Business Radio Picks Up Static : Media: A hot ‘80s trend has cooled, but some broadcasters are still optimistic.

Through the roaring 1980s, business news was one of the fastest-growing formats in radio. Business news stations and networks popped up virtually overnight amid promoters’ claims of an insatiable public appetite for financial and economic news.

But the public quickly got its fill. While business news has gotten a foothold on television, radio business news has fizzled, the victim of both a sagging economy and its backers’ miscalculation of audience interest.

Most of what purports to be on-the-air business news is a suspect combination of investment advice and sales. Of the more ambitious programming efforts, only isolated news shows, a handful of all-business stations and a single radio business-news network survive.

“They are having a very tough time of it,” says Allen Klein, president of Media Research Graphics, an Encino-based radio consultant. “The concept makes sense, but somewhere in the design of the format they missed the mark.”

Nonetheless, entrepreneurs continue to strike out in search of the missing mark. The latest: Los Angeles real estate mogul Fred Sands, who believes he has come up with a format mixing business and local news to draw listeners--especially commuting managers--whom other business broadcasters have failed to attract.

Earlier this year, Sands bought KDAY-AM for $7.2 million, dropped its rap music format, and changed the station’s call letters to KBLA--for “business Los Angeles.” The station, he vows, will not air financial advice programs plugging investment schemes--the programming that has given business radio much of its bad name.

“This has never been done before,” said Sands, the Santa Monica-based real estate broker whose signs dot the front lawns of the Westside and Hollywood. “We’ve done all the research, and it indicates there is a strong demand for this type of programming.”

But Sands faces an uphill struggle. Over the last few years, three different business-news radio networks launched plans. “Two crashed and burned, and the third is hanging on by its fingernails,” observes John Lund, a San Francisco radio consultant.

One of those networks, Los Angeles-based Financial Broadcasting Network, signed up 15 affiliates before going bankrupt in December, 1989. Another, Pomona-based Money Radio--operated by Edward (Buz) Schwartz, the controversial owner of KMNY-AM in Pomona--went off the air last winter.

The sole surviving business network, Colorado Springs-based Business Radio Network, has 85 affiliates, including KBLA.

“Since business news is a niche format, there’s probably only room for one network,” said Pat McCrummen, vice president of affiliate services for Business Radio Network, which claims about 1 million listeners per week.

The Colorado network is still losing money after three years on the air although McCrummen maintained that it is ahead of its business plan and should begin turning a profit by the end of the year. “We’ve been fortunate to have good people and supportive affiliates,” he said.

Other big-city radio stations--WMEX-AM in Boston and WQXR-AM in New York--recently flirted with all-business formats. WMEX dropped the format after less than a year; WQXR, after studying a format switch, decided to continue simulcasting classical music with its sister FM station.

“We were looking for an alternative news service for upscale New Yorkers,” explained Warren Bodow, president of WQXR. “Research indicated--as with any new format--you get a flock of new advertisers that you sell at charter rates for the first 90 days. But we determined the chances were less than even it would be profitable.”

The format does have its stalwarts.

Since 1980, Dow Jones & Co. has produced the Wall Street Journal Radio Network, a series of business news roundups fed throughout the day, mostly to big-city stations. When it merged with the floundering Financial News Network, NBC-owned CNBC took over FNN’s twice-hourly radio business news reports, which are carried on 75 stations.

To some extent, business radio was another spinoff from the raging bull stock market of the 1980s, similar to the proliferation of personal finance magazines and stock-tip newsletters.

Indeed, though Wall Street’s go-go days are gone, much of the financial “expertise” dispensed on radio continues to consist of advice from publishers and promoters. Most of their programs are aired on medium- to small-sized AM stations. The stations get many of the shows for free; in some cases, the producers pay the stations to air them.

A recent story in Money magazine reported that there are 200 to 300 self-styled financial experts dispensing advice on the air--often promotions for their own investment firms or schemes from which they stand to profit.

As for the financial gurus who launched full-fledged business stations and networks in the 1980s, many did not invest enough money to allow their networks to grow slowly, said Bob Gourley, who was station manager at Schwartz’s KMNY and a producer and editor at Financial Broadcasting Network.

Rather than build advertising support as their stations’ listenership and credibility increased, many wanted a quick return, Gourley said. So they resorted to selling air time to stockbrokers, commodities traders and others with investments to peddle.

Schwartz, for example, bought KMNY in 1987 with $5 million he raised by buying time on another station, Glendale-based KIEV, and then asking listeners to invest.

