Conventional Wisdom

[SirRoxalot]

Much has been made here over the years about the purchasing power and habits of 50+ listeners. Interesting article in Tom Taylor Now recently:

"AARP opens the doors of a new ad agency named “Influent50,” and MediaPost says “already, it has a dozen-plus clients, including Avis/Budget and United Healthcare.” Are boomers really that set in their ways and stuck to familiar brands? Influent50 commissioned a study by ORC International’s General Caravan Omnibus, showing that more than four out of five boomers (82%) are open to new brands and (says Mediapost) “33% are willing to buy the latest and greatest version of a product, even if their current version is working just fine.” One problem is at the traditional agencies themselves – where a lot of the workers aren’t “in the demo.” Influent50 says “50+ is more than a demographic, it’s a powerful community of thinkers, workers and spenders. Together they represent 70% of U.S. disposable income.” More from Influent50 here."

 

[Rusty Bridges]

The question is, will this new advertising agency help sustain formats like talk, oldies and classic rock or classic hits which cater to listeners older than 50? It seems like a 60 year old may have more in common with a 50 year old than with a 70 year old. For example, a lot of 50 year olds might like classic rock or classic metal or alternative, but consider talk radio and oldies to be formats that "old people" listen to. A lot of 70 year olds might like to listen to conservative talk or oldies stations, but they might not like classic rock. It just seems that 50+ is a very diverse demographic. A lot of people in the 50 to 55 age bracket dread being thought of as "old" and don't want to be associated with AARP. "That's for old people."

 

[SirRoxalot]

The study wasn't just AARP people. There's diversity in every other demographic, whether it's 25-54, 25-49, 18-49, 35-64, etc. If 50+ really does control 70% of the wealth, then it would seem foolish to ignore that demographic. Classic Hits is doing very well in a lot of markets (see WCBS-FM in NYC, or even WHTT here). Classic Rock actually reaches younger demos more strongly than most people suspect, especially with males. The most fragmented market out there is for Women 25-54. Moms may control more spending for the family, but most families are spending on necessities. In that case, price outweighs most other considerations, and vendors are putting their money into cheap advertising - i.e. on-line. You're mostly in the realm of the big boxes there - Walmart and Target for example - and national buys. Local vendors who are selling service and reliability probably do better off targeting those with more disposable income, and that's where where the upper demos reign. Don't discount the buying power of Grandma & Grandpa.

 

[tbolt909]

Everything is relative. A fifty year old probably doesn't think they are OLD,
but to a 21 year old anybody over 40 is ancient.

Many say that advertising isn't effective on 55+ people.
They won't accept this new data which hasn't been vetted by them.
When people hit 50, they become what Orwell called an "unperson".

Many quality Rock and Jazz formats were eliminated because 20 something
sales people don't relate and refuse to sell it.
Corporate radio usually blows up quality stations rather than change
Sales staff. The Woodstock generation has huge population numbers
and buying power. It probably isn't wise to dismiss them outright...

 

[Element9]

The 50+ demo is potent, because the person who's 53 and the person who's 68 hold one thing in common: They're over 50. And that's what the report is all about. Critical ma$$.

 

[Nick Seneca]

Many quality Rock and Jazz formats were eliminated because 20 something
sales people don't relate and refuse to sell it.
QUOTE]

Presumably you're referring to smooth jazz. The format is gone because it no longer delivered enough listeners in the sought-after demos. "20 something" sales people had nothing to do with it. Any radio AE who "refuses" to sell one of his stations will be shown the door pretty quickly!

 

[davideduardo]

The study wasn't just AARP people. There's diversity in every other demographic, whether it's 25-54, 25-49, 18-49, 35-64, etc. If 50+ really does control 70% of the wealth, then it would seem foolish to ignore that demographic.

Ad agencies simply don't buy radio for 55+ because their clients tell them not to. What most marketing departments find is that it takes more impressions to make a sale with older consumers, and thus the return on the investment is not adequate.

Classic Hits is doing very well in a lot of markets (see WCBS-FM in NYC, or even WHTT here). Classic Rock actually reaches younger demos more strongly than most people suspect, especially with males.

Classic Hits and Classic Rock sell based on 25-54 performance. THe 55+ is not generally monetizable.

Local vendors who are selling service and reliability probably do better off targeting those with more disposable income, and that's where where the upper demos reign. Don't discount the buying power of Grandma & Grandpa.

If you check the percentage of seniors who live on Social Security alone, you'll be surprised.

And those figures about wealth don't tell you how a few hundred thousand "one percenters" raise the average in a very deceptive manner. Even the income of the lowest level one percenter (net worth between $6 and $9 million depending whose figure you use) raises a below poverty level household to the national average about 500 times over!

