Stu Olds

Few people in this business have a better handle on the real-time economic condition of radio than Katz Media Group CEO Stu Olds. The 29-year Katz veteran, who started in its Chicago office back in 1977, currently oversees the radio sales division as well as the Katz Television group, Clear Channel Katz Advantage, Univision Radio National Sales and all corporate departments.

So when he recently alerted his clients that there's a strong pulse on a radio sales turnaround, the entire industry listened. Here, he goes beyond the numbers of offer a more comprehensive perspective on radio's budding sales growth.

When did you first notice the turnaround? Were you getting positive feedback form the field?

The turnaround was actually fairly sudden. I started to see it take shape in early Q4 and the actual evidence of the turnaround really started to register once we got into December. Granted, part of the turnaround can be attributed to the fact that the year before there obviously was no auto and retail business -- and we saw those two categories start to advertise as their efforts to jumpstart their businesses in November and December, which set the groundwork for the early part of the year.

Was there one main reason for the turnaround, such as the overall economy showing signs of life ... or the fact that last year's numbers were so bad?

You had several factors going on; there's typically more than one reason for a turnaround. Yes, the comps were favorable going into this year, but the seeds of this were planted at the beginning of '09, when Katz and the industry did an awful lot of things to reposition radio in a much more favorable light. That accelerated us coming out of doldrums.

There was a study by the Council of Research Excellence, which is the gold standard of research, and that study went to our Katz Marketing Solutions unit. That unit, led by Bob McCurdy, helped mine all the radio information out of that study and found data that reinforced radio's position as the dominant audio player. We had a much stronger audience in every population segment than anyone else. It started to give radio's credibility back to people who thought radio was old hat compared to the new audio vehicles. Even heavy mp3 users listened more to radio.

Plus, proprietary studies done by GM, Planworks, Starcom and MediaVest really showed the impact of radio's success - of being more localized and personalized. The value of radio credibility has reestablished its importance in the marketing mix.

So we took all that and made a huge investment in Katz Marketing Solutions; we took a different approach in how that developmental unit was organized. Not only did we put in great marketing sales people who really understood radio and its affiliated products, we also hired first-rate individuals who can speak more directly to some of the new ways people looked at radio from a metric understanding. Brian McElroy is doing a great job in getting agencies and advertisers to understand how radio fits in to the total mix from a metric standpoint.

Granted, we've got to tell a much better story about where radio fits in. The Katz Marketing Solutions unit, in the past 12 months, has established over 1,000 new vertical contacts at agencies and advertisers who had not been sold the benefits of radio.

How did radio get stuck in a situation where perception overcame the reality as indicated in those studies?

There's a USA Today mentality out there where people read a headline and see something about the growth of iPods and satellite radio or whatever, and they conclude, "Oh my God, we have to move away from radio because there are all these new technologies and vehicles out there." Those things can go from being urban legends to facts in people's minds. As an industry, we did not do a good enough job of penetrating to the right levels of decision makers to make them understand that radio is as viable as it has ever been.

In fact, these new audio vehicles only added to radio's universality. They didn't take away from radio; they just added to the number of ways radio can deliver audio to people and make it part of their daily lives. The fact is 85% of America doesn't tune in to satellite radio, while 77% of America still listens to radio every day. We just didn't do a good enough job getting that message across.

You mentioned that spot prices have gone up. How much higher do you see them going this year?

Radio is the perfect supply-and-demand business. The beauty of it is that as demand increases, pricing will move up. The demand will determine how high they will go. The good news is that we're also seeing similar tightness on the spot TV side. The great thing about radio being the #2 reach medium, behind TV, is that as TV tightens up and their prices go up, that positively impacts radio's pricing. If TV is soft and radio is tight, buyers would have a price alternative - and that wouldn't help us. The fact that both areas are tightening is extremely encouraging.

I don't know how high they will go; there's going to be a major clawback from where prices were a year ago during the worldwide financial crisis. Prices have now moved ahead from a year ago; as we go deeper into Q1 and Q2, prices will clearly move up. How much they move and how fast has yet to be determined.

Is there a risk of raising them too high, too fast that could slow this momentum?

We have a lot of humility in this business, having lived through 2009. We're more focused on making use of the core products of radio. If we're positively positioned with the market mix out there, of what agencies and advertisers are doing, the pricing will take care of itself -- if we put the focus back on the right position in terms of how radio works as a medium.

We have tremendous digital tie-ins, too. We've been expanding radio's expanding reach into the digital world through Katz 360, our digital sales unit. We've already had more digital sales on the books this year than we did all of last year. For the first time, we're participating in the digital upfront this year. We're doing business with the likes of Blitz, the Horizons Group and OMD because we have consolidated our product to make it easy for individuals to place some of their money in radio.

The initial revenue growth has been quite widespread - across all areas of the country, in a plethora of categories. Do you see that continuing, or will certain categories or regions of the country start benefiting more by a continued resurgence?

One of strengths of radio - national radio, in particular - is that we are not dominated by any single category. The most any category contribute to national spot is about 15%, so one category typically won't pull radio down, nor will one category lift radio beyond what it is. When you get broad-based growth, where the recovering economy could be the key in some categories -- while the need to advertise could be key to lifting other categories -- you start to get a bit of a positive tsunami.

What's taking place out there is that as this growth builds upon itself, radio becomes extremely attractive and viable inside the agencies and advertising communities. These numbers totally reflect that. In a lot of times, what you see is the business start to recover in the top-10 markets, then the next 25 markets get better a couple months later. This kind of recovery is quicker and more broad-based. In Q4 it started in markets 75+; when we turned the corner it jumped to the top 50 and beyond. That's evidence of radio becoming much better perceived and positioned inside the broader advertising community.

How much impact will the Citizens United decision have in bringing more money to radio, in terms of percentage, during this election year?

Political advertising is an opportunity to quickly impact a limited life product. For the most part, that shelf-life is August through Election Day. The fact that we have 37 statewide races -- Senatorial and Gubernatorial - makes for a much more competitive political environment, where we expect to grow political dollars this year beyond 2008, which was a Presidential election year.

Radio fits in extremely well in statewide races, where political campaigns can take advantage of the position we have in individual marketplaces. I look at where we are right now with the top 40 advertisers for radio ... and Political ranks #24. Issue advertising, where the Supreme Court ruling would have a big influence, is the 28th biggest category for us. Both will go up dramatically in the coming months, which will be good news for us.

Has Katz approached health care and financial interests, which are now free to spend more to block or push for issue legislation?

Corporations and political candidates protect what and how they support their causes more closely than companies do for a new product. For every party that wants to do something on one side of a political issue, there's a party on the other side that wants to do something, too. But those decisions come in very late with large levels of advance support. We're not going to get a lot of information by going to them now, but are looking to make sure they are thinking about using radio.

How has the advent of PPM in so many major markets impacted ad revenue?

We've pretty much started digesting the first round of PPM with big markets, so that's becoming less of a factor. There was some adjustment in terms of what types of stations scored well before PPM and after PPM but for the most part, advertisers have adjusted budgets to reflect the PPM numbers. Radio still has to deliver.

Several radio group owners have complained about the concept of "70 in the PPM equals 100 in the diary," because it has depressed spot rates, as advertisers pay according to the lower AQH. What can you do to change their perceptions ... or should you even try changing their perceptions?

If they were buying 100 points for the cost of X and only get 70 for that same cost, it's not going to be very attractive to them. We want to deliver 100, and it took a full cycle for advertisers to budget for the new measurement, to make sure they were buying the desired impact. If they want to buy 100, they want to get 100.

In conclusion, how much more growth do you see for the rest of 2010?

We'll clearly see double-digit growth in 2010; and all indications point to business getting stronger as we go deep into the political season. It's awfully early to forecast 2011. What I do like is that radio is in a much better position than it was a year ago, through our marketing efforts to bring better ideas and ways to make radio dollars more impactful. We're finding even more ways to make radio easier, more efficient and effective to buy through our new sales technology. The future is extremely bright for radio.