US radio how did it all start?

My wife Sharon posed the question one day, ‘If there’s one thing you’d like to do, what would that be?’ I told her it was to own a station in the US. Her response was, ‘What can I do to help make that happen?’ Wow. No-one had ever said that to me before.

I had a contact I made back in the 90s who was a high-end multi-billion dollar radio/tv broker in the USA. So I looked him up, and that’s how the whole USA experience started.  That broker is still a very close friend and every deal we have done he’s been there to help. I won’t do a deal without him. He opened the door to the US for me and taught me a lot about the US system, and you need help to navigate here.

I ended up coming here to manage a six station group with an option to buy in at various percentages.  We bought up to the maximum of 20%.

How many stations and markets do you operate in?

We expanded the group carefully – first in Alaska and then in Texas and Arkansas. We now have 15 stations and multiple translators to expand coverage areas and very importantly translators to simulcast our AM stations in their cities of license. We don’t have any AM stations that do not have FM simulcasts.

We operate in four markets varying in size, but our base is in Alaska’s Capital City of Juneau. That’s not our biggest market, but it is our biggest revenue and profit generator by far.

What formats do you cover?

Be easier to ask what we don’t cover. We have four country stations including a 50kw flame thrower in Arkansas with coverage into Louisiana, Texas and Oklahoma.

Country music is the #1 format in the USA, and in the markets, we operate you must have a country in the cluster to be a part of most advertising discussions. Country formats get you 120% per point, which is 20% more money than the average.

We also have an Urban AC which is #1 in the market it operates in, and we only get 20% of the per point value! That hurts when you are 5 points in front of the #2 station and they out bill you four to one! It sucks, but it’s a fight we are not giving up on. We also have news/talk, full service (which is our #1 biller in the group), two HOT ACs and two ACs, two Classic Hits and a Classic Rock.

The difference between the US and Australian radio?

Wow. Some many ways to answer this.  I saw Craig Bruce speaking in LA at a convention, and he said something that really resonated with me. It was basically this – We, (Australian radio) used to come to the USA to get great ideas, and we’d go back with binders of information to take back to Australia – we don’t do that anymore.

That speaks to creativity or diverging creativity. Australia has in the past taken its lead from the most dynamic and competitive media landscape on the planet and has not copied but rather grown in its own direction. It’s a different direction from the US – it’s like a tree that branches – same roots different direction. In my opinion Australian radio also benefits from and suffers from a regulatory system that needs a major overhaul. People reading this with stations will be yelling at me saying I don’t know what I am talking about and those who want to start a station will be saying ‘hell yeah’.

The Australian system stifles competition – the US system does not.  Look, guys like me could never own stations in Australia because the cost of entry is too high and the way financing is generally done in Australia is different.  Here it’s not uncommon for sellers to finance the transaction to some degree.  In fact when we bought our Texas stations that’s how we did it.

We paid $500,000 as a down payment (which we borrowed), and the sellers financed the balance of a $2.8m deal. A 100% financed deal. We rolled with that to get some time to get bank financing a year or two down the track. It’s easier to borrow from a bank when you have a track record with the business. I would struggle to find a deal like that in Australia, but if there are any sellers wanting to consider it, let me know!  The US market is hard – very hard – to operate in because of the competition –but if you’re good, it will work. Our market in Texas (which is the size of maybe Cairns) has 29 listenable FM signals and 7 AM stations. Want to play?

Up until recently, there was limited foreign ownership of US radio?

Correct. Only 20% for individuals and 25% if the ownership was inside a company.

Was there a law change which now makes you the first Australian company to acquire 100% control of US radio stations?

The law never changed, and it’s above my pay grade to speak to the legal side – we have an army of FCC Attorneys who encouraged and helped us with the application for what is called a ‘Declaratory Ruling’ which is now precedent for other applications. It was the FCC saying that they would consider what amounts to a waiver.

The rule that seemingly limited foreigner ownership goes back to World War 2. Some segments of the industry – Mexican broadcasters mostly – pushed the FCC in a review to commit to apply the rule of the 20/25% limit in the way that had not been considered.

We also made a submission on the matter. Here’s the test – is a foreigner owning above 20/25% against the public interest or is it ‘in’ the public interest? How can you prove that? We felt we could. In fact, two Mexican broadcasters with public companies applied for 49.9% foreign limits and got that approval a few weeks before ours, but ours was a very different case.

How was it different?

1.     Australia is America’s staunchest ally and a strong trading partner – ie, no threat to national security. We were apparently vetted by the Justice Department and Homeland Security;

2.     We had a ten-year experience in the US markets we were applying for;

3.     We were able to demonstrate strong community support for the application;

4.     The FCC knows who the foreigners are – as opposed to a public company where the share register changes all the time; and

5.     There were no letters of opposition.

In my opinion, it would be a mistake to think that because one Australian has got approval, the floodgates are open. My experience tells me differently but if you do the right things – lay the groundwork – I feel it’s VERY doable. You just need to know how and what to do and understand the culture.

