Increasing Your (Sales) Power (Ratio)

“It’s not my job to overpay for a radio station or to say, ‘You’ve done great, I’m going to reward you by paying more.’”   — JL Media director of broadcast Rich Russo in Inside Radio

IR’s writer opines:  “Improving ratings is often only half the battle. The next hurdle is driving rates in the marketplace. Convincing buyers who were paying $50 a spot to now pay $100 isn’t a slam dunk, even if the station’s ratings have doubled.”

They ran this graphic on Tuesday morning, posing the question about the reality that first the ratings go up and then begins the longterm task of getting the dollars the higher shares appear to justify:

Note:  this chart was updated after I first reproduced it and has now been corrected, with thanks to Inside Radio

This isn't the first time I have written about this (click to read some history from my perspective), but it's obvious to me at least that the increasingly automated cluster selling caused by consolidation that evolved over the past 20 years has created numerous situations where formats with great qualitative stories' power ratios have regressed to the mean.

Big owners have saved lots of money in expenses at the cost of top line growth.

Cuts in the cost of sales at many radio stations and the move to cost-per-point based transactional selling has proliferated as smaller owners attempted to compete and improve their bottom lines as well.

Now that a company has so many stations that they can throw into a pitch from multiple formats to chip away at a market leader's strongest station.

For example, Clear Channel owns seven stations in San Diego, more than twice as many as KSON owner Lincoln Financial.  At the same time, California's economy has not helped any media.

The country format audience share battles in Minneapolis, Atlanta, Portland, St. Louis, Boston. Pittsburgh and Seattle are much tighter than this single snapshot in time would indicate.  That requires a deep understanding of each radio station and the local market history.

Research Director, Inc's Charlie Sislen explains the problem like this:  "If we sell impressions and allow advertisers to treat all impressions equally, then the value of our spots goes down. However, if we position radio as a more valuable commodity, then we can grow our average unit rate and our overall revenue.  We need to continue to sell the value of our medium as a whole, and the value of each of our individual radio stations."

It has been great to see optimistic radio revenue forecasts from both BIA and Borrell, but discrete radio stations and individual formats will fail to achieve their real analog and digital potential until we get back to investing in local and national sales forces who understand the power of every format, have the time and tools to justify their unique value and we stop trying to steal pennies from other radio competition while leaving dollars on the table.

Country Money (Glass Half Full Edition)

The Inside Radio report this morning that country is radio's #4 billing format really got my mind churning, given that it has been four years since I tracked format conversion ratios in this space and at that time the format ranked #7 in a slightly different metric, converting ratings to revenue.

There was a time when news talk, with its 18 minutes per hour and country with an average of perhaps 12 commercial minutes per hour where the top two "power ratio" formats.  Back then, felt that was because country was able to sell its highly-engaged audience more effectively than other formats.
 Some of the loss of those old conversion ratios came as a result of clusters getting bigger and groups focusing more on "cluster shares" rather than just one station.  That, combined with country's growing mass audience over the last decade, has made our qualitative more like "the average" mainstream mass appeal radio station.

Nielsen's Radio Today 2013 tracks 1,857 country stations with a total cume audience of 66,025,700 and an AQH of 3,479,000!

Fewer sales reps are "country" (or any other format) specialists and the process of buying has become increasingly commoditized and less personal. 

This still works in the very smallest markets where we have many clients who still bill double their local audience share by doing personality endorsements, remote broadcasts and basically earning a premium by their proven ability to move product.  Well-trained sales people in these places like these can make surprising amounts of money and thus stay in those communities for a very long time, building more and more relationships of trust.

For example, the Country share in 2012 (from Radio Today 2013)
  PPM markets = 7.4
  Diary markets = 16.3
  Unrated markets (county by county) = 26.2
Those dollars outside the major markets that country bills spend just the same as the ones we fight for in the more compressed PPM metros.

Country is the one format at the top of the 2013 revenue ranker that hasn't fragmented into narrower pieces:  AC today has become at least three or four different formats, CHR has both pop and rhythmic, Rock has also splintered into a least four smaller pieces, Oldies has evolved to a completely different demo target, just to name a few.

The promise of consolidation was more format diversity and that does seem to have happened, but as BIA has tracked, that has not really grown revenues. 

Given the explosion of new media, I'd say that holding our own is quite an achievement since the media world of 2000 bears little resemblance to it in 2013.

Tell me what occurred to you after seeing the new numbers.

Country's Audience Shares Drop, But Revenue Shares Increase

As the RAB reports more "green shoots" in the haggard economy, country radio's format conversion ratio improved even as 12+ audience shares dipped in Miller, Kaplan, Arase's latest annual data.

Last year, there were 104 country stations reporting in the top 100 markets with a 4.69 share of listeners and a 6.66% share of radio revenues.

Power ratio = 1.42, which was up from 2007's 1.36, based on an average audience share of 5.06 and a share of marketing dollars of 6.90. In 2006, country's 12+ average share of audience was 5.36 and the format got 7.01% of local radio dollars, making the power ratio trend 1.31, a "good news/bad news scenario."

Let's build reveues by growing audience, eh?

Country Ranks #7 In Converting Ratings Into Revenue

Copyright© 2009 Miller, Kaplan, Arase & Co., LLP

Thanks to Mike McVay for the tip that this data for last year is now online at the Miller, Kaplan, Arase & Co. website.

Power Ratios act as a benchmark so you can compare your performance to others’ radio stations in your format. They facilitate the determination of revenue expectations based on audience share. For example, a Power Ratio of 1.2 signifies that the format receives 20% more revenue than your audience share would suggest. A 10.0 share on a station with a 1.2 power ration means that station should garner 12% of the advertising revenue in their market.

MKA publishes two different Power Ratio reports. Power Ratios by format is based on data that is prepared by MKA’s Market Revenue Division which gathers top line information for radio stations in over 100 US markets.