Radio networks savor hot demand for 2000 upfront

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Radio networks are closing a red-hot upfront with at least 40% of ad inventory locked up through the end of next year -- despite 25%-plus increases in prices.

"I've been doing this for 17 years and I've never seen this amount of volume of money become available for upfront purchases," said Jim Higgins, exec VP-general manager for United Stations Radio Networks. He expects to finish the upfront with about 45% of USN's inventory sold for 2000.

"It's never been this good," said Traug Keller, VP-sales for ABC Radio Networks, who anticipated selling 45% of inventory by year's end.

DOUBLE-DIGIT JUMPS

Radio ad revenues are expected to reach $17.7 billion in 1999, up from $15.4 billion last year. And the total could jump at least 12% percent in 2000, said Gary Fries, president-CEO of the Radio Advertising Bureau.

Network radio, which represents the smallest piece of the radio ad pie, could see even higher growth, Mr. Fries said. That's on top of its current sizzling sales.

"This will be the largest upfront [sales period] ever for network," said David Kantor, president of AM/FM Radio Networks, which expects to sell 60% of its 2000 ad inventory by the end of this month. Traditionally, network radio companies, some of which own stations and others that syndicate national shows, have sold about 30% of next-year inventory in advance.

DIVERSE FACTORS

"There are a lot of reasons [for the radio boom]," said ABC's Mr. Keller. "Things came together at the same time: the consolidation and mergers on the front pages, the explosion of the dot-coms and, though it's been overshadowed, the increased accountability at the brand level for spending dollars."

While dot-coms were a catalyst for increased sales, it's not merely the newcomers tossing ad dollars into the radio pots.

"It's kind of like the upfront for this year is a culmination of everything you always hoped for in media growth," said Mr. Higgins. "With increased budgets, existing clients like Warner-Lambert Co., the History Channel and Geico Direct are all coming back to a media they've been involved in for a number of years with more money."

Package-goods companies such as Procter & Gamble Co. and Kraft Foods are also storming the market with more brands.

"If you're a brand manager with the job to sell soap and budgets are going up only 5% but media costs are going up more, you have to start looking at new media, like radio and outdoor," said Mr. Keller, whose company represents about one-third of the network radio inventory.

AVOIDING RATE INCREASES

Advertising executives and media planners such as Mitchell Scholar, director of national radio at Horizon Media, New York, began encouraging clients as early as July to plan their 2000 radio advertising purchases to keep down rates. He said clients booking early escaped price increases that could top 25%.

Longtime radio advertiser Geico Direct, whose parent Berkshire Hathaway spent $32.3 million on radio advertisements in 1998, was spared the rush to buy 2000 ad space because the client negotiated a two-year deal in 1999, Mr. Scholar said.

"I think a lot of people in the past year have been testing radio and have had good results with it," said Reyn Leutz, senior VP-associate director of national broadcast at Ogilvy & Mather, Chicago. "People are motivated by efficiency and skyrocketing costs to find another way to reach the consumer."

Small networks, too, are reaping the benefits of a hot market.

Dean Gavoni, VP-sales for NBG Radio Network in Portland, Ore., expects to sell 75% of his 2000 inventory by year's end.

"We don't want to look a gift horse in the mouth," said Mr. Gavoni, who hopes company growth will increase inventory in the next 12 months. "We'd rather take a little less up front and be able to make it up later."

The boom in ad buys is also evident in the $2.7 billion national spot radio market.

Stu Olds, president of Katz Radio Group, is seeing first-quarter pacing for 2000 that is 30% to 40% higher than last year.

WHAT'S DRIVING SALES

"Radio is benefiting greatly from the healthy economy," Mr. Olds said. "As I look down at the business for first quarter [2000] on the books, it's automotive, entertainment, package goods, fast-food, soft drinks and telecom. There's a wide variety of business that is driving [the market] right now. This is as good a start to a new year as I've seen."

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