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.

Local Radio Is Getting Close To Billing As Much As Newspaper

At least we're growing.  And, clearly, they are not.

The local radio market is growing, albeit at a more moderate pace than it once did, by expanding its offerings to off-air platforms, providing a wider range of listener experiences and advertiser opportunities, according to the firm's new state-of-the-industry report. "Local Radio Stations Profiles and Trends for 2014 and Beyond" provides a comprehensive view of the industry based on the long-term research and analysis conducted by BIA/Kelsey for its clients and the industry. 

According to the new BIA/Kelsey report, the five biggest local advertising categories for radio are: retail (18.0 percent of total radio industry revenue), financial/Insurance (17.0 percent), restaurants (14.5 percent), automotive (14.0 percent) and technology (10.0 percent). BIA/Kelsey says local radio generates over 10 percent of its advertising from these five different groups of advertisers. And, the report says local radio receives 14.3 percent of all advertising spent by finance and insurance companies and 12.1 percent of all advertising spending by restaurants.

Perhaps we should wait for RAB to issue their quarterly radio revenue trend report later this month  (here's the latest one), but I think it's safe to say this:  focusing on national business growth or online development won't make up for a lack of a solid local sales presence.

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.

You Don't Have To Have The Highest Ratings

The top ten revenue radio stations nationally, released by BIA/Kelsey yesterday clearly demonstrate that, while being top-ranked in ratings or being in a metropolis is nice to have, it's not essential to being a top biller.

Let's take two recently-released numbers that actually have no "real" relationship to one another and try to coorelate them to see what we can learn with some quick back-of-my-napkin-at-lunch calculations:

WTOP ranks #1 nationally in total revenues from market #8 DC with a 7.5 audience share and is in the top tier of three stations virtually tied in share of audience between a 7.0 and 7.5: $8.5 million per share.

KIIS ranks #2 in revenues from market #2 LA, but is only ranked #3 6+ with a 4.4. Still, KIIS is in that first tier of four Southland stations which have between a 4.2 to a 4.9. Almost $13 million for every share of total audience in the latest monthly.

KFI is #3 nationally in revenue rank, in spite of being #1 in share of total audience with a 4.9 in the latest monthly PPM data. $9.8 million for each of those 4.9 audience shares.

Also in LA, KROQ ranks 7th in national revenues with a 2.7 share of audience 6+ according to the latest month, amidst a group of seven other stations with between that 2.7 and 3.1 in the third tier of PPM-rated stations (the second tier is four with between a 3.6 and a 3.8), with a 2.7. K-Rock, for example, ranks behind Go Country, but out bills the Los Angeles country station, thanks to a big morning show, which is a magnet for young males, managing to bill an incredible $15.6 million per rating share.

WBBM FM & AM ranks behind Chicago's #1 radio station 6+, WGN (5.4) and is tied for #2-#3 with a 4.7, followed by two stations at 4.5. $10.2 million per share.

In New York, the nation's most populous market the top rated 6+ radio station with a 7.3 share is WLTW, but they are actually being out billed by WCBS-AM which has a 2.8 share and also WINS-AM with its 3.5 share. 3.0-share WFAN is only $1.5 million behind. The 6th highest revenues in the USA belong to WHTZ, which notched a 5.2 6+ share last month. Per their latest ARB 6+ share: WLTW = $5,753,424. WCBS = $16,964,285. WINS = $12,000,000. WFAN = $13,500,000. WHTZ = $8.8 million.

Rank by $$ for each 6+ rating share in the latest monthly

1. WCBS = $16,964,285
2. KROQ = $15.6 million
3. WFAN = $13,500,000
4. KIIS = $13 million
5. WINS = $12,000,000
6. WBBM FM & AM = $10.2 million
7. KFI = $9.8 million
8. WTOP = $8.5 million
9. WHTZ = $8.8 million
10. WLTW = $5,753,424

Obviously, there are more factors involved in great revenues than just share of listening audience.

• Sell and position aggressively, command the best rates
• More commercial units per hour (news, talk and sports can carry about 30% more spots)
• BIG morning show which targets the most-desired demo
• Men matter; if you can hold onto them, you get the gold
  
• Making maximum use of all possible digital assets
• Be in a high revenue major market
• Have a very high cume (CHR and AC)
• Don't target over 55; the younger the better.
  

Do you have a different read on these stats?

Do you have a plan to grab more than your share of your market's dollars in the next year?

Pandora: Profits And Prophets

I will leave it to Mark Ramsey and Jerry Del Colliano to post daily sarcasm-laden advice to terrestial radio.

