Rock in New York City

[davideduardo]

(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

Expenses of any sort have nothing to do with power ratios.

Why do you always bring up "advertising" expenses? This is not the most significant or even the deciding expense item at radio stations.

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

Ratings determines rate. Higher ratings in sales friendly demos can pull higher rates, and almost always do.

Format and management determine how many buys a station gets on. That is independent of size of audience.

Some formats deliver audiences that are more avidly sought by advertisers. Sports stations deliver 25-44 and 25-54 men with little spillage... which is why sometimes agency clients only buy sports to reach men. It worked for decades for Gillette...

Smaller stations in terms of rating don't get on many agency buys. In some smaller markets, an agency will only buy a few stations deep against the target. In larger markets, they may buy 10 or 12 deep.

I assume that power ratios are used by BIA/Kelsey to measure how well a station is billing, given its audience popularity

It's just a metric to help understand stations, formats and markets.

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

Sales promotion, as mentioned, is stuff like sales literature, a sales-only client access website, pens with the station logo, ads in trade publications or local business publications, etc. They are a tiny, tiny part of trying to increase gross sales. Many stations spend next to nothing on the category.

...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

It's been since January (the preceding book, the Holiday book, is universally ignored) and mostly in the last 3 to 4 months / books.

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

Actually, we will not have full year data until well into 2014. The year has to end, and then analysis of the market data begins.

Again, I'm not sure you are aware of the dramatic changes the format has gone through in the last couple years,

Just look at the Arbitron American Radio Today I gave the link to and data for. Alternative national shares were moving down for 5 consecutive years; last year the downtrend flattened but it was still off by a bit over 20% from 6 years before.

The recent few months do not make up for the total losses of 5 years, although the format is obviously in less peril than once thought.

I've skipped the part about iTunes and artists and such, as that has no impact whatsoever on the time buying function.

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

But Wild was billing less than $2 million a year, and had about zero possibility of having positive cash flow. Nothing to lose. Now is undoubtedly profitable, with significant cash flow. There is no way to compare the situations.

And the Atlanta station, after just a few months, is not monetizing the very short term ratings gains. It takes 6 months to a year to start getting on most agency buys, because agencies use multi-book averages. They do this precisely to eliminate "flash in the pan" ratings gains, seasonal influences, Arbitron wobbles, etc.

- 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

Now is profitable. There may be ways to improve, over time, the ratings. There is incentive to keep Z-100 down, for the benefit of the rest of the CBS cluster. The costs of killing a cash flowing station are so great that it does not usually make sense to do it.

 

[davideduardo]

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

You are confusing the categories of promotion:

1. Sales promotion. Advertising, mailings and presentation materials and such for people working at ad agencies and clients. Most will never listen to your station. Promotion is intended to heighten awareness and build goodwill.

2. Audience promotion. On air contests, outside advertising, vans, stickers, T-shirts, events and concerts intended to make people listen or to listen longer.

Sales promotion helps to make sure you get considered for a buy. But buys are made based on your cost per point, not on the promotion itself.

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.

That's so untrue I don't even know how to start discussing it. So I won't.

 

[atlantaboy]

Ratings determines rate. Higher ratings in sales friendly demos can pull higher rates, and almost always do.

David, this is where your argument/methodology completely breaks down

Higher ratings don't result in higher expenses for the station, they result in higher expenses for the advertiser - higher ratings mean the station is more successful, and the power ratio method you're using punishes stations for having higher ratings, which is why the most popular Alternative stations in the country have the lowest power ratios

And, again, billing does not measure profit - the power ratio method rewards stations for spending more money on promotion/advertising, and then receiving a relatively higher amount of income - when, in fact, stations spending less money on promotion/advertising, and billing less, can be making much more profit

And, yes, CHR/Hot AC/AC/News/Talk tend to spend tons of dollars on advertising and promotion - I have witnessed all of these firsthand in three different markets (and have seen examples for decades) - Urban, Country, and Alternative don't need to, because they have niche audiences who can easily spread the word without having to spend tons of dollars on ads/promotion

There's no evidence that Now is any more profitable than Wild was - in fact, Wild was at least Top 5 in the 18-34 demo, while Now isn't Top 5 in any demo - the fact that profit is coming in because the market is large IMO is a ridiculous argument to be making, seeing as how a flip in format would very likely double that amount of profit

 

[davideduardo]

David, this is where your argument/methodology completely breaks down

Higher ratings don't result in higher expenses for the station, they result in higher expenses for the advertiser - higher ratings mean the station is more successful, and the power ratio method you're using punishes stations for having higher ratings, which is why the most popular Alternative stations in the country have the lowest power ratios

I'll try again: ad agencies establish a cost per point for each buy and market. Let's say that in New York, an agency is buying for a client who is targeting women 25-54. They set a goal of $1200 per point. They ask stations for rates, and the top 2 stations, both with a 0.6 rating, come back with rates of $800 per spot... just a tad over the CPP goal. They get bought, but not without asking for a couple of free "bonus" spots to level out the cost.

