800.275.2840 MORE NEWS» insideradio.com THE MOST TRUSTED NEWS IN RADIO WEDNESDAY, JANUARY 7, 2015 Radio 2015: Big ideas on the Washington agenda. It will be the year of copyrights, predicts one radio industry lobbyist, as a new Republican-controlled Congress takes over and big issues dominate the agenda. Inside-the-Beltway players say the issue for 2015 will be how far lawmakers can get with their lofty goals, a list that includes many potential pitfalls for radio. While radio royalties may win the prize for best staying power across multiple sessions, radio’s biggest challenge in the 114th Congress may have nothing to do with music. “The fallout from the election strongly suggests that tax reform is one of the first things that are going to be on the table,” says Dan Jaffe, head of the Association of National Advertisers’ government relations office in Washington. It’s one of the few areas where there seems to be agreement between the White House and Capitol Hill, with an interest in, at the very Radio 2015: All this least, stretching out the timeline for marketers looking to deduct their advertising expense. Tax reform week Inside Radio will examine the also polls well with voters. “It’s the biggest threat to the ad deduction ever,” Jaffe warns. A coalition biggest issues facing of groups is working the backrooms of Congress, trying to maintain the status quo. But with an issue broadcasters, along that crosses partisan lines, no one is ready to predict which way a tax reform bill could come together. with trends to be on What about the radio royalty? Another session of Congress came to a close without a freestanding the lookout for in the coming year. bill proposing a performance royalty on radio. And with a majority of House members against the idea, it may not have mattered. But as radio heads into 2015 with new lawmakers and new committee chairs, some unanswered questions remain. Judiciary Committees in both the House and Senate are angling to begin a rewrite to copyright law, which many in the record community and in Washington believe hasn’t kept pace with how Americans consume music. That’s a conversation that has increasingly been used to lasso a radio royalty into the mix. California Republican Darrell Issa may play a big part in radio’s 2015 with his selection to serve as chair of the House Subcommittee on the Internet, Courts and Intellectual Property. Issa has been an ardent supporter of a performance royalty on radio stations. He cosponsored the bill in 2009 that would have levied a fee and called the lack of one a “worldwide embarrassment” that shows an “ignorance of intellectual property rights” by Congress. It’s not just a radio royalty but other copyright issues that could impact radio, such as an expansion of copyright law to cover pre-1972 musical works that are currently exempt from payment. If there’s any silver lining, it’s that the last rewrite of copyright law took place in 1976, completing an effort that began in the 1950s. “There’s so much stuff that comprehensive copyright review can take years,” Washington attorney David Oxenford says. Still he acknowledges it’s possible some issues could be peeled off and debated more quickly. Old issues remain in cue at the FCC. Potential fixes to help AM radio, possible changes to media ownership regulations, and scores of pending indecency complaints — it’s a bit of a time warp for radio at the Federal Communications Commission as another year begins with each of those issues still unresolved. Media ownership rules aren’t likely to be revised until next year, when FCC chair Tom Wheeler has pledged to hold a vote on the 2014 quadrennial review by mid-year. In the meantime, the agency is quickly advancing a proposal to require radio stations to post their public file online. If the current outline is adopted, stations in the top 50 markets will be first to face the new mandate. All other stations will get an additional two years to prepare for the requirement. Wheeler has shown little interest in wading into broadcast indecency regulations, with a plate full of other hot-button issues, including next month’s expected release of new net neutrality rules [email protected] | 800.275.2840 PG 1 NEWS insideradio.com WEDNESDAY, JANUARY 7, 2015 which ultimately could have an impact on radio as its streaming business grows over the coming years. The FCC is certain to face tougher oversight hearings by the GOP-controlled Congress. NAB president Gordon Smith predicts there will also be some “increased pressure” on how the FCC operates as reform legislation, proposed by former radio station owner Rep. Greg Walden (R-OR), gets a fresh airing. Wheeler has said that a review of AM revitalization proposals continues inside the Commission, but he’s offered no timetable for how soon anything could materialize. Even ideas that appear to have near- universal support, like an AM filing window for translators, remain in limbo. More certain, according to agency staffers, is that radio will deliver its second-ever national EAS activation by the end of 2015. Bob Pittman sees ‘turnaround’ in 2015 ad market. “My sense is the economy is looking stronger,” iHeartMedia CEO Bob Pittman says. “People are getting more confident in putting their marketing dollars out there.” Speaking on CNBC yesterday, the radio executive delivered a bullish outlook about 2015. “I sense a turnaround and I sense in talking to the advertisers that this is the year in which they stop the slowdown and get back to playing on offense,” he told the cable biz channel. Asked whether upstart rivals like Spotify or Pandora could cut into broadcast radio’s growth, Pittman downplayed their impact. “Both of those are very tiny options if you need scale,” he pointed out, noting that 90% of all radio listening remains to broadcast radio. During his conversation with CNBC, Pittman went on to say that big data is allowing marketers to better assess their media buys, and that should play into FM/AM’s favor. “The advent of all the big data is not that we’re going to target better, it’s that the advertiser is going to demand from us that we give them return on their investment because they can actually track attribution,” he explained. While television and digital typically deliver a two-to-one return, Nielsen data shows radio’s return can be as much as six-to-one. “It’s stunning to have that much better ROI,” Pittman said, adding, “What that really reflects is that radio has been underpriced for a long time.” Inside Radio Readers’ Survey: Digital’s a double-digit business for more stations. Digital continues to play a larger role for radio and Inside Radio’s annual year-end survey shows fewer stations say they received nothing from digital sales and a larger number report it represented a bigger portion of billings compared to a year earlier. Nearly one-in-ten (9%) say digital contributed 11% or more of their 2014 revenue, a 50% increase from 2013. For most however, digital remains a single-digit budget line. More than a third (35%) says digital made up 1-3% of revenue. Another four-in-ten (24%) said it amounts to 4% to 6% of their billings. While another 17% report digital contributed 7% to 10% of the bottom line. Website display advertising accounted for the biggest piece of digital revenue once again, according to 34% of people who took our survey. But with the digital menu growing longer, more stations said they sold a bigger variety of inventory. The fastest-growing digital money-maker last year was the sale of internet-related services to clients, with 11% of readers saying that was their station’s biggest source of digital revenue. Daily deals, while not getting as much attention as they once did, continue to be a steady revenue stream for many. Twelve percent said daily deals and social commerce were their biggest digital revenue source, the same number as a year earlier. Others got their biggest digital bang from database marketing (4%), mobile ads (4%) and video advertising (3%). In-stream audio sales keep growing. Nearly half of Inside Radio readers (48%) who took our unscientific survey said they made more money in 2014 from the sale of in-stream audio advertising. That’s on par with a year earlier. Nearly as many (44%) said their streaming commercial sales were flat versus 2013. And another 7% said they made less from in- stream spot sales. While the overall trend line is still moving up, at the same time in-stream audio ad sales accounted for a smaller portion of total interactive revenue as digital ad sales are diversifying. One-in-five (22%) of readers said in-stream ads were their biggest digital revenue generator last year. That compares to a third who said that in 2013 and a quarter who reported that in 2012. Where are those dollars coming from? Readers are evenly split —17% say digital is bringing in new advertisers, while 18% think dollars are shifting over from existing on-air advertisers. A majority (65%) say it’s a combination of the two. Radio 2015 continues — including more from our year-end survey — in tomorrow’s Inside Radio. Home Depot remains radio’s biggest-volume advertiser for third year in 2014. Using a combination of different spot lengths and tailoring its creative to fit the seasons, retailer Home Depot remained radio’s most-aired advertiser in 2014.