CEO Lew Dickey and his "other" brother John are focusing on raising their average unit rate (known as AUR) in spite of the loss of talent to competitors, lower ratings and tough local economic conditions.
As one Cumulus manager put it:
“If we had high ratings and on-air talent, we could definitely go to our broke business owner clients and maybe pull a few more bucks for our quality advertising media products. But guess what, we don't deserve to ask for more when our market share of listeners is 30% less than a year ago because we had to slash the quality of our product”.
The first part of the year started optimistically for radio but the broader economy and sluggish recovery have taken a toll on the sector.
That’s not enough to stop the Dickeys.
Every Cumulus cluster according to insiders must run an average of 4,500 “no charge” spots a month that are being sent down from Atlanta headquarters. That is, the local stations run the spots, don’t get credit for the money in their billing or their bonus plans.
Here’s the straight scoop right from the horses ….
Lew Dickey himself in a memo to his “team”.
30% Higher Ad Rates
"Floor rates must be enforced and AUR targets must be achieved. We are a fixed-inventory business, so Peak revenue can only be achieved if rate structures are returned to Pre-recessionary levels. Radio rates have fallen some 30%, yet consumer spending is on pace to return to “peak” either this year or next. Our industry was guilty of predatory pricing which proved to be highly destructive and must be reversed".
Targeting Health Care, Education and Legal
"One of the key reasons why radio’s rate structure collapsed is the over-reliance on a small number of accounts and industries – namely auto, housing and financial services. When they were hit disproportionately hard, so was the radio business. In our march to “Peak” revenues, it’s essential that we expand and diversify the accounts and industry segments we target. It would be foolish and naïve not to learn from storm we’ve just come through. Industries like: Healthcare, Education and Legal Services are all growing and should be integral new revenue streams on our “Path to Peak”. In short, diversification is the responsibility of all responsible managers as you manage your book of business and develop your strategic growth plans".
Pawn Even the Poor Stations in the Cluster Off for a 30% Premium
“Each of our markets consist of multiple radio stations which EACH have 43,680 units to sell in prime on an annual basis. In other words, “Peak” revenue requires Contribution from ALL of the assets in a cluster, not just the primary assets. Every station has its own unique community of listeners and that community (regardless of its size) has intrinsic value to target advertisers. Most sales organizations “default” to selling the highest rated stations and then “package” in the others for little or no incremental value. This is a sub-optimal strategy which will produce below-potential revenue for the cluster. Achieving “Peak” revenue requires a strategic plan for each assets which recognizes its inherent value and contributes incremental revenue for the 43,680 units or chances for our target clients to communicate their marketing message to their potential customers”.
This guy must be out of touch with the real world.
In his “team” memo, Dickey predicts that the radio industry will return to “Peak” revenue by 2015 or $21 billion.
Is he nuts?
There is not a respected or for that matter scorned industry analyst who is predicting that the radio industry will even return to his recession levels -- maybe ever -- let alone grow to $21 billion.
Maybe Dickey is factoring in new media, interactive media, mobile Internet – you know.
Just one problem.
Cumulus doesn’t do new media all that much so in effect Dickey is predicting $21 billion for the radio industry even as new media is siphoning off advertisers monthly.
Now that’s optimism.
Or maybe Dickey's beginning to believe the hype he gives to investment bankers.
Then again Dickey also said he’s adding 100 new salespeople to help with local business. What he avoids is telling them that these salespeople will be working out of Atlanta.
Wonder if the local clusters get credit for the sales? Just asking.
Again in his own words Dickey sums up his plan to raise the rates even if local stations cannot justify them when he rallies the troops:
“In order to achieve our objective of reaching “Peak” revenue 2-3 years ahead of the industry, we obviously need to grow faster than the competitors around us. We will accomplish this goal through more sophisticated pricing practices and development of new business that our competitors will not because they will simply not manage the process required to truly develop these lucrative accounts”.
Radio will not be a $21 billion business in 2015.
Your local managers know best how to price their stations in local economies.
To build ad value, add on-air content that is local instead of the national syndication and voice tracking that Cumulus is stuffing down the throats of local listeners and advertisers.
Today, I have finally come to understand why Cumulus has become so mean to its employees, so centralized in their management and so delusional in their goals.
I truly believe this guy believes he is the only one in that vast company who knows what’s best for radio.
Print this out – save it until 2015 and let’s see if “Tricky” Dickey who is trying to reinvent an industry he trashed is as smart as he says or we are as dumb as he thinks.
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