Network Radio's Upfront Heads Up

On the heels of network television’s strong upfront season, radio network reports its upfront season is stronger than it has been in years. With more advertisers moving dollars into network radio, operators also feeling confident enough to increase ad rates for the first time in two years.

Although eight of every ten dollars spent on radio is still bought from a specific station in a local market, network radio is increasingly becoming a player. In the past few years the network radio business has doubled, to account for $1 billion in revenues annually according to Westwood One CEO Joel Hollander, who runs the second-largest network. Despite this year’s advertising recession, forecasts show network radio will grow 10% in 2002.

“I see more people coming into network radio, that’s why there is a more vibrant upfront,” says Jay Williams, president of American Urban Radio Networks (AURN), which targets African-Americans.

Talk American Radio Network president David Landau has seen the marketplace in much the same way. “Rates have stabilized, there is activity breaking earlier than last year, and it’s of a much better tone.”

At the agency level, the attraction can be pricing efficiencies that can’t be had in national spot radio. “Our network radio spending has grown considerably, literally doubled over 2000,” says mediaedge:cia senior partner/director of radio Kim Vasey. “We’ve seen a couple of clients that were in network radio a minor extend their presence in network radio.” Among mediaedge’s clients that have moved dollars into network radio are Kentucky Fried Chicken and Payless Shoes.

The largest network, Premiere Radio Networks, has a roster of clients topping 400. Among the clients returning to network radio are Sears, Phizer, Wrigley, JC Penny, and Priceline. Also back on network radio is Synergy Brand’s CigarGold, an online cigar retailer. Synergy president Stephen Barbella says they have pledged to spend $200,000 on Premiere, primarily on its Fox Sports Radio Network. That list continues to grow with clients such as Kohl’s, which finally reached the point of national distribution to necessitate a national buy, and RentWay, which had been buying on the scatter market but opted to jump into upfront this year.

Premiere Radio EVP, director of advertising sales Rhonda Munk explains that some advertisers who chose to sit out of last year’s upfront ended up paying more. “A lot of advertisers that had been upfront opted to play scatter the market thinking they would get better deals. They did until about the end of March.” Then, radio began to rebound and inventory began to tighten. “A lot of advertisers found that their ability to buy the ratings point levels that they needed and the specific day and day part was very tight. In some case we would have 10 or 15 buys on the table all vying for the same inventory.” In many of those cases, heritage advertisers that stepped forward during the post-September 11 upfront season were given the time.

The apparent increase in demand, has led to an increase in rates. Premiere is upping its rates between 5% and 7%, says CEO Kraig Kitchin. That, he explains, is ruffling some buyers’ feathers. “There are some advertisers entering the marketplace who believe there should be no increases.” AURN is in a similar situation, and Williams says they have chosen to leave money on the table in a few occasions, rather than cut its rates.

“I didn’t like the price increases and I made the decision to hold back some money rather than go in for the whole package,” says Vasey. “I just didn’t like the pricing and I think we’re going to get better pricing in the scatter market.”

OMD USA managing partner Natalie Swed Stone says the networks need to remember that advertisers are still living in a difficult economic world. “While we understand that rates are increasing, the advertisers need to see it a little more slowly.” Many are skittish about booking time too far out, she says, adding, “If they have a better product, then we will consider paying more for it.”

Vasey’s strategy of holding back dollars may already be paying off. “We’ve had some major cutbacks in the first quarter. I anticipate that money is going to come back, but right now they put it on hold.” That can be tricky, since a stronger economy could mean even higher scatter market rates, admits Vasey. “It is a risk, but I think there’s enough inventory out there and there’s enough viable RADAR-rated properties and strong syndicated properties.”

The one caveat in the network radio success story is this – upfront means significantly less to radio than it does to TV. While television networks sell as much as 90% of their ad time during upfront, network radio typically moves just 40% of its avails leading up to January 1. Last year, in a post-September 11 marketplace, only 30% was booked.

Zenith Media VP Matt Feinberg says he is also seeing signs that indicate that network radio, while healthy, it’s not as robust as some would have you think. “We were trying to get out of inventory and we couldn’t get rid of it. That’s a sure sign that things aren’t as good as they seem.” Zenith only enters the upfront for one client, Red Lobster, opting to buy network radio on the scatter market for the rest of its accounts.

Swed Stone thinks stories like the one you’re reading only serve to hype the market. “It’s no secret that the television upfront was very strong, so if you’re a broadcaster you want to try to let the perception that you’re doing well as they are.” Instead, she says the real barometer for radio is not the upfront, but rather the scatter market.

Munk agrees, yet she says as radio continues to consolidate, its networks are increasingly important. While five years ago they reached 70% of America, today they reach 90%. Says Munk, “That’s why advertisers are seeing us as much more of a national alternative.”

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