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07/07

Why Aren’t Radio Program Directors Compensated on Top Line Revenue?

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Once upon a time a radio station featured two opposing forces: The sellers who sold the ads that interrupted the content and the programmers who created the content to grow the audience that sellers interrupted. The system was built to do two things: Maximize the audience and then throw obstacles at them – spots – that blocked their ability to enjoy the content they came to the brand for in the first place.

Sounds like a house of cards, doesn’t it?

While each side – sellers and programmers – needed the other, the success of each was also compromised by the other. As if to reinforce this essential conflict, sellers were compensated in part based on revenue and programmers were compensated in part based on ratings.

But today, radio stations no longer own the ears of audiences. There are a wide variety of ways to get long blocks of music besides waiting for stations to provide them. Meanwhile, radio revenue growth has largely stalled, and trends indicate that any growth to come is likely to be from non-spot sources.

This means ideas are at a premium: Ideas that connect consumers with clients in the presence of radio brands across platforms – on- and off-the-air.

And how do you make those ideas the centerpiece of a broadcaster’s strategy? How do you communicate to all hands that these ideas – and the profitable interactions they make possible – are why commercial broadcasters exist?

You do it by stating the mission, clarifying the strategy, reorganizing the structure, and bringing compensation into alignment with the “reason to be” for the brand.

Over the weekend I sent around a tweet asking how Program Directors were compensated, and here’s what I heard back: 70 – 90% base salary with the remainder being a bonus based on ratings (in rated markets). There is very little, if any, compensation based on top line revenue even though driving top line is a goal of a broadcasting company and, indeed, the goal of ratings.

But as anyone in the radio space knows all too well, ratings and revenue are not the same. Particularly not in an era when the ideas that separate growth from decline will invariably spring from something other than spots. It will be revenue not born of ratings.

So why are broadcasters facing a world where revenues have less and less to do with ratings but compensating their Program Directors – their Chief Content Officers – on ratings rather than revenues?

Do you really care if your ratings hiccup as long as your revenues continue to rise? Do you really care to have high ratings if your revenues fall?

Sellers and Program Directors are no longer on opposite sides of the conference room table with folded arms. They are on the SAME side. And the sooner management realizes it, the better off they will be.

Compelling, effective, and profitable radio brands of the future will be those which are engaging and attractive to consumers and compelling and effective for clients. They will be brands which emphasize ideas that appeal to both fans and advertisers everywhere. Audiences will not come if we don’t appeal to them. Clients will not advertise unless we bring them customers. The incentives for sellers and PD’s in a post-spot world are exactly the same.

Tomorrow’s great radio brands will not simply be aggregators of larger audiences with ever-less attention and time spent listening.

They will not simply be sellers of ever-larger volumes of spots at ever-lower rates to ever-fewer customers with ever-growing alternatives.

A Program Director compensated in part on top line must be a partner in growing that top line. Over the long term, top line only grows when the fans and the clients are both happy, not one or the other.

This is what being a Brand Manager really means: You are responsible for all aspects of the brand, including its profitability. Otherwise the PD is simply a technician - overhead.

In a world of ideas, we should expect that a Program Director (who knows the product better than anybody else) helps us create, grow, and execute ideas to delight fans and monetize those fan experiences in all platforms on- and off-the-air.

And the great, creative, talented Program Directors will relish this opportunity.

In unrated markets, this move should have been made years ago. And the time is now to make it in rated markets.

Nielsen will only become a less effective predictor of revenue growth as time moves on.

Is your structure set to make the most of this reality?

Or is your radio station built as if it’s still 1999?

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