Representative Of Radio: New Interep CEO David Kennedy Makes His Case (04/09/07)
By Joe Howard, Editor-In-Chief
David Kennedy spent the bulk of his radio career — 33 years, to be exact — with one company, Susquehanna Radio. When that company was sold to Cumulus Media Partners in May 2006, Kennedy — among radio’s most well-liked and well-respected executives — left virtually the only radio home he’d ever known. At that moment, he arrived at a crossroads.
On the strength of his reputation and relationships throughout the industry, Kennedy could have landed at any number of places. But he sat back, studied his options, and waited for the right opportunity to present itself.
That opportunity came along somewhat unexpectedly, at the end of a meeting with longtime Interep CEO Ralph Guild. Kennedy and Guild were meeting on some unrelated RAB business when Guild — who’d founded the independent rep firm in 1981 — suddenly raised the idea of Kennedy replacing him. “It was completely out of the blue,” Kennedy told Radio Ink in February, when his appointment to Interep’s CEO post was announced officially. “I was honored that they thought of me.” While no final agreement was reached at that first meeting, before long a deal was in place for him to succeed Guild, who last summer celebrated a remarkable 50 years in the rep business.
Guild is staying on as non-executive chairman, but Kennedy is now the man guiding a company that, like the industry it represents, has had its share of challenges. Interep is looking optimistically toward the future, and its new leader has a few surprising ideas about how radio can elevate its game, and improve its image among the nation’s advertisers.
RADIO INK: Now that you’ve had a few weeks to settle in at Interep, what are you hearing from your clients? What are their concerns, and what are they asking of you?
DAVID KENNEDY: The vast majority have reaffirmed their commitment to the company. They are excited to hear our plan. They appreciate our focus on financial restructuring, and they look forward to participating and benefiting from these initiatives. They’re not expressing concerns about the industry. They’re committed to the industry, and they’re delighted to hear some of the things that we’re talking about at Interep. It has been a very consistent honeymoon period. I didn’t know what to expect from them when I moved into this role, but the reception has been remarkable.
I’m very excited by the company’s prospects for growth and for redefining the rep space. At the time I joined Interep, I made it clear that a key priority would be to rebuild the financial framework of the organization. Ralph Guild and I have devoted much time to the development and execution of a strategy to solidify our foundation, and we’re well on our way toward completing our objective. In addition, we’re working on a formal strategic plan that will address two major goals: reinforcing and securing our core business, and further enhancing our efforts on behalf of our stations in the area of complementary media growth opportunities, the Internet — websites, streaming, podcasting, data basing, things like that.
Let me also say what an honor it is to have joined Interep. I have admired and been a partner with this organization for a couple of decades in one way or another. When I was with Susquehanna this was the home of our dedicated rep firm, Susquehanna Radio Sales, so I’ve been very familiar with its work for a long time. Its reputation for success, integrity and innovation, combined with its outstanding team from Ralph Guild throughout the company, made it a very attractive opportunity for me to consider and I’m very proud to be associated with Interep.
RI: What factors are slowing radio’s revenue growth?
DK: The reality is that there are indeed some new audio entertainment and information competitors for local radio, and there is a modest but demonstrable decline in time spent listening. However, the perceptions of these realities paint them as being far more severe than they actually are. It’s the perceptual issues that are causing us greater trouble right now.
In the face of these new competitors, radio has not only held its audience more successfully than any other medium, it has actually grown. Reach is up in the past decade as the population has grown, and research has shown that the average person spends more time with radio than with any other major medium. Once these truths are reinforced and the hype and negative spin diminished — and I believe they will be — then radio will again be properly recognized for its unmatched ability to deliver results.
RI: What ideas have you heard for changing this perception?
DK: In terms of growing the business, it doesn’t need to be anything profound. There needs to be a return to some of the basics: listening to the buyers, the planners, the agency CEOs, the advertisers. Let them know that you hear them, and that you care about what it is they want to accomplish.