Stations 3 to 8 all have 0.4 ratings against the demo. The rate needed for the CPP goal is $480 per spot. If one station quotes $600, and does not offer significant value added incentives, they get tossed off the buy.

The ones that qualify are run against software that shows reach vs. frequency of impressions. Sometimes a station that adds little reach is taken off, too, even if it does meet the rate criteria. And occasionally an overpriced station that adds a lot of reach will be put back on.

The agency ends up buying the stations that come the closest, or beat, the CPP goal once reach and frequency or other factors come in. Take it or leave it.

Note that the pricing is a near absolute. Then things like reach come into play. Stations that don't get on buys tend to be the ones that are overpriced or don't contribute to buys.

Agency buys are often audited by the client. So there have to be strong and quantifiable reasons for buying a station.

And, again, billing does not measure profit - the power ratio method rewards stations for spending more money on promotion/advertising, and then receiving a relatively higher amount of income - when, in fact, stations spending less money on promotion/advertising, and billing less, can be making much more profit

Because audience promotion is generally at so low a level since the recession began, you are making way too much out of this particular expense item.

Remember, much TV advertising and even some outdoor is either inter-company or trade. No cost at the end of the day.

 

[atlantaboy]

David, this is where your argument/methodology completely breaks down

Higher ratings don't result in higher expenses for the station, they result in higher expenses for the advertiser - higher ratings mean the station is more successful, and the power ratio method you're using punishes stations for having higher ratings, which is why the most popular Alternative stations in the country have the lowest power ratios

I'll try again: ad agencies establish a cost per point for each buy and market. Let's say that in New York, an agency is buying for a client who is targeting women 25-54. They set a goal of $1200 per point. They ask stations for rates, and the top 2 stations, both with a 0.6 rating, come back with rates of $800 per spot... just a tad over the CPP goal. They get bought, but not without asking for a couple of free "bonus" spots to level out the cost.

Stations 3 to 8 all have 0.4 ratings against the demo. The rate needed for the CPP goal is $480 per spot. If one station quotes $600, and does not offer significant value added incentives, they get tossed off the buy.

You have an example where the top 2 stations have a higher power ratio than stations 3-8, though - or, you are ranking stations by their power ratios, and assuming that stations with the highest power ratio will offer the most expensive ad spots

In the first case, with Philadelphia 18-34, the #1 ranked station has the lowest power ratio, but it would be the station offering the highest bid, since the ad agency knows that that ad will reach more of the 18-34 demo than any other station in the market - unless, of course, there is something inherently unattractive about advertising with Alternative listeners, and judging from Clear Channel's financial decisions, the current trend of Radio 105.7 in Atlanta with its advertisers, and KROQ's billing status, that seems extremely unlikely, if not impossible

In the second case, the ad agency doesn't care about the station's power ratio - they care about the audience that will hear their ad, so implying that the agency would skip over the #1 18-34 station for a station with a higher power ratio makes no sense

Let's say that WRFF has a power ratio of 0.3, because its share far exceeds its expectations for billing - a station with the exact same billing, but half the number of listeners (say WBOS), would, according to you, have a higher power ratio, and therefore be able to offer a higher ad price to agencies - the implication would then be the Alternative stations with mediocre shares are far better off financially than Alternative stations with high shares

The only way, IMO, that using a power ratio to measure success makes sense, is if you have, say, a station reaching a huge audience but repelling a lot of advertisers - and then the assumption is that if the station flipped formats, it would reach the exact same large audience, but attract advertisers

But there is absolutely no evidence, from Clear Channel financial experts that constantly study the finances of their 30+ Alternative stations, from AllAccess financial experts, or from Cumulus financial experts that the Alternative format somehow repels or limits advertising - if this were true, there is no way that Clear Channel, the absolute leader in radio corporations nationwide, would maintain and even flip stations to Alternative - they are in debt - they need money just as badly as everyone else - and to suggest that they are making poor financial decisions simply for the pleasure of offering the format to listeners is absolutely absurd (in my opinion)

The possibility that the Alternative format repels ad agencies in some markets, but attracts them in others, is IMO just as ridiculous - especially the prospect that out of every major format, Alternative is the only format with this kind of extreme variation in its advertising appeal

 

[atlantaboy]

BTW an AC station in Ft. Myers just flipped to Alternative - funny how they would flip a station from a "high power ratio" format to an unprofitable, "low power ratio" format... :

http://news.****************/cgi-bin/rol.exe/headline_id=n27120

 

[davideduardo]

You have an example where the top 2 stations have a higher power ratio than stations 3-8, though - or, you are ranking stations by their power ratios, and assuming that stations with the highest power ratio will offer the most expensive ad spots

I did not give power ratios... I just gave somewhat reality based ratings data to show how buys go down. Stations get on the buy if the cost per point is within the goal for the buy.

