Stanton on AM Radio

[DavidEduardo]

Yes, AM radio is in trouble, but not because a handful of successful stations have too much advertising. Those particular stations are the exception. If you want to use a station to prove that AM radio is in trouble, I'd recommend KVI or KJR. Those are failing AM stations. I would bet they have a lot of ads too. They probably run infomercials on the weekend. They're not failing because of their advertising. And changing the number of ads they run won't help their ratings. But once again, as an ad agency guy, he should understand why this is.

And the OP does not take into account the non-programming issues that have reduced the viability of AM such as increases in noise levels, urban sprawl that moved people outside formerly viable AM signals, and the added competition when FM became viable back in the 70's.

 

[TheBigA]

And the OP does not take into account the non-programming issues that have reduced the viability of AM such as increases in noise levels, urban sprawl that moved people outside formerly viable AM signals, and the added competition when FM became viable back in the 70's.

The first of the three links in the OP discusses the noise issue, but doesn't even mention too many ads. In fact, none of the linked articles substantiate his thesis that advertising is killing AM radio.

 

[CarAgencyGuy]

And the fact that the practice has not been emulated in some form across the country speaks even louder.

David, It's been going on here for a number of years and I almost certain in Portland as well. IMHO, it is a great positioning statement for the advertisers (we're worth the 'high' side of your CPP buy range because each spot is better highlighted- use some other 'cheap' station to 'bring in the buy') and to the listeners (more music, less clutter). And if we believe a lower spot load means higher ratings (which was the central assumption of the article and previous comment) then it give the station more audience to sell which helps hold the rate- so the question is WHY wouldn't it be emulated?

Thanks for calling out the snarky CPP comment, if anyone in this board wants to start talking ratings and how they are computed and how agencies use them, I promise a fun discussion. Your explanation was on point in my view and I always appreciate your insights.

 

[TheBigA]

And if we believe a lower spot load means higher ratings (which was the central assumption of the article and previous comment) then it give the station more audience to sell which helps hold the rate- so the question is WHY wouldn't it be emulated?

Because there's no proof that lower spot load means higher ratings. If there was, everyone would do it. It would be a lot easier and a lot cheaper. You'd need fewer salespeople. I really don't have any proof that this particular station is actually getting a higher price for its spots. According to post #18, it's way underbilling its ratings. So the higher ratings are not delivering their share of revenue. What I know about alternative is it's in low demand from advertisers, regardless of ratings. So I just think it's a marketing gimmick.

 

[DavidEduardo]

David, It's been going on here for a number of years and I almost certain in Portland as well. IMHO, it is a great positioning statement for the advertisers (we're worth the 'high' side of your CPP buy range because each spot is better highlighted- use some other 'cheap' station to 'bring in the buy')

Ya' gotta' get a buncha' cheap spots to make up for a really high rate on a station that charges more in proportion to the reduction in the spot load. But I see your point... a local agency can sell through the concept to a local account by rationalizing it. But on national or regional multi-market buys, most buyers will not expose themselves to criticism by adding a high CPP station to a buy.

For those not in either the advertising or radio business, time buyers are given a target CPP goal and instructions as to what the reach and frequency goals are and told to try to bring the buy in within those parameters. It does not enhance their image to their supervisor if they present an over-CPP buy in one market, no matter what the excuse.

and to the listeners (more music, less clutter).

But there are certain cases where lower commercial load works, and those where it does not. It has to be perceptibly less, so going from 16 minutes to 14 minutes is not going to cut it. And then there is the question whether listeners for a particular music format will increase with fewer spots... meaning some people did not listen at all. Or will existing ones listen more? Maybe they already listen when they are around a radio, and fewer spots won't help.

And if we believe a lower spot load means higher ratings (which was the central assumption of the article and previous comment) then it give the station more audience to sell which helps hold the rate- so the question is WHY wouldn't it be emulated?

That is the big question. To justify a higher rate, ratings have to go up.

My prime experience with lower commercial loads was decades ago. Put a station on the air with less than half the commercial load of the leading stations in a crowded market. Priced the new station higher than any other station. Agencies said, "who are you trying to fool?". Sold no spots. After 6 months, still no spots. None at all. 7th month: ratings were done, station was absolute #1 and so big agencies could not buy around it, so they cut some of the lower rated stations and paid me.

