Jeff Smulyan: Never Ride A Rollercoaster Upside Down

Tara Sands (Voiceover) 00:00:02
The sound off podcast. The show about podcast and broadcast starts now.

Matt Cundill (Host) 00:00:13
One of the things I learned about David Letterman's show, whenever he had a guest who had just written a book, he would never tell the audience about the book until the end of a segment. Then he would hold up the book for the audience to see. Turns out that the TV research showed that if people knew the guest was plugging their book, less people would watch and might even flip the channel to see who Jay Leno had on. Well, I'm not David Letterman, but my guest this week has written a book and has worked with David Letterman. Jeff Somalion is the founder of Emmis Broadcasting, creator of the first all sports radio station, and once was part owner of the Seattle Mariners. And now we can add author to that list of accomplishments. Jeff Somalion joins me from his office in Indianapolis. The beginning of most of our careers happens around university, and I'm always curious about why people choose what they choose. And you chose telecommunications and history. Now I understand why you chose USC, that's obvious. But why those two fields?

Jeff Smulyan (Guest) 00:01:11
Well, I actually started out I was going to be a political science major, and I had a couple of political science classes as a freshman and said, I think I'll switch to history. And then it's funny, I have to laugh. SC did not have a big telecom program in those days. Now today, the Annenberg School is one of the finest in the world. And we have Annenberg has like two or three buildings, and Willow Bay is the dean. It's fabulous. But in those days, I probably could have majored in it, but there weren't that many classes.

Matt Cundill (Host) 00:01:39
What was the radio station that gave you your first buzz that made you think, I got to be involved in radio?

Jeff Smulyan (Guest) 00:01:45
Well, I grew up listening to Wife in Indianapolis. Also WLS in Chicago. When I started college in 1965, it was just when KHJ was starting in LA and that was really a major entity. And I think I always loved Radio. I grew up listening to baseball games on Clear Channel radio stations. And it's ironic, I wrote my larvae article on the Clear Channel rule, but I listened to I was a big Giants fan, so I listened to Giants in Cincinnati and St. Louis and Philadelphia and New York games out of Houston. So radio was just an integral part of my life. Always loved the business, always thought it was a tremendous amount of fun.

Matt Cundill (Host) 00:02:27
So a couple of things. I think a lot of us who love baseball fell in love with radio through baseball because the games were at night and, oh, look, I'm picking up a game from Chicago, and I'm picking up a game on KMOX. But at the same time, Indianapolis has had this exciting radio. It's fertile ground for talent. I think it's because it's around the Great Lakes, and there's lots of great radio coming in from all directions. What's your feeling on that?

Jeff Smulyan (Guest) 00:02:57
Well, again, it was a unique marriage. I've talked to more friends who grew up listening to top 40 radio in the 60s, mid, late 50s, early 60s. That was sort of the dawn of top 40. And as I've given speeches about the book, the transistor was, I think, a mid 50s invention. It made radio portable. It could put radio in everybody's pocket. And I think the American passion for baseball in those days, it's hard to describe how different it is today when the passion in this country is for football. But clearly every kid seemed to care about rock and roll music and baseball.

Matt Cundill (Host) 00:03:35
Your dad bought a station in 1973, and you worked there as the general manager.

Jeff Smulyan (Guest) 00:03:41
Yeah. Well, what happened was, I always wanted to be an entrepreneur. I was going to go back and get a master's in telecom. Somebody said, I have to laugh in those days. If you want to be an entrepreneur, get a law degree. Today everybody would get an MBA. And when I got done, I was looking for stations out there, and my dad said, look, come home. I've got a cousin who has a small station, it's not doing well, he needs a lot of help. Come back and run it. And while you're waiting to start your company, do this. And my mom sort of talked me into coming home. First six months I went back to Indiana. I said, why did I do this? And then after that, I've fallen in love with the place. And now I've had a zillion opportunities to leave, but I never leave because it's home.

Matt Cundill (Host) 00:04:22
It was a news talk station, I believe, and David Letterman was on the staff.

Jeff Smulyan (Guest) 00:04:26
David Letterman was our midday guy. And David, when he took the job, he said, I'm going to do this for a year, and then I'm going to try to go to Hollywood and become a writer and comedian, and the rest is history.

Matt Cundill (Host) 00:04:36
Did the station have a relationship with NBC at that point?

Jeff Smulyan (Guest) 00:04:39
Not at that point. At that point, it was strictly an independent news talk sports station. We had news in the morning and David's talk show in the midday and sports in the afternoon. Later, in 1974 or five, NBC decided that they were going to try an all news network, primarily on their FM stations. They didn't have enough faith in it to put it on their big AM stations around the country. But we realized that saving a lot of overhead. It was very tough to get enough ratings in those days with a daytime station. So they were the news and information network. They provided you with all your programming. You went local for news blocks, news breaks, and they did it for about, probably 15 months. And then they threw in the towel and said, we can make this work.

Matt Cundill (Host) 00:05:27
And what was your next move? Was that Omaha?

Jeff Smulyan (Guest) 00:05:29
No, that was religion. We realized that as a daytime station, it was going to be very tough to get big ratings or decent ratings in an Indianapolis market with basically the four or five big AM stations that were full time, as well as starting the growth of FM. So we realized that probably the best thing for that station was religion, and we did it, and it worked well. And then we ended up going to Omaha and buying Bob Gibson's AM and making that religion as well.

Matt Cundill (Host) 00:05:58
So there's still an entrepreneur in you?

Jeff Smulyan (Guest) 00:06:00
There's always been an entrepreneur in me, I always say I'm an entrepreneur because I'm not hireable by anybody else in a free society. So I've always been an entrepreneur.

Matt Cundill (Host) 00:06:10
So between 75 and then the creation of Emmis, was there anything entrepreneurial that took place in there, or was Emmis the entrepreneurial venture?

Jeff Smulyan (Guest) 00:06:16
Yeah, Emmis was always the idea to put the company together, find a station to buy. We actually bought the station in 79. It took us two years to get everything done. So the Emmis really started ongoing, sort of trying to find the partners, trying to find the station for several years before we got it done.

Matt Cundill (Host) 00:06:34
Your book, by the way, brings back these incredible memories of my path, just going through radio and just seeing the call letters and remembering them all. And these are letters I haven't seen in years, things like WLOL and KPWR and WHN, renowned call letters. So tell me a little bit about the culture of Emmis that I didn't get to experience because I was living and working in Canada.

Jeff Smulyan (Guest) 00:06:59
Well, I think emmis was always started with the idea that it was a people first company. If you read the book, you'll find the Eleven Commandments. I wrote the first Ten Commandments on a napkin at a manager's meeting 40 years ago when somebody said, what are our values? And it was never, jeopardize your integrity and have fun and be rational and believe in yourself and take care of your people. The 11th we added after the Major League Baseball experience, which was admit your mistakes, kind of a tongue in cheek approach to that. But I think the culture was always very collaborative. It was always having a group of people who had a say. We always said, give them a stake in the operations of the company and the ownership of the company. So I was very proud. I think that the people of Emmis have been fabulous, and many of us have stayed together since the very beginning. And people I'm proud of the fact that it's a company that's attracted and kept people for a long, long time.

Matt Cundill (Host) 00:07:57
So as I was putting together this episode, I realized that I've actually already started writing another episode that has been about three or four years in the works, and it has to do with, I think, 1988 at HOT 97 in New York and the big concert launch that took place there. And I think I've got I want to have, say, Rocco Macri. I want to have him come on the show and talk about all that. But I managed to I got you on first.

Jeff Smulyan (Guest) 00:08:21
Rocco was our promotions guy, went off to start I think it's promo suite. He's done very, very well. Very good guy, very good guy.

Matt Cundill (Host) 00:08:28
I look forward to putting together that episode. And that was 1988. And in 1989, you bought a baseball team, right?

