740 AM (Canada)

[Nick Gerard]

  Could they make a living selling a Standards format, without ratings, getting 15% direct and 10% agency, collected? 

Excellent question.  It would require a commission percentage radically higher than the usual.  I'm suggesting 35% (I said "radically").  Forget agency business.  It will be close to nothing.

The reason for the high commission is the low average cost per spot which would be necessary for advertisers on this station to mount a realistic ad campaign. We're talkin' a standards-formatted 1 kw AM with passable market coverage.

I'm suggesting 100 spots per month 6A - 7PM at $10 per spot.  A $1000 monthly schedule. Even that is stretching it for many advertisers. That's roughly 25 spots per week. Eves and overnites n/c bonuses.

If a salesman could sustain 10 accounts like that - not as easy as it might sound - that would be $10,000 in monthly billing for the station. At 35% commission, the AE gets $3500.  Over a year that would be $42,000. 

Would that be an acceptable annual income for a radio salesman in Buffalo? You tell me - I don't know because I don't live there.

Admittedly, what I've outlined is a pie-in-the-sky average.  Of course there would be seasonal variations.  On the other hand,a good salesman would also have some additional accounts with smaller monthly schedules, like $500.

Disclaimer: I am not a businessman, and know little about the economics of running a real world radio station. I'm just a schlub posting on an internet board.

 
If you had 3 sales people achieving the above on a station with low operating expenses - I'm talking a computer in a closet with no air personalities - that would net the station $234,000 annually after commissions - but before operating expenses.  (Expenses, anyone - how much?)

Whaddya think?

Nick Seneca

 

[JustPastBuffalo]

Our friend Nick is more than some "schlub" posting on a radio message board. His experience indicates he knows more about operating a radio station, both theoretical and practical, than he admits. But the numbers, particularly a $10 unit rate, seem too low to sustain a radio station.

Debt service, insurance, both personal and property, government taxes and operating expenses would considerably reduce the $234k projected net after commissions. Posters here such as McGlynn and Savage could refine the numbers, but I'd suggest revising the projections starting at the other end of the equation and work backwards. In other words, "I want to make a profit of $xxx each year." Or, "What am I gonna need to make a living, pay my employees, make a profit and pay off the mortgage?"

Begin with expenses. Project and establish Operating Margins.

See here: http://ycharts.com/rankings/industries/Broadcasting%20-%20Radio/profit_margin

Although that ^ link ^ shows a chart that offers evidence of lower quarterly margins, I've worked for radio companies that targeted 30% to 35% margins (minimum).

See here: http://www.radioinfo.com.au/news/11408

How much would you, as an owner-operator (jock-salesman-production guy-janitor-engineer) need to net? Establish and project Earning Before Interest Taxes Depreciation and Amortization (EBITDA), then reverse-engineer your spot rates. I'd suggest that "ten dollars a holler" does a disservice to the men and women who are selling the product. Foremost, the product is worth far more than $10 per unit, based not on ratings or CPM, but projected and subsequent actual listener response rates.

Discuss?

 

[chas108]

How much rate whoring may be taking place in the market? If a leading station has some $10 a holler deal - even if those spots ultimately get bumped - it presents a challenge.

It's going to take AE's trained in the art of relationship selling...with a passion for the success of the station, to have even a shot at pulling it off. Someone like that may require more than $42,000/year.

$10/unit...adjust that for inflation back to the "glory days" of say 1977...and I think you'd be looking at $2.00 or so back then. Was anyone surviving on those kinds of rates back then. I think my first station in unrated Brattleboro VT (40 years ago this very month!) had a $10 rate card...

 

[SirRoxalot]

Buffalo ain't Brattleboro, and $10 rates simply don't happen here on stations that get any kind of numbers. While $42K may sound like chump change to a lot of sales folks, it's what a lot of other people at radio stations would like to make. It would also be a nice supplement to Social Security and a badly hammered 401K for some "mature" sales people who would both understand and enjoy the format. The radio station certainly wouldn't want to hire them as full-timers because you'd have to add a hefty amount for benefits and payroll tax on top of that $42K in commissions.

With that said, you're still likely to get a lot more people putting $1K/month on that station instead of increasing their investment to maintain the same frequency. Ideally, reducing the number of spots keeps advertising from driving away listeners, and makes the ads that run more effective since they're not lost in a swamp of 10-unit stopsets.