In fact, the top stations in NYC in Women 25-54 have a 0.6 rating (that's rating not share) so the comparison is, as stated, a reasonable one.

Agencies don't buy based on a station's historic power ratio. They buy on whether stations offer listeners in the target demo and whether the cost per point (or fraction thereof) is near the target CPP.

In the second case, the ad agency doesn't care about the station's power ratio - they care about the audience that will hear their ad, so implying that the agency would skip over the #1 18-34 station for a station with a higher power ratio makes no sense

You are confused. I am talking about ratings points. In New York, the highest rated station in 25-54 has a 0.5 rating. The highest in 18-34 has a 0.7 rating.

The only way, IMO, that using a power ratio to measure success makes sense, is if you have, say, a station reaching a huge audience but repelling a lot of advertisers - and then the assumption is that if the station flipped formats, it would reach the exact same large audience, but attract advertisers

Power ratio is a measure of the effectiveness of the station, it's format and its management in monetizing its ratings. Business is full of metrics like that, ranging from debt to equity ratios to price to earnings ratios. Power ratio is a number used by management of stations, buyers, sellers and finance organizations... something quite obviously you are not.

 

[davideduardo]

BTW an AC station in Ft. Myers just flipped to Alternative - funny how they would flip a station from a "high power ratio" format to an unprofitable, "low power ratio" format... :

Not all AC stations have high power ratios. WTLT has lost half its 12+ share in the last two years, and its billings from 2007 to 2012 have fallen in half. The station is now down to about 20th in 25-54, and it was obviously due for a change. Further, WTLT was being beaten by another AC, which was taking more of the revenue.

In other words, a change in format based on the lack of prospects for the old one... just like Wild in Atlanta.

Also, the owner has WARO, a highly rated (#3 in 25-54) classic rock station that bills nicely... so they have experience and obviously a belief in rock... making alternative a better cluster fit than AC. This is not unlike Greater Media's two rock stations in Philly... which perform magnificently in billings because Greater Media knows how to sell the product; they take a full 15% of the total market billings with those two stations.

 

[davideduardo]

In other words, a change in format based on the lack of prospects for the old one... just like Wild in Atlanta.

And more than that, it was based on competitor WJBX abandoning the active rock format in the last few weeks... leaving a big ratings and billings hole that was larger than the niche a #2 AC was occupying.

 

[atlantaboy]

And more than that, it was based on competitor WJBX abandoning the active rock format in the last few weeks... leaving a big ratings and billings hole that was larger than the niche a #2 AC was occupying.

Correct - just as there is a big ratings and billings hole in New York City larger than the niche a low-rated #3 CHR is occupying. The explanation that Wild had "no prospects" is certainly inaccurate - it had no less amount of prospect than Now 92.3 does - and Clear Channel could've held on to it to erode ratings from WVEE, just as you claim that CBS is holding on to Now in order to erode ratings from Z100

As far as power ratios, you haven't given an example of a market where the #1 station in a target demo has a power ratio lower than the #2, #3 station, etc. - apparently, you used "ratings points" - the simple fact is, a low power ratio does not deter advertisers from skipping over the station and/or the station's ability to sell advertising at a price competitive with their market share

Forget comparing formats for a moment - just look at your power ratio data for various Alternative stations - in general, the stations with the largest audience have the lowest power ratios, and the stations with the smallest audience have the highest power ratios - using power ratios to indicate a station's financial success (again, according to Clear Channel, Cumulus, Sun radio, and All Access) is absurd

 

[chrocket87]

Correct - just as there is a big ratings and billings hole in New York City larger than the niche a low-rated #3 CHR is occupying. The explanation that Wild had "no prospects" is certainly inaccurate - it had no less amount of prospect than Now 92.3 does - and Clear Channel could've held on to it to erode ratings from WVEE, just as you claim that CBS is holding on to Now in order to erode ratings from Z100

Now makes money. Wild likely lost money. You are comparing apples to pears.