Instead, as you wait for "Hear 2.0" and "Inside Music And Media" blogs to load on your other browser tabs, I'd like to humbly direct you to Jim Edwards' blog (Pandora’s Business Model Looks Like a Suicide Pact).

Pandora is locked into a Catch-22: The more users it has, the more advertising it can sell against those pairs of ears. But at the same time, the more ears that are listening and the longer they listen, the more songs they hear and the more Pandora must pay out in music license fees. The company seems to realize that its business model, for the next 18 months at least, is a mutual suicide pact between its music costs and its revenues:

Content acquisition expenses increased $16.5 million due to increased royalty payments driven by increased listener hours and by higher revenue.

While we had net income in the fourth quarter of fiscal 2010 and the second and third quarter of fiscal 2011, we expect to incur losses on an annual basis through at least the end of fiscal 2012.

Meanwhile, good ole fashioned local radio reaches more than nine of ten Americans every week and has solid profits on a station by station basis in all market sizes.

Someone may get rich owning Pandora in the near future (can you spell LinkedIn?), but the company's viability in the short or even medium term remains a question mark.

"Scale" can be a good thing ... as long as you're not scaling an immense wall of growing debt, and your operating costs aren't accelerating faster than your revenues.

BCAB 2011 Wisdom

"People don't want to be friends with a toilet paper. Be more than a BRAND. Think gestalt and discovery. No one waiting to hear from you. Be real, compelling, personal. Stop broadcasting to a mass. Start listening. We only change when things stop working for us. You can profit from change" - John Parikhal

"There are no boring stories only boring story tellers. To master the digital world: Adhere to the principles of powerful storytelling. Entertain and inform whether it is live or on-demand. Keep in mind that shows that are downloaded may not be heard right away. Expect that when there's news of an immediate nature, or a big break in a story, people will still go to their radios, TVs, and computers with the expectation that you will give them the most immediate up-to-the moment information." - Valerie Geller

"Stay as current as you can with all the new media technology toys, but keep in mind that human stuff still always relates best. A station I work with got more hits and viral buzz that anything they ever did with listener photos in a "dog-human lookalike contest." - Daniel Anstandig

"Radio at its best is good people doing extraordinary things." - Paul Ski, CEO, Rogers Media/Radio Group

"Never make a key decision when backed into a corner under duress. There's ALWAYS a creative solution." - Anthony von Mandl, quoting his father

What a terrific meeting! I thought last year's was the best ever. Now, I must revise that opinion up one year.

Really, my ONLY disappointment was when I asked what the group heads were planning to do to grow top line in the coming year and it seemed like they all agree that 3% up this year is good.

Maybe it is when you're trying to move a behemoth, but I had hoped someone would challenge us to get rates up by getting beyond selling against one another to the same "buyers" and aggressively targeting new media business.

That's what the whole convention was about, and I was wondering if any of them would be so inspired that they'd see more revenue potential as a goal beyond pacing with the economy as a whole.

Figures Lie

Competitive revenue estimates have always been a very tricky game, since some owners refuse to report and others exaggerate or minimize what they do share with the auditing firms.

One thing is for sure, though, in the Inside Radio readers poll estimates for 2011. The recession is over for radio and spring flowers are already starting to bloom.

"Digital dollars are growing in importance for many stations, but their impact on the bottom line remains fairly small according to most readers. Four-in-ten say digital and interactive revenue will represent just 1%-3% of 2011 billings. One-in-five (21%) predict they’ll account for 4%-6% of ad revenue with 13% predicting they’ll be worth 7%-10%. Just 5% of respondents expect 11% or more of 2011 revenue at their station or cluster to come from digital. Perhaps the biggest surprise is the number who thinks online is still a revenue dud: nearly one-in-five (19%) say digital/interactive will account for less than 1% of their billings this year."

As we move forward into the year, I hope those percentages go DOWN, not UP.

Here's why:

Half of Inside Radio readers responding to our year-end survey said their station or cluster’s revenue goal is mid-single digits or higher. More than one-in-five (22%) say their goal is 10% or higher compared to last year, with nearly three-in-ten (28%) facing a 2011 goal that’s up 6%-10% over 2010. Roughly one-third of readers (31%) say their revenue goal is up 1%-5% this year with 12% budgeting for a flat year. Revenues did recover more quickly than some expected in 2010 and that may be one reason why 5% of readers who took our survey said they expect revenue to decline this year. The industry was fairly split on 2010. Slightly more than half (53%) said their station or cluster reached its revenue goal last year, with 47% saying they missed the target.

