Rock in New York City

[atlantaboy]

I hope the Cumulus situation works out, but what about Townsquare's WKXW? Its tagline is "New Jersey 101.5", and in the Morristown market it's trended 3.3-3.0-1.9, and its share in the NYC market is 1.1

NJ 101.5 is a Central New Jersey play, as others have indicated. It's "home" to Trenton, and serves the area between the NY metro and the Philly metro.

I know Talk formats can be tricky, because it's an efficient way for advertisers to reach the male audience during drive times, but those overall share ratings seem pretty dismal - again, I'm not sure if there are drive-time shows under contract, etc.

You know nothing at all about one of America's most successful smaller market talkers. This is, of the 15,000 stations in the US, one of the least likely to change format.

Not sure about finances, but flipping to Alternative would certainly give them higher shares

You are looking at shares that the station gets at the fringe of its signal coverage... shares it gets because it is unique in offering a New Jersey pureplay talk format (actually, a hybrid).

Plus, the New Jersey suburbs would be a perfect fit for an adult-leaning Alternative station, just like the northern suburbs of Atlanta are now - no?

In a word, no. Not even when the Ice Age comes to Hell.

David, did you even read the posts following that one? The issue has already been resolved : It's a Trenton station

 

[atlantaboy]

Remember, you can also have high revenue that doesn't necessarily translate into high profits, and you can have low revenue that does result in high profits, all depending on advertising expenses to the public, promotional expenses to advertisers, staffing costs, and a whole different variety of factors.

Congratulations. You are starting to get it.

However, sales promotion is a small expense. Yet you mention it, but don't mention sales costs (seller commissions, sales management overrides, agency commissions, rep firm commissions, etc) which can be in the 20% of gross sales range in transactional (ratings driven) markets.

Lol please read what is written - I did mention sales costs (i. e. "promotional expenses to advertisers") - and, no, sales promotion is not always a small expense - Clear Channel spends a huge amount of money on television advertisement, which is not cheap

Bottom line with WRFF, their programming is exceptional, and attracts a huge number of listeners, both 18-34 and 25-54 - if there is an issue with finances, bad advertising decisions, bad sales department decisions, etc., there is nothing to prove, or even suggest, that it has anything to do with the programming

Let's please stick to the content of what we're discussing, rather than you spending post after post proving that you are experienced in the business aspect of radio, which no one is doubting you are

 

[atlantaboy]

But with WRFF, at $4 million in billing, there are many many stations in the market... my guess is either 10 or 11 of them... that have BCF higher than 'RRF's gross billing. That is just based on intuitive analysis of billings, formats and typical expense structure that comes from a half-century running, owning and programming radio stations.

Originally, you posted that WRFF is 18th in billing (and that there was essentially no difference between billing rank and profit rank) - now you're admitting that 11th or 12th is more realistic, and admitting that your source for that information is you own personal "intuitive analysis of billings, formats, and typical expense structure" - and it's essentially been proven that your previous conceptions of the Alternative format in 2013 are outdated - also that you're not even familiar enough with the format musically to recognize the difference between Alternative and Active Rock

This whole thread is just nonsense - for all we know, WRFF could be 3rd, 4th, or 5th in profit

Again, I respect your experience and knowledge about the business aspect of radio - however, I don't think you are knowledgable about current aspects of Alternative radio and where the format is headed, relative to the music industry, or of changes that have occured musically in the past 3 years

 

[davideduardo]

But with WRFF, at $4 million in billing, there are many many stations in the market... my guess is either 10 or 11 of them... that have BCF higher than 'RRF's gross billing.

Originally, you posted that WRFF is 18th in billing - now you're admitting that 11th or 12th is more realistic, and admitting that your source for that information is you own personal "intuitive analysis of billings, formats, and typical expense structure"

Apples and Oranges here.

WRRF is 18th in gross billings. I believe that there are AT LEAST 10 or 11 stations that not only waaaaaay outbill WRRF, but which have cash flow (BCF or EBITDA), sometimes called "operating profits" that exceed the total billing of WRRF. In other words, their profits after expenses are higher than WRRFs gross income before expenses.

My source for estimating profit is the combination of very accurate gross billings data for the most recent calendar year, combined with a knowledge of what it takes to run stations in different formats. As FCC filings say, "my experience is a matter of record" and the potential variances are not material for this kind of vague argument.

