11-9-2012
Depression set in as I started listening to conference calls from radio companies this quarter. Business is either flat or off -- way off. Most CEOs shared their reasoning on why the third quarter was so weak, but Ed Christian at Saga said what others probably wanted to say: "I have no idea why it's off." The flat quarter was simply unexpected.
Last year at our Forecast conference, all the group heads predicted a boom in advertising as a result of political spending. That didn't happen, and now everyone is scratching their heads. On top of that, regular business is off, which also has everyone wondering what happened. Though some stations (especially political Talk radio) saw added spending, the expected broad spending did not occur.
My belief is that political spending in radio was down for three reasons:
Swing state focus: National campaigns understand that politics at the national level is to a large degree predictable -- for example, California is always going to vote Democratic, and Texas is always going to vote Republican. The money, it appears, went to the swing states, like Wisconsin, Ohio, and Florida.
Glut of television inventory: Sad to say, but candidates often select television over radio, and only increase their spending in radio when TV is sold out. Because there was a glut of inventory in the television industry, those candidates needing more airtime were not forced to shift to radio.
Stealth media is more important than ever: Many were surprised at the outcome of the national election because the polls were extremely tight in the final days, and several appeared to be favoring the Republican nominee. Though the Obama campaign did all the usual, visible things, they also spent a tremendous amount of money on the invisible. They masterfully executed an Internet strategy and a data strategy that weren't easily understood or accounted for by the media and pollsters. More and more candidates are spending enormous amounts of campaign money on "stealth" Internet campaigns.
That may explain why political spending shifted away from radio. But why is non-political down?
It's easy to blame it on the economy, which of course is part of the problem. But that's been a problem for years now. So why the sudden drop in spending? I call it "political paralysis."
In the months before an election, there is naturally a dramatic increase in political rhetoric in the media. As each party demonizes the other and works to increase the level of fear about what will happen if their candidate is not elected, business owners start to take notice. When their fear increases, their spending decreases. A month after the election, things go back to normal.
In the 2010 election, I saw it in one of my other businesses. About four months before the election, the rhetoric was high and advertisers stopped spending, but they didn't say why. We started asking and they all said, "We've decided to wait to see the outcome of the election before we spend any money." This was happening with both Democratic- and Republican-leaning advertisers. Their fear and uncertainty paralyzed them.
Before this election, we were ready with a strategy to lock up business further in advance and to offer answers that helped advertisers overcome their paralysis -- though we still saw some effects, especially in the last 30 days before the election.
My guess is that local radio advertisers were holding back until they were certain of what was going to happen. Even though half didn't see their candidate win, they will soon realize that life goes on, and business needs to advertise.
I also believe other advertisers want to avoid the noise. When political ads dominate the airwaves, advertisers don't want to be on the air for fear of not standing out. More ads mean more clutter. I personally got so tired of the political ads that I stopped watching television until the election was over.
Are there other reasons radio is off? Probably. But I think you'll find these are the biggest drivers of the reductions in this past quarter. At this stage, the most important thing you can do is get face-to-face with advertisers, get them back in the game, have answers ready to overcome their concerns if they are smarting about the outcome of the election, and make them understand that if they fear their business will go backward, it's more important than ever to increase visibility to get more customers in the door.
Also: Mark your calendars, and in the future, put your political paralysis strategy into play long before the campaigning begins.
Radio will be back. Though we can analyze it to death or wonder if there is some other reason we suddenly experienced a drop, understand that life goes on after elections and this temporary setback will end. Christmas is upon us, and advertisers need to play catch-up for those customers they lost by not advertising in the last quarter. I suspect radio will rebound to normal levels in the fourth quarter.
Eric Rhoads
PS: We'll have a chance to ask advertisers about these issues at our Forecast conference, on November 28 at the Harvard Club in New York. We have some of the most powerful advertisers in the world appearing on panels, and we can get their take on some of these ideas. Check out our agenda HERE
(11/9/2012 10:15:04 PM)
American media just experienced the most expensive, ad-deluged process in the history of any democracy.
Radio got the short end of that stick and it wasn't because there was a lottery.
There was every opportunity for radio to take a "creative resource"-role, but now I'm the one talking gibberish.
Radio has already wiped out its creative departments and impoverished the medium even more.
If radio was really "our baby", we would be charged with child abuse... and the penalties would be extremely harsh.
The whining, meanwhile, is pathetic.
(11/9/2012 4:01:48 PM)
Thdere are so many more advertising options available to retailers, compared to 15 years ago. And the radio "product" is very different now. The big players like CBS and Clear Channel, essentially control the major markets. They are committed to maximizing shareholder value and profits, and have dumbed down many of their stations, with voice tracking, cluster breaks, reduced commissions, and more. How all this impacts their customers (advertisers) or their employees, is of no concern to them.
(11/9/2012 10:21:02 AM)
Sellers are discouraged. Management is beat down - THERE IS ZERO excitement anymore. No one wants to be in radio they are stuck in radio.
(11/9/2012 8:38:59 AM)
I have spent most of my 30+ year career moving between politics and radio, so I see this from both sides of the fence. Most political professionals believe that television works better than radio.
However, the future of political marketing involves tightly targeted niches. The Bush people started this trend in 2004, but used it mostly on direct mail. Obama's two campaigns have expanded the concept. They bought a lot of cable in the last cycle, buying shows that might have had low ratings, but which were extremely efficient at reaching the populations they needed to reach, while the Romney people and the Republicans spent their money the old-fashioned way...1000s of GRPs on mass buys...most of which was completely wasted.
I believe that radio should be in this game, because radio could do the same job as cable even more efficiently and with less cost, but radio does not know how to sell itself anymore, and it does not have the data tools to show campaigns how well it reaches small slices of the population like non-white single mothers who make less than $35k per year or Hispanic entrepreneurs. Nor does it really understand how to educate campaigns on how radio supplements television or direct mail.
Television, to the degree the candidate can afford it, gets at least some production values.
Over the years, I have voiced numerous radio ads for American candidates (non-accented, midwestern sound), and the copy I was compelled to read was beyond atrocious. There were no production values or imaginative approaches either - just insulting gibberish.
But then, that's how we roll on a day-to-day basis anyway.
Radio isn't losing its credibility, Eric. It's throwing it away.
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