If the most optimistic and productive half of the Inside Radio readers do hit their goals and traditional revenues go up for the top half of stations between six and ten+ percent, that could make their percentage of revenues from online and NTR activities drop, even though total dollars from all sources go UP.

E-marketers may fail to report it that way in the coming year, but wouldn't THAT be a delightful thing?

Blogs I Can't Top And Won't Even Try

Today, I want to send you to a pair of great blogs which make important points, worthy of your attention:

Greater Media Chairman & CEO Peter Smyth: In radio, every first quarter is a battle to prime the revenue pump, but this one stands out as the most critical Q1 in years.

Tom Kelly and Paul Kelly: In Kelly Music Research’s national telephone survey, only 4% of music station P1’s exhibit Extreme Fan behavior. 96% of those polled can be described as Normal Fans.

As in all forms of research: it is important to carefully-design the questions but also to fully understand to whom you are asking them!

BIA: TV Revenues Back To 90's Levels For Three More Years

Normally, this blog wouldn't quote a press release on television, but this one hits home, since you know it applies to radio, more or less, as well:

The television industry will end 2009 with lower than expected revenues of $15.6 billion, a 22.4 percent decline from 2008, in a year that was dominated by shifting advertising budgets and a poor economy, according to BIA/Kelsey, a strategic and financial advisor to media companies in the local marketplace.

The significant drop also begins a leveling-off of television industry revenues to the mid-$10 billion level — not seen since the mid-1990s — through at least 2013, as reported in the fourth edition of BIA/Kelsey’s “Investing In Television® Market Report.”

BIA/Kelsey sees 2010 revenues for the television industry as increasing slightly to $16.1 billion, of which $130 million in additional revenues will come from online advertising. The company notes that online income brought the industry $518 million in 2009, a 12 percent increase over last year’s $463 million. BIA/Kelsey predicts continuous annual double-digit revenue growth from online channels, such as Internet and mobile, through 2013, when the industry should reach the $1 billion mark.

The report also shows that while most markets did poorly in 2009, others will manage to post positive numbers in 2010, primarily due to significant state and local elections.

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?

More From Strata: "At what point do you see the economy and your business returning to a strong growth period (if not already)?"

The top concern remains client spending which was the main challenge in the first quarter and up 138% since the end of 2008.

Back in 2008, client attrition topped the list of agency challenges. But when asked when they felt the economy was going to return to a strong growth period, there was a 67% increase of those who felt the rebound would come by the end of this year.

This could be evidenced by the fact that 15% of the agencies plan on hiring this year, and 80% plan on no reduction in staff.

72.5% of the agencies saw their clients either making minor cuts or cutting back considerably from their spending in 2008.

15% of agencies say that that their customers are most focused on Spot Radio (a 500% increase since the end of 2008)

This Is What A Light At The End Of The Tunnel Looks Like

STRATA surveyed media buying advertising agency clients to get an idea of trends and challenges agencies may be facing. 65% said they plan to use "the same or more" spot radio in the coming months. The sample is from 40 agencies of varying sizes across the country.

In Canada, Frank Sinatra Was Right

According to the CRTC's annual analysis, 2008 was "A Very Good Year" for radio. TSL was steady at 18.3 hours a week. Revenues were up 5%.

One troubling stat: In spite of the fact that Canadians spent 13.8 hours online, up from 13.4 in 2007, “the streaming of AM and FM stations over the Internet has experienced a decline over the last few years...(as)..the percentage of Anglophones who streamed a radio station in a given month dropped from 23% in 2005 to 16% in 2008."

Is this due to Cancon, causing Canadians to listen to more hits per hour on the streams of international radio stations? One thing for sure, it's not all the irritating public service announcements and repetitive "fill" inside American radio station streams necessitated by having to cover up national commercials that makes many U.S. radio station streams hard to spend much time with, because Canadian radio streaming is a 100% simulcast of the station.

Podcasts increased 46% year to year for English-speakers.

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.

Dear BIA Financial: "Ouch!"

BIA economist Dr. Mark Fratrik predicts a tough two years ahead:

“Radio has considerable challenges for audience and advertisers, but it’s still viable in lots of places. It’s just more challenging than it was five or ten years ago.”

Good news: many small and medium markets are growing even as the CPP-driven majors are stagnant in '08 and projected to be in '09.

Commercial Loads Are UP From A Year Ago

Media Monitors CEO Philippe Generali tells Inside Radio that commercial inventory cutting seems to have come to an end. The "race to go down has stabilized" with the average commercial minutes per hour holding steady.