A second point would be to educate them continually about radio and its strengths. They truly do want to know how they can better serve their advertisers, and we can help them accomplish that.
A third point would be to continually leverage radio’s unique ability to integrate complementary and interactive media for the client’s benefit. They’re crying for this as well, and radio can do it like no other medium can.
A fourth point is accountability, accountability, accountability — for example, the move to electronic measurement, electronic data interface, electronic invoicing, and so on. That is critical.
A fifth point, which we hear very frequently and we need to take to heart, is to work together to make radio easier to buy. The RAB is taking a proactive role in this area, and we’ll be working with them as well.
RI: Services like Google Audio Ads aim to do just that — make radio easier to buy. How do these services affect the value of radio advertising?
DK: There are a lot of other ways we can make radio easier to buy. There is a place for those kinds of services, but we have yet to define what that place is. The firms that are attempting to maneuver into that space are trying to learn both from us and from their clients. It is inappropriate to dismiss these firms as detrimental to our business, but nor do I believe we should embrace them with open arms and give them full access to our entire inventory.
RI: You mentioned the marriage of complementary formats. GM Executive Director for Advertising & Media Operations Betsy Lazar recently noted that some radio stations cannot accept ads from national advertisers unless the stations themselves host and track the ads. Many national advertisers prefer to host and track their own ads. Is this something Interep is aware of?
DK: It seems to me that she is talking about a proprietary-based technology, and there are a lot of those kinds of platforms in a lot of different algorithms to accomplish that. Radio needs to develop some standardized algorithms and software approaches to resolve this. We’re not there yet — a lot of industries are not there yet — but we clearly have to move in that direction. I have made no secret of my belief in the importance and value of interactive media and its role in building relationships between media and customers. The interactive operations of this company are vital and will be a key area of growth for us in the years ahead. Our Interep Net Solutions division clearly plays an important role for those advertisers who need the ease and convenience of a wired buy and the benefits, flexibility, and targeted nature of a spot buy.
RI: What are some other complementary vehicles that radio can use?
DK: If you look back at the work Susquehanna did with the Internet starting in the mid-’90s, you know that I’m a longtime advocate of the unique synergy between radio and the Internet. Interep recognized this, and has supported its stations’ efforts for many years as well. One of the most striking pieces of work is a recently released study from the Radio Advertising Effectiveness Lab that demonstrated the power of the complementary nature of the relationship between radio and the Internet in key measures, such as unaided and aided recall of ads, website visitation, and emotional bonding. When you combine this research with radio’s ability to drive traffic to websites and its additive reach capabilities, you simply can’t deny the positive impact of these media.
RI: Some advertisers believe radio is taking a slow approach to electronic measurement. What is your reaction to that sentiment?
DK: I don’t agree. The industry is taking a measured approach toward introducing it. There’s no question that the demand for electronic measurement has escalated dramatically in the past several years. The rollout of Arbitron’s PPM is under way in Philadelphia now, and we expect the results to conform with those that emerged from the testing in both Philadelphia and Houston. Likewise, a second system from The Media Audit and Ipsos will be tested in Houston, and will provide yet another perspective. Electronic measurement demonstrates some new strengths for radio and realigns a few other assumptions. I believe the advertising community will continue to recognize radio’s effectiveness and support the move to this new currency. We’ve all known the power of radio’s reach, and electronic measurement makes that point very vividly — which offers up a whole new platform on which radio can compete with other media.
RI: How will electronic measurement affect how radio is sold?
DK: National advertisers have been among the loudest voices calling for greater accountability, as well as more granular and more timely data on radio listening. Electronic measurement answers those points, and provides a very solid platform for more productive and beneficial relationships with these advertisers, which will in turn give them greater confidence in radio’s ability to serve their needs. As a result, I am optimistic about its deployment in radio as a new currency for our business.
