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July 14, 2006
New Report Shows Folly of Radio Industry Focus
A recent report by Arbitron and Edison Research, the two leading data providers for radio stations and agencies, exposed the faulty thought process driving decision-making in the radio industry.
Their report is an update on the status of the "adult hits" format that we've previously written about. Their claim is that the adult hits format is successful because "A Switch To Adult Hits Still Means Bigger Audiences For Most Stations In Radio's Newest Format".
So all that matters, according to Arbitron and Edison, is audience size. Is that true?
The answer is an unqualified no. What matters is the quality of the audience a radio station delivers to its advertisers. As we've said before, while adult hits may bring bigger audiences, they are less homogenous, and therefore less efficient to advertise to. Advertisers are paying to reach more people, but a lower percentage of them are going to be responsive to the ads.
What does this mean for the stations switching to adult hits? It means that while their audience size may grow, their advertising rates will have to decline to reflect the lower quality of the larger audience. Whether the switch to adult hits is profitable for radio stations will be determined by whether the decline in rates will offset the gain in audience size.
Why isn't the radio industry focused on it's unique ability to aggregate homogenous audiences and serve them up to advertisers? Maybe for the same reason that golfers care more about hitting long drives when it is common knowledge that improving putting is what will actually improve their score. We're quite sure that when the radio industry stops trying to "me too" iPods and starts focusing on what they can do better than any other medium, they'll reap the rewards.
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Comments
Hello Jeff and Brett. Thanks for mentioning our recent research on the Jack / Bob format. Just some points of clarification.
I'm not sure where you got the inference from the report that 'all that matters is audience size.' While we pointed out that the audience for these stations is larger in most cases than the formats that were there before, we didn't say that this is 'all that matters.'
Also, we have talked to several station managers who are ecstatic with the audiences that they have accumulated. At the very least, the 25-54 efficiency (almost no listeners under 25 or over 54) is very useful to them. This might not be the 'homogenous' audience you are referring to, but many of our clients seem willing to trade 'homogenous but small' for 'top 5 25-54'.
By the way, I don't really see any reluctance on the part of larger broadcasters to deliver hyper-targeted audiences. These 'Jack/Bob' stations are approximately 100 stations out of 12,000 nationwide. Even after the variety frenzy of the last year, there are still plenty of skeptics, and most stations are very niched.
While many people just view Jack/Bob as a more interesting classic hits or Hot AC station, there are certainly some who would be leaving radio for iPod or satellite. They've been offered more focused choices--and they still have plenty of them in any given market--and they're not interested.
Not every 'adult hits' station has been a winner, as we make clear in our report. But many of the converts are, indeed, very happy they made the change, and a report on the billings for adult hits stations would almost assuredly show that as a group they are making far more money.
-Larry
Posted by: Larry Rosin | July 17, 2006 04:32 PM