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August 09, 2006

Victory For Radio Advertisers? Mixed Comments by Clear Channel CEO Hogan

During his Q2 earnings call on Tuesday, Clear Channel CEO John Hogan made some interesting comments.

In a sign that Mr. Hogan has a perspective that radio advertisers will welcome, he said:

"...we need to be consumer-centric, that we need to be programming our radio stations so that we give people more of what they come to radio for, and that is content. That we need to be more creative and innovative in how we put commercials into the mix..."

Bravo! Those of you who follow our comments on this blog will recall that we've suggested this very perspective to Mr. Hogan in recent posts. We're glad to see he's listening, or at least that he didn't need our advice.

But then Mr. Hogan goes on to make the following assertion:

"It is hard to engage someone for sixty seconds and we think by offering a variety of spot lengths and spot positions, that we're providing a better product."

Now we've lost him. On two counts. First, we disagree - and we have quite extensive first hand experience with this - that it is hard to engage someone for sixty seconds. Direct response radio advertisers know empirically that, to the contrary, it is hard to engage someone in just thirty seconds. Now, it is true that for some products sixty seconds may not be required. But it still very likely requires something more than 30 seconds. Less choice here makes for a poorer product.

Second, a "better product" is one that allows paying customers (radio advertisers) a reasonable amount of choice. Some would even say that a better product is one that provides more choice, not less. It is extremely difficult to support the statement that a wholesale switch to 30's, which cost more than half as much as 60's yet are less effective, is providing a better product.

Further, if Clear Channel's advertisers (its paying customers) were to put boring ads on the air that don't engage listeners, they won't be around for long because their campaign will be ineffective. So it seems that Clear Channel is not only not providing a better product, but also trying to enforce a solution to a problem that already has an automatic mechanism to correct it.

Here's the essence of the problem. Clear Channel has TWO customers, not one. It has listener customers, and it has paying advertiser customers. So when Mr. Hogan says he's being "customer-centric", which customer is he thinking about? And which customer is his senior management team and the rest of his company thinking about? It sure doesn't seem to the the paying customers. Implementing a set of policies that meets the needs of one customer at the great expense of the other will result in failure at worst and in mediocrity at best. We hope Mr. Hogan and his team will review their plan and come up with a better one. Surely they can do more to come up with more compelling content than limiting ads to 30 seconds.

Posted by Jeff Small & Brett Astor at 12:05 PM | Permalink