Clearing the Air
Radio strategy changes with cuts in ad slots, rate hikes
By PAT MAIO
Staff Reporter
Suddenly, the watchword in radio is clutter.
Soon after Clear Channel Communications Inc., which owns eight Los Angeles radio stations, announced plans to reduce the amount of commercial time on its airwaves beginning next year, other station owners and operators were applauding the move. Many, though, are hedging whether and to what extent they will join the San Antonio-based radio giant in cutting commercial and promotion times, sometimes referred to as “radio spot load.”
“I’d love to see commercial loads lightened,” said Pat Duffy, vice president and market manager for Infinity Broadcasting Corp.’s L.A. stations. Infinity, a unit of Viacom Inc., owns seven stations locally and commanded a 27.8 percent share of the L.A.-area revenue pie, second in L.A. to Clear Channel, according to BIA Financial Network Inc.
When Duffy took over last year, he ordered a reduction of the clutter of ads and promotions on news talk station KFWB-AM (980). “KFWB ran more inventory. It wasn’t smart for them to do that,” he said.
Walter Sabo, chief executive of Sabo Media, a New York radio programming and management company, labeled this “Capitalism 101.”
“It’s common sense. It’s overdue, and will result in a healthier industry, because it helps ads to stand out better,” Sabo said. “This is the first law of capitalism. Lower the inventory to increase demand and put pressure on price.”
Excess inventory has prompted routine price-cutting in recent years, which turned off Wall Street and led to stock declines. Under its new plan, Clear Channel stations would not be able to run more than 15 minutes of advertising in a single hour. That compares with the 20 minutes or more of advertising that some stations currently program.
The decision to cut back on ads highlights a dilemma that station operators have grappled with for some time: How to maximize advertising revenues without chasing away the listeners that advertisers covet?
Dot-com effect
George Nadel Rivin, partner in charge of broadcast services at accounting firm Miller Kaplan Arase & Co. in North Hollywood, said radio station ad loads grew in the midst of the dot-com boom when demand for airtime was big.
But when that demand collapsed, stations were left with a lot of ad inventory at lower prices than they would have liked. By reducing commercial time, Rivin said, advertisers will see increased value from reduced clutter and thus be willing to pay more per advertising unit.
“For years, the print media has thrived on getting premium rates for inside covers and placement of ads in the upper right hand corner of a page, while radio has not geared its rate cards toward placement,” Rivin said. “A move to reduce the number of spots will improve the picture.”
Corissa Embro, president of Industry Media Specialists, a Santa Monica-based radio media buying service, also applauds Clear Channel’s efforts.
“Of course, I don’t want rates to go up, but quality should have been there. If there is less inventory there, prices should rise,” she said. “I can’t wait to see how this affects ratings and how stations sound.”
Per-hour advertising times often vary according to format. At Christian music station KFSH-FM (95.9), one of four L.A. radio stations controlled by Camarillo-based Salem Communications Corp., 12 minutes of ads typically run each hour, while at another Salem outlet, news talk station KRLA-AM (870), ads run in the 16-17 minutes-per-hour range.
“We want to reduce it more,” said Terry Fahy, vice president and general manager of Salem’s local stations. “We were working on something before but this gives us a shot in the arm.”
Fahy pointed to the emergence of digital music players such as Apple Computer Inc.’s popular iPod as another reason for growing concern over clutter. Apple has sold more than 4 million iPods while more than 100 million songs have been downloaded from its online music store.
“I have two kids who are 22 years old, and when they listen to music, they go to iPod to download songs,” Fahy said.
Bill Tanner, program director for Spanish Broadcasting System Inc. in Santa Monica, said he would like to see less clutter on radio, but that’s a tougher balancing act for Spanish-language stations because they charge advertisers about 40 percent below English-speaking outlets. “Parity is an issue. At the end of the day, we are here to make a good living for ourselves.”
In L.A., Spanish Broadcasting runs KXOL-FM (96.3) and KLAX-FM (97.9), which hired Spanish-language host Renan Almendarez Coello, also known as “El Cucuy” (“The Boogeyman”), last March.
SBS runs about 12 minutes of commercials per hour for music stations and 15 minutes for news talk stations. While Tanner believes that his stations have the proper balance of commercials, he would like to see them command a higher price.