RI: How will it affect the job of radio sales reps?
DK: I don’t know that it will be any different. It is a new currency, a new form of measurement for the business. It will be equated with the past currency, because it highlights a number of new strengths for radio. It will be a learning process for both the sellers and the buyers. I have seen a marked anticipation and positive reception for this new information, which is why I am optimistic for its potential deployment in the business.
RI: What are the prospects for radio returning to higher growth? Can electronic measurement be the catalyst for that?
DK: If we allowed ourselves to be defined on the basis of transactional spot business, then yes, you might be able to make a case that radio growth has slowed, or you might even call it a mature business. But if radio can be properly recognized for all of its strengths and capabilities — and I believe electronic measurement can play a key role in helping us to accomplish that — then there is no reason why radio can’t see improved growth rates. I have long believed that radio has been undervalued relative to its impact and its ability to generate results. When you consider all of the many complementary vehicles that radio can apply to tackle a marketer’s problems, there is a tremendous upside. When you look back on growth rates, there’s no doubt that consolidation and the dot.com boom of the late 1990s contributed to accelerated growth rates, but much has happened since that time that creates even more opportunity for radio.
RI: Do advertisers still believe that radio gives a good return on investment?
DK: Never assume that the advertiser is fully up to speed on all the capabilities of radio. I’m a believer in frequency just as I’m a believer in reach, and there is nothing wrong with making the point and making it again concerning radio’s strength. The work of the Radio Advertising Effectiveness Lab is exceptional and unmatched in media. As a result, we have some powerful tools to use as radio broadcasters to make the points about our medium. It is my hope that more radio sellers will fully understand all that these research projects demonstrate about radio’s capabilities, and will ensure that the advertisers they speak with understand those studies as well.
RI: Are you hearing anecdotally if sellers are using this research and pitching it to clients?
DK: They are, and the Radio Advertising Bureau has developed some remarkable tools to assist sellers both locally and nationally.
RI: What are the biggest challenges in terms of other media that national revenue has to fight against?
DK: There isn’t one that I can point to. It’s more a case of listening to the advertiser and presenting the best program to solve the marketer’s needs and designing the program that will work for them, rather than trying to steal dollars away from another medium.
RI: What are your thoughts on the XM/Sirius merger?
DK: I don’t know that I’m qualified to comment on the legal and regulatory issues raised by the proposed merger, although I believe the NAB rightly raises serious questions about antitrust concerns, conformance with the intent of the original licenses, and candor on the part of both players. As they currently exist, neither has been a threat to national or local ad dollars, but I believe that advertising is in their plans for the future. This has the potential to cause some minor problems for local radio, but it also has the potential to improve advertisers’ perceptions of radio as a medium. Whether from satellite or from a terrestrial-based AM or FM transmitter, it is radio in the minds of many people, and if these companies can effectively reach some small group of listeners, it has the potential to improve radio’s perception in the minds of advertisers. We must continue to watch it carefully and work to ensure that all advertisers’ best interests are met.
NAB President/CEO David Rehr is correct when he says that neither company is failing. Satellite radio has succeeded in defining a niche — a small niche, but a niche nonetheless — for radio listening. To the extent that this niche is attractive to certain advertisers, and if that is the best way to reach those customers and demonstrate radio’s effectiveness, then that will be good for radio in general.
RI: That’s a bold stance.
DK: Perhaps it is, but it’s one that I hope some people who think ahead will understand. There are many questions and emotions surrounding this satellite radio merger, and they are well founded. But it’s also important to step back and remember what business we’re in and what our objectives are. Particularly at this time, given the many ill-formed perceptions of radio under which we operate today, we must do our best to set aside narrow, parochial views and realize that anything that happens that promotes the effectiveness and value of radio — sponsored audio content, whether from a transmitter, satellite, or the web — will benefit all of us.
