On Tuesday’s quarterly earnings call, Radio One CEO Alfred Liggins was asked a question about radio’s pricing pressure. His answer was that radio has been living with pricing pressure for quite some time and says that’s due to radio’s two largest companies — iHeartMedia and Cumulus — having balance sheet issues. In other words, their need to generate revenue to pay down debt is so great, they will take whatever rates they can get to write the order. So why is David Field’s name in the headline?
Liggins reminded analysts and investors that David Field’s mantra for years has been that radio is underpriced. Field likes to say radio is punching below its weight class. However, Liggins added that Field — and Entercom — now have more assets, they are a much bigger player, with scale, and perhaps their bigger size and clout will help raise rates across the industry.
Liggins believes, as Field does, that radio is still underpriced. And the numbers don’t lie. Radio has been pretty much a flat industry for several years now, and seems to be happy to be flat at times. Liggins said, “When you don’t have balance sheet issues, you can act more rationally and take more chances. It ultimately mitigates.”
Liggins was also encouraged that Liberty Media made a play for iHeart. He says it’s a good sign that smart people, like the folks at Liberty, are interested in the strong cash flow characteristics of the radio business. He says he’s been pleasantly surprised at how resilient radio has been and the interest from Liberty underscores that.
“When you don’t have balance sheet issues, you can act more rationally and take more chances. It ultimately mitigates.”
Many stations’ have their backs against the wall in the revenue department which is pressuring them to undervalue their inventory.
I think both Mr. Radio and Kramer have excellent points. It can be challenging to sell a product that has been chronically undervalued for years but, as Mr. Kramer mentioned, the station’s (or their owners) are in complete control of the supply. You always have pricing leverage, what you may not always have is the courage to actually use that leverage.
Mr. Radio, you are forgetting that there is no real “supply and demand” here. Broadcasters can limit the “supply” as much as they have the courage to, including going commercial-free (especially local broadcasters), so that if potential advertisers want to reach the radio-listening audience, which is as strong as ever, they will have to pay a market ROI rate.
And this is starting to happen.
When smart advertisers realize that they have to pay a similar rate for radio’s ROI as they do for other media, they will.
Amen, Roy Radio
We are just dumbfounded that many high-ranking radio managers, including Liggins, demonstrate what appears to be ignorance about Economics 101 when they complain about radio’s pricing. Pricing is NOT about stations or station groups just “raising the rates.” SUPPLY and DEMAND drives pricing in ANY business. Period. End of story! If there are more potential buyers lined-up to buy your product, than there is supply (inventory) available to serve those buyers, you can raise your pricing. But if there is more product available than there are buyers, you have ZERO pricing leverage. What about this is so hard to understand????? So stop blaming your sellers, or other radio companies, because you are not getting the pricing that you think you deserve. The MARKETPLACE and Supply and Demand determine your pricing, not you!! And finally… when Mel Karmizan started the insanity of cluster breaks… 8, 10, 12 or more commercials in a row (Karmizan did that as a short-term revenue and stock play, with no regard to the fact that he was driving away listeners)…anyway, with the insane cluster breaks, that just exacerbates radio’s problem of too much “supply” or inventory of ad time, which works dead against creating demand or the ability to raise pricing. And we are not even talking about how advertisers’ messages don’t even get heard, when they are buried in the middle of a long cluster break.