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Radio: It’s a Business

ABC Radio talk show host Sean Hannity - Talkradio 790 KABC (Photo by Kevin Winter/Getty Images)

Before I went on the air eight years ago, I was a fan of talk radio. I’ve listened to it all over the country. I still remember hearing Rush Limbaugh for the very first time and thinking, “Who let this Bozo on the air?” My problem wasn’t Rush; my problem was having an incomplete understanding of how radio works.

As a listener I always wondered why radio stations broadcast the programs they did? If they programed a conservative commentator like Rush Limbaugh, wouldn’t it make sense to balance their programing and follow him with a liberal voice like Ed Schultz? Wouldn’t that attract the half of the audience they were missing? Wouldn’t that be doing the listeners a favor by presenting both points of view? Unfortunately the listeners would not accept that premise and probably tune both shows out.

To put that into perspective, imagine a station playing an hour of, “The Best of Loretta Lynn,” and following that with an hour of, “The Best in Rap Music.” Would that make any sense at all?

Instead stations put Loretta on one station for that audience, and rap on another for that audience. If either fails to generate a profitable audience, then it would be replaced. Rush Limbaugh, or anyone else, only stays on the air if enough people listen. Otherwise, he’s back to a one-station market in Sacramento, CA.

Competition for Listeners and Ad Dollars

Without listeners there is no station, and no business. Commercial radio is supported by advertiser dollars. If I walked into your business and told you that I would give you a $20 bill for every dollar you gave me, how often would you like to see me?

That’s what radio advertising sales people do. They turn $1 bills into $20’s, $50’s, and $100’s by bringing customers into your place of business. They do that by matching your advertising message, with the listeners that are most likely to respond to your specific message. Advertising must always be an investment; it can never be an expense to the person buying the advertising. In short, it should pay for itself.

If you’re a financial planner you’ll want your message on stations that reaches a more affluent audience, regardless of the content of that station. If you’re a mass merchant, or want to reach all ages, you should consider buying a package of advertising to appear on several stations, and times, throughout the day.

If you’re selling trendy clothes, to youthful buyers, you might show up on one or more of the rock stations. If you personally hate rock music, but love opera, do you just kiss off that audience? Do you forego advertising on a rock station based strictly on your personal musical taste? Most business owners would say no. Content does not matter; listeners matter.

It All Comes Down to Ratings

How does a station know how many people are listening to that particular radio station each quarter hour of each day? Radio uses independent rating services that survey listeners by age, sex, income, location and many other criteria. Arbitron Radio Market Rankings is one of the biggest companies that provide this type of service. At certain times of the year Arbitron will survey each radio station in a particular market to create a listener profile for each station.

In the Bozeman market there are approximately 16 radio stations for listeners to choose from. As you can imagine, there is fierce competition between these stations for advertising dollars. And, there are only so many spots available each day. No station can run wall-to-wall ads 24/7 and expect to survive. Content attracts listeners, and listeners attract advertisers. Poor content = poor listenership = no revenue to the station.

Do Customers Care Where They Heard Your Advertising Message?

Rush Limbaugh has certainly had his share of boycotts over the years. In the most recent one he lost some national advertisers based on remarks he made about women’s contraception. Most advertisers stayed, not because they agreed with him, but because they wanted the ears of those that would continue to listen. That was a smart investment because, due to the controversy, there was little change in his ratings according to industry sources. And, it was quickly forgotten as the next big news story emerged.

The majority of advertisers are economy driven, not program driven. Their concern is, when is my target market tuned to the radio, and how can I profitably reach them on a regular basis?

Drive time radio, depending on your location, is usually 6-10 AM Monday thru Friday, and 4-7 PM in the evening and usually costs a little more. Midnight to 6AM would naturally be less expensive.  But, at any hour of any given day, there are listeners tuned in to commercial radio. A customer is always there.

If a listener has a problem with you advertising on a particular program or format they don’t agree with, ask them this question. “How do you know I’m advertising on that program if you’re not listening?” OK, don’t ask them that. But, the up side is, they are in your place of business. Make a friend, and sell them something — after all, didn’t your radio advertising bring them in?

How is Program Content Chosen?

Advertisers buy listeners ears, not the content of the programing. Radio stations do the same thing. The more people who listen to a particular host, or program, Rush Limbaugh, Sean Hannity, or Glenn Beck, the more a local radio station must pay to carry that host’s program.

A station owner might have a particular political ideology, but that would have little bearing on the programing presented, because radio is a business. If “Peruvian Pottery” happened to be the most listened to program in the country, you’d be cutting your own throat not to carry it. Radio stations carry the content they do because it’s in their economic interest to do so.

It’s rarely important to the station owner or advertiser what the content of the program is. “I don’t like that 40th song, so instead of being a Top 40 station, we’ll be a Top 39 station.” That just doesn’t happen. If the FCC likes it, so do advertisers.

What’s most important is, how many people will hear the advertiser’s message, and how much profit can that 30-second spot generate, so the station can remain on the air, and be profitable against 15 other competitors?

Some Final Thoughts

Studies dating back to the 1940’s show that businesses that maintain advertising during recessions, or tough economic times, not only do better during the slow periods, but also come out of bad times much stronger than their competitors.

Recessions, and bad economies, weed out weaker competition, and that actually increases the numbers of potential customers you’re not reaching, if you’re cutting back on your advertising. In addition to that, every upset customer that walks out of a competitor’s business does what? They get in their car and turn on the radio. Will you be there with them?

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