Radio InSights

Chicken Little and the Whipping Post

One of radio's Chicken Littles has seized on a new eMarketer report to again prove radio's sky is falling. The report, entitled, "Will Internet Kill the Radio Star?," projects that by 2008 online advertising spending in the US will surpass radio advertising for the first time. Inside Radio just picked up the story, and it is likely the headline will be repeated by the other radio trades. Press release journalism at its best.

eMarketer is one of many Internet research companies that sell reports (for $695 in this case) that essentially regurgitate research published by other research companies and combine it with a minimum of original thinking. Think of it as a very expensive book report. The study combines a smattering of Arbitron data, Bridge Ratings projections, and other research bits and factoids to paint a dreary dark future for radio.

Predicting the future is easy, because it is little more than a guess disguised as inevitable fact. By the time the future comes, no one remembers (or cares about) the predictions, so futurists are rarely taken to task for widely missing the mark (which they do with great regularity). Analysts badly over-estimated the number of iPhones that Apple would sell in the first few days they were available. Satellite radio subscription projections have proved particularly optimistic and wrong. Both satellite operators and analysts have constantly revised their estimates downward. Authors often misread the future of whole industries. Remember the bright futures predicted for Webvan and community wide hotspots?

We are living in a period when anything knocking radio can get published. Write about any new technology whether it is satellite radio or WiFi enabled iPods, link it to radio's imminent demise, and the Chicken Littles will seize on it. Then the trades pick it up. And unfortunately for radio, too many station operators will believe it.

The truth is, radio is too preoccupied about alternative delivery methods like streaming. After years of cutting budgets and ignoring the product, radio does not need to divert precious dollars into new technologies until it demonstrates an understanding of how far our product has deteriorated. Given the mediocrity of too much radio today, the last thing we need is to enable more people to hear it.

We have far more immediate and pressing concerns than worrying about the growth of online advertising spending.

Overcoming Our Instincts

In the days before deregulation and consolidation, choosing a format was a simple matter. We looked at what listeners wanted to hear and picked the most popular format that was unserved. If all formats were covered, we attacked the weakest competitor serving the largest audience with the goal of splitting the audience. Today, however, things are not so simple. In most markets, there are other stations within the group that potentially complicate our decisions. What if the largest formats are covered by sister stations? What if the weakest competitor is our own station? If we have a one share and our sister station has a five share, do we declare success when we grow to a three, but our sister falls from a five to a three?

And what of the revenue implications of our actions? If a competing company has one of the top billers in the market, does it make sense to deploy a sacrificial station to attack the top biller, in hopes of chipping away at the station’s ratings? If the strategy ends up freeing dollars that our whole group takes, do we declare victory despite anemic ratings?

Finding formats that achieve individual station success while simultaneously advancing corporate goals is not an easy matter. Generally, we can do one or the other, but in markets where groups have more than two stations on a single band, we can rarely do both equally well. Maximizing a station’s individual share too often hurts sister stations. Protecting fellow group stations too often produces an underachieving station.

These are not intuitive conclusions for a radio person who remembers radio before consolidation. We all developed a "take no prisoners" approach. Back then we all fought for share where ever we could find it whether it be ratings or revenue. While the business has changed since then, the ingrained competitive spirit continues in sales departments that fight for dollars even against sister stations. We see it in programming departments that will take listeners from any station–even a sister station. And most importantly, we see it at the corporate level where every programmer and sales person is punished for not acting this way.

If radio is to benefit from consolidation, we must recognize that these old ideas are ingrained in virtually everyone in a position of power within radio. We speak of synergies of consolidation, but our instincts are to fight our family members as hard as we fight our competitors.

We must develop a new understanding that choosing formats today requires a coordinated market strategy that recognizes that maximizing corporate revenue in a market does not always coincide with maximized ratings. There are occasions when the best market revenue strategy is not the best format strategy at the station level. Formats should be chosen taking into account both our competitors as well as our fellow stations in the group. The decision regarding each station’s format should be part of a market strategy, and formats should be changed not because the individual format is failing, but instead because there are options that better aid in executing the market strategy.

