The big radio groups’ strategy for generating business in 2009 will likely have a significant effect on their bottom line. We broke this story first (RBR 11/3/08 #215): Big radio groups have been submitting national spot business with network radio pricing to network radio buyers.
What we’re hearing now is companies that utilize national spot radio are having their agencies no longer request national spot RFPs, but to convert to network radio RFPs so they too can benefit from the pricing that the national groups are providing for the network radio buys. This is taking the place of having the agencies issue national spot RFPs.
Matt Feinberg of Matt Feinberg Media says in the current economic climate, everybody is under pressure to generate positive cash flow, local stations included. "So local stations may be more inclined to price below what they are used to. And yes, it may be hard for them to swallow, but ‘times is tough.’ Whether, or not, it has an adverse affect on them in the long run is hard to say right now."
RBR/TVBR observation: The national spot strategy of pitching network radio business can have a tremendous blowback effect on the radio groups. 1) If the market turns around, they’ll be choking on rates that they will surely regret selling in the upfront. 2) If any of the big spot advertisers—AT&T, Toyota, Bank of America, Chase Manhattan–decide to start playing in the network radio arena, pricing for traditional spot radio will go into a sinkhole. Pricing your national spot from $12 CPMs down to network radio’s $4 CPMs might be a very bitter pill to swallow.