Radio changes, ratings, and business

[stan]

We speculate a lot on this board regarding format changes (or lack of them), what stations should do (or not do), but the stations (or clusters of them) are businesses that either make money and are successful, or don't. A case in point is satellite radio, which has only two competitors, and they want to merge to keep afloat. What happened here? After all, satellite (and now HD-radio) was supposed to be the next big thing.

http://www.thestreet.com/_htmlttt/newsanalysis/investing/10341855.html

That being said, the author makes the point that the Ipod is replacing radio, even satellite radio, because people can program the music (or whatever else) that they want to listen to, and can have more control.

In Houston, ownership is for the most part clusters of stations. I suppose that most, if not all, are profitable, or you would see changes in programming (like ESPN on 97.5). Within each cluster, there may be stations that are more profitable than others. Does anyone here know how corporate management evaluates a cluster - is it done station by station, or as the whole entity? The reason I ask this is that there may be a station like KTRH that is a "news" station - news may not be profitable, but their content may be carrier on 3 or 4 other stations, so there is a benefit to the cluster of stations.

 

[chuckakers]

You got the "profit" part right. Ratings are great for wannabe PD's to argue over on forums, but the management of any station or cluster makes moves based on ROI and ways to make more "R" on the "I" (if you don't understand ROI, this is probably not the right post for you).

If customers, aka advertisers, are happy with the results they get from a station, they will continue to buy advertising on that station, with very little regard for ratings. Decision makers in business focus on the bottom line, not the fickle nature of ratings and the infinite ways sales sluts manipulate them.

Before someone gets on a soap box about "ratings equals audience size, which equals potential customers reached, which equals lower cost per potential customer for advertising", don't bother - I get that. But a business owner wants results above all else. If station "A" has twice the ratings as station "B", but station "B's" advertising brings in twice the customers, who do you think will get he next advertising contract?

Ratings are useful to entice a potential advertiser to buy. Beyond that, they mean absolutely nothing.

Chuck

We speculate a lot on this board regarding format changes (or lack of them), what stations should do (or not do), but the stations (or clusters of them) are businesses that either make money and are successful, or don't. A case in point is satellite radio, which has only two competitors, and they want to merge to keep afloat. What happened here? After all, satellite (and now HD-radio) was supposed to be the next big thing.

http://www.thestreet.com/_htmlttt/newsanalysis/investing/10341855.html

That being said, the author makes the point that the Ipod is replacing radio, even satellite radio, because people can program the music (or whatever else) that they want to listen to, and can have more control.

In Houston, ownership is for the most part clusters of stations. I suppose that most, if not all, are profitable, or you would see changes in programming (like ESPN on 97.5). Within each cluster, there may be stations that are more profitable than others. Does anyone here know how corporate management evaluates a cluster - is it done station by station, or as the whole entity? The reason I ask this is that there may be a station like KTRH that is a "news" station - news may not be profitable, but their content may be carrier on 3 or 4 other stations, so there is a benefit to the cluster of stations.

 

[davideduardo]

If customers, aka advertisers, are happy with the results they get from a station, they will continue to buy advertising on that station, with very little regard for ratings. Decision makers in business focus on the bottom line, not the fickle nature of ratings and the infinite ways sales sluts manipulate them.

This is often true of local accounts in small markets that use one medium and even one station at a time. They indeed can measure a station or a newspaoer ad individually.

In top 10 markets, much of the revenue comes from ad agencies from near and far, and is sold based on delivery... ratings, CPPs, r&f, etc. In a multimedia campaign, the contribution of each component is measurable only on the basis of reah, not on quantifiable sales by each part of the campaign.

A typical small agency campaign might have 4 or 5 radio stations pluis a variety of support medi, such as direct mail, localized boards, and even some local spot TV as well as possible web presence, e-mail support, etc.

Before someone gets on a soap box about "ratings equals audience size, which equals potential customers reached, which equals lower cost per potential customer for advertising", don't bother - I get that. But a business owner wants results above all else. If station "A" has twice the ratings as station "B", but station "B's" advertising brings in twice the customers, who do you think will get he next advertising contract?

Unless you are a club (get cash in advance, please) that can measure the door each night, it is vastly more difficult to determine who gets you the sales... and whether the creative, the copy, etc., were right or wrong.

Ratings are useful to entice a potential advertiser to buy. Beyond that, they mean absolutely nothing.

I was in one top 15 market where there was so much agency business that I did not even have any local direct sellers. Everything we sold was first and formost based on ratings vs. rates. Nothing else mattered.