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Urban Air Fare
December 1, 2009
Have an opinion? Add your comment below. The Dr. flies you first class in "Urban Air Fare."
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Restructuring Reality -- Even "Trickle Down" is Going Up
If you're a programmer or air talent, I don't have to tell you that we're going through some tough times. All companies have had to undergo cost-cutting initiatives. They have had to make painful cuts to survive. That's the real reason for so much unemployment, voicetracking, syndication and shift stretching.
Urban stations are bringing in about 25-30% less revenue than they were a year ago. Station advertising budgets have been practically eliminated. The only station promotions allowed are those directly tied to and paid for by a client. Commercial load limits have drifted skyward as rates have plummeted. Concepts such as rate integrity and turning down business seem as quaintly obsolete as local morning shows.
Economists are predicting that the current recession may last a while despite faint signs of improvement. This has caused owners and managers to keep cutting, even when in their hearts they know there isn't much left to trim.
These cost-cutting measures aren't confined to just our industries. Take the airline industry, for example. If you've been on a flight recently, you've seen there isn't much left to trim there either, which is why airlines are going to be cutting flights. For the fourth quarter of 2009, total available seat-miles -- which means one person flying one mile on one flight, is projected to fall to 12.4 billion - which is close to post-9/11 levels. Two years earlier in the fourth quarter of 2007, it was 14.2 billion.
In the case of the airlines, cuts aren't limited to just those who fly and passenger amenities. In the next few months, capacity - the number of butts that can be placed in a seat - will be sliced. Naturally, having fewer flights will lower costs and boost the all-important revenue per available seat-mile metric. For passengers, the drop in supply is likely to push fares higher and convenience lower. So if you're looking for non-stop flights, you may have to look harder and be prepared to pay more. If you still believe that "getting there is half the fun," the decline in non-stop flights probably won't bother you as much. Better prepare for layovers though ... lots of them. Layovers help airlines consolidate flights, fill vacancies and boost revenue per available seat mile (RASM). But, layovers also mean that you'll spend a bit more cash at McDonalds or Wendy's before you board.
Meanwhile, back on Wall Street, it's earnings season - and what happens on Wall Street will ripple through every business in the country. Cutting costs could actually lead to higher prices, which both radio and the airlines desperately need, but in the case of the airlines, it means a smaller base of seat-miles on which to make money. Competition will fall on some routes, and overall supply drops -- both of which give airlines the power to increase fares. Of course, these really are minor forces compared to broader economic conditions. The ability of customers to pay is ultimately what drives the cost of a ticket, and absent an economic recovery, fares will stay low, as will airline earnings. Being in-the-air, like being on-the-air, is still all about numbers.
It's important to understand the numbers that can make a difference in our careers and lives. The numbers we're referring to now, obviously, are Arbitron numbers ... and there is always a story behind the numbers. We want to examine both this time and answer the question, "Wwhen is the best time to do an analysis?"
If you had a good book or series of trends, you could easily say that yours has become a favorite station for your core audience. But that's somewhat illusory. Favorite station is a value judgment, not any measure of listening. Those diary-keepers or meter wearers who credited your station may or may not be partisans. Another common usage term is "loyal audience." That doesn't mean anything, either. There's no real definition for loyalty. It's whatever you want it to be.
For Urban formats to survive, we need to understand that it's a scratch-and-win, instant-gratification world that keeps moving faster and faster. Regardless of format, great radio stations are not made up of any one thing you do, but rather of all the little things you do right at the right time. One of those little things that can make a big difference is to find a way to attract heavy listeners.
What constitutes a so-called "heavy listener?" It is probably best defined as anyone listening to a single station for more than 100 quarter-hours in a given week. Imagine someone who spends 25 hours a week with your station. Approximately 39% of your quarter-hours will come from heavy listeners. If they credit our station, we're glad, but it can't help but make us wonder what some of these people do with their busy lives in these fast times.
Regardless, these heavy listeners dramatically affect your station's ratings. When stations are up in the Winter and down in the Spring, you should immediately look for these heavy listeners. Sometimes, a really strong, well-executed contest or promotion, either by your station or your competition, can cause these ratings swings.
In the meantime, here is something to think about: Whether it's flying through the air or being on-the-air, we're all in survival mode. Reducing operational expenses and performing financial triage is absolutely necessary for survival. So, if controlling expenses is the primary objective, how can this be reconciled with concurrent investments that may be required for transition to the new business model?
First, it must be recognized that the value of the radio station, like the value of the airline, must be redeemed. Rebuilding value, not just cutting costs, is critical. Much of the new investment can be funded though careful reallocation of current expenditures, providing increased value with little or no net cost increases. The overall value of the average station or cluster can be appreciably enhanced through systematic implementation of proven operating methods and new multi-platform revenue strategies.
Hopefully we work for a company that has a good strategic plan in place and a good team to execute that plan. This can have a profound effect on a station, regardless of format. When this happens, everyone wins - the investors, the employees, the advertisers, the listeners and the community. When we take them on a trip, regardless of the altitude, we want to make sure they enjoy the ride. That way, they'll come back and ride with us again.
Word.
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