Frank E. Kavenik “The ABCs of Buying a Radio Station using BroadcastMetrics™”
This article focuses on how you can use BroadcastMetrics™ to analyze the financial viability of buying a radio station that will be listener-supported. BroadcastMetrics™ is a strategic planning system that helps listener-supported radio and TV stations to improve coverage, audience, and revenue. The five steps in the BroadcastMetrics Revenue Growth Cycle are listed below:
BroadcastMetrics™ – Revenue Growth Cycle
This article focuses exclusively on Signal Development which is Step 1 in the BroadcastMetrics Revenue Growth Cycle. You can read more about BroadcastMetrics at: HERE.
The financial viability of purchasing a radio station that will be listener-supported can be analyzed by following an ABC analysis process encompassing:
A – Analyzing the Signal
B – Budgeting Expenses and Revenue
C – Calculating the Return-on-Investment and annual Cash-flow
This article summarizes these three processes for you.
A. Analyzing the Signal – Good, Better, Best
In purchasing a radio station, you are acquiring the ability to reach listeners within a specific geographic area. Therefore, it is essential to accurately forecast where and how well your signal covers listeners at home, work, school, businesses, and in their vehicles.
Accurately predicting how many listeners and donors a station will cover requires accurately measuring and forecasting signal coverage. There are three levels of accuracy in forecasting signal coverage for a radio station. They are listed below as Good-Better-Best.
Good-level Signal Coverage Forecasts – FCC Contours
A good-level method to forecast signal coverage is using FCC contours. They are rough estimates of where people will be able to hear your radio station. FCC contours support the legal process of licensing stations. They are less accurate as a method of forecasting actual signal coverage.
Copied below is an example of an FCC contour map. It shows rough estimates of where people may be able to hear the station:
Better-level Signal Coverage Forecasts – Longley-Rice Forecasts
One better-level method to forecast signal coverage is to utilize the Longley-Rice signal forecasting methodology using specialized signal analysis computer software such as V-Soft. www.v-soft.com Using Longley-Rice is more accurate than FCC contours at predicting actual signal coverage.
The Longley-Rice method and V-Soft software produce a color-coded map of forecast signal coverage like the one shown below:
Better-level Signal Coverage Forecasts – Signal Strength Measurements
Another better-level methodology than FCC contours is taking signal strength measurements in the coverage area to measure actual signal coverage. For an FM radio signal, this process should include hundreds or even thousands of signal measurements. For an AM station, this process should consist of dozens of measurements.
There is a practical reason for the difference in the number of measurements taken for AM vs. FM signals. You can take FM signal measurements automatically with a specialized measurement instrument such as the Audemat FM-MC5 analyzer. With automated FM signal measurements, it is possible to efficiently take hundreds or even thousands of FM signal strength measurements.
On the other hand, AM signals are most accurately measured one location at a time using a manual process. Because this manual process is time-consuming, it is usually only practical to take a few dozen measurements for an AM signal.
For an FM radio station, Audemat measurements produce a map like the one shown below, made using V-Soft software. In the map shown below, the color of each measurement dot represents the measured signal strength at that particular measurement point:
An Audemat is a precision test instrument that automatically records measurements of FM signal strength. A new Audemat FM-MC5 costs about $9,000 and is pictured below:
You can read more about the Audemat FM-MC5 at:
For AM radio stations, a Potomac Instruments PI4100 can be used to take signal strength measurements manually, one at a time. A new PI4100 costs about $15,000 and is pictured below:
You can read more about the PI4100 at:
Best-level Signal Coverage Forecasts – Combining Longley-Rice Forecasts with Signal Strength Measurements
The best and most accurate method for forecasting signal coverage for radio stations is to combine a map of Longley-Rice forecast coverage with a map of measurements taken with an Audemat, a PI4100, or another calibrated instrument. This combination produces a map where the background colors represent forecast signal coverage, and the color of the measurement dots represents the measured signal strength at each location.
You can compare the color of the background forecast map with the color of the measurement dots. In the areas where the color of the measurement dots and the forecast map are the same, measured signal strength equals forecast signal strength. Where the colors are different, the measurements were above or below the Longley-Rice forecast. Further analysis is required to determine the cause of these differences.
If the signal is performing below expectations, then there may be a technical problem with the station. As a potential purchaser, you can ask that the signal coverage problem be identified and resolved before the purchase. You could also request a price reduction to compensate for the reduced coverage.
Shown below is an example of a V-Soft map showing Audemat measurement points plotted as small circles on top of a background map of the Longley-Rice forecast signal coverage for the station:
B. Budgeting Expense and Revenue
Developing a multi-year operating budget consists of two different processes: Forecasting annual expenses and forecasting yearly revenue.
Of the two processes, accurately forecasting expenses is usually faster and easier. The expense forecasting process can be accomplished based on information for the particular station, experience with other stations, and industry standards.
Accurately forecasting future revenue is a much more complex and time-consuming process. There are five levels of revenue forecasting systems. Listed from A-Level the most accurate, to E-Level the least accurate. The five levels are:
- Donor-based – Platinum-level
- Neighborhood-based – Gold-level
- Demographic-based – Silver-level
- Population-based, multiple-contour – Bronze-level
- Population-based, single-contour – Copper-level
Each of the five methods of revenue forecasting is discussed in detail by the HisAir.Net article:
Forecasting Donor Revenue for Purchasing a New Radio Station – Five Methods
The annual station operating budget combines the expense forecast with the revenue forecast for each year of operation. Future revenue is forecast to the level of accuracy (A through E) that you desire.
C. Calculating Return-on-Investment and Annual Cash Flow
The budgeting process produces the data upon which you can calculate both Return-on-Investment and annual cash flow. Forecasting yearly cash flow is essential to ensure that funding is available to cover both the initial purchase price (or down payment) and possible negative cash flow during each successive year of operation. A minimum of five years of operation should be analyzed.
Calculating Return-on-Investment is essential to enable you to compare the present station investment opportunity with other past and future investments. The ROI calculations help to assure that the decision to purchase a station represents the highest and best use of your available financial resources.
You can help determine the financial viability of purchasing a listener-supported radio station by using BroadcastMetrics to support an “ABC” analysis process that includes:
A – Analyzing the Signal
B – Budgeting Expenses and Revenue
C – Calculating the Return-on-Investment and Annual Cash-flow
Using this ABC process can help you gain confidence that you are a good steward of available financial resources.
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Frank Kavenik helps leaders of Christian radio networks to increase coverage, audience, and revenue. He holds degrees in management, law, and engineering and invented the BroadcastMetrics strategic planning system. His background profile is on LinkedIn HERE