Beware of Loyal Listeners

In an effort to reduce research costs, some radio stations are doing home-brew on-line research with their "loyal listener" database. If your station is one and you are making programming and marketing decisions based on the results, a growing body of evidence raising doubts about the reliability of on-line research should raise alarm bells.

Proctor & Gamble, the world’s biggest buyer of survey research, spends $200 million each year on research. The company fielded two identical on-line studies one week apart. According to Kim Dedeker, Vice President of consumer and market knowledge, the two studies delivered diametrically opposed results. And this is not an isolated case. There’s growing evidence that on-line surveys do not replicate well. In other words, the results from one study to the next can vary so much as to make the research worthless.

ComScore Networks, a company that offers on-line surveys using panels of non-professional respondents did a study of on-line research. They found that only 0.25% of the on-line population accounts for 32% of responses in other on-line surveys. Less than 5% account for more than half of the responses. This may be part of the explanation for wildly differing results of on-line studies. When the participants of a study are a small unrepresentative sample of a much larger universe, the results become very unstable. Two on-line studies fielded identically can produce entirely different results.

Harker Research has studied members of radio station loyal listener clubs and found results that parallel the findings of ComScore. Members of a loyal listener club are not representative of a broad cross-section of a station's listeners. They are part of a station’s long tail of listeners, a relatively small group of listeners who are opinionated activists with views more extreme than the majority of the station’s listeners. On-line surveys of listeners in a station's database combine the unrepresentativeness of on-line survey participants with the unrepresentativeness of database members, to produce entirely unpredictable results. Making programming and marketing decisions based on the results of a survey of this atypical portion of an audience can have a destructive impact on ratings.

The Advertising Research Foundation has announced that it is forming a council to draft new standards aimed at, "stemming erosion of client credibility" regarding on-line research. According to the ARF, "Reports of the failure of on-line studies to replicate when repeated are becoming more common. The influence on results of the ‘heavy on-line survey responder’ is worrisome, but has not yet been studied in a disciplined and objective manner." It seems the growing evidence regarding the unreliability of on-line surveys has become obvious to the P&Gs of the world, and it’s hurting the on-line research business.

Changing format with a coin toss

Few radio station managers would change format by flipping a coin, but a new analysis of format changes between 2000 and 2006 in top markets suggests that radio stations are essentially doing just that. Of the 120 format changes analyzed by Harker Research, 51% of the stations that changed format ended up flat or behind their pre-change ratings. Only half of the stations that changed format ended up benefiting from the change. This does not take into account the financial costs of changing format. If we consider lost revenue and additional marketing costs, it is likely that significantly less than half of the stations that changed format ended up financially ahead.

Radio stations too often become frustrated by their lack of success, and switch formats hoping that the new format will change their fortunes. The problem is that poor ratings often result from a poor understanding of how to do the format correctly. Even the best formats can fail if poorly executed. A station that fails at one format due to poor execution is likely to execute the new format as poorly. So instead of solving a ratings problem, a format change just worsens it.

Before giving up on a format, make sure that every possible explanation has been explored to account for the station’s poor performance. Do not assume poor ratings are an indication that listeners don’t like the format. Assume that listeners don’t like the way you are doing the format, and try to figure out how to do it better.

Radio's New Ratings Currency?

As long as Arbitron has produced radio ratings, it has emphasized average quarter-hour (AQH) share as the quintessential measure of a station’s performance. At Arbitron’s web site under "top-line ratings" one finds AQH share. According to Arbitron, looking at share gives us "a bird’s eye view of how the stations in your market are performing."

Apparently that isn’t the case in Philadelphia or Houston. Arbitron stopped publishing share rankers for these two markets some time ago. If you try to look them up on Arbitron’s web site, the ratings appear to have ended in the Fall of 2006 for Philadelphia and Winter 2007 for Houston. Later numbers have been replaced by asterisks, with the explanation being, "data are not available for this station/survey." Clearly that’s not the case. Arbitron continues to measure listenership in both markets and in fact released the latest Philadelphia and Houston ratings this week. However, the rankers Arbitron released for Philadelphia and Houston were based on cume persons.