Again, billing is known with reasonable accuracy. Costs are not known, but can be reasonably estimated with a knowledge of broadcast management.

and it's essentially been proven that your previous conceptions of the Alternative format in 2013 are outdated - also that you're not even familiar enough with the format musically to recognize the difference between Alternative and Active Rock

I never made any such statement, except to say that at the agency level (and in Top 10 market ratings discussions, this is all about transactional agency business) buyers are not really making distinctions between sub-genres of rock.

This whole thread is just nonsense - for all we know, WRFF could be 3rd, 4th, or 5th in profit

There are, as I said, about 10 or 11 stations that, based on billing, are between totally likely and very likely to have cash flow (profit) well in excess of the total billing (gross income) of WRFF. There may be even more.

Again, I respect your experience and knowledge about the business aspect of radio - however, I don't think you are knowledgable about current aspects of Alternative radio and where the format is headed, relative to the music industry

But the issue here is not about the music industry. It is about the viability, in New York City, of an alternative formatted radio station. Music cycles come and go much faster than billing cycles, so even if alternative stations have had several upward months, they will not reap any benefits until late in this year, if at all and if the increases are sustainable over multi-book averages. So blips, until confirmed as trends, are irrelevant. In fact, the 5-year trend for alternative is downwards.

Then the other issue is about the year or so of losses a format switch creates... all the lost billings, slowly building (if any) new revenues, start-up costs, severance costs for dismissed staff, etc. Can an alternative station make enough after 24 months to make up for the losses caused by the format switch?

All that is why WBAI, if sold (and a big "IF"), is the most logical place for alternative.

 

[davideduardo]

Lol please read what is written - I did mention sales costs (i. e. "promotional expenses to advertisers")

"Sales promotion" is a tiny, tiny part of the cost of sales. It includes such things as entertainment, sales literature (including online client targeted equivalents), incentives for advertisers ("buy in January and get a cruise for two") and a few ads in trade publications.

- and, no, sales promotion is not always a small expense - Clear Channel spends a huge amount of money on television advertisement, which is not cheap

That is not sales promotion.

Bottom line with WRFF, their programming is exceptional, and attracts a huge number of listeners, both 18-34 and 25-54 - if there is an issue with finances, bad advertising decisions, bad sales department decisions, etc., there is nothing to prove, or even suggest, that it has anything to do with the programming

Except that you ignore the elephant in the room: as a group, with few exceptions, alternative stations have below-one power ratios and underperform. So the ability to monetize an alternative audience is, at least, a major challenge.

Let's please stick to the content of what we're discussing, rather than you spending post after post proving that you are experienced in the business aspect of radio, which no one is doubting you are

But what we are discussing is the business aspect: would an alternative format be a viable choice in New York. "Viable" means "profitable". Getting ratings is not a measure of potential profit, just one of several indicators of which all have to coincide for profitability.

 

[Barry]

All that is why WBAI, if sold (and a big "IF"), is the most logical place for alternative.

And if I understood you correctly David, WFAS 103.9 would be another logical place, that need not depend on the chaotic decision making process of WBAI management.
Would an AAA rock format have better prospects than alternative in this area? Most parts of the New York metro probably cannot receive The Peak 107.1 very well. It seems that many AAA stations have stayed with the format for many years, perhaps indicating steady if unspectacular performance.

 

[davideduardo]

David, did you even read the posts following that one? The issue has already been resolved : It's a Trenton station

No, it's not "a Trenton station". It is a station for the "rest of the state" outside of New York and Philly's Jersey suburbs. It even shows in the Allentown and the Wilmington books, which is relevant because both of those markets have counties in New Jersey.

And the overriding issue here is that you thought that WKXW was a candidate for a format switch. Your obsession with alternative music blinds you from the reality that faces radio stations.

 

[Theater of My Mind]

I suspect Cumulus will be highly interested in the 99.5 stick.

However, if someone like Educational Media Foundation were to get their hands on it, I could see K-Love shifting from 96.7 to 99.5 and 96.7 flipping to Air-1.

Ughh.

 

[atlantaboy]

Would an AAA rock format have better prospects than alternative in this area?

