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RAIN Investment Guide for radio CEOs for 2009

Posted on: 01/12/2009

If you’re the CEO of one of America’s radio broadcast groups, you’re clearly in for a rough year.

Like all virtually all other ad-supported traditional media (e.g., newspapers, broadcast TV, magazines), your 2009 revenues are expected to be down 10% or more from 2008. Since you’ve already spent the last few years cutting expenses, this revenue hit is going to decimate your bottom line.

Still, you’ve got to keep going! (Well, or retire.) The U.S. economy will eventually recover, advertising spending will eventually pick up again, and consumers will continue to crave audio-based information and entertainment (i.e., radio).

So the smart move — your only viable move — is for you to keep your company’s nose above water in the short term and make some moves that will leave you well-positioned in the long term.

Five smart investments you need to make in 2009

Here are five investments you can make in 2009 that will position your radio group for success in 2010 and beyond:

#1: Talent. FM radio thrived in the ’80s and ’90s largely by being a jukebox (“Better rock, less talk”) at least 20 hours per day (i.e., outside of morning drive). Unfortunately, in the ’10s, much better jukebox alternatives are going to be readily available to consumers — iPods, of course, but also cable radio, satellite radio, and Internet radio (on PCs, mobile devices, and throughout the home).

What can you offer consumers to compete with these commercial-free and/or customizable alternatives? Personality. You’re going to have to have air talent that’s some combination of informative, entertaining, and/or comfortable.

You can invest in coaching or you can, if necessary, invest in new people. But, either way, it’s an investment you need to make to secure your terrestrial stations’ futures.

Clear, concrete proof that radio works for advertisers

#2: Research proving radio’s value. I am personally convinced that 30 to 60 seconds of a compelling audio message, priced in the range of a $10 CPM (i.e., about a penny per listener), is the most effective form of advertising most advertisers could by.

Unfortunately, I can’t prove it. And I’ll bet neither can you.

Thus, my recommendation for smart investment #2: A nice, clear, crisp, practical, real-world research study proving that radio is America’s best-value form of advertising.

The radio industry took a couple of very good steps in the direction in 2003-04 with its “Radio Ad Lab.” Unfortunately, I think the PhDs involved got too much control of it — one recent white paper they produced “used Continuous Emotional Response Analysis (CERA) to measure emotional activation at a deep, pre-cognitive level with Facial Electromyography (EMG).”

That’s not what Joe the Furnace King wants to read. Joe doesn’t care so much about how radio works as whether it works.

Joe would like to see a study like this: “Across the five cities of a recent multi-city test, using the same offer in all cases, $40,000 in newspaper advertising sold 61 furnaces, $40,000 in TV advertising sold 85 furnaces, and $40,000 in radio advertising sold 108 furnaces.” (And then repeat for other types of product categories — dog-sitting services, restaurants, vacation packages, etc.)

That would be an investment that would pay for itself in spades!

(Continued next week.)

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  1. Kurt,

    Thank you for highlighting the investment in quality talent for terrestrial radio. We at LuxuriaMusic believe its equally relevant to invest/develop on-air talent as a differentiator for Internet radio.

    With the thousands of “juke box” Internet radio stations in the market, our challenge was/is how to keep the programming fresh and refine our relevancy in the market.

    We pursued the strategy of live on-air talent since we invested in our Los Angeles on-air studio in 2006 (we also have live broadcasts from around the world) to differentiate ourselves in the market. The initial response from our audience was negative because they were used to the jukebox aspect of LuxuriaMusic and did not like “all the talking”. (Internet radio industry colleagues expressed similar thoughts on this strategy). We did experienced a drop off in overall audience after introducing live programming. Over time, the live programs have built fiercely loyal audiences due to the quality of the programs (our on-line chat and live studio cam strengthened the bond with the hosts).

    We currently have over 30 hosts on staff (http://www.luxuriamusic.com/djprofiles.html) that produce 30 programs a week . Although on-air personality is important, our key differentiator is that our staff consists of music business professionals, artists, composers, producers, DJs and historians that form a collective brain trust of music knowledge and that is reflected in the depth and breadth of our programming.

    In fact, many terrestrial and other stations have approached us about syndication of our hosted programs and the LuxuriaMusic format. We expect a number of these deals to be announced in 2009.

    It is still a tough market and many industry trends on the revenue side of the business that I expected to happen 5+ years ago are still elusive yet I am very optimistic for 2009.

    My 2 cents from the left coast…


    Cliff Chase
    LuxuriaMusic, LLC

    Cliff Chase · Jan 11, 03:37 PM · #

  2. I find it interesting that we have high hopes and I hope you are right. The time frame of the good news may be another story. But I like stories. That’s why getting into radio was my dream. Radio Connection places students inside the radio station to train. http://www.radioconnection.com where a talk show host wantobe gets their foot in the door.

    Mark · Jan 19, 02:16 PM · #

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