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It’s no secret that spot radio has been struggling for some time. The industry has suffered a litany of threats from new audio sources including internet radio, music downloads and I-Pods, satellite radio, audience measurement and other issues. While local advertisers still value radio as a key element of their media mix (19%), national advertisers have not been so enthusiastic, spending just 6 % of their dollars in the medium.
radio-starEven with local radio’s dramatically higher spend over national advertisers, it hasn’t come close in recent years to anything like the mid to late ‘90s growth rates of 8-14 %. And it doesn’t appear that things are turning around. According to the Radio Advertising Bureau, local revenue was down 2% for May 2007 vs. one year ago and, per Goldman Sachs , Clear Chanel 2007 “radio revenue is pacing down 0.5 %, and will need to improve to drive cash flow against an expected low single digit rise in OpEx.”

Clearly, these statistics underscore advertisers’ perceptions about radio accountability. Our discussions with executives throughout the industry, from station groups and the research side of the industry, indicate that stations believe they are truly accountable. Yet advertisers don’t see it and, as long as that’s the case, ad dollars will continue to go elsewhere. Advertisers have been quite vocal about the problems they see, particularly when it comes to the way radio’s business is conducted vs. other media. Schedules are seldom posted and delivery is not guaranteed, contributing to a less-than-satisfactory evaluation of the media.

In an effort to reinvigorate the business and grow its share of spend with national advertisers, U.S. Spot Radio is rethinking how local radio does business. Industry initiatives abound to help turn things around, most notably:

  • Clear Channel’s “Less Is More,” an initiative to reduce commercial loads, shifting the emphasis to shorter ad units/fewer: 60s.
  • This seemed to improve listener experiences and advertising recall, but was a hard sell that did not provide immediate improvements in the revenue picture.
  • The Radio Ad Effectiveness Lab (www.radioadlab.com) was established in 2001 to improve industry understanding of radio’s efficacy and improve advertiser confidence in the medium. Studies thus far have addressed personal relevance of radio, synergies with other media, engagement, etc.
  • Arbitron’s Portable People Meter (PPMSM) provides new hope for electronic measurement of radio audiences. PPM offers the promise of continuous measurement, with marked improvements over the widely acknowledged deficiencies in diary measurement. We believe PPM will ultimately offer a service that will bolster industry confidence in audience measurement, but it will be years before its use is widespread and Media Ratings Council accreditation, while progressing, has not been a snap.

MMi’s recommendation to revitalize the radio industry:

It’s high time for a new model of radio advertising sales and to adopt real performance/accountability standards. Spot Radio schedules should be posted on the latest radio ratings and compared to negotiated delivery. The radio industry should join those in spot and national television, as well as national print, in offering audience guarantees, providing assurances to advertisers that they will be made whole when schedules do not perform. This will bring a new era of accountability to the industry at a time when other media are rising to the occasion. In the process, radio’s star will certainly rise.

Media Watchdog