The obvious question is why? If share gives us a bird’s eye view, why cume persons? Why not publish shares for these two markets like Arbitron does in 298 other markets? The reason is that it would make it too easy to see how much People Meter ratings differ from diary based ratings. It would lead to awkward questions that Arbitron would rather not have to publically address.

If the new ratings "currency" becomes cume persons (and 6+ cume persons at that), Arbitron can back away from it’s attempt to claim that there’s little difference between diary based ratings and PPM based ratings. They can end their quixotic efforts to "reset"costs per point. If they can get everyone to focus on cume, nearly 40 years of ratings history evaporates, and we start over. But it probably won’t work

Cume is to radio what circulation is to newspapers. It is a radio station’s reach. The number one rated station in Houston is KODA. In July it reached 1,705,500 listeners 6+. The number one station in Philadelphia is WBEB. In July it reached 1,969,300 listeners. If radio competed with newspapers, these numbers might mean something, but radio’s nearest competitor (and the other electronically measured medium) is television. When was the last time you saw television ratings reported as circulation? How many people does the show House reach? Unless Nielsen starts reporting television show "circulation," Arbitron will have to begin reporting PPM ratings in a more meaningful way. They might get away with some combination of share and cume rating, but cume persons as radio’s new ratings currency is DOA.

Agency Redefines Radio

Media Post reports that MediaVest, a division of Leo Burnett Company, has decided to drop the use of the term, " radio." Joe Mandese writes, "As The amorphous, platform-shifting nature of the current media marketplace is driving at least one major shop to redefine a medium based not on its distribution, but on the fundamental nature of its content format. MediaVest's new approach to audio planning is part of a growing industry shift away from defining media based on their distribution platforms and toward understanding how consumers interact with it."

So MediaVest has decided that radio is part of a broader media category they call "audio." Railroads were marginalized by airlines because they saw themselves as railroads and not transportation companies. If radio does not want to be marginalized by these other competing audio delivery systems, we should not forget the mistake of the railroads.

Word of Mouth and Radio

One measure of the strength of a brand is the willingness of consumers to say something positive about the brand to others. This is referred to as a brand’s positive “word of mouth” (WOM). If something is interesting or useful enough for a person to say something positive about it to others, it is generally thought to be a strong brand. In a recent Kelly Fay Group study, the brands with the highest net positive scores were Coca-Cola, Pepsi, Wal-Mart, Sony, and Toyota. In a study of teens (ages 13-17), the top brands were iPod, American Eagle, Dr. Pepper, Chevrolet, and Nintendo.

Research indicates that the attributes that make a brand worth sharing include such things as value, reliability, and offering something worth sharing. It is understandable that these brands would rate highly in these areas. In our research, we rarely find radio stations that rate highly in positive WOM. The percent of people willing to tell others about their favorite radio stations rarely reach double digits. Soon after signing on a new station might reach higher net positives, but after a few months even these stations trail off.

The irony of radio’s poor WOM is that success of word of mouth has little to do with innovation or novelty. New products or services do not inherently generate higher positive WOM, as the top scoring brands demonstrate. Positive WOM is generated by a product’s ability to solve a problem or serve a useful purpose. Apparently few people see radio stations doing either very well.

GreenStone Media Closes Doors

GreenStone Media, the company that championed "female-targeted talk programming" is closing its doors. In announcing the closing, CEO Susan Ness wrote, "We believed (and still believe) that women need a voice on commercial radio, and that radio needs women's voices."

The failure of GreenStone Media may be due to broadcasting's unwillingness to allow women to be heard. However, a more likely explanation is that Greenstone failed to offer any compelling programming that women wanted to listen to. While its programming wasn't widely distributed, it was on in several markets. If the company served an otherwise ignored segment of the market (women), then women should have responded. They didn't.

The fact is, that women do have a major voice in radio programming today. Their interests and needs play a significant role in molding radio, including talk radio. A politically oriented News-Talk radio station is typically 40-50% female. No station can succeed without serving half its listeners, which is why most News-Talk stations research women.