Sunset for TV and Pure plays…and the Introduction of the SCBA Auto Focus Report

As of now, the “great threat to Radio” is at the beginning of a very slow and painful decline to its ultimate place as another niche audio internet playlist, much like Sirius/XM has become. Of course we are talking about Pandora, whose stock just suffered another bone crushing loss of value (-10%) as investors now know its business model is genetically flawed. We are talking about Pandora, whose ominous audience erosion has been continuous for the past 5 months; both in time spent listening and log in occasions. “Active users” fell again from 76.2 million to 73.4 million as their “earnings guidance” to investors plunged for the second time in three months. Stock Scouter, a service of MSN, gives the stock a rating of only 3 out of 10.

A humbling 3 out of 10 rating for the “next great threat to Radio.” All that hype, all that attention, and all it comes down to is an embarrassing rating for its stock and its business model.

Pandora’s ultimate descent will not be pretty for investors or the “media experts,” but descending it surely is.

An inconvenient truth for yet another start-up trying to be Radio… 

Now with no other new, tangible threats (real or imagined) to our business, we are urging the industry to look beyond these pure plays who want to compete with Radio but have neither the creativity, content, or sound business model to succeed as does Radio.

Radio today is much stronger and more ubiquitous than ever before and we must now lead from a position of renewed strength and get back to the basics of our business as quickly as possible.

Our consistent listenership and immense audience reach in Southern California (94% of all Persons 12+) is the envy of any media and our solid 2013 revenue growth of 4.4% (adjusted for 2012 Political revenue) is a major financial step forward for our member stations.

As a measure of Southern California’s robust revenue surge, one only has to look at the total amount of new business written in 2013, which was a remarkable $39.1 million dollars from 545 forward thinking advertisers. This is new business development for Radio at a record level.

Southern California Radio’s digital growth was an impressive 23% in 2013, clearly showcasing the demand of digital platforms seamlessly married to over the air Radio and giving advertisers a complete, effective, and sustainable advertising campaign.

Stating the obvious, the 2014 version of Southern California Radio is as solid and durable as it ever was.

We now have to re-state our value to clients and new prospects and focus them once again on the effective reach, frequency, and portability medium that is Radio.

A major priority for all of us in Radio is to help each client maximize their advertising dollar to help them gain new customers at the lowest possible “acquisition cost.” By doing so, Radio will be providing real value and true partnership worth. An in-depth understanding of how, why, and where they are spending their valuable media dollars is essential if we are to become a trusted source to guide and grow their business, now and in the future.

If we were to examine one industry for Radio to focus on for this type of deep client advertising review, it would have to be the Auto category; both dealers, dealer associations, and of course, the manufacturers themselves.

As any auto dealer principle or dealer association president will tell you, the cost to attract and acquire new and conquest auto customers is getting more expensive all the time, yet few can explain why.

Is it because of more competition…inflation…too many choices…. habits and patterns that are not reviewed…the burgeoning expense of reaching a moving target that just keeps on moving…?

Or is it something much more basic than all the assumed reasons above?

While Southern California Radio has earned considerable ad revenue from this category, (it remains #1 on a regional level) an analysis of where dealers and dealers groups are spending their media budgets from the 2013 X-Ray report from Miller, Kaplan, Arase is revealing.

While Radio is considered an integral part of most auto dealers’ media plans, it is still local TV that gets the lion’s share of the ad budgets. To give you some perspective, total ad spending through November 2013 for auto dealer associations alone for the LA market area was allocated as follows:

  • TV spending – $221,051,218
  • Radio spending – $34,086,440
  • Newspaper – $4,061,213
  • Digital/Search – N/A

For those of us in radio, this is clearly an imbalanced ratio, especially when we look at some undeniable new realities that now threaten viewer appointment local/network Television.