When you put yourself in the position of an advertiser who’s trying to reach an audience, and looking at the possible ways he or she can take advantage of radio — whatever you call radio — satellite may come into play. Like it or not, it’s part of the constellation. Right now, it’s essentially a non-factor, but it may become a factor. If we can do something together — which will obviously be a majority buy on terrestrial radio stations but which adds that little niche that satellite radio represents — and add to the effectiveness of the overall buy to make the client happy, then we’ve just brought another client closer to our medium. And we’re liable to get more dollars from that client.
It genuinely troubles me to see people limit radio’s overall potential due to fear of this unknown, when the unknown is so small and is likely to remain so, especially if local broadcasters do their job well. I recall clearly the early days of cable when television stations did their best to pretend that cable didn’t exist. But in reality, cable has been responsible for the creation of much more television programming than in the past. It’s more diverse and targeted, but because the value of the television medium has increased in advertisers’ minds, both the networks and local stations have continued to experience product improvement and strong revenue growth as cable has grown.
RI: I once saw a chart about the early years of cable TV that demonstrated how broadcast television advertising revenues grew even as cable viewership eroded broadcast viewing.
DK: If you talk to many of the people in television today, they’ll tell you that was a very unpleasant lesson, but an important one nonetheless. It is a lesson that is also important for us in radio. By its very nature, satellite radio as it exists today cannot become to local radio what cable is to local TV. But it’s so vital that we not put blinders on with respect to our medium, and recognize that this is an “and” environment in which we’re living, not an “either/or” environment. That, to me, is critical.
RI: Radio views satellite radio as a competitor, not an ally. That’s a difficult mindset to overcome.
DK: Satellite radio has been a bad actor in terms of its compliance with the FCC rules. Whether the deployment of their terrestrial repeaters or the receiver/adaptors that are causing interference to FM radios, they have not operated in the spirit of the statutes that created the medium, and now they are appealing for a waiver of one of the fundamental premises of their existence. So, you can’t help but react somewhat incredulously to what they say, and take the position that the public will not be served by this merger. And there is some merit in that argument. But, when you accept the fact that one way or another, a service like this will probably exist, why not recognize that whatever form it takes, it is ultimately something to work with rather than fight. Radio has enough competitors as it is.
RI: With the recent Internet radio royalty decision, is there a revenue-generation opportunity for Internet radio? Are the uncertainties about these royalties one of the reasons that many radio stations aren’t streaming?
DK: To the extent that the fees charged to Internet radio stations end up curtailing their ability to grow their businesses and serve their listeners, that’s a problem that must be addressed. I would hope that, upon appeal, the interests of those who use the Internet for offering radio services can be viewed in a different light.
The battle between the RIAA and radio, with respect to costs for streaming, have gone on for quite some time, and different radio companies have taken different approaches to try to control their costs. It’s still experimental for both sides, and the fees have been very problematic for many companies. That’s not good for the stations that want to stream, nor is it good for the RIAA, because they have in essence limited their potential return on this new technology as a result of the fees that have been imposed.
RI: Do you think there are revenue opportunities with HD Radio?
DK: The HD Digital Radio Alliance — formed to bring together the industry’s best minds to determine the most powerful way to introduce this amazing new extension of our medium — determined that a non-commercial launch was in everybody’s best interest, and for the foreseeable future, that’s how it will remain. As receivers become more widely available and listenership reaches a critical mass, I’m sure the Alliance will evaluate several other schemes — including advertising support — as a means of monetizing this new medium. There are other opportunities for monetizing the channels, including data streaming; information sponsorship, such as traffic and weather and other content descriptions; listener databases; etc. As the audiences for these channels grow — and I believe they will — they will become more attractive, and our company and many local broadcasters will be at the forefront of defining that value.
RI: Do you envision developing new ways of selling for HD, or will you be able to extend what you do now to these channels?
DK: We’re going to be extending what we do now, and working very closely with the local stations in order to determine the best ways to market these new channels.
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