Conventional Wisdom

[TheBigA]

The AARP study indicates that older people aren't immune to advertising, particularly if targeted toward them. Somebody's buying those Cadillacs.

The AARP doesn't have to convince radio owners. Most of them are old enough to be members. Radio stations don't care who's buying advertising as long as somebody buys.

If the boomers have so much disposable income, why does WBFO have to beat them up so often to get them to pay their share? It's not that complex a process.

 

[davideduardo]

Social Security lifts 90.5% of people over 65 out of poverty.

At an average retirement benefit, per the SSA, of $1294, and with a large percentage of those receiving no other income, such people are barely out of poverty. And they are certainly not affluent and they don't have much disposable income.

Even those with only social security mostly live above the poverty line. For 64% of people over 65, Social Security is less than 50% of their income. The average Social Security retirement benefit in June 2015 was $1,335 a month, or a bit over $16,000 a year. That's above the poverty rate.

Just barely. And consider what the averages hide: the people with the lower SS retirement benefits are generally those with little savings. They are the people who had lower incomes when working and did not accrue as high a benefit credit.

You don't have the same expenses as a working person under 50.

Every retirement article and book (Kiplinger's, Money, WSJ Retirement Report, etc) stresses that retirement living costs are underestimated and the safe figure in early years is 80% of pre-retirement income. As one ages, uncovered medical and assistance expenses will actually increase.

If your house is paid for, or you sell your home and the proceeds cover your housing for the majority of the rest of your life, you only pay fees or taxes, and senior discounts reduce those as well. You don't have kids, you don't have the same expenses related to commuting, parking, clothing, food, etc.

You have Medicare supplemental insurance, Medicare RX insurance and your household expenses are generally fixed and subject to inflation, increasing taxes, higher sales taxes, increased taxes on dividends if one has investments, etc.

Most people over 65 lead a simpler, quieter, and less expensive life. In most areas of the country, they can not only make ends meet, but may have more discretionary income than an average family.

They are on fixed incomes, and things like Social Security don't increase at the rate that the cost of living does. The SS COLA is a joke, and seniors fall further behind each year.

The AARP study indicates that older people aren't immune to advertising, particularly if targeted toward them. Somebody's buying those Cadillacs.

27% of the US population is over 55 as of last year. Cadillac will sell 150,000 (give or take a land yacht or two). The average car owned by a senior (and many no longer drive) is approximately 12 years old... about 2 years older than the national average.

No big display of affluence here.

BTW, I'm not just pulling numbers out of my ass like some people:

Nor am I. I am using the latest data from the SSA itself, and demographic and income data from the annual ACS reports and from Claritas data.

 

[SirRoxalot]

Perhaps it's a reaction to the major programming changes that WNY Public Broadcasting made to WBFO when they took over. Older listeners may be more immune, or more insulted by the stick-over-carrot approach that the current campaign offers. You see it as "fair share". They see it as "value for their dollar".

 

[SirRoxalot]

David, you've had all of the expenses listed above before retirement. They came out of your pay. In fact, for many Americans, the cost of health insurance, including Part B coverage, is less than it is for working Americans thanks to Medicare, including Part B and RX coverage.

Household expenses are fixed IF you maintain the same household. When there are fewer people in the household, or especially if you downsize, costs are reduced. Most seniors are well aware of that.

Are seniors more careful with their money? Yes. Will they spend it? Yes. If, as the original study quoted says, they represent SEVENTY PERCENT of disposable income, 82% are open to new brands, and “33% are willing to buy the latest and greatest version of a product, even if their current version is working just fine”, then agencies - and the companies who represent them - need to pay attention.

Radio's role in this is to educate the people who purchase their advertising. Radio has done a pretty poor job educating media buyers - local or national - for a long time now. Study after study shows that the metrics favor radio, yet money keeps going to other media that simply don't deliver as well. Lately, iHeart and others have been cutting sales positions - the very people who should be making that case. After shooting themselves in the programming foot, now they're shooting themselves in the sales foot. Is it any wonder that the industry is limping along?