Jeff Smulyan (Guest) 00:08:37
I have a favorite saying in life the line between being a genius and an idiot is very fine. I've been on both sides many times. When you're right, you're a genius. When you're wrong, you're an idiot. So I have one chapter which is idiot to Genius, which is WFAN, which we put on the air, 1987. We talked about being a collaborative culture. Our managers didn't want to do it. And one of my friends said, what do you want to do? After we voted, they voted against it. And I said, you really can't lead where people won't follow. So we're not going to do all sports. And the next day, Rick Cummings, who was then head of programming, we've been together every day for 40 some years. Rick came in and said, look, we still think it's a stupid idea, but you want to do this, so we'll try it. And that was the ignominious birth of all sports radio in the United States. It didn't work well for a long time, and then it took off. And when it took off, it skyrocketed. We brought in Don IMAS. We switched to NBC's frequency. We brought in Mike and the Mad Dog, and then we were looking around for stuff to do. We had FM stations in every major market. We had carried the New York Mets on W Fan, which was originally Whn. We bought the stations from the Double Day family who owned the Mets. So we ended up in discussions and people said, gosh, you guys are great marketing guys. We have a very, very tough situation in Seattle. And we said, what the heck? We love baseball. I had theories, always had theories about the economics of sports, which, if you read the book, are all throughout the book, why things work in sports, why they don't. And I had been to Seattle as a kid and loved it and thought, what a great opportunity. So we bought the Seattle Mariners in 1989.

Matt Cundill (Host) 00:10:18
I got to listen to the demise of WNBC, and then what came next, because I was in Montreal, I used to listen to WNBC at night, and then I started to listen to WFAN, and it was the New York Mets. And as a Montreal Expos fan, I already despised all of the New York Mets with the exception of Gary Carter, and I could hear it. And the Mets were really a big deal, and the timing was just right for WFAN to succeed, although it took a bit.

Jeff Smulyan (Guest) 00:10:52
Yeah, well, it's funny, as we switched that the Mets were the defending world champions. I have to laugh. We bought NBC the next year. In those days, you could only own 01:00 a.m. and FM, and obviously the 660 frequency was a full clear channel. And so we knew we were going to switch to that frequency and sell 1050. We were talking to Don Imus, who had been on WNBC. We had always loved Don. I had been a fan of Don long before I got to New York, but Don had been in and out of rehab. And I remember meeting with his agent right before the switch, and I said it was Mike Lynn was his agent. I said, Mike, we have a radio station losing records amounts of money. We have a baseball team with more drug problems than anybody in Major League Baseball by that year, and we have a personality who's been in and out of rehab for the last five years. If we put all these together, what could possibly go wrong? And he laughed and we talked about it, but it took off and it became an iconic radio station.

Matt Cundill (Host) 00:11:54
What was plan B instead of sports radio?

Jeff Smulyan (Guest) 00:11:57
Well, we could have left at country. It was country at Whn, we knew, even though everybody said it's the largest country music radio station in the United States. Well, that's true, because there's 16 million people in New York, but it was still about the 25th rated station in the market. And when we bought NBC, we had bankers and other investors who said, how long are you going to keep this WHN thing up? And we said, well, we're going to keep trying and see what we got. But it was losing a lot of money until we made the switch. We probably would have sold it or I doubt if we'd gone back to country music.

Matt Cundill (Host) 00:12:31
How much time did you give it?

Jeff Smulyan (Guest) 00:12:33
Well, you always want to give it two or three years. Like I said, it lost so much money. Jim Lamply called it the Vietnam War of Emmis. It was effectually known as Smulyan's Folly for a long time. I come from a group of very serious needlers, so be at 05:00 and somebody say, well, we lost another $18,000 at Band today, so we were going to give it another year or so after the merger. Our bankers said, how long are you going to give it? And I always laughed and said, if we hadn't been hitting on all cylinders everywhere else, the bankers would have said, you better sell this. But it worked out. 

