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RAB's Gary Fries: If We Don't Remain Relevant, We're In Great Danger (01/30/06)

By Reed Bunzel, Editor-in-Chief

“During the past 14 years, Gary has transformed the Radio Advertising Bureau to its current status as a very sophisticated, technologically astute distributor of information and services.”

With those words, RAB Board Chairman Joe Bilotta last August accepted the decision by president/CEO Gary Fries not to seek renewal of his contract when it expires at the end of this year. With Fries at the helm, “the RAB training programs have benefited all who participate and have evolved to be the standard for many broadcasters,” Bilotta noted. “With the emergence of the Radio Ad Effectiveness Lab initiative, the RAB has been asked to administer the sales and marketing of the program. Under Gary's leadership, the RAB has accepted that challenge and hired, trained, and set an agenda for a whole new team of national marketing sales executives.”

Fries was tapped to lead the RAB in 1991 at a time when severe economic woes were threatening the very fabric of the radio industry. RAB membership had dwindled precipitously during the preceding years, and the association's financial picture - as well as its New York headquarters - appeared bleak, at best. But Fries turned all that around, first by actively seeking greater membership participation from broadcasters who had all but written the organization off, then by moving the bulk of the RAB's operations from New York to Dallas.

Since then, Fries has raised the profile of the radio industry and established the RAB as a “full-service resource center for advertisers, agencies, member stations, the press, and the financial community.” Under his guidance, membership has doubled to more than 6,000 radio stations and 1,000 associate member organizations. During his tenure, the RAB also introduced or advanced numerous training, non-traditional revenue, and certification programs, and oversaw the creation and development of the RAB Radio Training Academy. Additionally, Fries led the industry to the forefront in media accountability, playing a dominant role in the development of the RAEL by working with advertisers, agencies, and broadcasters to further the industry's understanding of how radio advertising works and how to measure its effectiveness.

During a radio career that has spanned more than 40 years, Fries has held numerous executive positions in virtually all aspects of the business. His first radio job was in Lincoln, NE, where he worked as a part-time salesperson at Stuart Broadcasting's KFOR while still in college. By age 24, he landed his first management position at KRGI in Grand Island, NE. Following a succession of career and geographic moves, Fries served as vice president of ITC Communications and Multimedia Broadcasting, Inc., president and chief operating officer of Sunbelt Communications' Radio Division, and president of Unistar Radio Networks and Transtar Radio Networks.

Today, Fries regularly represents the radio industry at broadcasting, agency, advertiser, and financial gatherings across the country and abroad. He serves on the Arbitron Radio Advisory Council, the National Association of Broadcasters' Radio Convention Planning Committee, and the Ad Council Board of Directors. He also is chairman of the John Bayliss Foundation, and co-chairman of both RAEL and the Radio Creative Fund. In 1994, he was roasted by the Bayliss Broadcast Foundation, and inducted into the Nebraska Broadcasters Association Hall Of Fame. The Illinois Broadcasters Association also bestowed that same honor on him in 1999, and in 2000 he received the Arkansas Broadcasters Pinnacle Award.

Although Fries still has months to go before stepping down from the RAB leadership, we at Radio Ink thought RAB2006 would be an appropriate time and place for Fries to share his views on the radio industry, revenue growth, advertiser accountability, and what the future holds for his immediate successor.

INK: A year ago we were predicting low- to mid-single-digit growth for 2005. What happened in the ensuing 12 months to create such a lackluster performance for the industry?
FRIES
: It all boils down to the fairly lackluster economy. There weren't any drivers, and there wasn't a lot of introduction of new product. The industries we rely on for advertising were flat. They were not being aggressive, and there was no spark to light the fire. The radio industry has to realize that it mirrors the aggressiveness of the overall economy, and the economy just wasn't aggressive in 2005.

What is the most critical metric used to measure the temperature of the economy?
Consumer attitude. New housing starts, jobless rate, oil prices, and GDP all are factors, but it really comes down to whether the consumer believes this is a prosperous time. You can walk through any mall in the U.S. and determine whether consumers are excited or not. If people are smiling and jubilant, that's a positive attitude, but if people don't have the spark - if they've withdrawn into a bunker-type mode - then it will be hard to get things moving quickly again.
In fact, this is part of the metric of all advertisers, who are very astute about consumers. They are sensitive to how they should release products, change existing products, and reinvent products. They don't do these things aggressively when they aren't going to be embraced by the consumers. They withdraw, just as consumers do. Essentially, advertisers serve as a mirror of the consumer, and advertising expenditures are regulated by that.

Did you see enough optimism in the 2005 holiday buying season to believe it will carry over into this year?
Retailers seemed to have become aggressive earlier in the season. They realized that after the disastrous 2004 holiday season, which set the tone for the following months, they needed to be aggressive early on. With that in mind, they went into the Thanksgiving retail season already in full motivation. We could see the revenue stream flowing into radio at an early stage. That said, I feel we came out of the holiday season in a neutral mode. Some people say business was up, some say it was down, but it certainly was not a home run, and it really hasn't set the stage for 2006. Last year, it set a very negative stage, and we could feel it immediately. This year, I don't feel that negativity, but I don't feel that it's off the charts, either.

Can radio still rely on certain expected buying patterns, or has Madison Avenue shifted beyond those “old” industry expectations?
The advertiser is being driven by some new metrics, and the average person in the radio industry does not spend a lot of time trying to understand them. These new metrics cover two very important points. First, advertising has to be totally accountable and totally measurable. There is no more room for experimentation or waste. Advertisers must be able to see how every dollar flows into their return on investment for their particular campaign. Second, the advertiser is becoming very consumer-centric. Advertisers have always has cared about the consumer, but I'm talking about how the consumer works and thinks and reacts. We've always lived with the metric of impressions, asking the questions: How many people did you reach? What were their demographics? Now it's being measured by the consumers' reactions. They are trying to get into the information cycle - what was the motivation, what was the reaction, who actually moved? They have a lot more tools to study and understand their particular consumer, and in most cases they're trying to pinpoint that target and put the money right on top of that target.

Which is something that radio does very well -
That's the good news: We are a very one-on-one, personal medium. We reach specific, targeted targets, and in doing so we can be very viable. We have to develop the measurement systems and the ability to convince advertisers that radio is a very efficient medium. They are looking at this as a whole new world, so they don't have any prejudice for or against any medium. They're willing to use any medium that puts the message right in front of the particular consumer they're trying to reach.

Are we behind the curve in understanding this new world of advertising?
Actually, local radio sales are pretty aggressive. It's a natural way of selling in the local marketplace, where you're dealing with the local merchants. However, when you start getting into the filtered sale - dealing with agencies and time buyers - we still have not come of age. We're getting the message through about how the efficiency and targeting of radio really works. Our increased marketing effort at the RAB, plus the RAEL studies, have gone a long way toward making some progress. But this is like opening a door and finding 10 more doors to go through. Until we get the entire industry focused on the new paradigms and new metrics that advertisers and agencies are using, we will never maximize our potential.

How critical is it for the radio industry to adopt a new measurement methodology immediately?
It is essential - and it must be accredited by the Media Rating Council. Whether we like it or not, the diary is perceived as obsolete and broken. I've heard it from advertisers and agencies. Electronic measurement isn't only the way of the future; it's the way of today. The roll out of electronic measurement cannot come fast enough, and it needs to be in every market. The diary can no longer be part of the equation. Many large, national advertisers place their business locally or through merchants in the form of co-op or support funding, and they won't accept an antiquated rating system.

Is Clear Channel doing a service or disservice to the industry by looking at alternatives to Arbitron's Portable People Meter?
Somebody had to do it. It was essential that somebody take the lead on this. Clear Channel is the logical party to do it, although I don't know where it will lead. I don't know if it will bring us to the final conclusion, but it will at least take us to the next step.

During the past few years, the radio sector has fallen out of favor with Wall Street. Do analysts give short shrift to radio's inherent values that aren't necessarily reflected in share price or earnings?

I understand the dynamics of Wall Street and why they view the radio industry the way they do. Unfortunately - or fortunately - radio became a public industry during a super-growth period that was created out of the dot.com boom and a very strong, aggressive economy. During that time, Wall Street developed some strong expectations, and radio companies had to hit that bottom line. This, in turn, took away some of their marketing and promotion investment that traditionally had been very important in growing the industry. We didn't expect that when all the operators in a market went into that mode, suddenly radio - which had been a very aggressive marketer - lost its market presence. I remember when you couldn't drive down any freeway in any major city and not see aggressive billboard campaigns. You couldn't turn on a TV without seeing promotions for new radio formats, new promotions, new contests. Advertisers and agencies have told me that because this excitement seemed to go dark, radio seemed to become less exciting.

How much of a threat is satellite radio in this new, emerging media landscape?
I hear very little about this from the advertisers and agencies. Last fall, Mary Bennett, executive vice president of the marketing division, and I made a series of calls in Detroit, where we talked to automobile people at various levels. When we tried to bring up the satellite radio issue, they had very little interest. All this hype has been driven directly by the satellite PR machine, and radio has been very sensitive reacting to it. They're trying to get their noses under our tent, and we just have to defend ourselves. I do not feel it is as emotional an issue with the advertising community as we perceive it is.

How do you envision HD Radio changing the radio landscape? Can radio continue to thrive if this technology and all its features are not adopted in the near term?
HD radio is a great opportunity - the only opportunity we really have right now. Part of radio's problem is that we have been very traditional in our programming and in our delivery systems. There's very little about the radio in the dashboard of your car that's different from what it was 10 or 15 years ago. HD Radio gives us the opportunity to become hip, and everyone is trying to embrace the hip-ness of it. The design of the radios is very important; these receivers need to be new and fresh. They need to say this is today's radio vs. yesterday's radio. In many respects, our positioning for our future will be guided by how well we take advantage of this, and how hip and exciting we can make it.