But, I know, these guys are geniuses, and everythings fine. It's all going as planned. Us poor folks in the trenches just aren't capable of understanding how big business works. And that's gold in those showers falling down on us from farther up the corporate ladder.

 

[TheBigA]

Perhaps it's a reaction to the major programming changes that WNY Public Broadcasting made to WBFO when they took over.

So then you're confirming the conventional wisdom that older listeners are less willing to accept change, the very thing the AARP study is attempting to dispel.

 

[TheBigA]

Lately, iHeart and others have been cutting sales positions - the very people who should be making that case. After shooting themselves in the programming foot, now they're shooting themselves in the sales foot. Is it any wonder that the industry is limping along?

If having all those sales people on staff was as ineffective as you say, how does KEEPING them on staff make an improvement? Maybe it's time to change the approach?

Have you ever considered that maybe some advertisers don't want to be "sold." They just want to reach consumers without some commission-driven salesperson trying to get them to increase their order or quote them the latest study. Once again, you're confirming the conventional wisdom.

 

[davideduardo]

David, you've had all of the expenses listed above before retirement. They came out of your pay. In fact, for many Americans, the cost of health insurance, including Part B coverage, is less than it is for working Americans thanks to Medicare, including Part B and RX coverage.

Again, I refer you to just about every kind of literature on retirement that exists where the common, nay, universal, thread is that planning to spend less than 80% of pre-retirement income in retirement is folly. Start with Kiplinger's and Money magazines, where much of that information is available online.

Household expenses are fixed IF you maintain the same household. When there are fewer people in the household, or especially if you downsize, costs are reduced. Most seniors are well aware of that.

And many can't sell existing properties because they are underwater on mortgages or live in low-housing cost areas where what they get for an older home will not, if invested, pay the rent on a smaller place. Remember, investments are hard pressed to return 3% these days, and often much of that is taxed.

Are seniors more careful with their money? Yes. Will they spend it? Yes. If, as the original study quoted says, they represent SEVENTY PERCENT of disposable income, 82% are open to new brands, and “33% are willing to buy the latest and greatest version of a product, even if their current version is working just fine”, then agencies - and the companies who represent them - need to pay attention.

You need a reality check here. Companies don't represent agencies. Agencies serve as suppliers to companies who want to advertise. They supply creative services, media knowledge and media placement.

Taking a big company as an example, P&G names an agency to handle a new product. They come in with all the data on consumer research that P&G has spent hundreds of millions on just in the last year. They instruct the agency to support a test market campaign in Terre Haute and Spokane and Albuquerque and Montgomery, and they analyze the results. If the product gets launched, all the marketing data from the test markets gets rolled up into the other data P&G has, ranging from PoP data on consumer age and other stratifications to sales by neighborhood based on ethnic and age concentrations. They then tell the agency what demographics to buy and they may even stratify the markets by sales potential.

This is the stage where the agency is told to buy 25-44 women. Or some other demo. The agency clicks their heels and says, "Sir, yes Sir!" and proceeds to tell the media department how to plan the buy.

Radio's role in this is to educate the people who purchase their advertising. Radio has done a pretty poor job educating media buyers - local or national - for a long time now.

Media buyers don't determine whether to buy radio or not. They don't, very definitely, determine what ages to buy. They are negotiators, trying to bring in the best array of stations in a market to meat reach & frequency and CPP goals. Period. You can talk all day, take them to lunch all afternoon, and beg all evening and they can't change the client mandated age specs.

On the TV side, CBS mounted an effort nearly three years ago to get 25-64 and 35-64 to be among the TV targets instead of 18-49. They worked with the agencies to present to clients (one does not independently jump the agency unless they want to risk the entire shop's business). It has not worked. In fact, we barely hear about it any more.

Study after study shows that the metrics favor radio, yet money keeps going to other media that simply don't deliver as well.

This is an issue that radio has had for as long as I have been selling (I sold my first contract to Coca Cola in 1961). TV spots and print ads offer the agency more billable work for creative. Radio spots don't. Today, Internet and new media options have the same ability to generate more agency revenue than just commissions for radio buys.

