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Turn on your radio.
As recovery eludes, ad breaks are all over the dial
By Gabriel Spitzer
A year ago, radio buyers who wanted decent prices for decent ad time had to buy two months in advance.
Even then they paid dearly.
These days, four or five days advance notice is enough, and when it comes to price, well, there's room to talk.
And for buyers there's more welcome news: That's not going to change anytime soon.
"The marketplace continues to be soft, probably even softer than in the second quarter. Some stations manage to sell out a good part of their inventory, but it’s all on a week-to-week basis," says Mark Lefkowitz, executive vice president and media director at Furman Roth Advertising in New York.
As with most media, observers who had been predicting a second-half turnaround in the radio ad market are now looking to next year.
The end of the second quarter showed little hope for a recovery.
Over the first five months of 2001, local radio ad revenue was down 4 percent from last year, punctuated by a 5 percent drop in May.
National ad money dropped 22 percent in May and 21 percent year-to-date, for a combined loss of 9 percent in May and 8 percent year-to-date.
Predictably, the slowdown has driven ad rates into the floorboards.
"Rate structures across the board are back to where they were a couple of years ago, before the dot.com craze. They’re certainly more like the rates we got in 1998 than what we got in 1999 and 2000," says Agnes Lukasewych, account director, local radio broadcast, at Media Planning in New York.
In many markets, that means that what ad money is out there is finding its way to the top-tier stations, regardless of what format they might be.
"There are a couple of key stations in every market that are doing well. Across different demos they’re still right up there on top. They’ll be the first to go. If you’re a second-tier station, you’re probably hurting right now," says Lukasewych.
"When rates are attractive all around, the top-tier stations are being looked at more because people can afford it. If you could find something at Barney’s or K-Mart for the same price, you’d get it at Barney’s, right?"
The Radio Advertising Bureau is quick to point out that radio’s hard times in 2001 look much better if you leave out the bloated year 2000 and that in fact the medium is healthy.
To illustrate this point, RAB has introduced an index that sets 1998 revenues at 100 index points. By this measure, May’s combined national/local index would be 129.1. Year-to-date, radio would be at 130.3.
Some analysts and buyers believe that radio has hit bottom.
One sign that the worst is behind is that some stations are preempting spots bought at discounted rates—a new phenomenon in recent months.
"You’re starting to see a lot of preemption of low-rate business. In our last month of calls it’s the first time we’ve heard about it," says James Marsh, senior broadcasting analyst at investment bank Robertson Stephens.
"We’ve been hearing that CPMs have backtracked about 18 months or so. But it seems like pricing has stabilized to some degree."
Marsh points to other indicators that radio is leveling off: June revenues, for example, are pacing down 7 percent, by Marsh’s estimate—a slight reprieve after May’s 9 percent decline. July could be down just 4 percent, while Marsh projects August to be flat.
"We’re cautiously optimistic moving into the second half. Clearly radio is kind of bouncing off the bottom. I think the second quarter is going to look and smell a lot like the first, but it appears that advertising revenue pacings are moving in the right direction," says Marsh.
"The problem is that there’s no encouragement for anybody to lock in rates when they’re going down every day.
"As rates start to move up, people start to think these are pretty good prices, maybe I ought to lock in for a few months. And the next thing you know, rates are moving in the right direction again."
Marsh points to the fourth quarter for signs of recovery, which is a bit earlier than what buyers are reporting from the trenches.
"Based on my gut, and having lived through the early '90s, I don’t really see the fourth quarter turning around and saving the year for radio stations. My guess is the second quarter of next year. I can’t see any reason to think it’s going to come around any earlier," says Furman Roth’s Lefkowitz.
Consistent with the overall media landscape, it seems as though radio has bottomed out, there to remain for several quarters before turning up again.
"It’s not going to pick up by fourth quarter. But I would think it’s at bottom. I don’t know that times can get any leaner," says Lukasewych.
July 17, 2001 © 2001 Media Life
-Gabriel Spitzer is a staff writer for Media Life.
