Local radio used to be an essential form of media in every market. Every city had multiple stations playing music, offering talk shows, and delivering things like school closings.
Every kid of a certain age who grew up somewhere where snow days were a possibility remembers sitting around a radio hoping their school was named. Local radio delivered the news that you couldn't get anywhere else mixed with ads that touted neighborhood stores, restaurants and service providers.
Related: Fast-food chain nears end after failed Chapter 11 bankruptcy filings
The rise of satellite radio, podcasts and the internet has slowly eroded local radio. You no longer need a radio station to tell you whether school has been canceled as that information is readily available on the internet.
Local radio has suffered from death by 1,000 paper cuts. Services like Yelp, for example, make it easier to discover local restaurants and businesses. Podcasts and streaming music have given people more choices when it comes to what they listen to in the car.
Nobody needs to put on the radio to hear their favorite music or talk show. People now have the option to listen to whatever they want to pretty much whenever they want to, and that has devastated local radio.
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Local radio chain files for Chapter 11 bankruptcy
IHeartRadio, the largest radio chain in the U.S., filed for Chapter 11 bankruptcy in 2018. The company survived that process by giving most of the equity in the company to its debtholders in exchange for forgiveness of about $10 billion in debt.
Since emerging from bankruptcy in 2019, IHeartRadio has struggled and recently had another round of layoffs. There's simply less demand for local radio and that has created challenges that have affected other radio chains as well.
High Plains Radio Network, a company that operates stations in Texas, Arkansas and New Mexico, has filed for Chapter 11 bankruptcy. The company, which filed its petition in the Northern District of Texas, reported $1 million to $10 million in debt with the same range of assets.
The company said in its filing that funds would be available for unsecured creditors. High Plains Radio Network has not outlined a financing plan for its bankruptcy or any plans for how it intends to move forward.
Radio network was built for this market
High Plains Radio Network Founder Monte Spearman has more than 30 years of broadcast experience working in small markets. He said that while local radio remains essential, especially in smaller markets, the operating conditions have become challenging.
"The rules of radio ownership have changed, retail has changed, and digital competitors have changed advertising," he posted on the HPRN website.
"Don’t get me wrong, research confirms that 90% of Americans still listen to broadcast radio every week. Even with new audio competitors, the magic of providing local information, news, and entertainment on local radio still works for listeners and for advertisers."
Spearman built his company with a lower cost structure than local radio stations traditionally have.
"The goal for me was to stay local, but to significantly reduce operating costs," he said. "Many of my friends in the radio business told me I could do one or the other, but not both! I was not convinced! I knew a large part of the answer for increased efficiency and cost reduction was in the better and more creative use of existing technology. Through trial and error and helpful employees, that has proven to be true for our HPR Network."
He was successful in doing that, but that was not enough to operate profitability.
"The largest operating cost in radio has always been personnel; usually around two-thirds of a station’s total operating cost. I decided I could do more with fewer people, and still be local, so I focused all my efforts on making that happen," Spearman wrote.
"And today, we have succeeded. We have great people working at HPRN, but because of the use of modern technology, our personnel costs are only 25 rather than the usual 65%, and the HPR stations still provide relevant local programming."
That sounds like a recipe for success, but the failure of the model suggests that local radio may not have a future, or will at least continue to contract.
