“The low hanging fruit is gone,” pronounced Cumulus Media CEO Lew Dickey during Wednesday’s Kagan Radio Summit in New York. Following the run-up in late 1990’s, the past several years have seen far fewer radio groups rolling-up. Deal makers blame a lagging economy and an overabundance of buyers compared to sellers as the reason. Yet consolidation, and its subsequent increase in advertising rates, may not be over. Instead, like a bear bedded down for long winter it may wake up hungry – for assets. “I absolutely believe there will be more consolidation in the next 12 to 36 months,” predicted Westwood One CEO Joel Hollander. In fact, many in the radio industry expect two or more of the mid-sized groups to combine their assets to take on the big players like Clear Channel and Viacom’s Infinity Radio group. As 2002 winds down, the radio industry is clearly looking for a better 2003 than it had this year. While advertising sales have strengthened throughout the year, the volatility on Wall Street hampered many group’s ability to grow. Emmis CEO Jeff Smulyan feels that situation is coming to an end “There are plenty of buyers and plenty of capital out there to gobble up stations, but prices are high,” he said. High prices aside, a number of broadcast groups hit a brick wall built by banks tightening the reigns on credit. “The banks have been reluctant to lend money and that is why there haven’t been a lot of deals being done,” explained Regent Communications CEO Terry Jacobs. Add to that, said Jacobs, is the incorrect assumption among sellers that the high prices paid pre-recession are still available. Media broker Peter Handy agrees 2002 has been “pretty choppy” for getting deals done. “We’ve had a half dozen clients who have been put on the shelf for the entire year. They wanted to [sell out], but there was more reason to stay; there’s just been too much uncertainty.” Yet he believes the corner has been turned, and predicts 80% of those stations will be traded in the next six months totaling $500 million. Dickey is not so sure that many deals will be done, however. “Consolidation is going to be fairly slow in the next 12 months. It’s the smaller deals that will still be done, as the economy improves and people become more bullish.” His group, the second largest in terms of the number of stations, is often mentioned as group poised to combine with a current competitor. The Federal Communications Commission is presently reviewing its radio and TV ownership rules, and while it looks as though it will clear further deregulation, it is not expected to have a significant impact on the number of radio stations an owner can hold in a market. Following the passage of the 1996 Telecom Act, that is what a number of radio groups did, growing rapidly into the massive groups that we know today. It is that which Smulyan credits for radio’s increasing ability to take advertising dollars away from other media, particularly newspapers. “We’re continuing to gain share over newspaper,” said Smulyan. “In our local markets, that’s where the dollars are. We took 5% from local newspapers over the last decade and that has been the fuel for this great growth for this industry.” Mediaedge:cia senior partner/director of radio Kim Vasey agreed consolidation has been “a good thing” for the radio industry, particularly in terms of the training its salespeople get, she is concerned that too often they are concerned about getting the buy and not building a constructive relationship with the agency. Throughout the consolidation process there has been a fear among advertisers that the decreasing competition among owners would result in a higher rate charged to clients. While most group heads would agree that rates have risen, most would point to the more professional way radio has marketing its airtime. Tomorrow: A look at how some stations are using inventory controls to charge advertisers more.