There may be a way to make this work in a mid-sized market if you're not burdened by a $1.5-million purchase price. WECK's got all of that into their AM/FM translator combo, and that's their problem. They simply overpaid.

 

[chas108]

Buffalo ain't Brattleboro, and $10 rates simply don't happen here on stations that get any kind of numbers.

That's a good thing...my perception's always been that it's such a market-to-market situation. Can't look at other similar-sized markets and automatically assume you can bill similar numbers for similar ratings.

Several years ago my cluster in Pittsburgh offered a program to fill unused avails by offering a...

...wait for it...

FIVE DOLLAR rate. In market...er, uh, #25.

Here's how it worked: Each Wednesday, that weekend's unfilled avails for would go up on a website and you could call your AE, log on and buy them for $5/unit...with the understanding that you would be bumped if a higher-paying client came thru with a buy.

This was during my 3 1/2 years in agency hell and we had a major auto client who always bought that way. This was somebody who used to pony up the prevailing rate before the program became available.

I'm not sure the program still exists...hope not. Sure miss the days when "FM" meant "limited avails"...am I showing my age here?

 

[JIBGUY]

The irony is the younger demo doesn't have any disposable income.

That's exactly what most advertisers want. They want those who are easiest-influenced by advertising, with little disposable income, who will buy on credit. CREDIT is the economoic engine of America, NOT the profit in the product. Best to advertise to "people who will buy it without thinking, don't need it and can't afford it." - Add to that the other reasons posted on this board as to why Standards stations can't make it in the USA.... biggest one... Salespeople are usually under 30, and have no idea that older people like music too; have no idea there was music produced before 1964.

Stations doing standards in the USA are either doing it because they don't know what else to do with their little AM, OR the owner(s) have a love for the music.
CFZM owner likely loves the music, but ALSO is stuck with that format as the CRTC requires no change for that station.

 

[bmcglynn]

CFZM owner likely loves the music, but ALSO is stuck with that format as the CRTC requires no change for that station.

Exactly. In Canada, a licensee cannot decide to change a format on their own. Any change must go through the regulator - the CRTC. Look at 1220 AM in Sainte Catherines where the license was revoked for changing format without CRTC approval.

CHWO 740 was given a gift by the CRTC about 12 years ago when the CBC migrated most of Radio 1 to FM. In Toronto, that meant vacation of a 50KW clear channel frequency on 740. Prior, CHWO was a small Oakville-based 1KW signal (at 1240 or 1250).

 

[Nick Gerard]

Putting this format on, the most important question will be, "can a likely advertiser afford to mount a meaningful campaign that gets people in his store?" When the radio campaign works, your advertiser is more likely to be a repeat customer. And that's what you must have.

$10 a spot too low? Here's a scenario. Mr. Relationship Seller is an AE at our hypothetical 1 lunger on 1230. He's made several sales calls on Mr. Neighborhood Retailer who likes him and has come to have confidence in him. Mr. Retailer hasn't ever used radio, but has decided that he will, with some difficulty, spend $900 a month on this standards formatted station.

What will the station have sold him? For $900 at $30 per spot (M-F 6A-7P), he'll get 30 spots that month. Chances of meaningful customer response? So-so, at best.

At $10 per spot (M-F 6A-7P), his 900 bucks provides 90 spots that month! That's a real nice schedule. With great copy, he becomes a happy advertiser. That's what you must have, and you must get him back on the air again and again.

$10 a spot too low? Think about what you're asking Mr. Retailer to do. You're asking him to use scarce ad dollars to take a flyer on your station playing the Lettermen and Andy Williams in glorious mono using yesterday's technology. You'd better provide him a substantial schedule and do everything you can to make his ads work!

Program guys with no history in sales trench warfare are shaking their heads saying "tsk, tsk...$10 a spot. that's just disgraceful." No, just the opposite. You're giving his campaign a realistic chance of success.

"But...but....you'll use up all your inventory!!!" you say. If you are ever fortunate enough to have that problem, that's when you start to nudge your rates up to $12 and maybe later to $15.