Lately, iHeart and others have been cutting sales positions - the very people who should be making that case.

When there is less and less valuable and profitable local direct business, and the national is handled by one NSM for a cluster or perhaps several co-owned clusters in conjunction with the rep, not as many sales people are needed. I was DoS, among other things, of a station in a top 15 market in the 80's and some of the 80's and we had 3 sellers. The three were enough, as there was no profitable business they could not cover; 95% of revenue was from agencies.

So there are situations where adding sellers increases expenses but has no impact on sales... it also annoys the good sellers who may lose accounts to populate a list for the newbees.

[/QUOTE]But, I know, these guys are geniuses, and everythings fine. It's all going as planned. Us poor folks in the trenches just aren't capable of understanding how big business works. And that's gold in those showers falling down on us from farther up the corporate ladder.[/QUOTE]

I think I am going to skip commenting on a paragraph apparently dedicated to golden showers.

 

[SirRoxalot]

So, you skip over the "value for their dollar" part? And the change in fund-raising tactics? Not all change is good. Perhaps WNYPB should recognize that they're changes are simply unpopular.

 

[SirRoxalot]

If having all those sales people on staff was as ineffective as you say, how does KEEPING them on staff make an improvement? Maybe it's time to change the approach?

Have you ever considered that maybe some advertisers don't want to be "sold." They just want to reach consumers without some commission-driven salesperson trying to get them to increase their order or quote them the latest study. Once again, you're confirming the conventional wisdom.

Who said that having more sales people was ineffective? I don't see how you intuit that from what I wrote. Sales people have been cut, sales talent has been lost to other media, because of changes in compensation, and because training isn't as good as it used to be. Revenue rowth has slowed. It seems reasonable that there may be a correlation. Good, well-trained sales people work WITH a client to develop an advertising strategy. Bad, poorly-trained sales people use your Herb Tarlick approach. Relationship selling matters with local clients, especially in medium and small markets. It's hard to establish those relationships when you have a revolving sales force.

 

[SirRoxalot]

David, your view of how it all works may be valid in major markets, but much of it is simply untrue in medium to small markets. You continue to ignore the part of the study that says that 50+ controls 70% of disposable income. Your contention that seniors are the ones upside down on mortgages is laughable. And housing prices have returned to pre-crash levels in much of the country. Even Florida, one of the hardest-hit areas, has seen housing prices coming back to pre-crash prices lately.

Local is still the backbone of sales for radio. In 2014, nearly 78% of radio revenue was from local spot advertising. About 6% came from network spots. About 5.5% came from digital. 10.2% came from off-air. National spot revenue has been down for most groups lately, for whatever reason you'd like to choose. There is certainly an opportunity for local sales people to present a case for looking at a wider audience. That would affect 94% of sales. Seems like it might be worth the effort - IF there are enough sales people to service clients as more than order-takers (as the unlamented Farid proposed).

 

[TheBigA]

So, you skip over the "value for their dollar" part? And the change in fund-raising tactics? Not all change is good. Perhaps WNYPB should recognize that they're changes are simply unpopular.

This isn't just a problem for public radio in Buffalo. This is a problem in Miami and Houston. Last month, a group of three public radio stations in Miami were sold to EMF, a religious broadcaster, because the stations were losing money. Last week, the classical public radio station in Houston announced it was for sale, and its programming was moving to HD because it was losing money. It could happen in Buffalo for the same reason. It has nothing to do with WNYPB's fund-raising tactics. Those tactics weren't employed until it was apparent that the listeners weren't donating.

Public broadcasting appeals to older demographics. That's a fact. Public broadcasting isn't burdened by the needs of advertisers for younger listeners. Public broadcasting is exactly who the AARP wants to reach. But it requires those older listeners to PAY for radio, something they're increasingly unwilling to do. Older listeners dislike commercials, and they dislike fundraising. They also dislike taxes. So how does one pay for broadcasting that aims at older demos when that audience refuses to pay for it?

 

[TheBigA]

Who said that having more sales people was ineffective? I don't see how you intuit that from what I wrote.

