In our annual network radio upfront feature, we ask top media agency buyers for their take, along with noting the big issues driving dollars. The theme this year is many budgets are still up in the air. Negotiations are ongoing, but the media buying community and their clients are looking to be far more cautious this upfront before committing dollars for 2009.
Streaming audio is going to play a bigger role than ever, so how will that play a role in upfront dollars? There have been many changes in network radio as of late, so how has the changing competitive landscape altered negotiations? How is supply/inventory looking for 2009? We asked these questions and more.
The participants:
Rich Russo, JL Media SVP/Director of Broadcast Services
Kim Vasey, GroupM Senior Partner, Director of Radio
Natalie Swed Stone, US Director, National Radio Investment, OMD
Agnès Lukasewych, MPG SVP, Group Account Director, Audio Broadcast
Matt Feinberg, SVP/National Radio; SVP/Director, Interactive Broadcast; Director/Radio, Zenith Media Services
Irene Katsnelson, Universal McCann VP, Director of National Broadcast
Pat McNew, PHD EVP/Local Media Network (LMN) Director of Operations
Maja Mijatovic, Horizon Media Director of National Radio
Pearl Kim, Supervisor, National Broadcast, Carat USA
What do you anticipate in this year’s upfront from clients and from sellers?
Vasey: Network radio started out in 2008 with a bang but has since slowed a bit and the A/Es are under a great deal of pressure to maintain pricing and shares. With the overall economic downturn I expect we may face some challenges in maintaining spend levels in 2009 which will drive pricing down or, at the very least, flat.
Swed Stone: Aggressively seeking business given uncertain economy.
Lukasewych: Expect this years’ (2009) upfronts to be flat to slightly up (1%). Although we have seen declines in local/national spot radio, network radio has continued to have small increases each quarter of this year.
Feinberg: Clients are looking at radio efficiencies to extend reach. Sellers are facing ever increasing competition and a tightening economy so they will be aggressive with their platform pricing. Agencies are looking for innovation and value. So between these different needs, challenges and desires we should have an interesting upfront season.
Katsnelson: Generally speaking, the upfronts are taking place as in prior years. Though it’s still early to tell on volume vs. YAG, the traditional upfront advertisers are all back. This is obviously great news for radio and maybe an indication that the medium is considered viable for many clients.
Mijatovic: From clients: more flexibility, holding back budgets. From sellers: stronger networks, more inventory (local kicking it to national).
Kim: All of our Upfront advertisers will continue to do an Upfront for next year.
How will the economy impact you and your clients?
Russo: That remains to be seen, history has proven throughout the years that when the economy tanks, the advertisers who hold steady and stay in the game end up stronger in the long run. So the hope is that clients are savvy enough to weather the storm.
Swed Stone: We expect belt tightening all around and scrutiny of budgets and details.
Lukasewych: Would expect most clients will have to be more reactionary this coming year, shifting marketing plans as the economic forecast changes.
Feinberg: Several weeks ago a US Senator said the fundamentals of the American economy were sound. A week later Wall St. fell apart. So given the insight, and understanding from our high ranking representatives , we believe the US economy is not getting any better (“duh”) and clients, agencies and Joe three-pack (he can’t afford a sixer anymore) are in for some tough times. However, advertisers still need to get the word out, so they will look to us to put together even smarter media plans and negotiate that much harder so their dollars can see the maximum benefit re: consumer communication.
McNew: Until the credit crunch is resolved any client trying to market and sell a product that’s a “considered” purchase and may involve financing is going to have difficulty.
Mijatovic: No one will be immune.
Kim: As far as what I’m seeing, here at this shop, I don’t see a negative impact. That may not be true across the board, but I don’t really see drastic cuts from any of my clients.
Do you anticipate the same, more or less clients coming in? Why?
Vasey: Yes, I expect all of our clients who use network radio to be active in 2009. It’s a highly effective, efficient media that continues to deliver for our clients. It’s a challenge to predict what will be up or down for 2009 as not all budgets have been finalized yet.
Swed Stone: Either the same or fewer—some clients will not be able to commit any budgets this early and may convert to scatter as needed.
Lukasewych: We may see more clients come into network radio. Today’s economy is forcing all companies to streamline costs and because network radio has historically been more efficient than local/national spot radio, it is well positioned to benefit from a struggling economy. Budgets may be down but we may see more advertisers turning to more radio to maintain their share of market.
Feinberg: Our client base is in and out of the audio space (it always has been) and agency creative issues continue to be a challenge. However clients who have competent creative AOR’s continue to look at radio from a strategic standpoint to communicate their message. Certainly as the digital platform expands and vendors, are able to market it so it can compete with other web offerings, the chance of new revenue streams increases.
McNew: We expect things to be “at best” flat to down 4%.
Mijatovic: Yes, because 2008 produced results; my clients are in network radio over 10 years now.
