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Encouraging words
for Less is More
A-OK for Clear Channel's plan to trim ad clutter
By Sean Leahy
Among the various ills of radio, high up there
with media buyers has long been ad clutter, too many spots sandwiched
together such that commercial radio in some cases has come to seem like a
string of ads with an occasional song tossed in to break up the sales
patter.
But that may finally be changing. Back in December, Clear Channel
introduced Less is More, an ambitious strategy to reduce ad clutter, and it
appears it's beginning to do just that.
So reports a top Wall Street analyst in an evaluation of the
program after its first half year.
As Clear Channel has reduced its inventory, so too have some
of its competitors, especially in the larger markets, and the effect has
been to reduce total ad inventory.
"In June you saw inventory go down, which means
competitors are cooperating with running less units," says Jason
Helfstein, an analyst with CIBC World Markets and the study's author.
Helfstein reports that Clear Channel's competitors reduced
inventory in June by 1 percent over June 2004, after being up by 4 percent
in April and 5 percent in May over the previous year. Their inventory was
down in New York, Philadelphia, Los Angeles and Detroit.
That's significant on two counts. It shows that competitors were
initially taking advantage of Clear Channel inventory tightening by
increasing theirs to handle the spillover of advertisers from Clear
Channel. Then they too reduced inventory, realizing that they too
could charge higher prices for those fewer units.
It also proves out what analysts believed about Less is More when
it was first announced by the nation's largest radio group, with 1,200
stations. To work, it needed Clear Channel's competitors to follow its
lead in order to bring about an overall reduction in inventory.
Helfstein contends the reduced inventory cannot be
credited to a fall in demand. June was an active month, with revenue was
up between 2 and 3 percent versus May's 1 percent.
Certainly, Less is More has run into resistance, much of it from
media buyers and advertisers upset over higher prices and a scarcity of
inventory, particularly in markets where Clear Channel is a dominant radio
player. Buyers are grousing they are paying the price for Less is More
upfront, with the payout--less cutter--still some time off.
Under Less is More, Clear Channel hopes to reduce its inventory
by 19 percent and limit commercial breaks to four minutes. But Clear
Channel also told advertisers they would be required to buy a certain
percentage of 30-second spots with the standard 60s, with the 30s priced
at a premium, or about 75 percent of the cost of a 60.
One problem has been that many advertisers only have 60s, and that's
led to many taking their business to Clear Channel competitors. Others have
gone elsewhere because of inventory shortages at Clear Channel stations.
But even so, Helfstein reports that aspect of Less is More is
also working, with Clear Channel's mix of 30s on the rise. In December its
mix of ads was a 31/69 percent split between 30- and 60-second ads, but by
June that mix had grown to 40/60.
Kim Vasey, a senior partner and director of radio at Mediaedge:cia, says that her
clients have not specifically avoided buying Clear Channel because of Less
is More but that there were some buys they passed on because of
significant rate increases. Vasey says the effect of Less is More has been
most prevalent in major markets such as Los Angeles, Washington and
Philadelphia.
Helfstein says that although Clear Channel
struggled with the 30-second spots early in the year, he expects the
outlook to improve during the rest of 2005. He stops short of calling Less
is More a success, but he says it may be helping radio correct its ad
woes.
"I don't want to say Clear Channel is solving the industry's
issues," he says, "but they are acknowledging the radio industry
needs to reduce inventory."
He said Clear Channel's goal should be achieving a 50/50 mix
of 30- and 60-second spots and then getting premium rates for the
60-second ads. "At the end of the day the only the thing that will
drive success in this business is pricing," he says.
Vasey agrees that reduced inventory is a good trend for the
radio industry to be following.
"It has heightened the
clutter issue for broadcast groups," she says. "The more we
can improve on radio's environment for both the listener and the
advertiser, the greater potential for expenditure in the medium."
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July 20, 2005
©
2005
Media Life
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Sean Leahy is a Baltimore writer.
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