Radio Station Billing

[pumpin73]

I don't understand how station billing works. If a radio station consistently has low ratings, how can it bill well? It seems like it used to be the opposite. I am confused how the station makes money if the product they are putting out isn't good.

 

[TheBigA]

I don't understand how station billing works. If a radio station consistently has low ratings, how can it bill well? It seems like it used to be the opposite. I am confused how the station makes money if the product they are putting out isn't good.

Just because a station gets low ratings doesn't mean the product isn't good.

If you have good ratings, you sell good ratings. If you have bad ratings, you sell something else, such as specific demos or access to a specific audience. If you have an exclusive on a sports team, you sell access to those fans. In the case of music, it becomes difficult because radio stations don't own the music. So they can't sell the music or any access to it or the musicians. That's why music stations focus on their air staff. They can sell their morning show. In the case of iHeart, they have a national alternative morning show, The Woody Show, and they do various national campaigns around that show.

 

[Kelly A]

I don't understand how station billing works. If a radio station consistently has low ratings, how can it bill well? It seems like it used to be the opposite. I am confused how the station makes money if the product they are putting out isn't good.

Sports radio is a great example to what BigA mentioned: Advertising agencies who want to reach a male 18-49 demographic, will automatically place orders with sports-talk or sports-focused radio stations. Beer and vehicle manufacturers in particular, are product lines interested in reaching that demographic.

 

[pumpin73]

Just because a station gets low ratings doesn't mean the product isn't good.

If you have good ratings, you sell good ratings. If you have bad ratings, you sell something else, such as specific demos or access to a specific audience. If you have an exclusive on a sports team, you sell access to those fans. In the case of music, it becomes difficult because radio stations don't own the music. So they can't sell the music or any access to it or the musicians. That's why music stations focus on their air staff. They can sell their morning show. In the case of iHeart, they have a national alternative morning show, The Woody Show, and they do various national campaigns around that show.

I can somewhat see that. But what if the station (which doesn't have any of those things) has a direct competitor that gets much higher ratings, would it still bill well? Case in point, B96 in Chicago. They have been tanking in the ratings for a while. Their direct competitor KISS-FM gets better ratings. B-96 doesn't really have anything they can piggyback off of. They got rid of the weekend dance mixes, their morning show is piped in from another city AND they don't really have any airstaff. What else is there, besides their name? Which doesn't mean much when your programming is lackluster.

 

[TheBigA]

What else is there, besides their name? Which doesn't mean much when your programming is lackluster.

That's why they changed formats to Hot AC a couple weeks ago.

The problem with music formats is you're dependent on subjective personal taste. That's a bad thing to depend on.

 

[pumpin73]

Sports radio is a great example to what BigA mentioned: Advertising agencies who want to reach a male 18-49 demographic, will automatically place orders with sports-talk or sports-focused radio stations. Beer and vehicle manufacturers in particular, are product lines interested in reaching that demographic.

Basically, if you don't have competition for the format or demographic, you can justify high billing even if the ratings are low.

 

[TheBigA]

Basically, if you don't have competition for the format or demographic, you can justify high billing even if the ratings are low.

That only works if you have something advertisers want. If you have an exclusive on Hungarian folk tunes, no one cares.

 

[Kelly A]

Basically, if you don't have competition for the format or demographic, you can justify high billing even if the ratings are low.

Even if one has competition for the same audience in the same market. Ad agencies are just interested in reaching the demographic who likes sports.

 

[pumpin73]

That only works if you have something advertisers want. If you have an exclusive on Hungarian folk tunes, no one cares.

I more or less meant a format that there is a hole for in the market.

 

[TheBigA]

I more or less meant a format that there is a hole for in the market.

I've been involved with such stations, and that works best in non-com radio. Advertisers don't care about format holes, as we saw in NYC with country music.

 

[Mikey Radio]

I more or less meant a format that there is a hole for in the market.