Here's a scenario production guys have observed dozens or even hundreds of times: A P.O. shows up for a small business you've never heard of. You craft a great spot, it runs for 3 weeks and is never heard again. That business paid rates higher than he could afford. He couldn't get enough spots. He naively believed that his small, short schedule would get people in the store. It did not. That campaign was dead before the first inch of tape rolled across the capstan.

A standards station cannot afford to do that for the sake of maintaining an artificially high rate. $10 a spot is not "rate whoring" on a 65+ station. You're not gonna be going after the big advertisers on the younger FMs trying to grab a little of the action by offering a basement rate. Instead, you're opening the door to a whole new field of small businesses who will find your station refreshingly affordable.

$10 a spot too low on our hypothetical 1 kw'er at 1230? Compared to what? Compared to a hot AC FM with a 7 share? Compared to a grandfathered 100 kw FM? Or compared to WUFO and WXRL?

Remember, standards is usually the format of last resort. With artificially high rates, it has no chance.

Put aside the talk of which songs to play, which air personalities to hire, and how much audience share you dream of. Irrelavant. The only question worth asking is "can a likely advertiser afford to mount a meaningful campaign that gets people in his store?"

Nick Seneca

 

[JustPastBuffalo]

What motivates a 65+ listener to visit an advertiser? It's often said word-of-mouth is the best testimonial. This applies also to advertisers, who, like consumers, talk to each other. Car dealers readily share success stories and information. "This station didn't work," or "that morning guy moved product."

Setting the spot rate argument aside for a minute, the question is, will a Standards station move product? Will listeners 65+ show up and spend money? Nick makes a cogent argument for the $10 rate. Although it seems too low (especially for Buffalo), the "introductory rate" serves to prove that (1) there are listeners, and (2) they respond to commercials. But again, are "geezers" capable of getting in their Buicks, Town Cars and Crown Vics (good-natured stereotyping) to buy the product? Secondly, who's selling to 65+ listeners? There are only so many Catholic Cemeteries and WNY Wheel Chair-type accounts.

JIBGuy makes a valid point about credit and who uses it. The nation swims in the waters of credit. It's almost certain that people didn't buy their first home, car or furniture with cash. Owners don't pay cash for radio stations. Like consumers, they finance the deals. Without credit, the wheels of commerce don't turn.

And as has been noted earlier, once in, how does one get out? It appears that issue is foremost in the minds on AM owners these days.

 

[JIBGUY]

A myth and a truth... The myth is that Standards stations don't work (for the advertiser). Actually, they do. Funeral homes, Dr Feelgood Elixirs sold via 30-minute infomercials, Assisted-living facilities, hospitals.... If a Standards station's spot inventory is made up of these, the station will sound depressing..... depressing enough to turn off the 50-65 audience that may tune in for the music, as they don't want to feel old. But there IS a small class of good sponsors.... banks! Banks who want to get older folks' saved $$$ into their investment accounts. and then there are RV-dealers. Older folks are the ones who usually buy Winnebagos. - But overall, things are bleak for Standards stations in the USA.

Seniors do use credit cards, but they almost always pay the entire balance at the end of each month. THAT'S no fun for the credit card company!

Having operated two standards stations for just about two decades now, I can tell you that overall, it is a struggle, and no way can a Standards station afford to hire local jocks/hosts for its on-air sound.

As some of you know, in 2007, I started a listener-support model for my Boston and Maine stations (with no commercials). Works like a charm. No credit cards, no electronic payment, just send a check. Works like a charm. If I was a crook, I could REALLY do well.

As a result on my non-commercial presentation, my stations have a very significant 45-to-65 group listeneing And a lot even younger. Check out the ages of listeners on "Friends and Lovers of WJIB" on facebook, or go to phoenix.com (search "WJIB") and read about all the thirty-somethings and even one-year-olds listening to Standards.

Can a Standards station like this work in Buffalo? Don't know for sure. CFZM is there, but still might work since mostly all music without talk shows and without commercials would be quite attractive to Buffalo-area folks. - and definitely would work in Rochester, Syracuse, Binghamton.

 

[bmcglynn]

A myth and a truth... The myth is that Standards stations don't work (for the advertiser). Actually, they do. Funeral homes, Dr Feelgood Elixirs sold via 30-minute infomercials, Assisted-living facilities, hospitals.... If a Standards station's spot inventory is made up of these, the station will sound depressing..... depressing enough to turn off the 50-65 audience that may tune in for the music, as they don't want to feel old. But there IS a small class of good sponsors.... banks! Banks who want to get older folks' saved $$$ into their investment accounts. and then there are RV-dealers. Older folks are the ones who usually buy Winnebagos. - But overall, things are bleak for Standards stations in the USA.