It's been a long time since I've seen a station with "gotta buy me" ratings. KNDD is certainly not such a case. Too expensive, then buy around it.

And I think that is why the lower load and higher rate idea has not proliferated.

If anyone in this board wants to start talking ratings and how they are computed and how agencies use them, I promise a fun discussion.

That would be marvelous. One can't expect listeners to understand the buying process or to understand how it affects what programming is offered so insights into the revenue side of radio are quite valuable on this kind of board.

 

[bobdavcav]

This has turned into an interesting discussion. What I have noticed is that Entercom seems to like to cut the number of spots in half on its Alternative stations, but that doesn't happen with any other format. I can't speak for Portland, but I know the station in Buffalo, also at 107.7 ironically, does something similar. If I understand them correctly, KNDD is three two-minute breaks per hour, while WLKK is two three-minute breaks per hour. Does the fact that it's only the Alternative stations that do this tell us anything?

 

[TheBigA]

Does the fact that it's only the Alternative stations that do this tell us anything?

AFAIK it's only on two alternative stations, out of multiple stations in that format that it owns. It doesn't offer that guarantee in New York or LA. I didn't see it offered in Portland or San Francisco.

The example you bring up in Buffalo is the lowest rated music station in the market. So the assumption that lower spot load means higher ratings certainly doesn't apply in Buffalo.

 

[Kelly A]

This is an excellent discussion! Thanks to Car Agency Guy for starting it, and BigA and David for bringing their insights to the table. Having worked for a 501C3 for the past ten years, I'm a little out of the advertising/ratings loop, but in reading the discussion still have a couple observations:

We need to separate what goes on in the Seattle market, not assuming that KIRO represents what is/could happen with other AM stations. KIRO has a unique legacy place in the world, having held the local sports radio broadcast rights for the two most popular local teams. The audience for listening to the games know where to tune. That's been KIRO's bread and butter for decades. I would argue that everything else on that station amounts to filler between game broadcasts. If, as BigA represented, advertisers and agencies just want "reach," which really equates to volume of spots, then what better time to provide that, than between games? If I'm station KXYZ-AM, and I want to bid on Mariner's rights for the next five years , I'll probably lose my shirt because of the legacy-listening factor for KIRO. I believe the future for AM is on shaky ground because listener's are going away from AM because they're dying, literally.

 

[iamarussianpirate]

Before anyone flips out about posting numbers, I’m just quoting this article here from Inside Radio which was written a year after the 2 Minute Promise went into effect. (http://www.insideradio.com/less-spo...cle_aac248ae-14be-11e5-a8a3-1be634bbe040.html) It says:

“Among 18-34-year-olds, The End has climbed from eighth to fourth in Nielsen's PPM Jan-May 2015 survey period with a 6.2 share, up 48% from the same period last year. It also rose from eighth to third in the 18-24 demo, with an 8.2 share in the same period, up an impressive 110%.”

So, if you look at the Jan-May 2018 avg, KNDD is now #3 18-34 and #2 18-24. I’m not going to post the actual share #’s here, but their 18-34 share is up 32% from the 2015 numbers quoted by Inside Radio, meaning altogether their 18-34 share has doubled since they started the 2-Minute Promise in 2014. The article doesn’t mention where KNDD was sitting in 2015 for A18-49 (#5) or A25-54 (#12), but now they’re at #3 for both of those demos – up 52% with 18-49 and 67% with 25-54.

It’s not as if the Alternative format is going gangbusters all of a sudden, so my guess is the 2-Minute Promise has something a lot to do with their success.

I disagree with David Field in many areas, but this is exactly what radio needs to do and I am glad he’s given this experiment time to work. He’s looking at the industry long-term and was willing to sacrifice revenue to see if this could work.

Billing wise, I know KNDD is getting on more pieces of business than they did in the past thanks to their newfound ratings, but I’m sure they’re still either flat or down in revenue since when they began the 2-Minute Promise. For a station like KNDD with a format that isn’t necessarily mass appeal, this to me is a win. Half the spot load with double the ratings gives you close to the same revenue as you had before, and a better rank than your format would normally deliver. So this is great for KNDD, but there’s a reason Entercom hasn’t done the same with KISW, KHTP, KKWF and KSWD.

