How Red Lobster is like AM (and Talk) Radio

AM_Radio1

I am one of the last believers in AM radio.  I love the medium.  It kills me to see the shape it’s in today. It didn’t have to be this way.

A number of months ago I wrote a blog that received a lot of positive and negative reaction within the radio industry.  The FCC is proposing a series of fixes to help the so-called suffering AM radio broadcaster.  I dared to call B.S. on these proposals.  I wrote that article in a passionate, over the top manner to get people to pay attention.  People did.  Some broadcasters, including my former employer, didn’t appreciate someone being so candid.

As an example, one of the ideas from the FCC is to allow AM broadcasters the use of FM translators or very low power FM stations to help them reach an audience, which for some AM broadcasters means any audience.

The reason an FM translator won’t help a broadcaster increase the worth of their AM station (which is an owner’s ultimate goal) is fairly simple.  The proposed fix is on FM.

In that article I mentioned the worth of many AM stations lie not in the business of “radio,” but in the land the studios or towers sit on.  While some AM stations may not have enough revenue coming in to pay the electric bill, real estate may make these unviable radio stations worth millions.  Think about it. The mega-radio broadcasters have vast real estate holdings.  VAST.

In Los Angeles, the number one radio revenue market in America, Cumulus has the “for sale” sign up for the land the studios and offices of legendary KABC-AM and KLOS-FM occupy.  These 10 acres are said to be worth around $90 million.  What does that price tell you about the business of “radio” for these stations?  From what I have been able to research, the deal appears to be a win-win for the broadcaster and a future developer.  Still $90 million says everything about the core business of those stations.

For many companies, it’s all about the real estate.  McDonald’s sells fast food.  The true worth of the business, however, is in its real estate holdings.  Real estate is what made its founder billions, not burgers.  Ray Kroc’s brilliance was his understanding of this.

Recently, Darden Restaurants, which owns numerous casual restaurant brands, announced it would sell its Red Lobster chain to Golden Gate Capital for $2.1 billion in cash.  In its fiscal 3rd quarter, sales at Red Lobster locations open at least a year fell by almost 9%.  According to a recent article in Bloomberg Business Week, Red Lobster suffers from a lack of innovation and something that is the ultimate death card, an older clientele.  Old people who don’t drink, don’t go out often and enjoy the “early bird” specials make up their customer base.  Red Lobster is in a death spiral and Darden Restaurants cashed out.

While some say this deal equates to a “fire sale,” with its bad revenues and clientele dropping dead each day, what makes Red Lobster worth $2.1 billion?  REAL ESTATE.

Golden Gate Capital has already sold the real estate of more than 500 of its Red Lobster restaurants for $1.5 billion.  Think about where a Red Lobster restaurant is located.  High traffic areas.  Near shopping malls.  Valuable land.  The investment firm already has its exit planned from this deal.  And yes, they will make a profit pulling the last dollars of equity out of the Red Lobster brand.

Gabe Hobbs, the talented radio consultant and friend, recently said the only formats left on AM radio are religion, sports and conservative talk.  He’s saying a lack of variety and innovation is killing AM radio and I’ll add killing talk radio, just as a lack of innovation is killing Red Lobster.

At its end with Darden Restaurants, Red Lobster was a financial drain and its business of selling “Endless Shrimp” was worthless and had no future.  Darden knew the remaining value of Red Lobster was in its real estate.  Many AM stations today have no viable business.  A station’s real worth is in its real estate.

Finally, Red Lobster patrons are an old and vanishing group.  Talk radio’s audience is old and shrinking too. This demographic has little value to many mainstream advertisers.  I predict Red Lobster won’t be around in 10 years and I’ll say the same fate is in store for talk radio if we don’t dare to innovate and bring younger listeners to the format.

Lucky for station owners, they will have real estate to cash in.  🙂

  28 comments for “How Red Lobster is like AM (and Talk) Radio

  1. Debbie
    May 22, 2014 at 1:30 pm

    WOWsie! Eye Opening. Thanks for the guts … to explain…. God bless the (old) USA.