As new media become increasingly competitive, will advertising alone be enough to provide the revenue that stations and groups need in order to grow?
For a long time I have been convinced that the value of spot radio will decrease and our other assets, including technology and how we relate to the audience, will become increasingly important. We have to consider who we reach, and how we reach them. We have an intimate relationship with every consumer. Ask anyone you see, “What's your favorite radio station?” They'll give you an answer. That's because they have a favorite radio station. We need to leverage that relationship with our listeners, and expand it.

What other income streams can be tapped to make up a significant part of a company's income without turning away listeners?
We need to make it a value-added type relationship, rather than just the entertainment factor of listening to the radio. As we achieve better audience analysis and measurement, we'll have a much clearer picture of who we are reaching, what we are doing with them, how we are motivating them. That's the value the advertiser will look at and embrace. They will want to use that relationship far beyond a 30- or 10-second commercial on a radio station.

In 2005, Clear Channel took quite a revenue hit from its self-imposed Less Is More initiative. How did this initiative affect radio's national revenue picture?
I definitely think Less Is More had an effect. It put a focus on the length of commercials and the number of units in the break. It caused a certain degree of confusion that was hard to sort out, but as people got their arms around it they fell into the groove. Some stations embraced it, and some didn't change a thing, but either way it affected all sides of the sales equation. However, I think we're beyond that. The issue is there, but it's no longer the primary conversation point. We don't find advertisers discussing it nearly as much as we did a year ago.

Have advertisers and agencies begun to accept shorter spots and the pricing that goes with them?
In some cases yes, in some cases no. I don't think anyone ever expected it to be totally universal. I've had numerous discussions with advertisers who say there are cases where you simply cannot use 30-second commercials. It's just not feasible because of the information that needs to be in that commercial. Instead, people view LIM as an option. In the past, you had 60-second commercials, period, and the people producing the spot had to fill up 60 seconds. Sometimes they had good material to fill it; sometimes it was obvious that they were using filler to stretch the spot. Now there's a viable option on the table, and people understand it and will use it.

Recent RAEL studies have illustrated radio's effectiveness and efficiency as an advertising medium. Did you expect all this data to move the needle - especially the national needle - more than it has?
The appetite for the RAEL information has been very high. There isn't a presentation we make with an advertiser where they don't say, “Would you come back and meet with this group of people” or “that group of people?” They've also been clear that the information is very relevant, and they really embrace it. Still, there is no silver bullet that will change everything instantly. It's possible that the RAEL information saved some business that we might not have gotten this year. The data allowed us to make more presentations and present radio in a positive way to more people than we've ever had the opportunity to do. The fact is, you're not going to get an appointment if you don't have some value line to present - and the RAEL study is the value line. We're sharing a lot of money with the new media sector, and we may be fortunate that this past year was not any worse than it was.

Is radio in serious danger from losing audience to other new media technologies?
Radio is and always has been in danger of losing audience. When 8-tracks and CD players hit the dashboards, people said that radio was dead, that no one would listen to commercial radio when they could listen to Eric Clapton all the time. We've always had to be defensive, and being in a defensive mode means you have to be aggressive. We must be aggressive in continually changing our content. We also must embrace the technology so we can present that content in a relevant way. If we don't, we're in great danger, but I believe the industry will continue to do what it's done in the past, and move with the flow.

What do you see as radio's greatest threat today and into the future?
Staying traditional. Radio is going to be here regardless, but we'll become as relevant as the Yellow Pages if we don't continually remain relevant. Radio's biggest threat is wanting to be what we were and are, and not wanting to be what the future holds.

How do you envision this year unfolding in terms of the economy and radio revenue growth?
It's very difficult to predict because I haven't seen any big swings in the economic picture. The elections may help us. We saw a tremendous amount of money in the hotly contested battleground states in the last election, and this will be a battleground type of election cycle. Radio will fare fairly well in that regard. But the important thing is the overall economic picture, and if that continues to brighten I think we'll have a pretty good year. Being overly optimistic and making grandiose predictions about radio revenue growth would be wrong at this point. Having said that, I believe we're going to see low- to mid-single digit gains, but even that will take some economic drivers. The big question mark, and everyone has to understand it, is the automobile field. Detroit is in serious trouble, and they have to decide whether to hunker down and try to survive, or try to market themselves out of their demise? If they try the marketing approach, that's very good for radio.

Since this is your last year at the helm of the RAB, what suggestions would you offer to your successor that would help the industry remain relevant and hip to future generations of listeners?
The greatest challenge is staying relevant with the programming, not becoming complacent or relying on tradition. We have to realize the changing environment out there. For many years, advertisers bought and sold with the same equations, the same ideas. Very few exciting things came about. It was basically all done in negotiation with the media buyer in a simple cost-per-point situation. Now that's all changing, and the biggest challenge is to change with it. The agencies are being asked by the advertiser to do more. The advertiser is saying, “If I can't get this type of support, I'm not going to spend the money with this particular medium.” My successor has to become engaged with these environmental changes and make sure the radio industry as a whole stays in step with the changes taking place. The whole deal is stay in step and not rely on yesterday's model to take you down the road.


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