The problem is that operators aren’t willing to instantly give up revenue in the hope that ratings/rates will eventually rise, and buyers aren’t willing to pay more for greater share-of-voice until the ratings do rise. There isn’t a spot-load/share-of-voice metric in Nielsen or Strata for buyers to take into account the value of being 1 of 6 advertisers an hour versus 1 of 12 advertisers in an hour. Buyers don’t have the time to explain to their boss/planner/client why Station A has a CPP 2-3x higher than the rest. Until there’s a way for buyers to quantify this, nothing will change.

Good discussion. I wish there were more ‘bigger picture’ discussions like this on this board.

 

[TheBigA]

Half the spot load with double the ratings gives you close to the same revenue as you had before, and a better rank than your format would normally deliver.

Still, the goal isn't to get the same revenue you had before, but to somehow GROW the revenue pie. Not because of greed, but because expenses rise every year. I know in my world, insurance alone is going up 10% a year. So while it's nice to celebrate great ratings, they only matter if they lead to more money.

 

[DavidEduardo]

The problem is that operators aren’t willing to instantly give up revenue in the hope that ratings/rates will eventually rise, and buyers aren’t willing to pay more for greater share-of-voice until the ratings do rise. There isn’t a spot-load/share-of-voice metric in Nielsen or Strata for buyers to take into account the value of being 1 of 6 advertisers an hour versus 1 of 12 advertisers in an hour. Buyers don’t have the time to explain to their boss/planner/client why Station A has a CPP 2-3x higher than the rest. Until there’s a way for buyers to quantify this, nothing will change.

And this paragraph is the biggest of the big picture points in this discussion.

If a station cuts the spot load in half, at that moment they will loose billing unless they are not running anywhere near sold out. So there is a cost in lost revenue, justifiable only if the ratings increase so much that the rates for the lower load are higher in exact proportion to the percentage of the load that is cut.

As you say, buyers are given buying guidelines on CPP and things like reach and frequency. They don't have the discretionary power, except at small shops where the buyer is the planner is the media director. So there is an initial revenue hit on transactional business.

The gamble in cutting spot loads is almost as big as a full format shift in terms of revenue. If the lighter load does not produce proportional audience gains, the game is lost.

With the encroachment of new media, the only way to avoid having those alternatives eat our lunch is to have a much lower commercial load. Combined with well curated music, that would lead to a listening experience that is even better than random algorithm selected songs on Pandora or the work needed to get the "right songs" in Spotify or other on-demand services.

I do not understand why, outside of Entercom and a couple of Alt stations, this approach has not been tried in other markets and formats. I suppose that loan covenants and such play a big part in not committing major cash flowing stations to such a change due to the hit on the bottom line it would initially represent. Yet the future of ad-supported broadcast radio, irrespective of the platform, seems to depend on doing this on a timely basis.

 

[DavidEduardo]

Still, the goal isn't to get the same revenue you had before, but to somehow GROW the revenue pie. Not because of greed, but because expenses rise every year. I know in my world, insurance alone is going up 10% a year. So while it's nice to celebrate great ratings, they only matter if they lead to more money.

But radio, as an industry, is not even keeping pace with inflation. There is a reason why the RAB even quit issuing its annual revenue estimates... they don't make the industry look good.

Anything that can be done that could reverse this trend... initially by stopping it... is worth exploring.

 

[TheBigA]

Anything that can be done that could reverse this trend... initially by stopping it... is worth exploring.

As I said earlier in this thread, a lot of it has to do with the willingness of advertisers to share in the commitment. If they'd buy in to it, it would happen.

 

[DavidEduardo]

As I said earlier in this thread, a lot of it has to do with the willingness of advertisers to share in the commitment. If they'd buy in to it, it would happen.

On the other hand, if ratings increase in a manner commensurate with the commercial load reduction, advertisers will still be paying the same CPP.

The problem is in the transition. PPM markets make the change a bit more gentle, as the results are much more immediate and new rates can be applied IF the ratings start to increase.