AAA is in a huge downswing right now - most breaking new artists are younger, still adult-friendly, and fit in the Alternative genre - unlike in the 2000s, there are very few current AAA core artists (that aren't played at Alternative)

AAA was popular back when Alternative was playing a lot of harder edged Active Rock, offering adults a softer, more "mature" musical alternative, but since 2010-2011, Alternative has evolved such that the AAA format isn't really necessary (in most markets)

The other big advantage of Alternative is that stations can offer a faster-paced, more upbeat format (compared to AAA), where currents are run more frequently, so that the music is more familiar

 

[atlantaboy]

@David, I respect your position in the industry, and I follow your logic, but most of your analysis, as you admitted, is based on preconceived notions you have of the Alternative format and its ability to make profit - I believe that you've discussed these financial issues, relating to the Alternative format, with colleagues over the course of the years, and that you have seen financial data presented that indicates the Alternative format is a financial risk, but I don't believe that this data relates to the current position of the Alternative format in June 2013

The bottom line for me is that Clear Channel, clearly, does not agree with you or your analysis, and they are in the business to make money just like everyone else - and, as indicated by the intentions of their CEO, Cumulus does not agree with your analysis either

I obviously have no idea how old, or objective, the data you're using to determine "power ratios" is, and you've explained that your analysis is largely based on your own personal experience with format patterns over the course of the years.

The data that we do have, from June 2013, that is objective, is that WRFF/Philadelphia is #1 18-34 and #3 25-54, so no matter what your financial analysis is, (1)a large percentage radio listeners obviously want to hear Alternative music, not just a select few, (2)Alternative stations, if financed correctly, have the potential to be financial successes, and (3)the probability that KROQ is this "huge exception" is extremely unlikely

 

[davideduardo]

@David, I respect your position in the industry, and I follow your logic, but most of your analysis, as you admitted, is based on preconceived notions you have of the Alternative format and its ability to make profit

My statements about the financial side of alternative stations are not based... as clearly stated... on "preconceived notions. They are based on a combination of the absolutely, totally, definitely and definitively latest billing data for the most recent full year: 2012.

Simply stated: a majority of alternative stations in 2012 had sub-par power ratios. Add to that the fact that, save for the last couple of inconclusive months, alternative has, nationally, been performing below historic levels.

Together, these factors would indicate to a station owner that great caution should be exercised in adopting this format. In other words, it's an option for "dead" stations, start-ups and such where there is no cash flow at risk and very limited downside... such as Clear's decisions in Philly and Atlanta. But where there is good cash flow, likely this is a bad choice.

- I believe that you've discussed these financial issues, relating to the Alternative format, with colleagues over the course of the years, and that you have seen financial data presented that indicates the Alternative format is a financial risk, but I don't believe that this data relates to the current position of the Alternative format in June 2013

Advertising sales is not influenced by single books, and to only a small degree by two or three books. Agencies look at longer term trends and averages, and do extensive analysis of other metrics, too.

A couple of good ratings months in 2013 makes little difference. Even a good string of months will not be fully monetized until next year, assuming sustainability.

The bottom line for me is that Clear Channel, clearly, does not agree with you or your analysis, and they are in the business to make money just like everyone else - and, as indicated by the intentions of their CEO, Cumulus does not agree with your analysis either

The CC move shows that Alternative is the "Format of Last Resort" for them... when all else fails, and the station is losing money, "let's try alternative."

Cumulus has done nothing on their statements. It's as if I were quoted in Inside Radio or Billboard saying, "I would like to have a Lamborghini." That does not indicate that I have one or even that I can afford one... just that the idea is appealing. Generally, though, anything that appeals to Lou Dickey is something that I get really apprehensive about.

I obviously have no idea how old, or objective, the data you're using to determine "power ratios" is,

I told you, umpteen times, it is the most recent available: 2012. Since 2013 is barely half-way through, there can't, possibly, be anything newer.

and you've explained that your analysis is largely based on your own personal experience with format patterns over the course of the years.

Geesh. I said that I have taken the published billing and power ratio data and estimated BCF for one single situation, Philadelphia. That's not "largely based" on anything,

The data that we do have, from June 2013, that is objective, is that WRFF/Philadelphia is #1 18-34 and #3 25-54, so no matter what your financial analysis is, (1)a large percentage radio listeners obviously want to hear Alternative music, not just a select few, (2)Alternative stations, if financed correctly, have the potential to be financial successes, and (3)the probability that KROQ is this "huge exception" is extremely unlikely

Again, you are taking ratings information and trying to get BCF projections out of them. That's impossible without a whole lot of other data which is market specific. But you are so painfully without knowledge, experience and education in the business of radio that any attempt to explain the broadcast facts of life to you is, while amusing, pointless and useless.