  2. May 22, 2014 at 4:24 pm

    Man Here in Dayton growing Up listening to REAL Music ,We had Gene “By Golly Barry” ,”Steve Kirk”,some great DJ’s and if My mind serves Me a lot more Music than Commercial, Back they The HANKY PANKY and 45 RPM’s were the KING ,OH and Elvis Too..45’s were .49cents too..

    • May 22, 2014 at 10:47 pm

      As one who worked on that station with Kirkie and Gene in the 80’s, thank you. It was fun…today’s kids just don’t know what it was like to listen to an AM station play music when you had a good signal and a well engineered station. It was truly magic. But, I’m with Darryl…unless the FCC gets its head out of its..well, you know…AM days are very limited.

    • May 22, 2014 at 10:49 pm

      As one who worked on that station with Steve and Gene in the 80’s, Mike…thank you. Today’s youngsters will never know just how good a well engineered AM music station sounded. It was magic. But, I’m afraid I’m with Darryl. Unless the FCC gets its head out of its, well…you know…AM’s days are truly numbered.

  3. Joe Smith
    May 22, 2014 at 6:39 pm

    Thanks Darryl, really miss your show on Saturdays

    • May 23, 2014 at 12:50 pm

      Joe. I miss spending time with you and the other listeners. Thank you for the thoughts.

  4. v j carr
    May 22, 2014 at 7:21 pm

    Not many AM transmitter sites are on valuable property these days.The ones still left are ones with high conductivity soil,usually wet lands. There may be a few AM transmitter sites, of some value, but nothing like the property of Red Lobster. Comparing apples and oranges.

  5. May 23, 2014 at 1:50 am

    Not a fair comparison. The land under Disneyland is valuable, but nobody in Anaheim is promoting it’s sale. Sure, many AMs are neglected, or set on ‘auto-pilot’. I’ve been on LaCienega Blvd, and I’m sure the property is correctly valued. FM translators won’t fix a thing, but opening up 530 KHz, and putting stations (other than the 55 that are there) between 1620 KHz and 1700 KHz, might relieve interference. AM is only as good as their receivers. And, there’s something to be said about the ‘over 50’ listener, in an economy like this. They still have cash! PS. For full disclosure, haven’t eaten in a Red Lobster in over 10 years. I listen to the radio, everyday!

  6. D. Peter Maus
    May 23, 2014 at 12:43 pm

    Lack of innovation. Older demos. About says it. It also says that Radio, one of the businesses with the most potential to create revenue out of thin air, has simply gotten lazy. It’s WORK to make Radio happen. And since the 50’s Radio has found new ways of doing less, while extorting greater rates for it. Program Directors have been about control, rather than talent development for decades. Manglers and owners have been working tirelessly to rid the airwaves of talent, because talent requires maintenance, and intangibles that can’t be formulatized. So, formats have been constructed that have made Radio talent irrelevant. And, for the most part, boring. Consultants have niche formatted stations to death, and have sold owners, programmers, and audiences on the fading relevance of AM. So, they’ve given up. And some once mighty AM stations, are now Travelers’ Information Radio, or 24 hour automated traffic. Depressing.

    If we really are to reinvigorate AM Radio, and by extension Radio itself, we need to start working, again. Start making Radio relevant to the markets we seek. Make it locally informative. Fun. Entertaining. Work for it. Or shut it down now, sell the property and by a McDonald’s franchise. Because that’s where the thinking is, anyway.

  7. Hans von Balkovsky
    May 23, 2014 at 9:13 pm

    To quote from a recent post,
    “Rule #1: “Ratings and Revenue.” You may have heard me say this. It’s something I really believe.

    Over the years listeners and special interest groups have accused me of various sins like programming to a certain political bias or producing programs that appeal to the lowest common denominator. Both very true.”

    “Lowest common denominator.”

