Was It Worth It?
An investment group that planned on bidding for Clear Channel was concerned whether the price was worth it, citing stories in the WSJ and other media about their revenue growth in 2006 attributed to their Less is More campaign. Their question was a good one: How much more growth is expected as the company reduces the amount of time devoted to commercials, substituting 60 second commercials in favor of 30s, 10s and 5s? The Lund Consultants were asked to evaluate what has happened to CC's radio revenues and ratings since instituting Less is More in late 2004.
Units vs. Minutes. Most broadcasters were skeptical about the concept when it was revealed two years ago. The concept of reducing 60s in favor of shorter commercials would mean less time devoted to spots in an hour, thus more music. But many professionals joined the naysayer camp since listeners counted commercial units not length. A six unit stop set with 30s is perceived to be the same as 6 60s, and running a 10 second spot between two songs must have an adverse affect on TSL.
We conducted a study of numerous Clear Channel FM stations in the nation's top 30 markets, especially where CC enjoys a strong ratings presence with multiple stations. We examined the spot load on those stations before LIM was instituted (2003), again in 2005, and recently (summer of 2006) before the political commercials began airing.
Most CC stations ran reduced spot loads with fewer 60s in 2005. The number of 60s aired was reduced by over half compared to the same hours two years before. With the lower commercial load, executives predicted higher ratings - but did stations enlarge their audiences? Our research did not indicate any ratings surge in 2005. It may be due to competitive stations also reducing their commercial inventory, or that listeners who objected strongly to commercials had already left radio for their iPods.
But look what happened this year: Our analysis of CC's commercial policy shows a huge increase in unit count. We discovered that CC apparently abandoned aspects of the Less is More philosophy in early 2006 on most major market FMs to air as many commercials as possible - far more than ever before. Some stations ignored the focus on 30-second spots and aired as many 60s as they did in 2003.
2006 Examples: In San Francisco, KMEL (CHR Rhythmic) ran 20 units in the 8 AM hour one day in May, 8 were 60s; KIOI (Hot AC) ran 16 units in the 7 AM hour in May, 13 of which were 60s. In Atlanta, WKLS (Classic Rock) ran 23 units in the 7 AM hour and 10 were 60s; WLTM (AC) ran 19 units and 9 were 60s. In Washington, DC, WASH (AC) ran 17 units in the 5 PM hour and 7 were 60s; WMZQ (Country) ran 16 units and only 5 were 60s. DC is one market where the unit count is identical to 2003 but the number of 60s was greatly reduced in favor of many shorter spots. Some markets like New York and Phoenix experienced reduced unit and minute counts from 2003 and still maintained the numbers of a year ago, as did many smaller markets.
Lund Assessment: Clear Channel airs shorter commercials today with a higher unit count, but about the same commercial minutes per hour on average as three years ago. Still, CC's revenue hasn't grown much, nor have FM station ratings. With many more units in stop sets plus the 10s and 5s between songs, Time Spent Listening declined resulting in lower ratings. Industry wide, Wachovia Securities reports in RBR that national radio inventory is up while pricing is down, a result of Clear Channel's Less Is More focus on shorter-length spots. With lower cost-per-points, Wachovia believes radio cannot exhibit top-line growth without pricing power.
The Very Best,
John Lund
The Lund Consultants to Broadcast Management, Inc., and Lund Media Research
Burlingame, CA
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