Kim: I anticipate more or less the same coming in from all of my clients.
What about categories—what’s up, what’s down?
Russo: Is anything up? I would assume auto, mortgage and banking will be down for a while.
Lukasewych: Not all clients are having a bad year depending on category/product offerings. Categories that remain a good bet are those that are trusted and offer the consumer ways of cutting costs. Discount retailers, do it yourself maintenance/appliance stores, and those financial companies that remain solid and have a vested interest in getting the word out. With banks taking a more conservative stance on loan approvals, we can anticipate a continued down trend in the automobile industry and mortgage companies.
Feinberg: From what I understand many of the big box stores are spending more in the network arena which makes a lot of sense. Auto is down for us, but, we find the upfront is not indicative of how the year will pan out.
McNew: Autos and banks are precarious and too tough to call at this point. Healthcare and communications tech will be up, but not enough to offset potential auto shortfall.
Mijatovic: Retail’s down; entertainment down, insurance up.
Kim: I have clients in the Retail, Real Estate and Dining categories. I anticipate the majority of them doing the same. Some may be down slightly.
What role will streaming/digital media play?
Russo: I think once the royalty thing is finally worked out completely, it could be a nice supplement to a buy.
Vasey: While we’ve been dabbling in this space in 2008 and expect to do so in 2009 – I expect that our spending will increase somewhat as we continue to explore new opportunities in the digital world of radio. However, I expect that our spending will remain in the single digits.
Swed Stone: We expect to be using it more and more in richer and more interesting ways.
Lukasewych: Continuing on-air presence through stations’ media players will help boost frequency that we have seen declining with lower time spent listening shown with new PPM methodology, therefore if budgets allow not a bad platform to extend into.
Feinberg: Digital media continues to play an important role with our clients. Streaming audio specifically has been part of our landscape for well over seven years. With the maturation of video pre roll within radio sites we anticipate continued growth.
Mijatovic: It will be part of our plans as it was for last 4 years.
Kim: We have bought streaming/online radio in the past across the majority of our clients. We have brought streaming, podcasting, text messaging opportunities that complement the media buys to our clients and some have embraced this new technology.
What about satellite radio?
Russo: It’s another work in progress, hopefully when they sort out the channels and overlaps, they can put together a really compelling lineup that gives advertisers a sizeable audience, and hopefully will be something the listeners feel is worth having because of unique channels like the UNDERGROUND GARAGE.
Vasey: With the limited penetration of satellite radio I don’t expect any significant increase in spending in this area, for us in 2009.
Swed Stone: We will also look for opportunities there and hope for new ones given the merger.
Lukasewych: For the right product/client this remains a highly target platform, especially now that they have merged some channels will become available to provide subscribers with additional niche programming.
Feinberg: Satellite continues to be fixture on our radio plans.
Katsnelson: Now that the merger is done and both suppliers are consolidating their businesses, the next step for Satellite radio is MEASUREMENT. Once the channels are fine-tuned and a final single entity is established, accurate measurement, applicable to all channels is key for advertiser participation.
Mijatovic: Slightly more but we are holding back the budget to make sure appropriate measurement is being applied to a new, merged company.
Kim: Now with XM and Sirius combining, it will be interesting to see what they come to us with. We have been buying XM or Sirius or both for a lot of our clients and now that they’re one company, I think it will be good for our clients. We can reduce a lot of the duplicated news/talk channels we have been buying on both networks and we will be able to see sports or comedy sponsorships with more variety or more options..
Is HD a factor?
Russo: I think sports looks great in HD, the picture is so clear, it’s like you are there and with the digital transition coming and the prices dropping, more people will have HD TVs. Oops, sorry about that, you meant HD radio… at this point BIGGEST WASTE OF MONEY AND RESOURCES in the history of broadcasting. It makes Betamax look successful.
Vasey: I don’t expect HD to be a factor in the network radio arena for quite a few years (if ever). HD will be more of a local application. Potentially, the HD stations could become part of a network line up of affiliates but the insignificant audience base would bring very little additional reach or frequency to any campaign. And, I think it will be a long time coming that we see any solid audience numbers behind these HD channels. Since some of the stations in PPM markets are having their HD channels encoded we may begin to have some hard data on usage which will be telling evidence of consumer’s wiling to go out and purchase an HD radio. I still believe it will take years before there is any solid audience numbers behind these channels.
Swed Stone: We will look at all emerging opportunities.
Lukasewych: I seriously think this will not get off the ground unless car manufacturers offer as a standard in the dashboards.
Feinberg: HD has yet to gain real awareness with the listening public from what we have seen, or not seen. However, we continue to believe HD radio will offer interesting opportunities for advertisers. It’s just a matter of time.
Katsnelson: Will only be a factor once upon installation in cars. This will give HD critical mass and a true national footprint. Next step would be programming and the ad model.
