Recession Strategy for the Radio Industry: Cut Spot Costs Now and Make Long-Term Deals

Radio advertising revenues are down an average of five to ten percent at stations across the country this year I am forecasting they will decline another ten to fifteen percent next year and an additional six to nine percent in 2010 The declines in small and midsize markets could be even greater The devastating loss of local and regional automotive revenues is compounded by an anticipated sharp downturn in retail spending into 2011 Last week radio broadcaster Westwood One the largest independent distributor of radio programming in the US was delisted from the NYSE Just a week earlier Westwood One president Rod Sherwood commented quot2008 was the year of developing and implementing a turnaround planquot Economic realities in 2009 give little leeway to media companies to develop and implement turnaround strategies The time for radio newspaper magazine local television yellow pages and other media companies to institute turnaround strategies has longsince past The problem with the plans of Westwood One and others is that they are designed to meet the needs of Wall Street rather than serving the needs of audiences and advertisers In November 2003 I published an Open Letter to the Radio Industry which included Seven Strategies for Rebuilding the Industry Today I am suggesting a new strategy for radio executives to consider for surviving the next 24 to 36 months In 2003 I wrote quotRun your business for the audience and not Wall Street Wall Street gives no inducement to struggling industries and companies when they try to redirect their businesses Companies that bite the revenue bullet in order to build longterm growth are punished by the financial communityquot I added quotThe radio industry must reposition itself recreate its unique marketing proposition and rebuild its competitive and proprietary positionquotThis recommendation is not as valid today as it was fiveyears ago It might become valid again in 36months as the overall media industry emerges from the pending economic cataclysm For the next 24 36months radio needs to run its business for advertisers not for Wall Street Radio39s greatest asset during the next three years will be its reach I recommend radio giants CBS and Clear Channel plus other station groups immediately announce dramatic commercial cost reductions for 30second spots while maintaining costs for 60second spots Let advertisers know immediately amp8211 before they push the costs down through negotiation amp8211 that radio is open for Upfront 24 and 36month deals that enable marketers to lock in low low rates and that deliver the mass audience reach they will require as the foundation for their marketing campaignsRadio Advertising Bureau president Jeff Haley suggests one of the core reasons total advertising investments have declined as a percent of GDP is because quotadvertising used to include multiple flights generating minimum twotothree time frequency Now advertisers are wrapping messages around the customer in a 360degree model which often delivers just a onetime reach Failures of new product launches suggest there is not sufficient reach leverage against campaigns that there should bequot Haley points out quotmarketers are trying to do different things in ways that aren39t having an impact Reachtoscale is a basic building block for marketing But the fascination with highly targeted campaigns focused on niche customer groups delivers reach that is too small to create demand and new ad campaigns fail Radio has ubiquitous reach and is a very effective medium for driving demandquotFive years ago I pointed out quotthe radio industry is desperately in need of a new playing field It39s too late to try to simply play the game differently The game is broken Radio as a medium is on a downward slope It39s time for a completely new game to be developed tested and implementedquot As the downward slope threatens to become a free fall I retract my recommendation from 2003 and suggest radio fall back on its core strength to survive this downturn Radio needs to become the WalMart of the media industry amp8211 the place advertisers can turn to for cheap trusted reliable advertising Rather than negotiating based on market conditions radio can follow the WalMart formula of everyday low prices Set the market low right now before the holiday season when advertisers need to reach consumers the most Assure advertisers that the doors are open 24hours a day and the best deals are available right now At the same time radio needs to dramatically cut back on unnecessary overhead Cut research to only the necessary minimum Sustain sales forces to work closely to monitor sales results with local retailers and adjust campaigns immediately to increase their effectiveness Most importantly radio must continue to invest in strong local talent Talent is radio39s biggest asset but this talent might need to be wiling to cut their income for the next three years in order to help their medium survive just as manufacturers cut their costs in return for WalMart distribution WalMart needs wellknown reliable brands filling its shelves Radio needs wellknown trusted talent Most importantly the talent needs to integrate advertising into programming Personal endorsements live performances and onlocation broadcasts amp160are as important to radio advertising as shelftalkers endaisle displays and manufacturers39 coupons are to WalMart39s business model Consumers trust onair personalities like Jim Kerr on Q1043 in New York Preston and Steve on WMMR in Philadelphia Jim Harper on Magic 1051 in Detroit BJ Harris on KALCFM Alice 1059 in Denver Craig Carton on WFAN in New York who talks about the cars he drives and endorses Vulcan Motor Club and ProFlowers Howard Eskin of WIPAM in Philadelphia who endorses Lexus of Cherry Hill and is the only radio endorser of Rolex watches through Bernie Robbins Jewelers Big Boy on KPWR Power 106 in Los Angeles Jonathan Brandmeier on WLUP The Loop in Chicago Mike O39Brien a 20year legend on KKLZFM in Las Vegas and Don Chase on WKMLFM in Fayetteville NCNo medium has as much local market talent in as radio Radio39s shelves are filled with this great merchandise The challenge for radio is to come to market right now with a pricesensitive strategy that gives it competitive leadership The medium39s strength is ubiquitous reach It is apparent that allmedia will have great price elasticity for at least the next 24months Radio can bite the bullet right now andamp160 use an everydaylowprice strategy to transition the industry fully to 30second spots Tell Wall Street that radio is meeting the needs of the economy meeting the needs of advertisers meeting the needs of consumers for a good reliable source of marketing information and recommendations No matter what media companies do in the next 24months the total media industry will be punished by the economy and by investors At least radio will be demonstrating leadership and a clear strategic shareofmarket strategy that will put other media amp8211 and especially newspapers on the defensive In some ways it39s unfortunate radio is the same business it was five ten fifteen twenty thirty years ago But in other ways for the next 24 to 36 months that will be radio39s greatest strength Here39s the warning a 24 to 36month lowprice strategy can only work for the longterm health of the industry if station groups use this window to invest in expanded HD multiplexing BuyFromFM capabilities that enable listeners to download music directly to their Zune iPod and cellphones expanded messaging in conjunction with the ANA4A39s AdID tagging connected to RDS and GPS technology to enable listeners to interact directly with advertisers expanded online initiatives and aggressive video content development marketing partnerships for local execution of national events and promotional initiatives experiential marketing programsamp160and development of database marketing offerings by building online social communities and local outreach programs Five years ago I wrote quotno creative business can grow without innovationquot The economic disaster that looms in front of the radio industry can be averted but for radio it will not be through innovation Set in motion amp8211 right now amp8211 a strategy to differentiate radio as THE lowcost high reach alternative Brag about everydaylowprices and make it your mantra Determine the pricing bottom publish a rate card and stick with it Stop competing stationagainststation and band together to sell the medium39s strengths Use the human resources of local sales organizations to become the representatives for advertisers within each station to manage the use of inventory most effectively to optimize sales resultsGroups with multiple stations in one market can merge their sales organizationsDrive up demand by making sure the medium worksInvest in innovation for the longterm Companies emerge from recessions with visionary products of the future not with the products of the past They survive recessions by offering clearly differentiated and relevant products and services Advertisers need reach they need low costs Deliver them and prepare for that time two to three years away when marketers will again be willing to pay premiums for innovation Based on developing a close collaborative working relationship to help each other get through these tough times in 24 to 36 months marketers and radio executives will be alliesinarms with strong positive relationships ready to move into the future togetherJack Myers consults with media companies marketers agencies and investors on business models and strategies He can be contacted at jmjackmyerscom

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Recession Strategy for the Radio Industry: Cut Spot Costs Now and Make Long-Term Deals

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"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

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