The 2010 radio upfront: More scatter, yet stabilized rates?

In RBR's annual network radio upfront report, we ask top media agency buyers for their take on next year’s biz, based on what deals are being placed and negotiated now -- along with what’s driving dollars.  According to TNS Media Intelligence, Network Radio was down 8.7% in the first half of the year. That’s actually not bad, considering overall radio was down 24.6%. National spot was down a whopping 29.2%. So what’s ad spend looking like going forward? Inquiring minds want to know. Creative selling will be very important this year—this upfront will definitely be more than spots & dots. Streaming audio is also going to play a bigger role than ever next year with ad buys. We also take a look at what categories will be up this time around.

The participants:
Matthew Warnecke, MediaCom Partner, Group Director, Network Radio/Network Broadcast
Maja Mijatovic, Horizon Media VP, Managing Director of National Audio
Matt Feinberg, President/Matt Feinberg Media
Ira Berger, Director of National Broadcast, The Richards Group
Natalie Swed Stone, US Director, National Radio Investment, OMD
Erin Collier, MPG Account Director/Network Radio
Eileen Casey, Associate Buying Director of National Radio, Zenithmedia
Kim Vasey, GroupM Senior Partner, Director of Radio

   
What do you anticipate in this year’s upfront from clients and from sellers?
Warnecke: While the marketplace for National Network radio is not as depressed as the Local radio marketplace, '10 Network costs should be lower and efficiencies should be proportionately better.

Mijatovic: More aggressiveness on sellers part and more digital offering; clients will expect rollbacks.

Feinberg: Emphasis will continue to be on digital and greater multi-media offerings. There will be more scrutiny of metrics and of course pressure from the client side to price according to market conditions.

Swed Stone: Clients will continue to scrutinize plans and look for better and better ROI. Sellers will continue to be flexible in order to please clients.

Berger: Relatively soft market with sellers sacrificing rate for share.

Collier: I anticipate that our advertisers may not put 100% of their dollars into the upfront. But rather, choose to put a portion of the dollars in scatter to see if they get better pricing/options based on marketplace conditions.

Casey: Due to the weak economy, getting "deals" is key for clients. National radio is regarded as an efficient medium for maximizing reach at a relatively low cost. For this reason, I'm witnessing more clients incorporating this medium into their media mix. Still it's our job to capitalize on getting the best value, which means going even lower on the rates and additional added value.

Sellers obviously don't want to slash their rates but if inventory is not moving, then they'll have to lower pricing. Only a few radio networks are pacing well this year and for the ones that are hurting, they'll have to put together attractive packages (something more than running spots) to be taken into consideration.

Vasey: Given the economy over the past two years I expect that a lot of clients may still opt for the scatter market place which allows them the flexibility to shift dollars as needed and spend based on the realities of economic influences.  For those entering the upfront - I expect they'll be tighter "out clauses" built into the upfront negotiations.


Do you anticipate a bit more spend, vs. the dismal year of 2009? Why?
Warnecke: This is a client by client question.  Curiously, some advertisers have left Network radio.  Others have embraced Network Radio's great efficiencies and consumer engagement from web synergies to on-air talent connections.  We continue to be hopeful that the strong message of the power of radio will lead to positive growth.

Mijatovic: Yes, because network provides coverage at more efficient CPMs.  Clients will focus more on media channels that can provide them bigger coverage for smaller out of pocket budgets.

Feinberg: I think spending will mirror the recovery, i.e. slow and steady. Since this recovery will not produce as many start ups there will be fewer jobs from new entrepreneurial companies, so consumer spending may still take awhile to get to where we, as an industry, need it to be for bigger brand advertising budgets. But on the average spending should be trending upward.

Swed Stone: I anticipate a very modest upfront following both last year’s radio upfront and this year’s TV upfront. Most advertisers will wait for scatter.

Berger: Many large national advertisers took advantage of the down network television market and I wonder what is left for radio.

Collier: I do believe we’ll see new advertisers in Network Radio in 2010. I think overall budgets are being shifted, taking from the more expensive media like television and moving into radio which is much more efficient. 

Casey: I think spend will be up just slightly. Radio experienced one of the worst years on record in 2009, especially Q1. Right now, I'm seeing the marketplace gain confidence again. Q4 scatter is very busy with retail and finance categories taking advantage of the marketplace. If this is an early indication of things to come, then we're in a good place.