 

[atlantaboy]

Simply stated: a majority of alternative stations in 2012 had sub-par power ratios. Add to that the fact that, save for the last couple of inconclusive months, alternative has, nationally, been performing below historic levels

You are choosing what to believe as "conclusive" and "inconclusive"

There is nothing absolute about BIA/Kelsey's process for measuring billing, or your interpretation of how much profit you estimate stations are making - not surprisingly, Dan Mason, CEO of CBS Radio, has ties to BIA/Kelsey

http://www.biakelsey.com/Company/Pr...OCAL-Reflects-Rapid-Shifts-in-Local-Media.asp

This data is conclusive...
WRFF/Philadelphia is 1st 18-34, 3rd 25-54, and 3rd 18-49
WWDC/Washington is 3rd 18-34 (its "best book since January", quoting AllAccess), and 3rd 18-49
KTBZ/Houston is 3rd 18-34 and 3rd 18-49
WRDA/Atlanta produced a huge 12+ ratings increase, from 1.8 to 3.4, as CC flipped it from Rhythmic to Alternative
WBOS/Boston is 3rd 18-34 and 4th 18-49
KROQ/Los Angeles is 3rd 25-54, 4th 18-34, and 4th 18-49
KDGE/Dallas has been trending up for the past four books
KTCL/Denver is #3 (by share) in the entire market, 12+
KBZT/San Diego has been trending up for the past 6 books

The only major market Alternative stations that are not doing well (KITS, WKQX, CIMX, etc.) have full-signal commercial AAAs competing with them for much of the same audience, as has already been discussed

It is extremely rare, if not unheard of, for a major market Alternative station without competiton from AAA or another Alternative station to be performing poorly

As I'm sure you are aware, stations are not required to report their profits, and any way of trying to derive a stations's profits based on BIA/Kelsey, manipulation of data (i. e. "power ratios") or any other method is subjective - as I'm sure you are aware, data can be analyzed and manipulated in any number of ways

Again, we have financial experts from AllAccess reporting that Alternative is definitively one of the fastest growing formats, fiinancial experts at Clear Channel not only keeping the large number of Alternative stations they own, but flipping a major market signal to Alternative from Rhythmic, and the CEO of Cumulus indicating that he would like to pursue, if it becomes possible, the opportunity to initiate a rock format in NYC

You are also, I'm sure, extremely educated in the finances of radio, but as has been documented numerous times in this thread, you are completely unaware of current trends, popularity, and appeal of the Alternative format in June 2013 - and many other people with long careers in the financial aspects of radio, who are more in tune with the current state of Alternative radio, disagree with your analysis

 

[davideduardo]

You are choosing what to believe as "conclusive" and "inconclusive"

There is nothing absolute about BIA/Kelsey's process for measuring billing,

OMG.

BIA is the source of data used by brokers, station buyers, corporate management, banks, investors and related folks to valuate, evaluate and measure the performance, potential and operation of radio stations.

The BIA / Kelsey folks also do custom appraisals and valuations for sales, bankruptcy proceedings, etc.

Here is a quote:
"BIA/Kelsey has a history of distinguished service as the leading valuations and appraisal firm to broadcast media stations and companies. Performing more than 4,000 valuation engagements during the past 28 years at an aggregate value exceeding $90 billion..."

These people are the experts and gurus of media performance and valuations.

The billing data comes from the Miller Kaplan data (and, in a few markets, other public accounting firms) and is scrutinized to properly state station by station revenue when an individual break is not consistent with reality.

or your interpretation of how much profit you estimate stations are making - not surprisingly, Dan Mason, CEO of CBS Radio, has ties to BIA/Kelsey

OMG, again.

Dan Mason has no ties to BIA. He was simply a speaker at one of their conferences. Industry leaders speak at all kinds of conferences without having any interest in the organization conducting the seminar, conference, meeting or seminar.

You really have no background in radio or in business, do you?