Matt Cundill (Host) 00:13:08
More with jeff in just a second. This is where we're going to talk about the future. What is the future for transmitters? Will radio even need them? How does he see digital and podcasting? And with baseball making rule changes, should radio let go of some of its rules. There's more, including a link to get a copy of Jeff's book Never Ride A Roller Coaster upside down on the episode page at soundoffpodcast.com.

Tara Sands (Voiceover) 00:13:34
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Matt Cundill (Host) 00:14:02
You've managed talent. You mentioned Emmis, Letterman. Ken Griffey is in there, too. What's the key to managing talent?

Jeff Smulyan (Guest) 00:14:11
I think the most important thing is respecting people. I don't care whether you're managing a receptionist or a salesperson or a traffic person or an engineer or one of the great center fielders of all time. Treat people like human beings. I have had a favorite saying. I've never met anybody who went to work in the morning and said, how do I screw my job up? So our job is to give that person the tools to succeed, give them the guidance and help them put a plan together and have them succeed. That's always been my sense.

Matt Cundill (Host) 00:14:44
Radio and baseball have just gone together so well. I feel like so much that you've done has involved baseball, whether it was ownership or your early days listening. And we're looking at baseball today, going through these massive changes. How do you look at those?

Jeff Smulyan (Guest) 00:15:02
Well, the problem is, I was on the TV committee. One of my dearest friends in baseball was Bobby Brown, who just passed away. Bobby was a famous Yankee third baseman, became a cardio surgeon, heart surgeon, then became president of the American League. Bobby always wanted to go back to a simpler time when we played the games during the day and we did it the way we did it. And I used to say, Bobby, we got a younger generation that doesn't care about baseball as much. So I think I still remember we asked the league if we could put the speed of the pitches up. We had Randy Johnson, and we said, look, Randy's hitting 100 miles. Let's put on the scoreboard. And the league was like, oh, no, you can't do that. You break the traditions of the game. I was laughed and said, I think a hitter is up there, knows he's throwing 100 miles an hour. You don't have to give him any information he didn't already know. But I think the new changes, whether it's the pitch clock, whether it's the batters clock, whether it's making the bases bigger to allow easier stolen bases, you've got to make the game faster. You've got to make the game more exciting, palatably, younger people. Unfortunately or fortunately, the American public's fallen in love with football. It's fast. There's a lot of violence. They've fallen more in love with basketball. A very quick game. And I think baseball. I love baseball because it was a game where you could really sit with your dad in the ballpark and debate, who are they going to bring on the left hander here? Who are they going to pitch it here? It's a much more cerebral game, but we're at a time in North America, as you know, where we're less focused on cerebral things and more on instant gratification.

Matt Cundill (Host) 00:16:41
I'd be remiss if I didn't point out that your purchase of the Mariners happened the same year as Jerry Jones of the Cowboys.

Jeff Smulyan (Guest) 00:16:47
Yeah, Jerry did much better. Jerry's got a $5 billion business, and we went through three years of agony.

Matt Cundill (Host) 00:16:55
What traditions does radio need to let go of?

Jeff Smulyan (Guest) 00:16:58
I'm not sure. It doesn't need to reemphasize the things that made it. I think the biggest problem radio has is it chases shiny new objects. We all fell in love with streaming. We fallen in love with podcasting. We've fallen in love with digital sales. Where radio really works is connections with people in a local market. If you look at my frustration with the business is some of the major players are now running 1820 units an hour. Commercials. They've stripped the local staff, and everything's piped in from 1000 miles away. They have no local involvement with their communities. That's what made the business. Is there a place for podcasting? Of course there is. Is there a place for streaming audio? Of course there is. Or satellite radio. But the things that made radio is it was local and it was live and it was free. And to me, for radio to succeed, and I think small market radio is doing a better job than the major companies, certainly financially, because they've stayed home in their communities and they've served them. 

