Radio Dropping Rates to Get The Buy
It's the same old story, only the faces of salespeople have changed. Radio has an abundance of inventory and salespeople have goals to meet because the home office has debt to pay. If money is on the table and a savvy client knows radio will buckle in the negotiation, that client will wait it out, knowing another radio seller is coming in the door and that cycle will start all over again. In turn, some sellers would rather walk through the sales managers door, with an order, try to explain the lower rate, rather than leave money on the table.
That cycle translates into slow (or flat) revenue growth for the industry and unbearably long stopsets on radio stations across the country. Saga CEO Ed Christian says this is a big problem that the industry has to do something about. Yesterday his concern was aimed at national business. "Agencies are testing the bottom. They are spending where the spots are cheap and they will continue to do so when there is someone willing to provide the supply." Christian also said national radio business is down and his company is focusing, even more, on local ad revenue. He said in Milwaukee the national cost per point has dropped from $68 to $45 and in Des Moines it's gone from $45 to $22.
Christian also said there was an expectation that when PPM came along more money would flow to radio as a result. That was an over-promise that has not delivered, he said. Saga does not subscribe to Arbitron.
(3/13/2013 6:44:50 PM) |
I think Phil (below) nailed it in his reference to a lack of confidence in the product on the part of the industry.
While confession can be painful, there are hardly no self-aware radio executives who don't know we have, for almost 20 years, been in the business of systematically and with intention trashing our own product output - on-air and creative.
This conversation or any other about rates is mute until our product-issues are addressed.
|- Ronald T. Robinson|
(3/13/2013 3:36:10 PM) |
You lose rate intergity when you are always working on "this month's" budget, it's a vicious cycle. Pushing your sellers to close this month, on an annual, and offering spot incentives, or lower rates to do it, rather than holding firm, "because I have to hit my budget", is a sure way to get behind the curve. Sure, you hit your budget, but you lost money in the long run, and you took up a years inventory at a lower rate, thereby bringing down your entire AUR. Once one rep at your station is forced to drop trough, every rep at the station will do so accordingly. When companies stop talking about "this month" and start talking in quarters, radio rates will rise.
Radio is desperate right now, and it shows!
|- Chicago Willy's|
(3/13/2013 2:41:31 PM) |
Radio is slowly dying!
(3/13/2013 11:01:57 AM) |
Rate cutting, no rates or negotiable rates are not a problem for radio alone. The auto industry has been attempting to rid itself of the self-imposed problem for years. JC Penney's new boss will soon lose his job in his similar major revamp that isn't working. These industries, however, are different than radio in one major respect: they believe in their product, so there is hope.
Radio's eagerness to "get the order" has it's real origin in non-belief in product;the terrible contagious disease that permeates an entire industry, at all levels of ownership and management.
Do you know another industry that argues with data collectors (Arbitron) who say listenership is up and healthy?
There are stations out there who quietly stick to their rate cards, raise rates regularly based on their belief in their product's worth, who dismiss cpp as a curious myth invented by agencies to get cheap spots, and whose stations' revenues are climbing and whose operating margins are pushing 50%. We can't reveal their identities because their business is not to share with those who wouldn't imitate it correctly, anyway. The would-be imitators don't believe.
(3/13/2013 10:52:11 AM) |
Stations worried about dropping rates for local advertisers (or traditional national advertisers through agencies) are looking at the problem of rate integity (due to too much supply) the wrong way.
While it's true that supply is large, demand is also large from an untapped set of advertisers: Small businesses who do business nationally. These are small, usually online companies who are too small for agencies or national network buys and since they do business nationally, they don't have the time or expertise to make spot market buys.
Bid4Spots has served these companies for over 8 years and awarded over $40 million to stations from this pool of advertisers at rates that are surprisingly high.
|- Dave Newmark|
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