 

[davideduardo]

Many say that advertising isn't effective on 55+ people.
They won't accept this new data which hasn't been vetted by them.
When people hit 50, they become what Orwell called an "unperson".
.

That's not the reasoning. As people age, they become harder to sell. And that takes more impressions to make a sale. And that takes more money, sometimes to the point of making the sale unprofitable.

 

[Rob Piotrowski]

Ad agencies simply don't buy radio for 55+ because their clients tell them not to. What most marketing departments find is that it takes more impressions to make a sale with older consumers, and thus the return on the investment is not adequate.

And study after study won't change that position. After all, the customer (the client) is always right.

 

[tbolt909]

There are vast numbers of 21-40 year olds who are up to their
eyeballs in college and credit card debt. What kind of purchasing power
do they really have?

Dick Rowe --Infamous executive for Decca Records said
to the Beatles manager Brian Epstein in 1962 ---
"GROUPS OF GUITARS ARE ON THE WAY OUT, MR. EPSTEIN.
YOU SHOULD STICK TO SELLING RECORDS IN LIVERPOOL"

The experts are never wrong...

 

[davideduardo]

And study after study won't change that position. After all, the customer (the client) is always right.

Considering that consumer goods companies spend billions and billions a year in proprietary consumer research, what is the chance that all of them are simultaneously wrong?

 

[TheBigA]

Interesting that their study focused on 50+ and not 60+.

 

[SirRoxalot]

According to the US Census, the poverty rate in 2013 for people aged 18 to 64 was 13.6 percent, while the rate for people aged 65 and older was 9.5 percent.

Social Security benefits aren't generous - especially compared to government programs in many other industrialized nations - but they're adequate for most people. Of course, there are differences depending on where you live. Social Security won't go far in NYC or San Francisco, but will suffice outside of many major metropolitan areas. One of the reasons people flee NY state when they retire is that you can live more cheaply elsewhere. Some come back eventually for family support, and better medical treatment available in NY than most other states.

Markets vary. Buffalo is heating up as a place where millennials want to be. In the past, older workers stayed because they were ensconced in institutional jobs in government and education which offered stability and benefits - particularly retirement benefits - instead of high pay rates. Entrepreneurism is making headway here, and there's are changes in demographics taking place. For the first time in recent memory, the city started gaining millennials, not losing them according to published reports.

Sales people, and radio as an industry, needs to do a better job of educating buyers. The hard numbers are there for them to make their case. Radio companies also need to hire younger sales people, train them properly, and fight to keep them so they can establish relationships with buyers in their peer group. The revolving door of young sales people needs to stop. More mentoring needs to happen - and perhaps more team selling. That means that more investment needs to be made in the sales end of the business, instead of gutting sales staffs. Instead, we're getting programmatic buying, which educates nobody and simply drops rates even more.

Radio has followed the trend of short-sighted management, concentrating on quick profit instead of long-term health. It's not just radio, but big companies sure have bought into the concept. It's all about grabbing the cash and dashing before the doors close. The exception may be Townsquare, who seems to understand that radio is part of the ENTERTAINMENT business, and is expanding their holdings in ventures that complement their radio stations. It's certainly not the perfect company, but they at least seem to have a plan that includes radio and its ties to the communities that they serve.

 

[TheBigA]

Radio has followed the trend of short-sighted management, concentrating on quick profit instead of long-term health.

Which radio companies have made "quick profits?" I don't know of any. You're not going to make quick profits in an industry that's growing at 1-2% a year.

The investment companies backing radio groups aren't expecting quick profits either. Lew Dickey doesn't appear to be operating under a lot of pressure to deliver quick profits. Certainly not based on his Q2 conference call.

 

[davideduardo]

Interesting that their study focused on 50+ and not 60+.

That's because the 50-59 group brings up the income averages, and makes the overall study "look" better.

Also forgotten is that in a huge percentage of cases, the only assets a close-to-retirement person has is home equity, a sum of money that produces no income; a good study would exclude this from any quantification of "savings".

 

[TheBigA]

That's because the 50-59 group brings up the income averages, and makes the overall study "look" better.

Yes I know. They're skewing their own study. That to me makes it inherently biased and useless.

No big surprise given AARP.

 

[davideduardo]

According to the US Census, the poverty rate in 2013 for people aged 18 to 64 was 13.6 percent, while the rate for people aged 65 and older was 9.5 percent.

Try recalculating this excluding Social Security benefits.

Those under 62 have no SS retirement income; nearly anyone over 62 does (90% of all persons 65+ get some SS benefits). The average benefit is around $1200 per month.