While I know you're mainly focused on advertiser-supported stations, another business model to keep in mind is listener-supported signals. There are lots of stations out there be they bible thumpers / religious, ethnic or some other niche format that may have very poor ratings in a given market, but that doesn't matter as long as the listeners are sending in enough $$ to keep the lights on and the station afloat financially. Some of those stations can also have poor coverage in a given "market" which is why they may fare poorly in the ratings, but again, solid coverage over an entire large city doesn't matter as long as they're able to be heard by the population who are most likely to tune in and send them $$.

 

[Kent]

I don't understand how station billing works. If a radio station consistently has low ratings, how can it bill well? It seems like it used to be the opposite. I am confused how the station makes money if the product they are putting out isn't good.

Most stations sell the numbers. So, bad numbers typically mean low billing.

All numbers, however, aren't equal. Advertisers typically want 25-54 women. You can do well in 25-54 women without doing well 12+. You can also do well 12+ but with a mostly 55+ audience and bill poorly. Las Vegas and Ft. Myers have had stations that did extremely well 12+ but didn't make very much money because the audience was too old for most advertisers to buy. As another poster mentions, sports stations tend to get a lot of 25-54 men, even though they typically have terrible 12+ numbers.

Something else to keep in mind is that it's not a sale until the check clears. You can have high 12+ numbers but not have high billing because you have mostly local advertisers who don't end up paying the bills. Restaurants and nightclubs often turn out to be no pays. You can sue them, but that's an extra expense, and you're not going to get oil from a water well no matter how hard you try.

Another way stations can make money with poor ratings is through forced buying. If I own a cluster of stations and everyone wants on my top-rated country station, I can tell you that you can't buy that country station unless you buy my classic rock station first. By the same token, I can tell you that you can buy my country station for far less than my rate card if you buy the other five stations in my portfolio. One of my friends in sales once got really frustrated with the competition because, "They're giving their 20 share country station away if you buy the rest of their stations. We can't compete with that."

Finally, Mikey talks about religious stations being profitable because of listener donations. Commercial religious operators can be profitable with no ratings because, rather than commercials, they sell blocks of airtime to preachers, who pay in advance. Salem is a good example of that, and it also has a digital portal so those preachers can stream their programming to their fans anytime and anywhere.

 

[davideduardo]

I can somewhat see that. But what if the station (which doesn't have any of those things) has a direct competitor that gets much higher ratings, would it still bill well?

Radio is not like sports where there is just one winner. In a market like LA or Chicago or New York, there can be 20 to 25 big winners, and then another bunch of secondary stations that don't even buy the ratings and sell specialty audiences like business people, ethnic groups and the like and make very good money.

Case in point, B96 in Chicago. They have been tanking in the ratings for a while. Their direct competitor KISS-FM gets better ratings. B-96 doesn't really have anything they can piggyback off of. They got rid of the weekend dance mixes, their morning show is piped in from another city AND they don't really have any airstaff. What else is there, besides their name? Which doesn't mean much when your programming is lackluster.

One is 5th in market billing, the other is 8th. The one that is 8th is the 55th highest biller in the USA. So they are likely quite happy but always looking to do better.

 

[davideduardo]

Most stations sell the numbers. So, bad numbers typically mean low billing.

Not always. All sports is typically below 10th and often below 15th in many markets, but often in the top two or 3 in revenue as they deliver men very efficiently.

All numbers, however, aren't equal. Advertisers typically want 25-54 women. You can do well in 25-54 women without doing well 12+.

Most buys are between 18 and 54. But most buys are not just for that demo. They are for "English Dominant Hispanic Women 25-44" or "non-Ethnic men 18-49" or some other more specific target.

Almost all broad ethnic buys are 18-49, but generally are against either men or women but not both.

You can also do well 12+ but with a mostly 55+ audience and bill poorly. Las Vegas and Ft. Myers have had stations that did extremely well 12+ but didn't make very much money because the audience was too old for most advertisers to buy.

There are stations in each of those markets that lean 35-64 or older that do very well in revenue because those are smaller markets and a lot of advertisers don't have agencies and don't look at ratings.

As another poster mentions, sports stations tend to get a lot of 25-54 men, even though they typically have terrible 12+ numbers.

And they get huge sales because only that format is eligible for sports marketing dollars that are not specifically radio dollars.

