October 21, 2008
The Moodswing Minute is designed for both advertisers and advertising sales professionals. Normally it is intended to promote the common denominators for improved client – seller relationships.
In this issue I would like to take a couple of minutes to focus on the radio business.
Overview
Private radio contends with many issues, one near the top of the list is audience erosion, and more importantly audience fragmentation.
Canadians tuned in to their radios for an average of 18.3 hours a week in 2007 down from 18.6 hours in 2006 and 20.5 hours in 1999 according to a report issued September 18, 2008 from Stats Can. (a small loss of only 2.2 hours over 9 years is admirable considering the fast paced emergence of other entertainment options and technologies).
Over the last couple years the CRTC has been awarding new stations at a pace not seen in recent memory. And as long as broadcast companies or wanna-be broadcasters want to apply, the CRTC will accommodate.
Last week the Edmonton market saw 4 new radio licences granted to Harvard Communications, Rawlco Radio, CTV and an independent application respectively. I am very familiar with the first three companies. They are strong broadcasters and committed to the industry.
But it brings the total of mainstream, in market, privately owned stations to 18 serving a 12+ population of just under a million people. (BBM Stats)
When there are elephants in the room, good manners suggest that you introduce them. Say hello to Supply ‘n Demand.
The radio business is exactly that…a business where owners and share holders expect a return on their investment, sooner rather than later.
Once the 4 new licences are on the air in Edmonton, an estimated 9,576 – 30 second commercials will be made available to purchase each week.. That is IN ADDITION to the commercial airtime that is already available.
Math
More supply = potentially lower in market ad rates
Lower rates = more sold commercials needed to reach sales targets.
More commercials = larger spot sets, potential “tune out factors” and diminished value for advertisers.
Myth:
“But we are #1 in the market we will be okay.”
Reality:
Fragmentation Adults 25 -54
The average Gross Rating Point Difference in 7 of Canada's major markets between the Number 1 and Number 6 station is .07 rating point, less than ONE point.
On any national buy using GRP criteria only, put the top six stations in a bag, hit it with a hammer and you will get the right combination everytime.
(Source S2, 2008 Adult 25-54
Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal)
Q & A
Should the CRTC to be more discriminating in their awarding of numerous licences at one time?
The ability for a market to sustain new stations goes beyond such factors such as generic reports on retail sales etc.
Audience decline and the rapid growth of commercial free, unregulated music, information and entertainment sources pose a considerable threat to the long term viability of the industry. Adding a large number of stations at one time does not increase radio tuning exponentially. It effectively “regulates profit” for the existing broadcasters.
I believe that the CRTC should seriously consider reinstating LSA’s (Local Sales Agreements) for stand alone or smaller radio operators in heavily clustered and small markets in order that these broadcasters can take advantage of the economics of scale as do their larger competitors.
This might stem the rush of applications to the commission.
Currently smaller operators have few options to grow their companies outside of the application process.
History shows that LSA’s add to format diversity and profitability.
CCD aka Canadian Content Development.
Commitments now go beyond the support of Canadian music and emerging artists. It now extends into journalism etc. in order to create original content for broadcast.
Is it unrealistic to have applying broadcasters retain a portion of their commitment in order to hire and train local journalists and on air personalities?
Isn't "Canadian Content" development really the training and development of people, the next generation of broadcasters?
Who better to train young broadcasters and journalists then working broadcasters and journalists?
Currently new licence recipients commit to hundreds of thousands if not millions to CCD during their first seven year term and then in many cases must run a “lean” operation in order to reach a profit position.
The CRTC can create a reporting system that will ensure broadcaster accountability..
And Finally....In the News: A Portfolio Analysis
"This is worse than a divorce...I've lost half my net worth and I still have my wife".
-author unknown (smart guy)
Until the next time...
Stay in a good mood,
Brad
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