    “Darryl Parks named Senior Vice President of SIMPLY MONEY Media.”

    But I repeat myself.

  8. truthbetold
    May 24, 2014 at 5:21 pm

    Let’s not go further than is merited with this.

    Mt Adams Fish House was like NPR and it didn’t help them.

    http://www.mtadamsfishhouse.com/

    http://tbo.com/business/business/2008/sep/25/bz-shells-restaurant-chain-seeks-to-liquidate-asse-ar-119605/

    Shells was like WKRQ………..gone.

    Eddie and Tracy?…..Long John Silver’s…..the Reign of Quantity. Although Jones, in character, not in real life, might make something more out of the name

    • Jack
      May 30, 2014 at 3:42 pm

      Can you repeat that in English?

  9. Andrew
    May 28, 2014 at 9:33 pm

    Can’t argue with any of your points here. And many have expressed similar sentiments. But I don’t see any company actually taking tangible steps to bring in the next generation of spoken word listeners. I see the same syndicated shows running in every market, and the local talent is often in the same demo that we complain about. If you only carry older hosts, you’re only going to get older listeners. We, as an industry, need to hire, coach, and develop talent that can relate to the millenials. You want younger listeners? Then actually put something on the air that they can relate to and will care about.

  10. Lou Kasman
    May 29, 2014 at 6:46 pm

    Today’s AM Talkers have not developed new approaches so what do you expect? The thought is Rush saved AM radio and that might have been so to an extent. Because of Rush a gaggle of other syndicated conservative talk shows were born. Now today there are no syndicated MOR talk shows so stations, even with declining ratings have nowhere to go. When you see 50,000 clear channel stations like WABC, WLS and KABC with miniscule numbers it’s time for a change. Consumer products like Tide, Lexus and others come out with different varieties all the time but radio, including FM music does not. The way to look at AM talk is to look back before looking forward. Looking back is live local talent talking about stuff in the market and some national affairs – What the public is talking about. To me the poster boy for where AM Talk must go is the WGN-AM template. Live, local talent and good discussion without beating someone up. The other important piece attracts sponsors.
    A longstanding middle market syndicated conservative talk personality contacted me as he was losing stations left and right. Long story short he couldn’t talk about anything else. So where will next cycle of life talent come from?
    The long standing assumption that listeners over 50 don’t change brands isn’t the case – folks are living longer. More importantly the demo has money and buys stuff whereby younger demos don’t have money. 50+ buy TV’s, OTC health products (Crest has a toothpaste just for 50+) food, services and more that weren’t around twenty years ago forging brand loatey. Auto manufactures per Automotive News say young people aren’t buying cars but 50+ are not only buying the cars but are upgrading.
    Hard to watch an evening network TV newscast with most of the spots for matures folk. These brands are spending money not for the fun of it.
    So where are these major station owners who can think out of the current box. As a former consultant to Red Lobster there are a number of reasons for the problems. Old locations in changed communities. Upscale dinners are turned off not by the food or price but other guests.

  11. Chris Stevens
    May 29, 2014 at 7:05 pm

    Darryl, I’d agree with your post in general. But if you’re so interested in seeing AM content diversified and the audience widened, why did you proclaim an agenda to be the “Grim Reaper of progressive talk” so openly? One would think you’d embrace the opportunity to widen the audience. And don’t tell me you supported it but the ratings weren’t there – because be that as it may, you spoke openly about finding pleasure in killing off the format – which suggests there’s some forms of innovation you don’t want.

    • May 29, 2014 at 8:01 pm

      ‘Cause the “Grim Reaper” quote made a good quote in the paper? That quote certainly lives on!