Generali says the number of :30 second spots is also holding steady - now accounting for 39% of radio spots. The radio industry averages 13.4 minutes per hour of commercials, compared to 13.3 minutes one year ago.

Since both Inside Radio and RCS' Media Monitors are Clear Channel companies (and, thus unlikely to report bad news about CCU initiatives), I'd say it's time to officially conclude that less has turned out NOT to be MORE..

TNS Confirms: It's Brutal Out There

If your revenues are flat, you're doing a lot better than the majority of us.

TNS Media Intelligence 2007 Forecast – 2: Internet display advertising is projected to lead the market with 16.0 percent growth in 2007. Outdoor spending is expected to rise by 4.6 percent versus 2006 with Consumer and Sunday Magazines right behind at 4.5 percent. The TV market is expected to turn in mixed results. Cable Network TV is forecasted to advance by 5.9 percent. Network TV expenditures are expected to increase by just 1.3 percent and Spot TV spending is expected to decline by 5.5 percent. The outlook for newspaper ad spending, which accounts for over 17 percent of total ad volume, is a drop of 2.9 percent. Small declines are also projected for Radio (-0.3 percent) and Business-to-Business Magazines (-1.5 percent).

Translation: the only ad growth appears to be in the low price spreads. If you don't have an aggresive web development initiative, it's time to start. That's where the money is going.

Country Radio Get$ A Compliment From Will Feltus at National Media

Nine questions for a political ad spender — "The Inside Radio Q&A" is a new feature and the first edition finds out there could be big bucks coming to radio from politicians this year. National Media is one of the biggest political ad buying firms and buyer Feltus says this year they’re working for Mitt Romney and have already made radio buys in four states.

Q: You put 10% of the Bush campaign budget in 2004 to radio — an unheard of number back then. What’s attracted you to radio?

A: TV has become more like radio and their audience is really fragmented — so that you can’t go out and buy threeTV networks and get the job done anymore.

Q: You’re buying for Republicans – so does that mean news/talk and country stations?

A: News/talk is the biggest format, definitely. But you can’t rely on that alone. We also buy sports stations. And, since news/talk’s audience is largely male – we also buy the AC type of formats to reach women. Country is much more of a mixed bag. It’s appeal to Republicans is exaggerated. It reaches both men and women — but in some markets its numbers are so high that it reaches everyone not just the voters we’re targeting. (this quote is highlighted in green for good reason!)

The NAB and RAB are holding a marketing session today in Washington trying to get radio a bigger piece of campaign media budgets. NAB chief David Rehr tells IR's Frank Saxe their goal is to show “the value proposition” of radio –— and make sure candidates “appreciate the unique connection that radio stations have with hometown listeners and voters.”

Some More Bad (Or, Is It Good?) News

Earlier today (see below) I reported that radio ranks last among local media in generating revenues online. Now, comes news that radio held 6.6% of ALL media spending in the first quarter compared to 6.7% last year.

Being flat from last year's share of media revenues is actually good news?

Some are saying so, but wasn't the promise of consolidation during its infancy a decade ago to grow radio's share of media revenues?

That was before the late 90's dot.com crash and 9/11, of course. If the economy's so good, how come we ain't rich?

Auto Spending On Radio Continues To Erode

The Radio Advertising Bureau reports that total radio ad spending rose 1% to $4.728 billion during the first quarter of 2007. The gain, which came despite a 1% decline in radio ad spending during March, reflects mixed results for the medium. While local radio ad spending, the biggest source of revenues for the medium, was up 1% to $3.244 billion, demand from national advertisers ebbed during the quarter, dropping 1% to $945 million.

Meanwhile, MediaPost's Joe Mandese dissects the despressing trend:

The relatively flat performance of radio no doubt reflects weakness from its top ad category, automotive, which declined 2.6% from the first quarter of 2006, which was also down 10.0% from the first quarter of 2005. The attrition in automotive ad dollars appears to be coming mainly from the national side. Auto manufacturer spending declined 4.2% during the quarter, while auto dealer advertising actually rose 7.7% over the same quarter in 2006. On the plus side, some key categories are showing renewed radio advertising vigor. The communications/cellular/public utilities category rose 17.3%, as did concerts/theaters/movies, and health care rose 9.5% during the first quarter of 2007. Radio's relatively weak start in 2007 does not bode well for the medium, which like other major traditional media, are under pressure from ad budgets migrating to online. During 2006, radio share of total measured media spending fell 0.2 points to 7.4%, according to estimates compiled by TNS Media Intelligence.