KXTR; A bad case of mono; Business trends strikes our notes for format

When Kansas City's only classical radio station, KXTR, was wrenched from the FM band and assigned to an AM frequency, it became part of a complex economic drama that has been playing out in the radio world the last decade. In city after city, it has resulted in widescale consolidation of stations by large, out-of-town owners who are impatient with radio formats that can't produce lucrative advertiser dollars. At the same time, the asking prices for radio stations have skyrocketed. KXTR reflects this explosion in radio values. In 1975 local businessman Robert P. Ingram purchased KXTR for $370,000. In 1987 Ingram accepted a bid of $5.75 million for KXTR and an AM signal. But after receiving more than 1,200 letters and even more phone calls from listeners, he changed his mind. By 1996, when Ingram finally sold KXTR and the AM signal, to Heritage Media Corp., the sticker price had risen to $9.7 million. Nearly all of that was for KXTR, meaning its value multiplied 25 times in 21 years. That year the sweeping Telecommunications Act of 1996 ended most government supervision of the broadcast industry. Radio groups went on shopping sprees, accumulating hundreds of stations. Entercom, based in Bala Cynwyd, Pa., was one of the most aggressive, building a portfolio that now numbers 95 stations in 18 cities. As the bidding grew more frenzied, properties were swapped like Monopoly cards. One station in Chicago had three owners in one month. Price tags soared, too, especially for strong FM signals - no matter what their current format, ratings or ad revenues. In 1997 Heritage, which had been bought by Rupert Murdoch's News Corp., unloaded KXTR on Sinclair Broadcast Group (which also owns KSMO, Channel 62). In just one year the price already had gone up by nearly a third, to $12 million. Two years later Sinclair sold off most of its radio holdings to Entercom in an $821.5 million deal. Of that, an estimated $15 million was for the KXTR signal. Unlike the Ingram holding group, KXTR's subsequent owners were publicly traded companies that answered to shareholders. And as each new owner assumed an ever-rising debt service on the station, pressure mounted on KXTR to improve its bottom line. And its bottom line was less than spectacular. A widely used industry yardstick is the conversion or "power" ratio. It tells investors how well each station does in converting its listeners into dollars. In 1999 KXTR's power ratio was among the lowest of any station in Kansas City. Despite averaging nearly 4 percent of listeners in the area, KXTR was taking in only 1 percent of the total radio revenues in the market, for a power ratio of just 0.38. (By contrast, a medium-sized rock station will average a power ratio of 1.5 or higher.) General manager Bob Zuroweste said classical stations are usually at the bottom of the power-ratio chart. But he said that has nothing to do with the popularity of classical. It simply reflects the dominant role played by advertisers who desire young audiences with contemporary tastes. "Ninety percent of the radio business is placed by the advertising agencies who pick those demographics," Zuroweste said. "Whether it's right or wrong, that's who they target." Under these conditions, can any classical station survive? They can and they do, though they are stations with qualities rarely found in the radio business these days: longtime ownership, rock-solid stability and loyal listeners who know they must open up their wallets to keep classical alive. In Cleveland, classical WCLV-FM has had the same owner since 1962. Other associations go back even further: The New York Times purchased WQXR-FM, that city's only all-classical station, in 1944. And KFUO-FM in St. Louis has been owned since 1948 by the Lutheran Church-Missouri Synod. Chicago has two all-classical stations: WFMT-FM, owned since 1970 by a nonprofit group; and WNIB-FM, which signed on in 1955 under its current owners, a married couple who have refused all offers to sell their signal. Both are supported in part by listener donations. The WCLV management in Cleveland realized years ago that radio advertisers were shunning classical listeners. So the station began developing other revenue streams. One is an online "shopping village" where listeners are urged to buy items, with a piece of the sales receipts going to WCLV. Bill O'Donnell, the station's program manager, blamed uncreative ad salespeople and indifferent corporations for the demise of classical radio. When O'Donnell heard that KXTR had a 4 percent share of the listening audience, he said, "Then there is no justification for changing the format. You know, nobody is holding a gun to these station groups to buy these stations at 18 times revenue and four times their actual worth. It's crazy." >>>