This data is conclusive...
WRFF/Philadelphia is 1st 18-34, 3rd 25-54, and 3rd 18-49
WWDC/Washington is 3rd 18-34 (its "best book since January", quoting AllAccess), and 3rd 18-49
KTBZ/Houston is 3rd 18-34 and 3rd 18-49
WRDA/Atlanta produced a huge 12+ ratings increase, from 1.8 to 3.4, as CC flipped it from Rhythmic to Alternative
WBOS/Boston is 3rd 18-34 and 4th 18-49
KROQ/Los Angeles is 3rd 25-54, 4th 18-34, and 4th 18-49
KDGE/Dallas has been trending up for the past four books
KTCL/Denver is #3 (by share) in the entire market, 12+
KBZT/San Diego has been trending up for the past 6 books

That data is not conclusive. It's just top line ratings data, and is in no way indicative of billings or profits.

Some of those stations bill OK, some underperform, and three of them overperform in billing (LA, Houston and San Diego). That is proof of the fact that there is no "automatic" conversion from ratings to revenue and stations that show short-term ratings increases do not... for a long time... show any billings increases and then only if the increases are sustained by many, many books.

The only major market Alternative stations that are not doing well (KITS, WKQX, CIMX, etc.) have full-signal commercial AAAs competing with them for much of the same audience, as has already been discussed

Denver has a 0.38 power ratio and Philly has a 0.3 ratio. How in the world is that doing well? Each is leaving two out of every three dollars on the table based on a share-to-revenue 1:1 conversion.

It is extremely rare, if not unheard of, for a major market Alternative station without competiton from AAA or another Alternative station to be performing poorly

Again, this thread is, in theory, about the potential for a station in New York City converting to an alternative format. As can be conclusively seen across the country, there is no certainty that an alternative station will 1) get high ratings, 2) be able to monetize the ratings and 3) will be able to do better than even mid-range performing stations already doing other formats.

As I'm sure you are aware, stations are not required to report their profits, and any way of trying to derive a stations's profits based on BIA/Kelsey, manipulation of data (i. e. "power ratios") or any other method is subjective - as I'm sure you are aware, data can be analyzed and manipulated in any number of ways

If we know the billing, have a knowledge of a market, and know the typical expense range of stations in a particular format, we can make very good estimates of the profitability of a station. All of us who have bought stations and managed stations in major markets are able to put together projections for several years that are good enough to get financing from skeptical lenders.

Again, we have financial experts from AllAccess reporting that Alternative is definitively one of the fastest growing formats,

What "financial experts" does a record company financed site have who are analyzing the state of alternative stations?

You are also, I'm sure, extremely educated in the finances of radio, but as has been documented numerous times in this thread, you are completely unaware of current trends, popularity, and appeal of the Alternative format in June 2013 - and many other people with long careers in the financial aspects of radio, who are more in tune with the current state of Alternative radio, disagree with your analysis

My analysis of the current state of the format is the same as anyone else in the business:

• There has been an upturn in audience for some alternative stations in the last 4 to 5 months / books.
• That uptick reverses 5 years of downtrending or stagnation as demonstrated in Arbitron's format tracking reports.
• The uptrending does not in any way make up for the format's losses over the last 5 years.
• Conversion of ratings to revenue takes more than a couple of books and is not seen until well after the increases as ad budgets are adjusted
• The alternative format, in general, has about the broadest range of piss-poor to very good power ratios, so the format is risky

 

[atlantaboy]

David, could you please go back and explain how you are getting your "power ratios," and if they are based on financial information, how that financial information is obtained?

Your financial data tips the entire Arbitron PPM process on its head - Denver and Philadelphia are the two highest rated Alternative stations in the country, and you have them with the lowest "power ratios", making the least amount of money

CBS's Now 92.3 is not even Top 5 in its 18-34 target demo, and isn't Top 5 in any demo - you're labeling Now as a financial success, and WRFF/WWDC/WBOS/KTBZ etc., which are all Top 5 in multiple demos, financial failures

Every bit of common sense, including the fact that Clear Channel financial experts clearly disagree with you, indicates that something is clearly wrong with your figures - unless, somehow, we are to believe that the entire Arbitron PPM process is flawed and inaccurate, or that somehow Alternative stations lose money by accumulating a higher audience

I guess it's possible that highly-rated Alternative stations were over-optimistic about their potential income as the format declined somewhat in the last couple years - but that seems like a problem that will fix itself when financial data comes out at the end of 2013, since the format is now growing again, and stations become more prudent about their expenditures

 

[davideduardo]

David, could you please go back and explain how you are getting your "power ratios," and if they are based on financial information, how that financial information is obtained?