    • Lou Kasman
      May 30, 2014 at 2:25 pm

      Progressive radio hasn’t been successful for a number of reason. The first reason was AirAmerica. The people who owned/managed AA were not radio people – Not even media people. No full court press to major agencies and advertisers. No real support for local affiliates. Never realized NPR was biggest competitor for ears. Second issue was affiliates, except for a few, had weak signals. In Detroit WTDW @ 1130 with 5,000 Watts. Chicago WCPT a daytimer. In Ann Arbor Michigan, one of the most progressive cities in the country WLBY-AM with 500 Watts. As my old boss Rick Sklar at WABC told me if they can’t hear you are not on radio.

      • May 30, 2014 at 5:36 pm

        But Daryl put liberal talk on 50,000 watt WCKY/1530 – even blowing up a moderately successful 50s/60s oldies format to do so – and hired Jerry Springer, a local name with a following well before his Trash TV vehicle, as the big name. And they gave it 18 months before ultimately moving it to 1360.

        That it failed says quite a lot about the format.

      • Lou Kasman
        May 31, 2014 at 2:36 pm

        Realize that Mr. Springer was highly visible news/political person in Cincinnati. At the time he was on WCKY he did start a TV talk program focused on politics. The TV show airing in a few markets failed. That’s how Jerry Springer Show evolved to become what it is today. The radio program became part of AirAmerica and if I recall it was morning drive – AA went through about 4 morning shows in first 16 months. I consulted a major market AA station at the time and thought Springer slow paced, monotone and boring. No matter what format radio must be entertaining and to me the show wasn’t. Like or not Rush is entertaining. I only watch snippets of Springer’s TV program, but again his personality doesn’t play a significant role. If I understand properly greater Cincinnati is Republican and the Democrats work not to be too progressive. As you say Daryl put AA on WCKY, but a number of Clear Channel AM stations switched to progressive talk at the time so maybe it wasn’t Daryl’s decision. CC’s thinking was to counter program conservative talk so each had a voice and revenue stream. Problem was CC didn’t own or manage AA and as I stated they got a very poor product.

      • June 4, 2014 at 3:16 am

        The Rush of today is not the Rush of 1992. Today’s Rush is a painful listen, and is nearly devoid of the entertainment factor that he did have in his heyday. If his decline isn’t exasperating the decline of commercial talk radio, it’s clearly being affected by it.

  12. May 29, 2014 at 8:53 pm

    Granted CHML is the only game in town in the city of Hamilton as far as talk radio goes but damn its not all political. And there are no shouting talking heads.

    Why couldn’t you be like them WOR? I mean you put effort into the Mets broadcasts. Why did you crap out with the rest of your programming? (ಥ﹏ಥ)

    Interesting article but with the internet I don’t see how any format can be dying. Reddit the young site for sexy millennials has a 24/7 talk radio stream.

    • May 29, 2014 at 8:54 pm

      Also holy (#$*% that audio quality. Why didn’t we adopt AM stereo as the standard. Hell it sounds great even on my crap sony boombox when DXing it. And I don’t even DX. I found it randomly on a crap radio at work out of boredom.

    • June 4, 2014 at 3:12 am

      True, Reddit has a talk radio stream. But has anyone made overtures to anyone there? Or, more importantly, would they be willing to host a show on conventional radio where they would be subject to content and format restrictions, advertisements, and regulations by the FCC?

      Which is the crux of the argument. Talk radio on conventional radio has been stagnent for well over a decade, has little in the way of incoming talent, and is running a formula that younger audiences are repulsed by. Especially when Rush uses the “low-information voters” crutch as a slam on Millennials… that’s one way to ensure that your demo will never get under the 55+ group ever again.

      • Lou Kasman
        June 4, 2014 at 1:15 pm

        I agree Nathan. Sports Talk has taken a place of heretofore political talk and now it has good ratings and reaches a male demo that is sometimes hard to find. The lap for the next cycle of AM radio lies with Clear Channel, CBS and Cumulus. Right now conservative talk is costing a lot of revenue shortfalls. You’d think they can develop a new format like Middle-of-the-Road radio and syndicated non-political talk products. What I mean by MOR is non-political, local talk.

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  14. January 7, 2015 at 2:51 am

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