HEARING THE CALL, BUYERS JOSTLE FOR RADIO; RADIO LOVES THE NET: 'PHENOMENAL GROWTH FOR MATURE INDUSTRY'

By Published on .

Most Popular
Radio has cachet again.

Radio advertising has undergone a resurgence since a wave of consolidation rapidly transformed the industry.

Now a business run by a handful of big media companies, radio is seeing economies of scale in programming, personnel and technology.

Media executives say although price increases across the board are a reality, they have less to do with consolidation than with the simple economics of supply and demand.

"Rates have increased significantly this year because of the demand," says Natalie Swed Stone, VP-manager of network radio at Media Edge, New York. "We're in a place where demand is equal to inventory."

STELLAR STOCK NUMBERS

The stock performance for publicly traded radio stocks has been stellar.

"First quarter was up 15%; second quarter should be up 10%-11% -- we've got solid double-digit gains this year," says William Meyers, VP-media analyst at BancBoston Robertson Stephens. "It's the benefits of consolidation, a strong economy and a lot of Internet dollars spent in radio. This is phenomenal growth for a mature industry."

Increases are in line with radio's value and demand should continue, says Chuck Armstrong, exec VP-chief marketing officer for AMFM Interactive, a division of AMFM.

"There's more demand, and it's the cheapest broadcast medium out there," he says.

Ad spending increases in 1998 across all media were up; most significantly, national spot radio rose 21.1% to $2.04 billion, according to Competitive Media Reporting.

Media buyers say the shift in supply and demand can be traced to dot-com advertisers, a hot radio spending category. Just like skateboarding-kids set fashion trends for teens, the dot-coms are out in front in their recognition of radio.

The new category is breathing life into the medium, making it hip again.

"If you have a new category and it elevates [cost per thousands], it creates a halo effect," says Patrick L. McNew, senior VP-director of operations for BBDO Worldwide's Southfield, Mich.-based Local Media Network division. "When you get a category that's hot, it gets the demand going and it gets the rates up."

Mr. McNew, who claims some radio networks have more than doubled the number of salesmen, also says more local selling shrinks the supply of radio ad opportunities.

VISA SUPPORT

Besides Internet advertisers, other national clients are bullish on radio. Visa USA is a significant client of Local Media Network. Cable TV network Showtime uses radio through Media Edge to promote tune-in to specific shows, according to Ms. Swed Stone.

"It's exactly the way that listeners are looking to use radio," she says.

Showtime buys all markets across the U.S. through networks such as ABC Radio Networks, AMFM and Westwood One.

Chrysler Corp. spent more than $50 million in 1998 on its Dodge vehicles, and that spending is all done locally, says Mr. McNew.

"Everyone thinks about Dodge as one client, and it's really 39 different clients because we have 39 different dealer associations" with different needs, he says.

With a finite number of advertising opportunities and control held by increasingly fewer owners, media planners and buyers will look for easier ways to do business. One bright light might be next year's introduction of XM satellite radio, a new broadcast band set to bow in 2000, which may provide more opportunities in radio once commercial opportunities are available.

"We'll be able to say no to some of these networks who are asking for high rates," Ms. Swed Stone says. "We want to be able to walk. That's what we live

In this article: