Posted on 06/20/2004 6:52:15 PM PDT by Diddle E. Squat
The strategy of stuffing commercial radio full of ads has backfired, as a handful of investment banks predicted slower growth, downgrading six key radio stocks -- Clear Channel, Emmis, Cox Radio, Entercom, Citadel and Westwood One -- and the sector as a whole.
Wall Street's piling on the industry comes two weeks after the sector's most outspoken advocate, Mel Karmazin, exited Viacom. The media conglom subsequently hinted that it may consider selling its giant Infinity radio division.
Karmazin built Infinity and repeatedly predicted over the years that consolidation meant radio would be able to snatch an ever bigger piece of the overall ad pie. The results have been mixed.
As radio companies merged, the number of spots has surged to a high of 25 minutes per hour in some cases, said Goldman Sachs analyst Richard Rosenstein.
He and others said the ad inundation -- which consumers have bemoaned for years -- has eroded the value of the spots. Advertisers have started to worry that their message is being diluted by the sheer number of blurbs.
Radio stocks will be stuck, said Banc of America analyst Jonathan Jacoby, until the industry faces up to challenges.
Rosenstein said radio companies can either lower their prices or reduce the number of spots. But "it is difficult to believe that such a structural improvement in pricing/inventory can happen overnight, and could take as many as two quarters or longer to accomplish once undertaken," he added.
JPMorgan Chase, Wachovia Securities and A.G. Edwards also lowered their investment recommendations on the sector after a report Wednesday cited weak ad data for the group in July.
Ad prices are expected to dip 4% in July from the year before. August is tracking flat against the same month last year.
National sales are down 7% in June and are seen dropping 13% next month, Jacoby said.
Overall, the radio sector has been the slowest in the media to recover from an ad downturn and the start of the Iraq (news - web sites) war last year. Generally, TV and newspapers have had a nice boost since then.
As a result, radio stocks are down nearly 20% since April, with many trading at or near their 52-week lows.
If there's a bright spot, A.G. Edwards thinks the stocks could be just about at bottom -- meaning there's no place to go but up. And Wachovia sees a possible rebound in September as a wave of political advertising on TV drives ad spending on secondary media like radio.
As the glum forecasts flew, investors pummeled most radio stocks Thursday. Emmis fell 6.10% to close at $20.02. Entercom dipped 2.32% to $36.70. Westwood One was down 1.08% to $23.89. Cox eased 0.35% to $17.20. Citadel slipped 0.14% to $14.49.
Clear Channel, the biggest of the bunch, bucked the downtrend, rising 2.43% to $36.71.
The analysts didn't downgrade Viacom, since the company's exposure to other businesses buffers it from a slowdown in radio. Still, Viacom shares were off 0.75% to $37.21.
And there does appear to be an increase in the number of stations that are squeezing in an unbelievable number of commercials in their breaks, using that technology that compresses out the pauses in speech to shorten the content time(one wonders if they use this to reduce Glenn Beck's show to 10 minutes per hour!)
And how about those stations that spend more time on their own promo's than actual news and weather? WOAI in San Antonio and KTRH in Houston are especially bad, spending more time telling us how great and often their weather is than discussing the actual weather, which 9 times out of 10 just a canned general forecast from the Weather Channel. Really, how hard is it for the newsreader to sometime during the hour glance at the TV or internet radar and tell us WHERE a storm is near and WHERE it is moving? "A 40 percent chance of rain" doesn't do jack squat for me when I'm out driving, telling me where the rain is far more useful. Is a cable TV or internet hookup really going to bankrupt these stations? I realize that some promo's are needed to establish brand identity, but they truly think that we are morons, tossing out there call letters multiple times a minute. Ya know, "Your exclusive KRAP traffic and KRAP weather together, heard only on KRAP on the KRAP 50,000 watt KRAP blowtorch. Live, late breaking, local, KRAP is your news source for exclusive KRAP news monster. When news breaks, KRAP is there. Now the KRAP update, with KRAP news specialist..." Followed by a 15-second news story, then a similar promo, then commercials, then a similar KRAP exclusive KRAP Weather Channel meteorologist...", 15-second canned forecast, another promo, and closing with the inane, "Remember the time you spent listening to KRAP's Blowhard and Blotto, only on KRAP."
How does the Bozo who came up with this tripe keep his job?
For the words of the profits
Are written on the studio wall,
Concert hall ---
Echoes with the sounds...
Of salesmen.
I'm seriously thinking about XM. What does it go for--about $10/month? There are times (more often than not) during my work commute that I get nothing but commercials--on all stations.
Then, of course, the miracle of the market happened and two other alternative stations joined the fray. After about two or three months where these alternative stations were the only ones worth listening to, suddenly XRT is XRT again. It's a beautiful thing to have the old XRT back. I'm sure they were getting their clocks cleaned by the alternative stations that even the old guys like me were tuning in to. That's what happens when you let the marketing guys rule the roost, IMHO.
Do you actually have XM radio? I do. The top of each hour is loaded with crap. Not just commercials, but useless homegrown "tips" on topics less interesting than watching grass grow. I bought the XM rig to catch Drudge, Savage and CoastToCoast when I'm out of coverage. The internet streams of Drudge are equal or better. Savage is moving further left. CoastToCoast is fine on my local AM dial. I'm not sure I'll pay for another quarter of XM service. It just isn't what I had hoped it would be from a content point of voice.
XM won't give you local news/weather unless you are in a major city
That sounds about right. Almost thirty minutes per hour of grating ads for restaraunts and car dealerships.
And, as you noted, KRAP's laughable self promotion.
Infinity and Clear Channel are so worthless it's hard to believe they can stay in business.
Gawd how I miss the old KZEW.
" topics less interesting than watching grass grow"
why you are knocking other people's hobbies? :-)
And you know, it wouldn't be so bad if radio ads weren't so incredibly annoying. There are ads that have made me swear to never buy their product just to spite them for their horrible ad.
I understand your thinking about XM voice. I wouldn't buy it for the voice.
I've had it a month now and it's about the music, never even had a voice station on, in fact I locked those out. It's on 24/7 on the home stereo since we don't drive much. Jazz, classical, classic rock, disco heh, R&B, country, Sinatra, soul, Cinemagic, they had an old Miles Davis concert on last week and sometime in July they are doing a massive hit countdown across the 40's, 50's, 60's, 70's, 80's and 90's stations that will take more than a week. We haven't had the TV on except for news and weather since we got it. Best 10 bucks a month I've spent for entertainment.
http://www.xmradio.com/programming/full_channel_listing.jsp?sort=number
There is a pretty good music station I would listen to if they did not give the call letters and assorted yap between each and every song. Just play the bloody music!
Sorry, Kirby and John and Rusty and Rush and Michael and Michael and Michael (you know who you are)...
And about WBAP. Every time there is a decent challenge to Mark Retch, I mean Davis, WBAP grabs them and shuffles them away, never to be heard again in this market.
I switched to XM and hardly ever listen to commercial radio except for Rush and baseball games. Hopefully, Rush and sports will eventually end up on XM, and then I can trash Am and FM completely. All they are are one commercial after another!
To my ears, it sounds like they are aimed at enlarging the under-100 IQ set.
And the FM transmitting to a radio.
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