Read what you wrote. You said that "radio has done a poor job." You said "money keeps going to other media." And the fact is that radio revenue hasn't been growing at the same rate as other media. So prior to the layoffs in sales, which is a recent thing, the sales people those radio companies had were ineffective.

Same as programming. Radio stations replaced local talent at 7 to midnight AFTER that talent wasn't able to retain audience. If having local talent and a certain amount of sales staff results in lower ratings and revenue, then it's obvious having that staff won't lead to increased ratings or revenue. Simple deduction.

It's not that they're "poorly trained." That's insulting to these experienced and qualified sales people who were let go. Ten years ago, they were doing just fine. But the marketplace has changed, and the competition has changed what advertisers want. I know a woman who sells local advertising here for Pandora. She is a sales staff of one. She left a small regional broadcaster where she had been part of a 4 person sales staff. Now she gets 100% of the commissions instead of 25%. She loves it. She's interacting with the same clients, but making more money. That's what having a smaller sales staff means.

 

[semoochie]

Who said that having more sales people was ineffective? I don't see how you intuit that from what I wrote. Sales people have been cut, sales talent has been lost to other media, because of changes in compensation, and because training isn't as good as it used to be. Revenue rowth has slowed. It seems reasonable that there may be a correlation. Good, well-trained sales people work WITH a client to develop an advertising strategy. Bad, poorly-trained sales people use your Herb Tarlick approach. Relationship selling matters with local clients, especially in medium and small markets. It's hard to establish those relationships when you have a revolving sales force.

I'm sorry. I watched the show but have no idea what you mean by a "Herb Tarlek" approach to selling and I'm sure there are younger people who don't even know who that is.

 

[SirRoxalot]

That's your interpretation, "A", but WBFO didn't seem to have that problem before the sale. Then again, management in those days didn't have the same attitude as the current regime.

 

[SirRoxalot]

Read what you wrote. You said that "radio has done a poor job." You said "money keeps going to other media." And the fact is that radio revenue hasn't been growing at the same rate as other media. So prior to the layoffs in sales, which is a recent thing, the sales people those radio companies had were ineffective.

Same as programming. Radio stations replaced local talent at 7 to midnight AFTER that talent wasn't able to retain audience. If having local talent and a certain amount of sales staff results in lower ratings and revenue, then it's obvious having that staff won't lead to increased ratings or revenue. Simple deduction.

It's not that they're "poorly trained." That's insulting to these experienced and qualified sales people who were let go. Ten years ago, they were doing just fine. But the marketplace has changed, and the competition has changed what advertisers want. I know a woman who sells local advertising here for Pandora. She is a sales staff of one. She left a small regional broadcaster where she had been part of a 4 person sales staff. Now she gets 100% of the commissions instead of 25%. She loves it. She's interacting with the same clients, but making more money. That's what having a smaller sales staff means.

The "poorly trained" doesn't refer to the long-time professionals who have been let go. It refers to the revolving door of sales fodder who are recruited with no experience, poorly trained, then leave after they fail to build a list big enough to live on. The old customers they were give were generally marginal accounts who don't advertise regularly, or need an inordinate amount of handholding for a limited schedule.

The consolidators replaced 7 to midnight talent while they still got numbers. It was strictly about reducing operating costs after they paid crazy multiples during the acquisition phase. Hubbing, syndication, and voice tracker were part of the "synergies" they said would make those multiples work. The result was a decline in shares and TSL. Strangely, cume stayed about the same. The difference is that listeners didn't hear what they wanted, even if the were "blessed" with "major market talent" who really didn't relate to local markets.

Your Pandora sales person gets 100% of the commissions. She also sees a much smaller number of customers. If she was the last one in, she probably wasn't allowed to call on the most likely advertisers. Now she can. Pandora's going to need more sellers if they're going to make a real profit. Let's see how she reacts when somebody else gets hired, and the account list is no longer exclusively hers.

 

[TheBigA]

WBFO didn't seem to have that problem before the sale.

Of course not. They had some support from the University. Not any more. It's a different situation when you're independent.