[/quote]
the simple fact is, a low power ratio does not deter advertisers from skipping over the station and/or the station's ability to sell advertising at a price competitive with their market share
[/quote] Correct. Advertisers skipping over a station causes low power ratios, not the other way around. But he never said that power ratios cause buyers to pass on a station.

[/quote]

Forget comparing formats for a moment - just look at your power ratio data for various Alternative stations - in general, the stations with the largest audience have the lowest power ratios, and the stations with the smallest audience have the highest power ratios - using power ratios to indicate a station's financial success (again, according to Clear Channel, Cumulus, Sun radio, and All Access) is absurd
[/quote] Here's a basic exercise on power ratios:
Station A has a 3.0 share and bills $4.5 million (5% of total revenues in the market)
Station B has a 2.0 share and bills $4.5 million (Again, 5% of total revenues in the market)
Who has the higher power ratio?
Now, let's say a format is 11th in billing in five different markets. If that format has shares of 5.0, 4.0, 3.0, 2.0, and 1.0 in the five markets and if all five are 11th in billing in their market, obviously, the highest rated ones will be lowest in power ratio.

When Lew Dickey stated an interest in rock initiatives, he just rock, not Alternative, Classic, Active etc. Very vague, so I'm not sure why you are so positive that he means Alternative. Furthermore, in the eight months since he said this, the only thing Cumulus has done regarding Rock (that I can think of) is the relaunching of Rock 100.5 in Atlanta (again, not Alternative).

Using AllAccess to gauge the financial performance of stations is absurd. Nowhere on the site does it give any information about the financial shape of individual stations, except for the top 10 billers of the year. They present ratings data, which is NOT financial data about the stations. They say NOTHING about the finances of the stations you listed.

 

[atlantaboy]

Now makes money. Wild likely lost money. You are comparing apples to pears.
[/quote]

Your source for that information?

BTW if CBS had owned Wild do you think they would've flipped it to Alternative? I think that question answers itself - they would've kept it, insisted (through a variety of posters on this board) that it was making money, and would have lost the financial opportunity that Clear Channel jumped on

 

[atlantaboy]

Here's a basic exercise on power ratios:
Station A has a 3.0 share and bills $4.5 million (5% of total revenues in the market)
Station B has a 2.0 share and bills $4.5 million (Again, 5% of total revenues in the market)
Who has the higher power ratio?

Good exercise - The station with the higher power ratio is the less popular station

 

[atlantaboy]

Using AllAccess to gauge the financial performance of stations is absurd. Nowhere on the site does it give any information about the financial shape of individual stations, except for the top 10 billers of the year. They present ratings data, which is NOT financial data about the stations. They say NOTHING about the finances of the stations you listed.

Neither do any sources you or David have listed - they say nothing about a station's finances (i. e. profit) - they estimate billing through a method which may or may not be subjective, and do not include expenses

Again, Clear Channel owns 30+ Alternative stations, and their financial experts agree with the ratings reports of both AllAccess and Arbitron

Your only source is 6 months out of date, irrelevant in terms of profit, and from a company which may likely have political ties to CBS - in addition, the information is being delivered secondhand from someone in the radio industry who would directly be affected by a shift in the NYC radio market

 

[atlantaboy]

One more note about power ratios, just to be clear IMO...

Alternative Station A has a 3.4 rating 12+, and makes $1 million in profit annually
Alternative Station B has a 7.8 rating 12+, and makes $1 million in profit annually

Both stations are equally profitable, yet Station A, the less popular station, has a high power ratio, while Station B, the more popular station, has a low power ratio

Comparing power ratios, naive readers would think that Station A is twice as profitable as Station B

Bottom line IMO - power ratios indicate nothing about a station's financial success, and can even imply the opposite, again, as the two most popular Alternative stations in the country have the lowest power ratios

 

[davideduardo]

Here's a basic exercise on power ratios:
Station A has a 3.0 share and bills $4.5 million (5% of total revenues in the market)
Station B has a 2.0 share and bills $4.5 million (Again, 5% of total revenues in the market)
Who has the higher power ratio?

Good exercise - The station with the higher power ratio is the less successful station

That happens frequently. Format preferences by buyers and station sales management will be as significant factors as actual ratings.

Here are the power ratios of the top 10 stations in 25-54 (based on a multi-book averaged):

1. 1.43
2. 0.73
3. 1.33
4. 0.95
5. 0.98
6. 1.13
7. 0.61
8. 0.99
9. 0.90
10 1.57

So you can see that rank in the key sales demo does not determine the power ratio. Sales skills, format, pricing, stability, tradition, service to the advertiser and a variety of other factors are all important.

