Recently one of the radio rags quoted the CEO of a small radio group who said some things that were right – and some things that were wrong.
I'm not going to finger the interview subject, because the poor guy will get twenty copies of this post in his in-box (and this way he'll only get four or five).
But here's what he said:
At the halfway point of 2009, our cash flow is up 4%, in markets that are down 16% in revenue. While the rest of the radio biz is chasing digital dollars that are simply not there yet, we have gone ‘old school’ and back to basics. [Our company owns] most of the key civic events in town. It’s not just concerts, either…giant food festivals, wine and chocolate events, chicken wing festivals, etc. Some we have created organically, and some we have approached individuals about and purchased, generally for 1X EBITDA. The net result is that while the national radio dollars have imploded and local remains sluggish, the event business, sold separately from our radio, has flourished. It accounted for 20% of cash flow last year and will contribute a similar or greater number this year. To give you an idea of event dollars versus digital in [one market] – year to date, the entire…radio market has billed $220,000 digital dollars. In June alone, [We] billed $600,000 in event revenue. As an industry, we are chasing digital pennies while running past the event dollars.
What's right about all this is that there is more to radio revenue than what pours – or drips – in from agencies for spots. Much more. Here's a case, for example, where a broadcaster leverages their key competitive advantage – the relationships they maintain in local markets between listeners and advertisers – and uses it to their great advantage.
What's wrong about this is the dismissive attitude towards "digital pennies" because those dollars "aren't there yet."
When you aim for a moving target you will only hit that target if you aim where it's going, not where it's already gone.
Digital, which will be about 12% of overall advertising spend in 2009, is likely to grow to about 21% in five years. Along the way overall advertising budgets won't grow much. This is huge. It means we are all digital marketers now, since digital is at the center of many campaigns anyway.
These numbers aren't likely to be wrong.
Do you want to be the genius who looks the other way at one-fifth of the advertising pie?
The reason your radio group gathers digital pennies now is because you're not built to gather the digital dollars or not partnering with the folks who can make those dollars yours. And if you are foolish enough to believe that you can start chasing those dollars when they amount to a big chunk of the spend, think again.
Start now or you will never, ever be in the game at all.
So don't run past the event dollars. But also don't ignore what will amount to one in every five advertising dollars within five years.