TODAY'S COMMENTARY by Jack Myers Monday, July 19th 2004

Clear Channel Radio Cuts Commercial Clutter, Shocking Radio Industry

Tuesday Jack Myers Report: Cable & Syndication Median Age Report
This Week's Jack Myers Entertainment Report: Ed Martin Live from Television Critics Association Tour

Clear Channel Sets Commercial Ceiling and Introduces New Selling Strategies

By Jack Myers
Jack@JackMyers.com

In a move certain to rock the radio industry, Clear Channel president John Hogan is announcing today a major "Less is More" enterprise-wide commitment to significantly reduce the amount of commercial and promotional inventory on every Clear Channel radio station. Clear Channel is the largest owner of radio stations in the U.S.

The reduction of commercial and programming time will vary by station, format and daypart but Hogan told Jack Myers Report Clear Channel is imposing a company-wide ceiling on the number of total minutes that can be aired per hour, limiting commercial breaks to four minutes and six commercial units, and reducing promotional time to two minutes per hour. In an even more radical decision that could have reverberations on Clear Channel's competitors and on the television industry, Clear Channel stations are going to begin selling specific positions in commercial pods, charging premiums for first and last positions in pods, and stations will begin offering an hourly stand-alone spot within an exclusive environment.

"We want to create reasons for advertisers to spend more money with us," Hogan told Jack Myers Report. Traditionally, TV and radio stations have avoided selling specific positions in commercial pods because advertisers expect to receive fair rotations of their spots, including opening and closing positions. With Clear Channel requesting premiums for the most desirable spot positions, advertisers are likely to request discounts for running disproportionately high percentages of their schedules in middle-pod positions. However, with fewer minutes per break and special inventory, Clear Channel expects this to be less a concern to media buyers.

In announcing a company-wide limit of two minutes of promotional announcements per hour to be implemented by October, Hogan said "in some instances this will keep the status quo and in others it represents a dramatic reduction in promotional time." The average number of commercial and promotional minutes aired per hour on an average radio station varies dramatically, but is reported to range from 16 to 26 minutes per hour with individual breaks as long as eight minutes of uninterrupted commercials. Each Clear Channel station will have the opportunity to design their own programming and commercial clock and decide how to "divvy up" commercials, said Hogan. "But they will need to stay under a defined ceiling. On country stations," he advised, "the ceiling will be 12 minutes per hour." Hogan acknowledged to Jack Myers Report he wished he could have made these decisions more than a year ago, but it has taken time to universally implement yield and inventory management systems and traffic programs at all Clear Channel stations.

This type of corporate move is certain to engender resistance from local station management and create internal political challenges. Hogan points out "stations have the balance of this year to implement these programs and to work through existing advertising commitments." He argues "this is a response to an industry issue that advertisers have been expressing. The radio industry runs too many commercials. Over a long period of time, the amount of ad inventory per hour has drifted upward and the environment has been diluted. We can no longer delude ourselves or ignore issues that have been easy to ignore. We cannot make excuses when confronted with the reality of an imposing load of commercial minutes per hour."

Clear Channel executives have met with several senior agency radio media buyers and Hogan says the feedback has been "positive to overwhelmingly positive. It is our responsibility to create new models and demonstrate they are worthy of investment." Hogan promised to announce several new corporate initiatives during the next several weeks that "represent pre-emptive steps to reinvent and revitalize the radio industry. We are reducing inventory and we also plan to help advertisers and agencies create, write and produce better commercials." The company is also introducing new compensation models that reward long term thinking by station management. "We need to replace reactive styles of management and make a commitment to supporting long-term proactive thinking."

On November 11, 2003, Jack Myers Report issued an Open letter to the Radio Industry that made the following recommendation:
Radio needs to rethink its position on clutter.
To avoid significant cost increases and to achieve onerous budget demands, radio has dramatically increased its clutter and lowered its commercial standards. I used to fall asleep nightly to the radio, knowing that I could depend on a good twenty minutes of music between commercial breaks. If there was a commercial break, it was short and not overly invasive. Today, in late night radio, commercial breaks come about every five to seven minutes or less, they are long, and commercials sound like Raceway Park and Crazy Eddie. I can't listen anymore. In my car, I flip around the stations in a futile effort to find a station without long commercial breaks during key rush hour time periods. New solutions are required or commercial radio broadcasting will quickly lose listeners to satellite and Internet radio. Radio needs to be inventive and radically innovative in designing integrated marketing relationships with major advertisers focused on reducing clutter and increasing advertiser value. Ideas include exclusive marketing and programming initiatives, partnerships with television networks, innovative sponsored approaches to uncluttered formats, new commercial lengths, and restructuring of commercial breaks. There are hundreds of ideas that the radio industry could test one station at a time, one daypart at a time. Although the industry knows it's troubled, the demand to suck in every available dollar to meet onerous budget requirements prevents creativity and exploration. It's time to explore creative ways to reduce clutter in radio.

Jack Myers Report salutes Hogan and Clear Channel Radio for its innovative and strategic initiative and looks forward to tracking the results of this decision.

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