  • 48.7% of all LA DMA households own/use a DVR. (Scarborough, R2 2013 A18+)
  • 60% of Americans skip TV commercials all or most of the time. (Triton Digital/Burns)
  • 3 out of 4 Americans record content to SKIP TV ADS (Motorola Mobility Engagement Study)
  • Fall 2013’s network premiere weekly programs showed national audience erosion of 15-25% compared to the same period in fall 2012. (Network Nielsen Ratings, Fall 2013)

Television in 2014 faces two immediate threats to its viewership. Ad revenue is in jeopardy as 50% of Americans now own/use a Digital Video Recorder and 60% skip the ads. And now, even more new technology darkens TV’s future; Hopper is a growing DVR with the Dish Satellite Network, allowing viewers to instantly skip ads on select shows.

The more pressing threat to traditional TV started in 2008, when viewers started streaming video services through their television by simply attaching devices like a DVD player, an Xbox, a Nintendo Wii and/or an Apple TV. Streaming services are now cheaper and easier to use.

In July 2013, Google quietly released ChromeCast, a device that looks like a flash drive and by simply plugging it in to your TV’s HDMI port, you can now stream from such sources as Netflix, YouTube, Hulu Plus, Google Play, or whatever is on Goggle’s Chrome Web Browser. That multi-purpose device costs only $35.00.

If the above does not strike doubt in any thoughtful auto association advertising team about TV’s eroding viewership, we need only to look at Netflix, the most direct and real threat to traditional TV that is now the game changer for TV viewing habits in the U.S.

According to their audited research data of their own 31 million subscribers, Netflix customers are spending 2 hours a day on tablets and smartphones, with peak activity from 8:00-9:00PM every night, further eroding the “prime time” of TV.

Netflix now call itself “The World’s Leading International TV Network” and with good cause. Their subscribers now total 31 million paid users, 3 more million than veteran HBO. However, here is the most compelling data point of all for traditional TV to worry about:

  • 30% of all streaming internet downloading happens from 6:00PM-11:00PM every night.
  • That’s an automatic 3.3 million viewer loss every night for traditional TV, in Prime time.

And a few more “inconvenient truths” for traditional TV and its advertisers to ponder:

  • The absolute busiest “television” platform in the world is YouTube, which is owned by Google and has one billion unique visitors watching six billion hours of video every month!
  • A new series entitled, “Epic Rap Battles of History” (ever hear of it?) shown on YouTube attracts an average of 40 million viewers – almost 4 times the viewership of AMC’s season ending episode of “Breaking Bad”.
  • Audience levels for TV network viewership are 30% less than in the 1970s.

Our measured criticism of traditional TV is founded in both the disturbing facts above as well as our shared concern with the auto industry about the rising customer acquisition costs they are facing today. We would like to re-introduce Radio as the more cost efficient and effective medium.

The Southern California Broadcasters Association is offering a realistic solution to this profit eroding issue in the auto business.

Our SCBA Auto Focus Report is an in-depth analysis which will provide any dealer or dealer association the following overview of their “cost to market” expenditures. The complete process includes:

  • Initial meetings with dealer association officers to verify expenditures and other related facts and information about their business
  • Using Polk data banks, a study of auto sales by association dealership
  • A cost ratio of advertising expense for each customer gained
  • A fact based recommendation to lower cost ratios and customer acquisition expense by providing actual monthly sales to advertising costs
  • Meeting with all principles to review findings and offer profit saving solutions

The SCBA Auto Focus Report is offered to the auto industry without obligation or cost. We believe the compelling data uncovered and the subsequent shifting of ad dollars from TV to Radio will more than offset our research and analysis expenses.
We will begin engaging the auto industry in Southern California with this new program starting today and will update all of our readers on our progress.

TV…please move over. Radio is back…faster, smarter, and ready to deliver real value as a true business partner to the Auto industry in Southern California and the nation.

The SCBA Auto Focus Report… a more profitable path to new and conquest sales for the auto industry.

Thom Callahan
Southern California Broadcasters Association
Los Angeles, CA