Matt Cundill (Host) 00:18:04
Sports radio, it feels markedly different than anything else on the radio today. I think it's evolved well. Yeah, it's got some digital struggles, and I think its role is changing, but it's really progressed where talk radio has just regressed. How optimistic are you about sports radio and looking forward the next five to ten years?

Jeff Smulyan (Guest) 00:18:27
Well, I think sports radio has grown. I mean, I can't tell you how many people said, did you ever think it'd be 700 stations? I said, I didn't think WFAN would survive six more months. So, no, I'm astounded there are 700 stations, but it connects with people. The big thing we did in New York, we hired a network guy whose focus was sort of make this a national station. And nine months later we said, look, we got to make this a local station. We're New York centric, which is when it started to do well. But if you're in Indianapolis, you want guys who know about the Colts and the Pacers in Indiana and Purdue and Notre Dame and Butler, and they could talk about them all day long and debate them all day long. And I'm a history major, so I remember Karl Marx saying that religion is the opiate of the masses? Well, today in 2023, in the United States, sports is the opiate of the masses. This is what people care about. I always say, as the world gets more complicated, sports is a great place to sort of disappear. Wrap yourself around what's going to happen in the NFL draft next week, or is John Morant going to come back and play in the playoffs for the former Vancouver Grizzlies, if you will. So it's that, and I think as long as it matter again, if it matters to people, then it will work.

Matt Cundill (Host) 00:19:49
How do you view the radio transmission tower and over the air content versus this onslaught of digital? And I mentioned this because I saw that the CBC in Canada was thinking about phasing this out. And this morning I wake up to Twitter, Facebook, and all sorts of other nonsense suppressing algorithms, and I'm like, maybe you want to hold on to those. How do you look at that?

Jeff Smulyan (Guest) 00:20:13
It's funny. If you read the book, you'll understand my obsession with saving that. The next radio project was a project that I got drafted into. One of the heads of the NAB, David Rear, came in and said, you know that in phones in Europe and Asia, they put an FM chip in there and for $5, people can listen to the radio over the year and we need to do that here and a group of CEOs said, gosh, we should. Somebody remembered we had partnered with Nokia in an application in Finland and said, we look into it. And I looked into it and I fell in love with it. And you have to remember, radio started its portability with transistor radios in the graduated to walkman and boomboxes. But in the last 15 years, radio's portability has kind of died. So if you understand the economics of streaming audio, you understand that having a terrestrial radio with that terrestrial tower you just talked about is an incredibly different economic proposition for the broadcaster. I'll give the example I gave in speeches when I was trying to convince everybody that we needed to embrace this. I just talked about Power 106 in Los Angeles. I said, I got a radio station in Los Angeles, Power 106. My cost of distribution is about $65,000 a year. That is the cost of the electricity to power my transmitter. So once I pay that cost, I have no more distribution cost, and my signal can reach one person in Southern California or 15 million, no incremental cost. But if I took that transmitter down and I streamed digitally, then all of a sudden my distribution is one to one. And that means that for every listener I get, I've got a data cost to reach them. They've got a data cost to reach me. And in the United States, we also pay music licensing fees for performance digitally that we don't pay over the air. So if you add up the cost so I said, look, take my same 3 million listeners a week and take them off the transmitter, and I have to reach the same people, same amount of time through streaming. My cost is about a million dollars a year just for data transmission, and another probably $500,000 a year for music licensing. And my listeners are going to pay another million dollars in data costs to receive that over the course of the year. So you've got two and a half million dollars versus $65,000. Well, that's why every time I ask anybody, has anybody made money streaming? The answer is always no. Spotify at one point had, I think, a $60 billion market cap. They still can't make any money because they're locked in with high music cost and other distribution cost. So that's why we used to say, every time I take the same listener listening to the same content from over the year to streaming, I take a 30% margin profit margin customer and make him a ten or 15% margin losing customer because the math has never worked. So we've fallen in love with streaming, but nobody makes money at streaming.