KMNY--run by Schwartz and owned by a partnership including his nonprofit organization, the Investors Club of the Air--was fined $10,000 by the Federal Communications Commission last year for failing to disclose that three talk show “guests” who recommended investments for listeners had in fact paid for their appearances.

According to Edythe Wise, chief of the complaints and investigations branch of the FCC’s Mass Media Bureau, the station paid its fine in full last November. Although KMNY continues to sell air time to investment advisers, it is presumed to be operating within federal rules by identifying the advisers as paid sponsors, Wise said.

Earlier, the FCC had fined KIEV $10,000 for an alleged failure by Schwartz to disclose that guests on his KIEV program had also paid for their appearances.

Today, KMNY’s typical broadcast day includes newscasts; investment-advice talk shows hosted by Schwartz and his longtime business partner, Vera Gold, and interviews with stockbrokers and other market tipsters.

Recently, Schwartz has been the focus of several lawsuits, including one by a group of KMNY investors who claim to be owed $25,000. Schwartz and Money Radio denied the allegation in Torrance Superior Court.

In January, KMNY’s former landlord was awarded $80,000 in back rent in a Los Angeles County Superior Court suit alleging that Schwartz broke his lease on offices in the Pacific Stock Exchange building in downtown Los Angeles. KMNY initially broadcast from the floor of the exchange in 1987, but stopped doing so within a matter of weeks.

Schwartz declined to be interviewed.

Gold said that KMNY is doing its best in difficult economic times to help listeners invest wisely. “We are trying very hard to instruct our listeners, to teach them how to protect themselves and their investments,” Gold said.

Schwartz, she said, has been unfairly maligned in the press--attacks that have weakened KMNY financially by driving away advertisers.

Neither is Schwartz the only radio investment adviser who has run afoul of the authorities.

In July, Morris English Jr.--who for years bought time on KIEV and KMNY--agreed to pay one investor $80,000 and another $1,254 in return for the dismissal of grand theft and bad check charges in South Bay Municipal Court. The Times has reported that his investment company, the Wellington Group, is being investigated by the California Department of Corporations, the Securities and Exchange Commission, the U.S. attorney’s office and the FBI for alleged securities fraud.

And Richard (R. G.) Reynolds, who broadcast on KIEV and other stations during the late 1980s, is awaiting trial in U.S. District Court in Los Angeles on 60 counts of mail fraud and two counts of obstruction of justice.

But while many would-be business radio entrepreneurs in the 1980s tried--and failed--to market themselves as investment gurus, others, such as the Wall Street Journal Radio Network and public radio’s “Marketplace” program, opted for a journalistic approach.

Sands said KBLA belongs in the latter category.

The model for KBLA, he said, “is KFWB with a business slant,” a reference to the all-news pioneer.

The station’s broadcasts include news, weather and traffic updates in addition to its financial and business reports. Business segments from the Wall Street Journal’s radio service and ABC Radio News are supplemented by KBLA’s staff. Business Radio Network fills the air from 8 p.m. to 6 a.m. combining talk shows, news programs and features.

Sands said he airs only a limited amount of paid programming or “infomercials”--and then only on the weekends. One example: a radio program produced by Longevity magazine. But KBLA does not broadcast any financial advice shows promoting stocks or money-making schemes.

“We are not going to take something that is controversial that might backfire,” Sands said. “I don’t want some widow saying she lost all her money as a result of something she heard on my station.”

Sands admitted that KBLA, for now, is losing money, in part because he invested “a couple million” in hiring a 30-person staff and upgrading studio and transmission equipment for the station. (He also acquired some valuable real estate around the station’s transmitter tower in Echo Park, leading to speculation that he intends to build condos on the site. Sands said he has no such plans.)

The venture, moreover, comes at a time when the Southern California local radio advertising market is in its worst slump in nearly 20 years.

Los Angeles local radio advertising slipped 5% during the first six months of 1991 to $146.3 million, according to George Nadel Rivin, a partner in Miller, Kaplan, Arase & Co., a Los Angeles broadcasting consultant.

“This is the first time I can remember since the 1970s that this market has been down for six months,” said Rivin.

Rivin noted that the downturn has at least been partially offset by an increase in national radio advertising, which in Los Angeles rose to $61.4 million from $55.8 million. “National advertising has been growing at a more rapid rate than local advertising in recent years,” he said.

“A business format will never do more than a 1.5% share of the audience in the Los Angeles market,” Rivin added. “But it could still be a profitable entity if it achieves a 1% share. It will take awhile. The problem has been no broadcaster has been progressive enough to devote a major-market signal to the business format.”