A recent case study
- iHeart is pushing the envelope again and running 41 units an hour between 6-7 am on urban WOWI in Norfolk.
- This does not include 10 or 15 second ads which runs the total up further.
- iHeart ran 24.4% of all units in the market while securing only 13.9% of the available revenue proving once again that consolidators with heavy spot loads such as this are often underperforming in revenue.
How iHeart gets away with it
- iHeart’s average unit rate is nearly half of the markets average unit rate.
- iHeart sells more units than any other group in the market but bills less.
- They win business by meeting low CPPs/CPMs and advertisers are either unaware or undisturbed that their spots may land in the middle of a 16 unit stopset.
- This calls into question what the real value of a radio spot is when listeners bolt from unlistenable stopsets no matter what low price the buyer negotiated with the station.
Leaving considerable money on the table
- WOWI is a top-tiered station yet they price like a bottom station causing the entire Norfolk market to collapse highlighting the self-inflicted wounds that big radio groups are not only inflicting on themselves but the entire radio market.
- When they sell cheap, they need to sell twice as many spots to match any other station’s revenue in the market.
Preventing audience erosion
- Their ratings are impacted by the large number of commercials creating a vicious cycle where they have to run even more spots to grow revenue.
- To mitigate audience erosion entirely, stations with 30, 40 or more spots per hour must clear all spots from other hours to fool Nielsen’s PPM methodology and this is facilitated by running few or no commercials after an overloaded commercial hour.
- In the case of WOWI in Norfolk, only four songs were played in the 40+ commercial hour of 6am on November 12th which I examined but other segments of morning drive have a lighter load if not no commercials.
Advertisers are either playing dumb or are
- The fraud being committed upon clueless advertisers who obsess about everything except spot placement is that when they buy morning drive, their ads run in 40+ unit hours like the WOWI example so technically they are getting morning drive as defined by the iHeart station but are not getting maximum exposure to the audience that is being artificially manipulated by running no commercials in hours of morning drive.
- Among the advertisers in this example: AT&T Wireless, Home Depot, Dunkin, FanDuel (one of the hottest segments is betting and their bet seems to be unfair), Novartis, United Healthcare, Cox Internet, Nissan, Lens Crafters, McDonald’s, Capital One, Lowe’s, Kohls, BetMGM, JC Penney, and numerous other local advertisers who don’t have a clue unless someone tells them (and why aren’t competitors outing iHeart?).
A better way to handle spotloads without losing money
- Fooling with the spotload and misleading advertisers as to what audiences they are specifically buying is unnecessary if operators like iHeart (and they are not alone) would just limit the number of avails to run up the price in a much more accretive supply-and-demand play.
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Jerry Del Colliano is a professor at NYU Steinhardt Department of Music and Performing Arts Professions Music Business Program. His background includes Clinical Professor of Music Industry at the University of Southern California, TV, radio, program management, publishing and digital media.
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