McNew: Huh? Factor? Who cares.
Mijatovic: No.
Kim: I think HD will become a factor within the next year or two.
What about supply? Has it changed?
Russo: Sure there’s a lot of it since the demand is way down.
Vasey: No, there really hasn’t been any major influx of supply in the industry. The biggest change is the number of RADAR networks continues to grow – but that was just a shift of inventory that was already available that was moved into RADAR. Unfortunately, many of the new RADAR networks, while having very solid ratings behind them, have limited inventory and are broad rotations. Utilizing some of those network present challenges when trying to meet daypart-specific goals. But we take advantage of these networks whenever they align with There is an increasingly supply of digital offerings from all of the networks and I expect that more of these offerings will continue to emerge for 2009 and beyond.
Swed Stone: we would like to see national radio’s share of commercial airtime increase –it is currently a fraction of the total radio hour. It has been increasing via programs and personalities—we would like to see more national access to stations in different ways.
Lukasewych: I think we’ll probably see some of the larger broadcast companies taking on more syndicated programs as a way to streamline operational costs which will trickle down to have an effect on increasing available network inventory.
Feinberg: Well certainly the number of national vendors has changed over the last few years, and they are always reconfirming their networks to address marketplace needs. However, as far as actual inventory I think it’s basically the same.
McNew: Yes it has changed. Maybe there will be less emphasis on clutter because there will be fewer advertisers cluttering the airways.
Mijatovic: There is more inventory and I suspect there will be even more, should local continue its steady decline.
Kim: 4th Quarter is usually the tightest quarter with the holidays and promotions our clients want to advertise. I think this quarter has softened a little bit but November and December inventory is still tight.
What about the competitive landscape? Has it changed?
Russo: Of course, Dial Global through their purchase of Media America and other configurations has become more of a player. Westwood has made some wholesale changes as well so there’s a possibility that they can get back on the map. It’s better for the industry as a whole if all of the players are strong.
Vasey: The biggest change in the competitive landscape the merging of Jones Media America with Dial Global and the number of RADAR networks that they now offer. United stations also put a network into RADAR and both companies have top ranked RADAR networks available. They’re non-daypartable but have solid ratings behind them. Merging JMA and Dial Global brings the combined product offer of each company under one roof so that changed the landscape a bit. However, I don’t expect our spend levels within their product offer to change dramatically. Premiere, ABC and Westwood still remain solid networks and each network has it’s strengths of networks and program offerings. I don’t see any major shifts of spending any of these networks in 2009 if our spending levels remain consistent.
Swed Stone: Yes—it includes multicultural sellers, digital media (online/satellite), and consolidated owners (Citadel, Clear Channel, Triton, etc).
Lukasewych: Competitive landscape will continue to be watched closely as advertisers compete to gain/retain share of market voice.
Feinberg: Can anyone say “Triton”?
Katsnelson: Competitive landscape has changed with Dial-Global’s acquisition of Jones/MediaAmerica, eliminating them as a supplier. DG has an excellent reputation and is now integrating the MA properties into their structure. I’m sure as a result, there will be some changes in inventory/vehicle selections resulting in a solid/viable product.
Kim: Dial Global and MediaAmerica have merged so that has changed the landscape a little bit. I have also heard TargetSpot has bought Ronning Lipset. It will be interesting to see how these changes will affect the options they have.
Are you using PPM data yet? Will it affect your business?
Russo: Yes we are using it. It affects business somewhat because clients are asking about it but in reality we won’t gain or lose a piece of business because of it.
Vasey: Yes, we are currently using the PPM data for all markets in which PPM has become currency. We are educating the planners, buyers and clients on the currency conversions from the diary method of measurement so that everyone is comfortable with the new measurement paradigm and knows how to plan and buy using the PPM data.
Swed Stone: Only directionally. It will begin to have an effect on national numbers in ‘09.
Lukasewych: Diary methodology should be as obsolete as “dialing” a phone number. Passive measurement will put radio on equal footing to other medias, especially online platforms, when it comes to accountability.
Feinberg: Yes, we use it. It is the currency of the marketplace, or is becoming the currency.
Katsnelson: Since PPM is currently in a few markets, impact on network audiences overall is not significant, but as it rolls out to more and bigger markets it will obviously affect audience estimates. We continue to track the progress of PPM and will evaluate data as it becomes available.
McNew: Yes, and we will be utilizing more PPM data as it becomes available.
Mijatovic: Not right now, because RADAR is a 4 book average so it will take couple of years before top markets PPM data (no mixing of PPM and diaries) goes into affect of RADAR.
Kim: Since we’re network radio it hasn’t really affected us. We don’t really see it in our RADAR or Act One nationwide numbers, but I think once the 10 PPM markets roll out and we see that in RADAR—maybe next year or 2010, we’ll actually see our ratings affected at a National level.