We had standards at WDNY-AM up until August when we went Classic Hits. In Dansville, that turned out to be a good decision from an audience growth perspective.

One of the challenges with Standards is the format itself. Oldies morphed into Classic Hits as the demographic shifted. Standards is at a crossroads of the 40's-60's crooners and soft adult contemporary. The issue we heard with a lot of the satellite delivered options is the direction of the format from the material available. I've always thought you need to take the format one direction or the other programmatically.

On the commercial side, the biggest hurdle I've seen has been getting reps excited about the format. If your reps are passionate about it, then they will sell it. If they are not, then they will focus on the other properties and "Bonus" the other station (if that is allowed).

Personally, I like the format when well executed. I've listened to 740 Toronto and 740 Cambridge/Boston - and both have a good handle on the music mix. As a kid, I enjoyed 68 WINR in Binghamton back when they were locally programmed Standards from the infamous Hospital Hill. What a great way to learn about music....

Brian

 

[Yeziknoradio]

CFZM owner likely loves the music, but ALSO is stuck with that format as the CRTC requires no change for that station.

Exactly. In Canada, a licensee cannot decide to change a format on their own. Any change must go through the regulator - the CRTC. Look at 1220 AM in Sainte Catherines where the license was revoked for changing format without CRTC approval.

CHWO 740 was given a gift by the CRTC about 12 years ago when the CBC migrated most of Radio 1 to FM. In Toronto, that meant vacation of a 50KW clear channel frequency on 740. Prior, CHWO was a small Oakville-based 1KW signal (at 1240 or 1250).

1220 is a weak example. The station was poorly cared for in the last bit of it's life.
The owner refused to declare it to be a multicultural station. If he did, the CRTC may have been more forgiving...but then there were other issues too, like Can Con tracking etc.
Plus, one thing you can't do is have an AC licence (let's say) and function as if you are licensed as a Multicultural station.
Their situation wasn't so much about changing formats as it perhaps was for not obeying what they claim to be.
They claimed to be an AC station with some multicultural content.
That same content was well over the restrictions that apply in Canada to stations that choose to run a station in that way.

I was under the impression that AM 740 is free to go all talk tomorrow if it so desires.
When Rogers Bought Kiss 92 from Rawlco, the Country station instantly became a top 40 station.

 

[bmcglynn]

I was under the impression that AM 740 is free to go all talk tomorrow if it so desires.
When Rogers Bought Kiss 92 from Rawlco, the Country station instantly became a top 40 station.

That should require CRTC approval. Spoken Word is Category 1 and Popular music is Category 2. Changing from one to another category requires CRTC approval. Changing from Category 2 (Popular Music) to Another category 2 does not require approval as long as you keep within the CanCon requirements.

Canada has a very regulated broadcast industry. Competition, revenue share, local music fund contribution, as well as financial wherewithal all play into broadcast license decisions.

Just yesterday, CKLX-FM Montreal was denied their application to change from Category 3 Jazz to Category 1 Talk.

http://www.crtc.gc.ca/eng/archive/2013/2013-123.htm

 

[warsaw35]

Long live AM740!

 

[jefflaurence]

Heres a story.

An interesting concept around Florida was an "associate listener" program. Older..Social Security types, we're invited to a lunch..told a little story of how "their" station needed them..that resources were needed or "their" station might soon go away....and an opportunity to make some extra money helping their favorite restaurants...stores etc by selling them really affordable packages and collecting a 15-25% commission based on the size of the package. This enabled the station to have a fairly large number of folks out selling the virtues of their favorite station, and helped to reach out to much smaller businesses who would not interest the younger sales people. As a result the station had some real growth. Spot length stayed at 30 seconds. A worksheet provided the "client" with information to send back to the station, and they ran as available time would permit. It worked. And the station made money to pay the commissions, and the power bills, and even re-invest in new equipment and Maintenence items. On air programming was, sadly computer generated, but it sounded very good. The spots were done locally by two of the owners, and a few others. And it made money. The owners even came up with a great idea. Give them all personalized "business cards" and to showcase these spots with an intro heralding them as "stationeers" and "when you see one in your place of business..give them a minute, and learn how radio can make a business grow"

