Message from the President: Invasion of Big City Sellers

June 26, 2017

 

I got into radio 32 years ago; before smart phones, internet and Facebook, and radio was so hip and cool. Radio had big names like Rick Dees, Paul Harvey and Don Imus. If you wanted to hear the newest hit by Phil Collins or Duran Duran you turned on your local hit music station which was most likely not called Kiss unless you lived in L.A. I was selling 100.7 WMMS-FM in Cleveland and even the sellers were seen as celebrities. Radio was vibrant, relevant and fun and when a local business wanted to generate traffic they called their local radio radio seller and we made it happen.

Now it seems more difficult to achieve these results as there is so much more competition for people's ears and eyes. Al Ries and Jack Trout said the average person saw 5,000 ads a day in 1981 when they released "Positioning; The Battle for Your Mind." The number of ad exposures we are exposed to since 1981 has to have increased dramatically. This has changed the behavior of advertisers as they find ways to connect directly with potential customers leading them to click onto their websites. This has also caused advertisers to move away from traditional forms of advertising like making a media blitz and hoping the prospect would come into their store.

Now big media companies are feeling the pinch of stagnant ad revenue and the lack of access to credit to buy more radio stations to drive their growth. iHeart and Cumulus both saw huge success in terms of revenue growth by buying up hundreds of radio stations. Wall Street loved this strategy and both companies took on billions in debt to fuel this seemingly endless growth. The recession of 2008 and the evaporation of billions in radio revenue put a stop to this money as quickly as it started. This left Cumulus and iHeart with few options to grow revenues since the same station's growth was 0 to 1% a year. This year radio will go backwards 4.4% according to the latest Borrell & Associates report.

Now iHeart has started to dispatch bigger market sellers to smaller markets where they don't have radio stations to sell digital ad products like geo-fencing, site re-targeting, video pre-rolls, digital direct mail and more. It may not seem like an attack but more like an infestation. These sellers will take $800 from one client, $500 from another and $1100 from another and it may not seem like much but it will ad up. iHeart has $20 Billion in debt and the company has stated publicly that it does not think it will make it 12 months past Q1 2017. So now they will go into smaller markets and attack the real, hometown broadcasters who work hard to deliver quality local radio.

iHeart knows many of these broadcasters are not equipped with the digital arsenal they posses and it will be easy picking up the low hanging fruit. Its bad enough that iHeart and Cumulus have caused much of radio's problems by driving down rate, revenue and customer service not to mention completely destroying hundreds of great radio stations. Now they want to spread the payback of their billions in debt to small, independent broadcasters! They will say their duty is to the shareholder but the shareholder will lose everything in the coming bankrupcty filings for both of these completely mismanaged companies.

How does a small radio group or cluster of stations fight back? First they continue providing great local programming, creative marketing ideas, fun local events and the same sellers who live in the community as the clients. Second, add a solid digital strategy that address the basic digital needs of their clients. If the clients in your town are not buying it from you, they are buying it from another provider or will be very soon. Will it be iHeart? Cumulus? We would like to ensure that your clients buy from you! 

 

Talk to The Media Store today and let us help you get in first in your home market. Remember, first in, wins! 

 

Hugh McPherson, President of The Media Store, LLC