 

[davideduardo]

Neither do any sources you or David have listed - they say nothing about a station's finances (i. e. profit) - they estimate billing through a method which may or may not be subjective, and do not include expenses

Power ratio, by definition, is a gross revenue figure. It's not intended to measure profitability.

And the billing data accessible via BIA is much more than estimates and is not subjective. The data comes from the information provided to an independent auditor who compiles market data in each market from each participating station's direct report. The only place where further "calculations" are performed are when it is not clear how revenues are really allocated within a cluster.

The data is quite real.

Again, Clear Channel owns 30+ Alternative stations, and their financial experts agree with the ratings reports of both AllAccess and Arbitron

I doubt the CFO of Clear has ever visited AllAccess; in any case, AllAccess does not produce ratings. It simply relays the data released by Arbitron. What you are saying is as if you said, "well the New York Times reported on those Wikileaks people, so they are involved in the release of government data..."

Your only source is 6 months out of date

Financial data of this sort is reported annually. There is no 2013 data because 2013 is not over. THERE IS NOTHING NEWER.

and from a company which may likely have political ties to CBS

CBS is not a political party. There can be nothing political here.

And speaking at a seminar is hardly in indication of ties to an organization. Nearly every important broadcast and media executive in the country has spoken at some moment in one of the BIA seminars or conferences.

- in addition, the information is being delivered secondhand from someone in the radio industry who would directly be affected by a shift in the NYC radio market

As I said before, I'd be delighted to have Now or Fresh switch to Alternative. Now and Fresh index well with Hispanics, while alternative stations underindex... the loss of either Now or Fresh might "free up" some listening.

 

[atlantaboy]

Here's a basic exercise on power ratios:
Station A has a 3.0 share and bills $4.5 million (5% of total revenues in the market)
Station B has a 2.0 share and bills $4.5 million (Again, 5% of total revenues in the market)
Who has the higher power ratio?

Good exercise - The station with the higher power ratio is the less successful station

That happens frequently. Format preferences by buyers and station sales management will be as significant factors as actual ratings.

Here are the power ratios of the top 10 stations in 25-54 (based on a multi-book averaged):

1. 1.43
2. 0.73
3. 1.33
4. 0.95
5. 0.98
6. 1.13
7. 0.61
8. 0.99
9. 0.90
10 1.57

So you can see that rank in the key sales demo does not determine the power ratio. Sales skills, format, pricing, stability, tradition, service to the advertiser and a variety of other factors are all important.

I'm sure that's true - but you're using power ratio figures to determine a station's financial success - sales skills and service to the advertiser can easily be adjusted - stability and tradition change, and format trends go up and down - what's not so easy to adjust is the popularity of a station - so if a station like WRFF, or the Alt. station in Denver, has huge 18-34 and 25-54 demo shares, compared to WBOS which as mediocre demo shares, it is completely inaccurate as well as meaningless IMO to judge the less popular station as better off financially because its billing (again, regardless of expenses) is high in relation to its low ratings

 

[atlantaboy]

I doubt the CFO of Clear has ever visited AllAccess; in any case, AllAccess does not produce ratings. It simply relays the data released by Arbitron. What you are saying is as if you said, "well the New York Times reported on those Wikileaks people, so they are involved in the release of government data..."

David, are you seriously comparing Arbitron PPM numbers to Wikipedia? ;D

AllAccess reports Arbitron data, both 12+ shares and demo breakdown - No one said that Clear Channel is using AllAccess to receive data - they're using Arbitron PPM numbers - I'm sure you know that as well as I do

AllAccess has financial analysts analyzing the PPM data - but, obviously, the actual data comes from Arbitron itself - and there's no way to spin or misinterpret the data - it's factual, and black-and-white

 

[atlantaboy]

Financial data of this sort is reported annually. There is no 2013 data because 2013 is not over. THERE IS NOTHING NEWER.

I know - I'm not indicating that you could have found more recent data - I'm indicating that the billing data you are using is, in fact, 6 months out of date with current trends in the Alternative format

I'm not implying that you could have found more recent information

But, obviously, if financial analysts report a large increase in Alternative format shares over the past 2 books, data you have from 2012, especially since it includes early in 2012, would be inconsistent and out of date

You cannot use generalized format data from January 2012 to make decisions about the prospect or success of an entire format in June 2013, whether or not more recent information is available - it is completely inaccurate

Arbitron PPM numbers are current, reflect the popularity of formats in June 2013, reflect current format trends, and the potential for stations to generate profit - if a station has poor sales methodology, that problem can easily be corrected, especially if it's a station owned by Clear Channel, which has top-of-the-line, experienced sales people working for them at 30+ Alternative stations nationwide