Something else to keep in mind is that it's not a sale until the check clears. You can have high 12+ numbers but not have high billing because you have mostly local advertisers who don't end up paying the bills. Restaurants and nightclubs often turn out to be no pays. You can sue them, but that's an extra expense, and you're not going to get oil from a water well no matter how hard you try.

And few of us take that business unless it is a trade or pays in advance. This is a non-issue.

Another way stations can make money with poor ratings is through forced buying. If I own a cluster of stations and everyone wants on my top-rated country station, I can tell you that you can't buy that country station unless you buy my classic rock station first. By the same token, I can tell you that you can buy my country station for far less than my rate card if you buy the other five stations in my portfolio. One of my friends in sales once got really frustrated with the competition because, "They're giving their 20 share country station away if you buy the rest of their stations. We can't compete with that."

It is not as simple as that, but stations use their cluster partners to bring in attractive sales because many direct clients like to deal with just one radio seller who can put together a package that covers all their potential clients.

I built my first cluster of 4 AMs and 5 FMs in the same market over 65 years ago and as I added more stations, I found I was getting bigger and bigger total shares of budgets because I offered one contract, one bill, one salesperson calling on them.

 

[Kelly A]

Most stations sell the numbers. So, bad numbers typically mean low billing.

Then how do you account for revenue figures for stations like WTOP, or WFAN? Two of the top billing stations in the country, but neither are top five rated.

Finally, Mikey talks about religious stations being profitable because of listener donations. Commercial religious operators can be profitable with no ratings because, rather than commercials, they sell blocks of airtime to preachers, who pay in advance. Salem is a good example of that, and it also has a digital portal so those preachers can stream their programming to their fans anytime and anywhere.

Salem hires and pays their own talent. They aren't just selling time to preachers. If you have a few minutes, and would actually like to learn about the Salem strategy, listen to episode 2 of 'The Divided Dial'. The host interviews the head of programming for Salem:

On the Media: The Divided Dial | WNYC Studios | Podcasts

On the Media is a weekly show that uses the media as a lens to understand our world.

www.wnycstudios.org

 

[Kent]

Then how do you account for revenue figures for stations like WTOP, or WFAN? Two of the top billing stations in the country, but neither are top five rated.

I mentioned a reason or two sports does better than the ratings would indicate in my post. It wasn’t intended to be an exhaustive list. The whole point was that ratings, while important for many operators, aren’t the be all and end all.

Salem hires and pays their own talent. They aren't just selling time to preachers. If you have a few minutes, and would actually like to learn about the Salem strategy, listen to episode 2 of 'The Divided Dial'. The host interviews the head of programming for Salem:

On the Media: The Divided Dial | WNYC Studios | Podcasts

On the Media is a weekly show that uses the media as a lens to understand our world.

www.wnycstudios.org

Fair enough that Salem has more than one business model. Again, I wasn’t trying to say that was all Salem did. Sorry if I gave that impression. I’m also aware Salem does more than one format. If you’re going to make money in radio going forward, you’re probably going to have to envision yourself as a content provider rather than just a studio and transmitter. If I get time, I’ll check out that podcast. Now, having said that, the bulk of the shows on Salem’s nearest religious teaching station is available on my local Bott Radio Network station. You can’t convince me those people aren’t paying for the time on both stations.

 

[Kelly A]

I mentioned a reason or two sports does better than the ratings would indicate in my post. It wasn’t intended to be an exhaustive list. The whole point was that ratings, while important for many operators, aren’t the be all and end all.

And that's the problem with published 6+ ratings. People who don't understand how radio runs from a business standpoint, think ratings is like some sort of scoreboard like a sporting game with winners and losers. Doesn't work that way

If you’re going to make money in radio going forward, you’re probably going to have to envision yourself as a content provider rather than just a studio and transmitter.

That's always been the case. Radio people and hobbyists focus on things like signal, power, or how nice the studios are. Content has always been king.

You can’t convince me those people aren’t paying for the time on both stations.

Sure, a lot of AM stations run brokered programming, especially nights and weekends. Those are time periods that advertisers aren't interested in.