Your financial data tips the entire Arbitron PPM process on its head - Denver and Philadelphia are the two highest rated Alternative stations in the country, and you have them with the lowest "power ratios", making the least amount of money

Power ratios are very simple. They are the product of the local commercial share and the share of revenue.

Take any rated market, and remove the non-commercial shares to get a commercial station base. Convert the total 12+ shares into local commercial shares.

Example: in a market with 80% commercial shares (and 20 non-commercial shares) where a station gets a 4 share in Arbitron, we would have a 5 commercial share. This is done because non-coms and out of market stations don't compete for local revenues.

Then look at market revenue and what percentage of the market revenues a station is taking. Calculate the ratio.

Example: If the station that has a 5 commercial shares only gets 2.5% of the local revenue, it has a 0.5 power ratio.

Or, you can subscribe to one of the BIA services and they will include the power ratio in the several hundred pieces of data they provide for every station.

And, again, power ratios just give a metric to the conversion of top line ratings to revenue. They are a measure of gross revenue, not of "making money" which describes profits.

CBS's Now 92.3 is not even Top 5 in its 18-34 target demo, and isn't Top 5 in any demo - you're labeling Now as a financial success, and WRFF/WWDC/WBOS etc., which are Top 5 in multiple demos, financial failures

I never said those three alternative stations were failures. I simply stated that they underperform the market in generating revenues. WWDC and WBOS likely have decent if not stellar cash flows, and WRFF is probably minimally profitable.

Now bills over $15 million. It likely cash flows $4 to $5 million on that as part of a successful cluster.

The issue is whether CBS would forgo the nice cash flow, and take on at least a year of losses to convert from a station in a format that generally has high power ratios to one that often does not.

Every bit of common sense, including the fact that Clear Channel financial experts clearly disagree with you

Clear put alternative in Philly and Atlanta as a last resort for two stations that were foundering and billing next to nothing by market standards.

indicates that something is clearly wrong with your figures - unless, somehow, we are to believe that the entire Arbitron PPM process is flawed and inaccurate

Again, having good ratings is no guarantee of good billings. There are many other factors in play, without which even the best ratings will not result in significant revenue.

 

[davideduardo]

David, could you please go back and explain how you are getting your "power ratios," and if they are based on financial information, how that financial information is obtained?

Here is an extract from another person's way of explaining "power ratio" in more general terms:

A power ratio is a business ratio used by media companies, such as television or radio stations, to benchmark company performance in terms of revenue. The greater a company’s power ratio is, the greater is that company’s ability to generate revenue relative to its market percentage of audience members. Company executives use power ratios to track and report trends in sales, to compare company operation with other companies in the same venue, and to appraise the company for a potential buyout. In order to calculate a power ratio, the company must first determine its audience share, the percentage of viewers, listeners, or users who tune in or who use that company’s services. Once the audience share is known, executives compare the company income to the total market revenue to determine whether the company is generating the expected amount of income, given its share of the audience.

When a company obtains a power ratio of 1.0, the company is producing the amount of income that one would expect for its share of the audience. A power ratio above 1.0 signifies that the company is producing income at a level that exceeds expectations. For example, a company with a power ratio of 1.5 is generating 50 percent more income than expected based on its market share. Power ratios below 1.0 signal lagging sales and lackluster income potential.


For more: http://www.wisegeek.com/in-finance-what-is-power-ratio.htm

There is a highly detailed academic description of power ratios and their meaning at:

http://www.academia.edu/1317235/Exploring_the_dynamics_of_power_ratios_among_US_radio_stations

The file can also be downloaded as a PDF as it is lengthy and goes into detail about how there is a certain momentum attached to power ratios that can be demonstrated using mathematical techniques like regression analysis. The piece also discusses the fact that advertisers use some formats more than others...

 

[MassMusicMan]

If the billing of Alternative stations is underwhelming considering their market share, which formats make more money than they should?

