If radio audiences aren’t growing, how come advertisers keep pouring money into radio?
In relative terms, the size of the listening audience isn’t really getting bigger, except to keep pace with increases in population. In other words, the same proportion of the population listening to radio 10 or 20 years ago is listening today.
But the last three years have been characterized by double-digit growth in ad revenues for radio stations. Last year was no exception; the 26 Los Angeles-market radio stations that report their revenues to accounting firm Miller Kaplan Arase & Co. in North Hollywood had combined ad sales of $605.7 million in 1998 the highest total ever reported in any market in the country and a 12.2 percent increase over 1997.
When you add estimated revenues from the other stations that don’t report to Miller Kaplan Arase, the total comes to $654.5 million, according to the Southern California Broadcasters Association.
It isn’t just L.A. radio that is growing at a rapid clip. According to George Nadel Rivin, partner in charge of broadcast services at Miller Kaplan Arase, revenue growth averaged 11 percent at the 105 radio markets around the country surveyed by the CPA firm.
The difference is that when you have a market the size of L.A., a 12 percent increase means an awful lot more than a 12 percent increase in Boise.
“The Los Angeles market is fortunate in that, because it grows from a higher base, a 12 percent increase means that you’re growing in the vicinity of $65 million a year,” Rivin said. “There are only about 25 markets in the country that even bill $65 million, let alone grow by that much.”
It may be radio’s very stability as a medium that’s behind the growth. While the TV audience fragments and newspaper circulation declines, radio stays the same and that makes it increasingly attractive.
More than that though, probably the greatest catalyst for the recent years’ growth was the Telecommunications Act of 1996, Rivin says. The act allowed companies to own more than one AM and FM station in a market, leading to massive industry consolidation that has produced a handful of very powerful station groups. That makes it much easier to buy radio time; instead of having to go to each station individually, you can buy time on a group and get broad national or local coverage.
“Radio is now on the same playing field (as TV and newspapers),” Rivin said.
Advertising on track
Union Station in downtown L.A. has everything that major rail hubs in other cities have big crowds, noisy trains, old-fashioned architecture but for years, something else was missing: advertising. Not anymore.
New York-based outdoor media firm Culver Amherst LLC began putting up posters at the station in mid-January under a contract with Union Station owner Catellus Development Corp., a spin-off of Santa Fe Pacific that was created to develop the railroad’s real estate assets.
Chris Culver, president of Culver Amherst, said he expects the signs at the station to generate about $500,000 a year in the first few years, but that will increase as the station itself grows. Catellus has ambitious plans for a massive office-retail development around Union Station.
About 30,000 people a day pass through the rail hub. Culver says that under a 10-year plan from Catellus, that is expected to increase to 250,000 a day when the development is completed. But don’t hold your breath.
Catellus has been talking about its Union Station project for nearly a decade. Although it did build a first phase, a new headquarters for the Metropolitan Transportation Authority, the rest of the project has remained in limbo as a real estate recession gripped Los Angeles and downtown office vacancies skyrocketed.
Of course, now that new downtown improvements like Staples Center, the new cathedral and the Disney concert hall are in the works, Catellus may be getting ready to put its money where its mouth has been since 1991. But not quite yet Ira Yellin, who is in charge of Catellus’ Southern California operations, didn’t return calls.
Culver Amherst, by the way, isn’t just concentrating on Union Station. The company opened an office in Mission Viejo last spring to spearhead an expansion into the L.A. market not an easy task considering the dominant presence of outdoor giants like Eller Media and Outdoor Systems.
“We’re a company that I guess doesn’t follow traditional thought processes,” said John Hall, who heads up the local office.
Hall is looking at non-conventional ways to enter the market. Right now he’s working with the city of Long Beach to study advertising opportunities on city-owned properties. Long Beach is looking to pad city coffers by putting ads on things like lifeguard towers and bike paths, although right now everything’s just at the proposal stage.
Webmercials?
The giant infomercial producer formerly known as National Media Corp. (now it’s calling itself E4L Inc., to sound more Internetty) is on a tear since changing its management and moving from Philadelphia to Encino.
Its stock, down around $3 a year ago, is now trading for well over $8. E-commerce revenues from its Web site, Quantumtv.com, rose by more than 600 percent, to $572,698, during the three months ended Dec. 31. Janco Partners Inc., the major research firm following the stock, raised its rating from “market perform” to “accumulate” last week. And a recent issue of Infomercial Marketing Report says that four of the 10 top-selling infomercials of 1998 were produced by E4L.
Despite the company’s success in conventional infomercials, it’s pretty clear that Wall Street’s approval of E4L is based mainly on its Internet strategy. The TV infomercial business continues to contract. According to Infomercial Marketing Report Publisher Steve Dworman, combined sales for the year’s top-10 infomercials were down between 15 percent and 20 percent from 1997 levels.
“There haven’t been that many break-through shows with major celebrities that have gotten people excited,” Dworman said.
News Editor Dan Turner writes a weekly column on marketing for the Los Angeles Business Journal.