 

[TheBigA]

On the other hand, if ratings increase in a manner commensurate with the commercial load reduction, advertisers will still be paying the same CPP.

Maybe, but for fewer impressions. Meanwhile the competitor who is driving down rates is Pandora, who has four spots an hour.

 

[iamarussianpirate]

Maybe, but for fewer impressions. Meanwhile the competitor who is driving down rates is Pandora, who has four spots an hour.

Pandora isn't radio, and most shops don't look at it as radio. I never see Pandora included on radio RFPs.

Also David is spot on (no pun) in saying that this is something radio needs to do as an industry for survival purposes. However, I disagree that if all stations went this route revenue would be the same. Ratings would theoretically go up, but there's a ceiling and only so many quarter hours to go around. Even if current radio listeners increase their radio listening and non-radio listeners suddenly start listening, CPP's will have to go up and buyers will need to be okay with that. Alternatively CPP's can remain the same and operators will need to realize that less revenue and a healthy medium are better than no revenue and an unhealthy medium.

 

[TheBigA]

Pandora isn't radio, and most shops don't look at it as radio. I never see Pandora included on radio RFPs.

Consumers use it as radio, and Pandora is targeting broadcast sales in their pitch.

In my view, low spot loads in streams are creating a new normal. People expect free music.

Also David is spot on (no pun) in saying that this is something radio needs to do as an industry

I agree but I don't think charging more for fewer spots will work, and it's obvious David Field has already found that out. There needs to be another source of revenue besides :30 spots. One of those is the personality endorsement mentioned in the OP.

 

[bobdavcav]

While this isn't necisarily related to this discussion, has the spot load on radio increased over the years? It seems that every aircheck I've heard since the 1980s where the spots aren't edited, has fewer spots than what you hear today. Three examples,
1. KITS/San Francisco, CA 1983. I was told the Hot Hits format was new back then, but even if they were coming out of a commercial break every time they played a weather report, that would be four breaks an hour, which each average about two minutes. That gives a total of eight minutes of add time per hour.
2. Several exampls of WBBM/Chicago, IL from 1983-1985, clock seemed to have three breaks of three minutes each built in, though the commercials were only included in the scoped version of one of the airchecks I heard.
3. KRTH/Los Angeles, CA 1996, probably the most surprising of the examples given, patially because of the time period and partially because of the surrounding programming, which I'll get to in a bit. This aircheck had three breaks consisting of two spots each.
These days, schedules like these are extremely hard to come by, especially in markets the size of the examples given. Most of the time, short breaks are found in small markets or on stations with very few national buys like KKXA. So, what happened in the last 20 years? One thing that could explain some of it is the trimming of the weather reports, you rarely hear more than one an hour these days, while KITS did them four times and WBBM three times in the hours sampled. If KITS had been sold out, that may have explained the difference between now and then, same with WBBM, but I'm not so sure about KRTH. The other thing I've noticed is that 60 second spots are less common than they used to be.

 

[CarAgencyGuy]

I had a client REQUEST a :60 spot earlier this year. I joking told them could write a great :45 spot but was never quite sure what to do with the last :15 (repeat the client's name, say the url). We went to the studio and the production director/engineer said he couldn't remember the last time HE did a :60 spot. Clear Channel started the whole "less is more" push what 10 years ago now? They thought it would increase their revenue to have four :15's instead of one :60. Not sure how that worked out for them. As far as spot load, I remember when KZOK tried one break an hour that had like 20 spots in it. David, while national advertisers may not care, you can be darn sure that local agencies knew ALL about it (the competitors informed us about it constantly) and it Did affect how we spent the ad dollars. We all started demanding to be first spot in the break and the whole thing fell apart pretty quick.

 

[DavidEduardo]

Consumers use it as radio, and Pandora is targeting broadcast sales in their pitch.

And Pandora has local sales teams in most of the larger markets, generally with more sellers than the average radio station in the same city. Pandora offers very good geographic targeting, too... something terrestrial radio can not do.

I agree but I don't think charging more for fewer spots will work, and it's obvious David Field has already found that out. There needs to be another source of revenue besides :30 spots. One of those is the personality endorsement mentioned in the OP.

Only if fewer spots results in much bigger audiences can cuts be justified.