 

[atlantaboy]

David, the disjoint in our data IMO is simple (after reading that article you provided)

Power ratios express revenue relative to market share - therefore, stations with a higher market share, like WRFF and KTCL have to take in more revenue than stations with a lower market share in order to maintain a power ratio greater than 1.0

(1)Stations with lower Arbitron ratings can much more easily produce higher power ratios, since they are not expected to generate as much billing in order to maintain a power ratio of 1.0 or greater

(2)Power ratios, again, use straight billing, not profit - so stations like WRFF and KTCL with a large market share and lower advertising/staffing expenses come off with lower power ratios, despite the fact that they are extremely profitable, most likely more profitable than many lower share stations with lower power ratios

Having higher ratings doesn't mean you have more expenses, so I don't see any direct link between power ratios and the amount of profit a station produces - many times, it might be inversely related

I assume that power ratios are used by BIA/Kelsey to measure how well a station is billing, given its audience popularity (i. e. could other stations/formats which are as popular bill higher) - but again, billing does not necessarily correlate with profit

Correct me if I'm wrong, but if WRFF or KTCL had mediocre audience shares, but spend more money on sales promotion, they would come off with high power ratios - but with high audience shares, less money spent on advertising/sales promotion/staffing/etc., they would most likely be more profitable than stations with high power ratios

I also think there's an additional disjoint in our data, in that most sources confirm that the large growth in the popularity of the Alternative format has been very recent, very likely the past six months or less - the financial data you have access to is for the fiscal year 2012, so any recent positive trends in the format wouldn't show up with BIA/Kelsey until the end of 2013

Again, I'm not sure you are aware of the dramatic changes the format has gone through in the last couple years, or IMO the ramifications they have had - two years ago, maybe even one year ago, I would've agreed that Alternative wasn't a good investment - but in 2013, the format, led by Clear Channel, has found a solid niche musically with the 18-34 demo, and established new core artists, with massive youth appeal, who now have both currents and recurrents to fill up playlists - in many ways, the new Clear Channel model of Alternative is somewhat a "Rock CHR" format for the 18-34 audience that doesn't want to hear Bieber, Kesha, Katy Perry, etc. all day long, or at all - and there are now a significant number of Alternative singles that are selling extremely well on ITunes, but don't fit in the musical mix of many CHRs, especially in large markets

To understand the financial investment Clear Channel is making, you really need to gain knowledge of the format in 2013, how many new artists are being broken each month, concert sales information, callout information on songs that are extremely popular with youth but don't fit on Rhythmic-leaning CHR playlsits, etc.

Wild in Atlanta didn't have ratings much lower than Now in NYC - flipping to Alternative was clearly an investment, and one that is strongly paying off for them - you can't compare straight billing numbers, obviously, since Now is in a market 3, 4, or 5 times the size of most others - it is still greatly underpeforming in ratings, and all indications are IMO that other formats on that frequency could be billing much higher

 

[davideduardo]

If the billing of Alternative stations is underwhelming considering their market share, which formats make more money than they should?

The most common overperformers are AC, Hot AC, CHR, news and, in some cases, talk.

News is pretty much limited to Top 10 markets. Talk is not as strong at conversion as in the past. Both of these formats benefit from running considerably higher commercial loads than music stations, so even if they sell at lower spot rates, they have more "slots per hour" to sell.

These are by no means the only overperformers. In Miami, some of the Spanish language rhythmic and AC stations lead in power ratios. There are some very high performing country stations and classic rockers. In these situations, the market as well as the heritage and management style of the station have a significant role to play in the conversion of ratings to revenue.

 

[atlantaboy]

If the billing of Alternative stations is underwhelming considering their market share, which formats make more money than they should?

Stations with low market share that bill higher than expected could easily be making less money than stations with high market share that bill lower than expected

The whole power ratio method IMO rewards stations for having lower ratings, and for spending more money on promotion/advertising, since that in turn can raise billing higher than the relative profit amount

Let's say Now 92.3, which has an extremely low market share, is spending a lot of money on sales promotion/advertising - that would raise the billing amount, and give Now a high power ratio - I don't see any way in which power ratios measure a station's financial success, and many times can give the opposite impression

Notice that the formats David mentioned - CHR, Hot AC, AC, News/Talk all tend to spend a high amount of money on advertising and promotion, while Country, Alternative, and Urban, on average, do not - they tend to have stations that raise to extreme popularity without the expenditure of a lot of money, since they have niche audiences who can spread word about the station personally, at events, online, etc.