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A TAX PLUM THAT'S HARD TO IGNORE RADIO EXECS FEAR THREAT AT LOCAL LEVEL FROM POSSIBLE REDUCTION IN DEDUCTIBILITY

By Published on .

DALLAS-Radio advertising executives are tuned to the same frequency when it comes to the impact that a change in federal tax law would have on the AM and FM dials.

"It's imperative that the industry raise awareness among members of the powerful House Ways & Means Committee and the Senate Commerce Committee, that those legislators understand the value of advertising to America's economy. It is the sole source of revenue for local broadcasters," said Eddie Fritts, National Association of Broadcasters president.

Mr. Fritts spoke at the Radio Advertising Bureau's 14th annual Managing Sales Conference & Executive Symposium here earlier this month, a meeting attended by more than 1,700 radio executives.

Although no bills have been introduced, attendees were buzzing about the possibility that Congress might propose limiting marketers' deductibility of advertising costs from 100% to 80%, with the remaining 20% amortized over a four-year period.

If enacted, such a change could generate an estimated $5 billion in revenue from radio alone. Preliminary estimates show radio represented about 6.8% of the $138 billion spent on all media in 1993, said Robert Coen, director of forecasting for McCann-Erickson Worldwide, New York.

Clearly, any bill along those lines would have a negative impact on all ad-supported media. But radio could stand to lose the most. The majority of radio stations are deeply rooted in small local markets with few regional or national ties and, therefore, have no alternate revenue sources.

Despite such concerns, radio ad revenue has been bouncing back. It rose 9.3% to $9.5 billion last year, the highest growth rate since 1985's 11.5%.

The ad bureau is unveiling an aggressive marketing initiative, the Radio Industry Executive Program, to try to further the medium's growth this year.

RAB President Gary Fries and leading industry executives plan to call on marketing executives at the top 200 advertisers to tout radio's reach and effectiveness. Target companies include Colgate-Palmolive Co., Kellogg Co. and Quaker Oats Co.

"We leave call letters at the door and make calls that sell the industry," said Gordon Hastings, president of Katz Radio Group, a New York radio sales rep company participating in the program.

Katz and a leading rival, Interep Radio Store, New York, have actually been teaming up in some cases to steer advertisers toward radio. Mr. Hastings said the companies recently convinced Bristol-Myers Squibb Co. to return to the medium, where the marketer is expected to spend several million dollars this year.

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