And the listeners have aged a few years since then. And become more set in their ways, and more averse to fundraising. As I said, they're simply fitting the conventional wisdom you say is wrong. But it's not. And public broadcasting is one more indication. A day will come when even non-commercial radio will be aiming at younger demos, just like their commercial brothers. And the AARP will wonder why.

 

[TheBigA]

The "poorly trained" doesn't refer to the long-time professionals who have been let go. It refers to the revolving door of sales fodder who are recruited with no experience, poorly trained, then leave after they fail to build a list big enough to live on.

It would really be nice if you were able to put specifics with your posts filled with TV-inspired generalizations. But you can't, because you don't know what you're talking about.

I know some of the sales people who were let go in the last round. I know who they are, and what their experience is. They don't fit that cruel and heartless description you give.

To me, it's funny that you criticize the "order takers" comment, yet you seem to think there's a relationship between the number of salesmen and the number of orders they write. That's simply not the case.

The consolidators replaced 7 to midnight talent while they still got numbers. It was strictly about reducing operating costs after they paid crazy multiples during the acquisition phase.

The facts in the timeline simply don't bear out what you say. But you'd never let that stop you. Evening ratings began to drop in the 90s. And revenue has never really been strong after 7PM. Anyone actually in radio will tell you that you make more money with local than with syndication, because you have to share the revenue with the syndicator. That's the case even if your company owns the syndicator. And lots of stations who are free from debt are running syndication or voicetracking evenings and overnights. It has nothing to do with consolidation. It's simply a function of the revenue not being there after 7PM. Say what you will about what the audience wants. WYRK is #1, and they're the one with a syndicated show 7 to midnight.

Your Pandora sales person gets 100% of the commissions. She also sees a much smaller number of customers.

And how do you know this? Have you spoken with her? The truth is she sees more people, because she has less company meetings to attend. She has less company paperwork to fill out. And she'll be fine when someone else gets hired. But that's not the point. You don't understand sales, and you don't understand business.

 

[davideduardo]

The consolidators replaced 7 to midnight talent while they still got numbers.

Evenings have been declining since the 80's, and many of us believe that this had to do with the rise in cable TV with more choice of content, including invasive and disruptive creations like MTV.

It was strictly about reducing operating costs after they paid crazy multiples during the acquisition phase. Hubbing, syndication, and voice tracker were part of the "synergies" they said would make those multiples work. The result was a decline in shares and TSL. Strangely, cume stayed about the same.

Cume stayed the same because most evening listeners in 18-49 and 25-54 listen only occasionally at night, but are regular 6 AM to 7 PM users. They just use less radio at night, a trend that started gradually over 30 years ago.

The difference is that listeners didn't hear what they wanted, even if the were "blessed" with "major market talent" who really didn't relate to local markets.

Other than CHR "night rockers" what local AC or adult format announcer has really been "locally relevant"? Way before consolidation we saw nights being dominated by syndication such as Art Bell in overnights (and late night in the West) and Delilah as well as all the national country shows and such. That's because there is no relevance of talking about the town you are in in the night and overnight shifts.

Your Pandora sales person gets 100% of the commissions. She also sees a much smaller number of customers. If she was the last one in, she probably wasn't allowed to call on the most likely advertisers. Now she can. Pandora's going to need more sellers if they're going to make a real profit. Let's see how she reacts when somebody else gets hired, and the account list is no longer exclusively hers.

If we take an average of the estimates of Pandora listening, we see that they are somewhere around 7% to 8% (my best guess estimate based on the available streaming connection and session data) of all radio listening. When we translate that into sales, in the markets that have dedicated Pandora sales staffs, they are often taking as much as or more than the #1 OTA radio station in billings. Taking the top billing US market, that means that the loss of revenue compared with 2007 has been entirely taken by Pandora... as much as $150 to $200 million in one market.

So that single seller is taking the biggest accounts and taking the biggest share of the radio budgets... because Pandora is selling as Radio, not a stream. And they sell against the local stations, saying that with one buy you get all formats and all musical genres at a competitive price. It would be quite profitable to be the only Pandora seller in a Top 100 market... likely making much more than any cluster seller.[/SIZE][/FONT]