The Financial Manager's Perspective: Following the Money

The best Way to give advertisers what they want is by ensuring that we are serving our audiences.

A couple of weeks ago,  MFM members had a chance to get together with analysts and representatives from the media buying community to discuss how media companies can, as the seminar’s title suggested “Follow The Money: Give Advertisers What They Want.”

While the seminar primarily focused on the changes that are affecting advertising sales, it also reinforced the importance of an axiom that remains constant: if we serve our listeners, viewers, and readers well, all else will follow.

That axiom seems to be a given, but  it’s worth making sure that we are applying it when we make even the smallest of business decisions that have a direct affect on our audiences.

I was reminded of this when the CFO for a station group gave the example of a recent conversation in the stands at a high school football game.  Students were discussing their favorite local radio stations and one of them replied, “I like WXXX because it shows me the name of the song and the artist.” 

As this CFO knew, the teen listener wasn’t talking about a digital radio service.  The local station had deployed a dynamic RBDS unit (also known as an RDS unit) that allowed it to send the data to radios with a digital alpha-numeric display.  This overheard conversation was a real eye-opener for him because, in several of his stations, they’d opted to install the lower-cost static RBDS units which saved them about $2,000 per installation.  Of course the difference was that the static versions can only display one line of information, typically the station’s call letters.  On the other hand, the dynamic version interfaces with the station’s automation system and can transmit the station’s tagline, the name of the song playing, and the artist.  Suddenly that $2,000 savings seemed like a false economy.  They’d missed an opportunity to keep listeners tuned-in.

Absent reliable listener data, it would be easy to assume that this feature wasn’t going to contribute much value to the business.  After all, aren’t teens listening to iPods or CDs?  Maybe not. A recent study by Paragon Media Strategies reported that 14- to 24-year-olds mostly say their radio listening has increased over the last year or two.

In addition, when researchers compared the teens’ answers to their responses from a year ago, fewer of them reported that MP3 players and other devices were cutting into the time they spend listening to radio this year.  “Radio stations may be doing a better job at connecting with those people,” Larry Johnson, the study’s author, told the New York Times.

This observation isn’t the only one that reinforces Internet visionary, MTV founder, and former DJ, Bob Pittman’s testimonial that “I think there are probably no better brand builders in the world than radio programmers.”

Certainly the radio industry’s expansion into online business opportunities is a great example of Pittman’s point.  As RBR recently reported, over 96 percent of radio stations utilize podcasting.  “These stations see podcasting as an important business investment,” RBR reported.

The story went on to say that interactive radio listeners represent the engaged audience that appeals to advertisers, who place their ads preceding every podcast.  In one example cited in the report, WCBS offers 50 to 70 podcast clips every day which “translates into 700 to 800 thousand downloads a month, creating tremendous ad revenue,” RBR found. 

Of course, the upside of these opportunities is revenue potential.  The other side of the coin can involve conforming to new regulations or financial reporting requirements.  This has certainly been true with respect to music licensing agreements; agreements which cover, among other things, how stations pay for the rights to music in podcasts.  Not only are there additional rules concerning digital rights, they continue to evolve, making it necessary for media companies to confirm that they are keeping in compliance with these requirements.

With that in mind, MFM has asked David Oxenford, of the law firm Davis Wright Tremaine LLP, to provide a music rights update via a Distance Learning Seminar later this month.  Scheduled for Tuesday, November 18, from 4 to 5:15 p.m. ET, David will discuss the rights needed to use music in connection with the operation of broadcast and cable companies, in both the traditional media and in digital applications, including:

* internet radio
* podcasts,
* production of videos using music,
* use of music in commercials
* music in station promotions
* downloads
* website user generated content

In addition to MFM’s recent Regional Seminar about advertising and monthly Distance Learning Seminars like this one, our members use an “ask the expert” service and online forums for sharing ideas on how we can continue to provide competitive opportunities that meet the demands of our advertisers and serve the interests of our audiences.  More information on these educational services is available on our web site, http://www.mediafinance.org

Given the current market concerns, it’s natural to think about where we may need to cut costs in order to compensate for revenue shortfalls.  However, there’s a lot of truth to the idea of being “penny-wise and pound foolish,” especially if our short-term focus gets us off course.  As the popular Omar Bradley quote reminds us,”We need to learn to set our course by the stars, not by the lights of every passing ship.”

--Mary M. Collins, President & CEO, Media Financial Management Association

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