Under FCC laws do you have to be US residents to own and control US stations?

No, we don’t. The FCC has no impact on anything beyond who controls the licenses.  As yet we don’t know if the FCC would treat us as being on some ‘approved’ list for any further transactions we may want to do, but being a citizen makes that moot.

Where are you based?

I am based – if you can call it that – in Juneau, Alaska. I spend a lot of time in Palm Springs, California (where we don’t own any stations – yet – I have looked) and visiting Texas from time to time. My wife and I are very connected to the Juneau market and very involved with the community.

We have a  very close and stable senior management team and flat management structure. If someone needs a decision on something, they feel needs approval they can get an answer in minutes, not hours or days. We move quickly, and that’s part of our success when some of our competitors have to report to a corporate structure. We can get a deal done with others are trying to get something approved.

Do you have plans to expand in the US?

We are very much opportunistic acquirers. If the deal is good, i.e., a distressed situation we might be enticed in situations where we see we can added value or if we could increase influence in markets we operate in – or adjacent markets.  Would we merge and create a larger group? I don’t know. Everything is on the table all the time, but we have very good businesses in very stable and growing markets.

Do you sell single stations/duopolies or market clusters?

Depends on the market. In our Alaska markets duopoly sales are common – single station rarely and – whole of cluster buys frequently.  In some ways, we’d like to unwind that kind of buying for agencies, but we’re doing so well it’s a ‘don’t fix what ain’t broke’ scenario. In Texas, it’s all single station – format driven selling and buying. That’s what the market is used to.

Is your company, Frontier Media largely a direct or national revenue model?

It depends on the station. Our Urban AC is about 70% agency revenue others in the 70/30 local direct to agency and other 90/10. In Juneau, depending on what’s happening at the Capital we could have a very large agency percentage – if for example the oil industry is pushing an agenda or there’s something a lobby group is trying to influence. That’s an awesome thing about being in a Capital city! I need to get a map out and look for US Capitals that are not big metros where we could buy something!

Any major trends in US radio to speak of?

Digital, digital, digital and driverless cars!

Everyone seems high on digital and how to monetize that in a new way every day, seemingly. It’s not like the old days when you had to choose one cart machine over another!

We’ve got to find ways to engage better with tech as an industry and local radio somehow has to be as good as metro markets. The driverless car thing is, in my opinion, the biggest challenge we have as an industry.

Think what that might mean? I tell you what I really like in Australia is the CRA Radio App. How rocking is that? The USA needs that – one app, all stations.

We have been doing what we can by having cluster apps, which has a lot of advantages. I’ve even thought about putting our competitors on it – at the bottom of course! The other major thing we’re on and every station needs to be in vocal search – Amazon Echo. It’s fun to use, and ever since I got mine, engineering has had it, and it’s hard to get them to give it back.

But there is lots we can do to interface with vocal search, and it needs to be easy and intuitive not just play station streams but unbundled content like news and best morning show podcasts and things like that – even contesting.  Things like Amazon Echo put the radio back into the home, an area we have been losing ground.

Any commentary on the major national networks in the US?

I don’t know much about them, but what I will say is a lot of people talk about iHeart’s woes or Cumulus. As an outsider, the radio stations are great businesses. There’s nothing wrong with their radio stations – the problem is debt structuring.  We are not in any markets where these guys operate and would not want to be; it would be suicidal.

The other thing I will say is my dream was to own ‘a’ radio station. That is also suicidal. You simply must be either the dominant cluster in a market or second-biggest the thought of anything else makes me break into a cold sweat.

Regional US radio versus major US metro, any thoughts?

Interesting question.  I am a regional radio guy. Our competitions are now in a lot of cases metro stations on streams. We have to be good local radio guys, and that is not rocket science. We must create strong local content and be connected to the local market like never before. Metros are very different. There are so many great ‘regional’ markets – or to put it another way – stations outside the top 100 markets. You can create great radio and make very good money without the capital outlay required for the top 100 markets.

Your thoughts on consultants – do you work with any?

Yes, I like consultants. I have worked with Larry Bruce (ex-Nova and Austereo ) on our Texas cluster, and we have and are working with Tracy Johnson on talent development and have for many years.

In fact, the morning show that we produce for our country stations has just gone into syndication. The way we do the show is totally cool and allows for high degrees of customization, and when you listen to the local station, you can’t tell it’s not local. We only provide content breaks and the stations format how they want.  They even do local contesting. It rocks, and I can see applications for talent wanting to get into self-syndication using the software and systems we have. In 3 years we’ve had over 100,000 files uploaded without ANY station errors at all. We call it ShowVoodoo.

Richard thanks for talking to Radio Today and best of luck in the US.

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