Vasey: While the mood appears to becoming a bit more optimistic I don't expect a windfall of upspend in any category.

 
How were rates in 2009?; Do you expect a change for 2010?
Warnecke: Rates were all over the board.  However, the long term lesson continues to be DO NOT buy last minute.  A late-in-the-day negotiator is faced with efficiency issues driven by lack of inventory and not driven by overall marketplace conditions or historical benchmarks.

Mijatovic: Overall I don’t expect a big change.  Some properties (limited inventory/top market structured/ radar rated) will go up because of the higher demand which I anticipate happening in 2010. 

Feinberg: Rates in 2009 were both good and bad depending on which side of the desk you where on. Hopefully 2010 will see fairer market pricing which would mean higher rates paid for good value.

Swed Stone: ‘09 was soft—expect the same for 2010 both upfront and in general as online audio expands overall inventory levels/supply and captures larger share of market.

Berger: Soft for at least the first half of the year;  improving economy could help pricing in the second half of the year.

Collier: Rates were flat to down in 2009 and I expect the same for 2010. I don’t anticipate that vendors will drop rates much below 2009 even though the ratings are dropping due to the change in methodology (PPM). That’s the big struggle we’re going to see in our industry in the next 2 years…the evolution of PPM and how it changes the CPPs and/or the GRP goals. And of course, the biggest challenge of all...how we explain ALL of that to our clients.

Casey: Due to an abundance of inventory from the networks, we were able to take advantage of the weak marketplace and come down on rates. The 2010 Upfront is expected to be healthier than 2009, leaving very little room for negotiating on the pricing.

Vasey: Rates for 2009 were negotiable and I expect that will be the case for 2010.

What new advertisers/ad categories might be coming in or coming in stronger for 2010? Why?
Warnecke: I'd be happy with a healthy auto industry.  Mass retailers also need to see the benefits of nationwide messaging.

Feinberg: We are seeing some of the car companies take the position of "when business is bad, advertize". So I believe the auto category will be stronger than in 2009. Non-durable goods should continue to be flat to up as consumers start to spend a little more after a year of belt tightening and adjusted lifestyle.

Berger: I have a gut feeling automotive could be big.

Vasey: Despite the down trend in spending across the top categories - I expect (overall) that these usual categories (Retail, Auto, Pharma) - will remain the in the top "categories" of spending but (again) not expecting any "windfall" upspend.  Looking at spending levels for the first half - seems like home improvement category is up for 2009 but who knows if that spend level will remain consistent into the new year.

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What about categories in general—what’s looking up?; what’s down?
Mijatovic: Up: insurance/retail/quick service restaurant.  Down is Tune-In/Entertainment.

Feinberg: It will be interesting to see what the banks do in light of recent events.  Will they duck and wait for the storm to blow over, or meet it head on and try to regain consumer confidence through advertising and PR?

Casey: Because of the cost efficiency factor: retail, packaged goods, beverages will see growth. Automotive spending went up in the second half of this year (likely due to "cash for clunkers") and I expect to see it grow in the next year. Another hot category is telecom because of increased competition, especially in the smart phone category. One category that's down is OTC.


How strong will streaming/digital media spend be in 2010?
Warnecke: Streaming will continue to be a part of the audio mix - remember, there are still 235 MILLION weekly listeners to radio and some of those folks also listen online.  Radio has also been shown to connect listeners with the web, so smart advertisers will connect with their consumers on air and online.

Mijatovic: Much stronger than 2009.  Sellers have been working diligently in providing interesting solutions which in turn peaked agency/clients’ interest.  Overall bringing more accountability to the overall audio buy.  Excellent job on the part of the sellers.

Feinberg: How strong is anyone's guess, but it should continue to grow like most other things digital.

Swed Stone: Will grow significantly as it becomes more mainstream.

Berger: Until it gets its act together (it is currently the Wild West in digital-land) its impact will minimal.

Casey: Definitely on the rise with advertisers who are familiar with the medium. The positive results of the Arbitron Edison research study certainly helped (audience doubling in last 4 years). More advertisers are dipping their toe in the water, so to speak.

Vasey: As the product offer continues to grow in digital media - I'd expect that our spend levels will increase. 