It went slightly sour when small groups of elderly "stationeers" would squabble with each other about being on another's "turf" trying to "sign up" someone who had already "signed up". Many businesses cancelled, not wanting to be a part of all this mess. Several minor injuries occurred, and police were aware of certain trouble makers..further one fellow took his business card, flashed it at a car wash attendant and told him to vacuum his car out "chop chop Goddammit" when he had paid only for an exterior wash..when told he would have to pay more..he reached under the seat one pulled out a pistol. Cops called again.

Oh, and the station owner had been logging these "spots" as "Helping our Elderly Outreach" PSAs, and never claimed them as commercials..pocketed the cash, and eventually shuttered the doors. The station is now a CVS drug store and half of the tower is in the weeds. The other half is just plain missing.

It is hard to think that today's 70 year old was 21 in 1964 when rock and roll was the ticket. Gogi Grant, Harry Bellafonte, Sinatra, Dino and Henry Mancini would have been THEIR parents choices. It would appear that the "elderly" are really just wrinkly teenagers who rocked.

 

[Yeziknoradio]

I was under the impression that AM 740 is free to go all talk tomorrow if it so desires.
When Rogers Bought Kiss 92 from Rawlco, the Country station instantly became a top 40 station.

That should require CRTC approval.  Spoken Word is Category 1 and Popular music is Category 2.  Changing from one to another category requires CRTC approval.  Changing from Category 2 (Popular Music) to Another category 2 does not require approval as long as you keep within the CanCon requirements. 

Canada has a very regulated broadcast industry.  Competition, revenue share, local music fund contribution, as well as financial wherewithal all play into broadcast license decisions.

Just yesterday, CKLX-FM Montreal was denied their application to change from Category 3 Jazz to Category 1 Talk. 

http://www.crtc.gc.ca/eng/archive/2013/2013-123.htm

That explains why it's only two hours of talk radio per day, and not any more, I suppose.
----> http://www.zoomerradio.ca/category/shows/goldhawk-fights-back/

AM 640 (just down the dial) made their changes gradually and over time, (shifting from top 40 to talk radio) not over night. That's why I'm not bringing them up.
I thought (if desired) AM 740 would go about it the same way...

 

[Paul_Warren]

Here in the Salt Lake City area, there's a '54-'65-era oldies station that seems to make much of its money through endorsement spots for vacation cruises and other travel products, remotes, etc. The jocks are live and local 6am-6pm, and most sound like 65+ guys who used to be names in the market. (I'm new here.) I'm guessing they sell half the day and do a "four-&-out-the-door" airshift the other half. (Voicetracking would make a lot of sense here.)

I suspect they'd lose a bunch of revenue if they went to the computer-in-a-closet model. Is it really a win to automate so fully you have to outsource production voices and do away with hosts for local promotions?

 

[vchimpanzee]

Banks who want to get older folks' saved $$$ into their investment accounts.

You mean mattresses?

 

[Yeziknoradio]

CFZM owner likely loves the music, but ALSO is stuck with that format as the CRTC requires no change for that station.

Exactly. In Canada, a licensee cannot decide to change a format on their own. Any change must go through the regulator - the CRTC. Look at 1220 AM in Sainte Catherines where the license was revoked for changing format without CRTC approval.

CHWO 740 was given a gift by the CRTC about 12 years ago when the CBC migrated most of Radio 1 to FM. In Toronto, that meant vacation of a 50KW clear channel frequency on 740. Prior, CHWO was a small Oakville-based 1KW signal (at 1240 or 1250).

Ah, but "change" a format is one thing. Then there's "Borrow a station"
For example, During the 2013 Hockey playoffs, Fan 590 is obligated to carry Blue Jays Base ball, and TSN 1050 does not have the rights to Leaf Playoffs, (Neither does AM 640, former home of the leafs)

As a result, for the first time in the history of 680 news, the news watch will stop:

http://www.sportsnet.ca/sportsnet-5...-leafs-stanley-cup-playoffs-games-in-round-1/

 

[Ed Trefzger]

As a result, for the first time in the history of 680 news, the news watch will stop:

Of course, the Leafs making the playoffs really is news.