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:60s vs. :30s: The pros and cons of "shortening the standard" - - Part 3

Is it fair play to ask radio advertisers to pay more money for less than what they've been getting in :60s? Will the buyers accept it? The marketplace will decide.

Says Natalie Swed Stone, US Director, National Radio Investment, OMD: "If they do not price at 50%, the transition will take longer - - advertisers will not support the change as readily."

"That is the 64-thousand-dollar question that is on everyone's mind," says Kim Vasey, Senior Partner/Director of Radio, mediaedge:cia. "I've been told, and what has been announced in the press is that a: 30 will be 75% of a :60 but, in the end, it will all be a negotiation. I don't think they can get away with charging 75%. That formula doesn't even exist in TV today. I'm told that the 'major TV properties' charge about 65% and the 2nd tiered TV properties charge 50%."

She adds, "I expect that Clear Channel will look to drive rates in 2005 - - as most broadcasters will. However, rate increases across any of the groups will be dictated by the health of the marketplace. If the market remains soft, none of the groups will benefit from increases in rates. This is a supply and demand business and when there is limited supply all broadcasters raise their rates. Rates can swing dramatically under the prevailing market conditions at the time of entry into the marketplace. From the buy side, we push to hold rates or get the lowest possible increases, while the sell side pushes for higher rates and double digit increases. That's the name of the game. As we move forward into 2005, we will be tracking our rates, as we always do, from all broadcast groups and continue to negotiate to maintain rate integrity for all of our clients. I believe that through a combination of the elements of the 'Less Is More' program that CC hopes to maintain revenue shares without walking into the agencies and saying, 'Okay, we've responded to your pleas to reduced commercial clutter now we need a 30% increase in rates.' They know they can't and shouldn't do that."

Clear Channel Radio CEO Hogan tells RBR, "We cannot unilaterally 'raise rates.' If we could, we would have done it already and skipped the whole LIM initiative. The market and buyers determine the rates, based on their demand. And our use of Tradewinds (inventory and yield management system) should provide the most attractive, predictable rates in the industry. Currently, :30s are sold as either the same price as a :60 (unit pricing) or at 80% of a :60. 75%, which is what we have recommended to our stations, is not that high and in fact is a discount from current prices. The issue is not one of price-it is one of what is the most effective length for a radio spot. For those that want and need a :60, we have them and will sell. We believe, however, that a :60 is not inherently better than shorter length spots. It is not the length but how it is used. In the fast-paced competitive world consumers/listeners live in, a shorter, better spot with more frequency will likely produce better results."

This article appears in its entirety in the November issue of RBR Solutions magazine. To subscribe to the all new January debut issue of Radio and Television Business Report - The Real Business Magazine, see below to receive it - - or call April McLynn here to get your free copy: 703-492-8191.


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