Noted TargetSpot CEO Eyal Goldwerger: “The streaming market is looking up. For one, radio buyers understand now that online listeners represent an important, growing segment of radio audience. But it’s not just growth that makes it a critical component of the marketing mix; unique features like precision targeting, measurement and analytics and helping buyers rise to the demand for increased accountability. The factors have fueled internet radio’s evolution from an ‘add-on’ to a critical component of the radio buy, and will continue to attract advertising dollars throughout the upfront and 2010.”

 
What about satellite radio?
Warnecke: They are somewhat tied to the auto market, so that's the temperature in question.

Mijatovic: Same as 2009.

Feinberg: It's still here and still has a loyal audience from what we have seen. Whether it has reached its plateau, I'm not sure. I think its growth is more dependent on outside competitive technologies, or the lack thereof, satellite’s marketing efforts and how soon consumers are willing to reach into their pockets.

Swed Stone: Satellite will also likely benefit from increased online/other audio.

Berger: On top of their many challenges the coming in-car internet access could make things exponentially more difficult.

Collier: Satellite is a hard sell these days. Without actual numbers and specific statistics to show clients how each channel is performing, it’s difficult to allocate dollars to the medium. Typically we buy satellite “in concept” based on what we know about the general audience of those listeners and to help expand our reach from AM/FM. I think the next big step for Sirius XM is online…that may be where they’ll pick up an additional subscriber base and have actual ROI with impressions and CTRs...etc.

Casey: The buzz on Sirius/XM has slowed due to listeners opting not to renew subscriptions and having no established audience measurement does make matters worse.  It's a shame because the content is probably the best out there. What they need to do right now is establish a source of audience measurement and that will put them in a much better position.

Vasey: We use Satellite radio strategically for some of the unique channels they bring to the table (Martha Stewart, Truckers Channel) and I our strategy will remain on target into 2010.

Will HD Radio be a factor in your planning and buying this upfront?
Warnecke: Our considerations continue to be audience delivery, efficiency, and client integration to name three...if any opportunity is competitive on those and other metrics...then, yes.

Mijatovic: No.

Feinberg: Good question. I'll get back to you on that.

Swed Stone: No—hasn’t yet achieved critical mass.

Berger: What’s HD Radio?

Collier: Definitely not…we really aren’t even getting sales people calling about HD Radio yet.

Casey: No

Vasey: No not as part of our upfront.

Are clients a bit spooked on buying “controversial” talkers after what has happened with Glenn Beck this year?
Warnecke: Any client that was avoiding controversy continues to do so regardless of specific recent events.

Feinberg: This issue is 20 years old if a day. Glenn Beck just happens to be the latest "slip of the tongue" media personality. Clients, especially public companies, are always concerned about being associated with controversy, yet almost every advertiser wants to be in the highest rated content (on any platform). Often ratings go hand in hand with controversy, so it's a fine line. Clients who advertise in those environments just keep an eye on things and have an exit strategy. If one of the personalities they sponsor crosses the line (whatever they consider that line to be), they usually wait until things cool down to dip their toes back in the tainted waters. Others just choose to keep an ongoing "do not advertise in" list, which serves as a guideline to buyers.

We all know that the irony of controversy and political “incorrectness” which sends many advertisers fleeing, but keeps viewers and listeners flocking to see what all the brouhaha is about. A client of mine once said it best "talk shows would be boring if they weren't controversial. There are only a limited numbers of slots for Mr. Rogers on the radio." We just have to be vigilant in our censorship of what we choose to be associated with and act accordingly when someone crosses the line as we define it.

Swed Stone: Yes—they are. The political climate has heated up significantly and clients don’t want to get caught in any of that. We will be increasingly cautious regarding content.

Collier: I think clients are always apprehensive when it comes to controversial talk. No one wants to show allegiance to one side or the other. They want to remain neutral in the eyes of their consumers. Everyone is always okay with a personality UNTIL that personality says something to put him/her on the front page of the paper. Once that’s happened, it’s unlikely that the personality will ever get removed from that “do not air on” list.

Casey: Yes and we had to add his name to our "do not buy" list for some of our clients. Although controversial comments do make interesting radio listening, these personalities need to remember it's the advertisers who are keeping them alive. They need to think before they shoot off their mouth.

Vasey: "Controversial talkers" is a format that most clients avoid and that has always been the case - before, during and after - any controversy that ever hits the industry.

--Carl Marcucci

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