Re: Radio ad sales down -*way* down

[dan.strassberg@att.net]

Isn't it almost a foregone conclusion that, when times 
are hard, if there is a medium whose ad rates have risen 
dramatically and whose product quality has declined 
dramatically, advertisers will say "screw them; there 
are plenty of other alternatives where I can spend my ad 
dollars"?

It seems to me that Clear Channel's strategy is to do 
the following: 1) acquire so many stations, especially 
in medium markets, that the company can dictate radio ad 
rates, and 2) through automation, voice-tracking, the 
use of out-of-merket voices, etc, drive down the cost of 
running stations.

Somewhere along the line, Mays et al have decided that 
this strategy justifies their paying astronomical prices 
for stations and borrowing to the hilt to pay for them. 
So far, the borrowing part has worked out--because 
interest rates have remained low, but should rates rise, 
the house of cards will collapse.

And certainly, CC has made some really questionable 
station buys. A friend told me about a $2.5-million 
purchase of a rimshot signal in a 20-station market with 
total radio revenues of $7 million per year. At best, 
the station can expect to capture no more than 10% of 
market revenues. That means CC paid almost four times 
the highest _revenues_ the station can expect. If the 
money to make the purchase was borrowed at 7% and the 
station has no other operating expenses (NONE!), CC gets 
a good return on its investment, but it's pretty easy to 
see how that could become a negative return.

This really makes no more sense than the business plans 
of the dot coms that have gone belly up.

> Off the cuff, I'd say spots sets are probably
> 29.9% larger than last year, too.  Co-incidence?