Matt Cundill (Host) 00:23:27
And I'll dovetail this back to an episode where I had Jason Barrett on, and we talked a lot about the struggles of counting those digital listeners and the attribution of the 25 to 54s who are listening to a Mets game through their computer and streaming it. How do we count all that and make money from it?

Jeff Smulyan (Guest) 00:23:47
Well, and that's the problem. The problem is it's very difficult. For years, people would say, I've got my stream of HOT 97 in New York, and I'm going to sell it independently of my over the air signal. And what you learn is your advertisers would pay you a fraction for the streaming signal as they would for the over the air. We finally just said, add them all together, you may get two tenths of a point more, and you could sell everything together. But forgive me, these are all long, boring answers to the challenges the industry faces.

Matt Cundill (Host) 00:24:19
Oh, I think people are very excited with these answers. Hey, the riches are in the niches in this podcast. And speaking of podcasting, you're looking at audio that is now on demand. It's time shifted. It's an RSS feed. It's tough to put a fence around it. How do you look at podcasting?

Jeff Smulyan (Guest) 00:24:39
Well, again, what I look at a lot of this is monumental value transfer from the distributors, the content creators, to the consumer. The consumer's got 3 million podcasting choices, and it's very difficult other than for the top hundred podcasters to make any real money. But consumers get the benefit of a lot of neat stuff. There's very few subscription things out there.

Matt Cundill (Host) 00:25:07
Jeff, if you could do it all over again, just take back one decision in your career so far that you could reverse. Which is it?

Jeff Smulyan (Guest) 00:25:15
Well, I've talked about in the book, not stepping up to try to buy the Minnesota Vikings was an egregious mistake. There's two my friend Carl Polad, I had an idea that you've always had a stadium problem in Minnesota in those days. And I said, if Carl on the Twins and the Vikings, he could sit down with the government and say, let's figure all this out. Carl loved the idea, and he said, if you'll do this, put up whatever you want, you can run the whole thing, be a major equity owner. And I was taking my kids on a trip to Europe and Israel right when the bid was due, and I just said, you know what? I'm taking the trip. In retrospect, not a good idea. You never know if you're going to win a bid. There's always two or three other bidders, but that probably was an egregious, egregious mistake. The other one was my friend David Stern, who was a big fan of ours, and I had a great relationship with him. He called me one day at the very end of our tenure with the Mariners and said, I have a bet with somebody. If somebody today gave you the Seattle Mariners for free in the only conditions where baseball could never solve its revenue sharing problems and you had to stay in Seattle for ten years, would you take the free team? And I laughed and said, no, because in ten years, the free team would cost me half a billion dollars with losses. And I said, that didn't get into the psychic cost of fighting these battles every day. So he laughed. He said, I knew that's what you'd say. And when he got out of baseball, he called me and said, I have a problem with the Houston Rockets. I need help. I'll get you all the money you need. Take the team over. And I said, David, I got to go fix Emmis. Emmis is struggling. Went through the downturn of 91, 92, and I turned him down. And obviously, that was, in retrospect, a pretty egregious mistake. But I have a favorite saying about my life is if any one of ten things had happened, my company be a thousand times bigger. And if anyone of other ten other things had happened, I'd be sweeping street somewhere. So my life worked out pretty darn well.

Matt Cundill (Host) 00:27:10
Jeff, thanks so much for taking the time to be on the podcast. All the information about the book, by the way, is in the show notes.

Jeff Smulyan (Guest) 00:27:17
Okay.

Matt Cundill (Host) 00:27:19
Thank you so much. Jeff and I had no idea about that Minnesota story. I just spent the weekend in Minneapolis and incredible. And I hope to get a chance to meet you at one of the radio events in the near future.

Jeff Smulyan (Guest) 00:27:30
Wonderful.

Tara Sands (Voiceover) 00:27:31
The Sound Off podcast is written and hosted by Matt Cundill, produced by Evan Serminsky edited by Chloe Emond-Lane. Social media by Aidan Glassey. Another great creation from the Sound Off Media Company. There's always more at soundoff podcast.com.