Classical radio fans spend big bucks online, purchasing goods and services via the Internet at a rate that is well above average. According to the latest national radio format study from Scarborough Research, Classical listeners are 30% more likely than the norm to have made an Internet purchase in the past 12 months. In addition, they are 49% more likely than average to have spent large amounts ($1,000 or more) online during the past year. "The Classical radio format listener is a well-educated consumer who appreciates quality and value," noted Howard Goldberg, senior vice president, Radio, Scarborough Research. "This format, which reaches established consumers with discretionary income, provides an excellent opportunity for advertisers to reinforce brand loyalty and to solidify their positions as preferred product and service providers.” The study, based on Scarborough’s USA+ database, revealed that Classical listeners prefer to purchase items online that are consistent with their well-educated, upscale reputation. For instance, they are 59% more likely to purchase airline tickets via the Internet, 55% more likely to purchase books, and 55% more likely to buy computer hardware. Perhaps one reason that Classical fans are so willing to spend money online is that they have adopted super-speedy broadband Internet connections at a faster rate than the general population. The study indicates that Classical listeners are 47% more likely to have a DSL broadband connection at home and 26% more likely than average to have a cable modem. Another factor behind Classical fans' penchant for online purchasing is that they have plenty of money to spend. The study confirmed Classical listeners' reputation for affluence, finding that 39% have household incomes over $75,000 and 77% own their homes. As could be expected, they are also very well educated. Classical fans are 60% more likely to hold a four-year college degree and are over three times as likely to hold a postgraduate degree. The Classical format also skews to the older audience, with over 42% of listeners age 55+ tuning in. Nationally, 6% of American adults 18+ have listened to Classical radio in the past week. But when it comes to concentrations of Classical fans, Washington, DC hit the highest notes, with 16% of the population tuning in to the Classical format. Other high-ranking markets include West Palm Beach, FL (15%); Harrisburg, PA (11%) and Minneapolis, MN, San Francisco, CA, Boston, MA, New York, NY and Tucson, AZ, (all at 10%). According to the study, Classical fans display many distinct purchasing preferences. For instance, Classical fans are heavy consumers of financial products and services. They are 57% more likely than the norm to have a money market account, 64% more likely to use a full-service stockbroker, and 45% more likely to engage a financial planner. Classical fans also love to drive foreign cars. They are 56% more likely to own/lease a luxury foreign vehicle and 24% more likely to own/lease a foreign SUV.
A Florida direct-marketing firm wants to bring television to places it’s never been before: commercial establishments that can’t get cable for one reason or another. P.R. Specialists Inc./Servitrust Corp. of Margate, Fla., is about to launch a campaign to sell satellite TV programming to places where cable service may not be available or be too expensive to get for infrastructure reasons. COO Lawrence Ruden says the company believes a lot of places that don’t have TV would want it – places like a customer waiting room at a doctor’s office or auto repair shop, a gym, or a business office or employee breakroom. “Since 9/11, a lot of people who didn’t have access to a television [at work], they found they were out of touch, that a lot of people wanted news,” Ruden says, adding that the company will also be offering the services to business offices that might want access to news and financial channels like CNN, Bloomberg and CNBC. Ruden’s company specializes in direct-marketing and fulfillment services firm that provides inbound and outbound call centers, primarily through independent centers in foreign countries like India. This is their first foray into providing TV services, through Riley, N.C.-based EVE Creative Marketing Services Inc. and satellite TV provider DISH Network. Debbie Jenkins, a consultant for P.R. Specialists, says that some office buildings or businesses are in rural areas or places that aren’t served by cable. Or it might be too cost-prohibitive to get cable TV. The company knows that firsthand, as their Florida office is in a building that the owner said would cost up to $15,000 to connect the building with a lot of ripped up pavement and other challenges. “If cable is not available or not in a building, that’s our prime market,” Ruden says. EVE Creative Marketing Services couldn’t be reached for comment, but a DISH Network spokesman says the satellite channel provider’s services are sold by a company-owned division to commercial establishments like hotels, restaurants and bars. There are a wide range of commercial packages. There are more than 7.4 million DISH Network subscribers but the spokesman declined to tell how many were commercial. There are also thousands of DISH Network resellers throughout the company but it isn’t clear how many, like EVE Creative Marketing Services and Servitrust, have focused on the commercial market. The spokesman says the company doesn’t have that information readily available. Ruden says their service will include three packages including news, financial, entertainment and local programming. It’s not designed to be used in a sports bar or restaurant where a wide range of exclusive sports programming is crucial. “That’s not the strength of this package,” he says.