The figures, from the SSA, are:

Among elderly Social Security beneficiaries, 52% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security.

Among elderly Social Security beneficiaries, 22% of married couples and about 47% of unmarried persons rely on Social Security for 90% or more of their income.

So we don't have the degree of affluence you think there is. If we take the 52% that get 52% or more of their income from SS, we have a maximum annual income of about $24,000 for half of the senior population... hardly a lot of disposable income there.

Social Security benefits aren't generous - especially compared to government programs in many other industrialized nations - but they're adequate for most people.

The two person household poverty level is $15,000 and change. That's above the average Social Security or survivor benefits.

Markets vary. Buffalo is heating up as a place where millennials want to be. In the past, older workers stayed because they were ensconced in institutional jobs in government and education which offered stability and benefits - particularly retirement benefits - instead of high pay rates. Entrepreneurism is making headway here, and there's are changes in demographics taking place. For the first time in recent memory, the city started gaining millennials, not losing them according to published reports.

Natural population growth should make every place a "gainer" in Millennials. Going from negative to normal growth just means that instead of losing, you are now standing still. That is hardly the stuff recruiting posters are made from.

Sales people, and radio as an industry, needs to do a better job of educating buyers. The hard numbers are there for them to make their case.

You have to distinguish between the sources of revenue. Local direct accounts are where, usually, the owner is the "buyer" and where the sales results will confirm the effectiveness of the buy. Agency accounts are based on metrics and client requirements and... increasingly, programatic buying.

You can't convince an agency to change the client demo specs, no matter how good a relationship you have with the media buyers. Agencies consider the relationship with the client to be the most valuable one, and suggesting they put that relationship in jeopardy is not well received.

Radio companies also need to hire younger sales people, train them properly, and fight to keep them so they can establish relationships with buyers in their peer group.

"Buyers" is an agency sales term. Agency media buyers have essentially no say in the demographic target of a campaign. So relationships may help on rate discussions, value added discussions and other "deal maker" talks, but they will not help on the basic CPP and targeting goals put in place at a higher level.

Instead, we're getting programmatic buying, which educates nobody and simply drops rates even more.

We are getting programmatic buying because the agency community wants it. We got the PPM because the agencies wanted it. We got CPP because agencies wanted a market-based metric. We pay for the ratings because we need the tool to sell to agencies. In other words, we are the seller and the customer gets what the customer wants or there is no business at all.

The exception may be Townsquare, who seems to understand that radio is part of the ENTERTAINMENT business, and is expanding their holdings in ventures that complement their radio stations.

If you analyze Townsquare's data, you see that it is the non-radio asset segment that is producing gains. The radio portion is not performing as well by comparison. Obviously, that is why they are buying non-radio assets and not expanding significantly in radio; their position on underperforming stations seems to not be to improve them but to spin them off.

 

[SirRoxalot]

Which radio companies have made "quick profits?" I don't know of any. You're not going to make quick profits in an industry that's growing at 1-2% a year.

The investment companies backing radio groups aren't expecting quick profits either. Lew Dickey doesn't appear to be operating under a lot of pressure to deliver quick profits. Certainly not based on his Q2 conference call.

Selling off your towers looks like quick profit scheme to me. Unfortunately, Clear Channel/iHeart and the companies that followed their lead badly overpaid and are so under water at this point that their model is unravelling. iHeart has managed to kick the can farther down the road - likely because the owners are the guys holding the notes. Their position of value vs. debt has actually deteriorated. Selling off the towers helps with the debt problem short-term, but it appears that their long-term strategy simply doesn't include towers and transmitters.

Citadel went bankrupt, and Cumulus is watching their stock price sink toward penny stock status even after the Citadel bankruptcy wiped out a major portion of their debt. The former debt holders are now the owners. They can't be pleased with the recent results, which have been outpaced by the market. Throwing more money at Nash, and cutting costs in their syndication division are attempts to pump up the profit side that simply haven't worked.

 

[TheBigA]

Selling off your towers looks like quick profit scheme to me.

That's because you don't understand how to run a business. Did you know that Chrysler doesn't own the Chrysler building? Sears sold the Sears tower. Businesses are better off leasing than owning. It's how this country is run. Let someone else pay the taxes, paint the towers, and be the landlord. That's not part of the core business.

Rather than answer a simple question, you bring up the same tired old stories about Clear Channel, Cumulus, and Citadel. But you can't answer the question.

 

[SirRoxalot]

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

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

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

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

http://www.irp.wisc.edu/faqs/faq1.htm#thresholds

http://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security

https://www.census.gov/hhes/www/poverty/about/overview/