Former NAACP President Ben Jealous on the January 6th "Non"-Commission
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Story by Inside Radio
McDonald’s was the 11th biggest volume advertiser on radio last week according to Media Monitors, which says it ran 28,831 spots on the stations it tracks. More of those spots could wind up on minority-owned stations in the future as McDonald’s announces plans to increase spending with diverse-owned media.
The change will not occur overnight. But by 2024 the company and its franchise owners have committed to more than doubling their marketing spending with media companies, production houses and content creators that are Black, Hispanic, Asian, Women and LGBTQ-owned.
The move means companies such as Urban One, Spanish Broadcasting System and Multicultural Radio Broadcasting could be in a better position to capture the fast food chain’s ad dollars, as well as women-led companies like Seven Mountains Media.
McDonald’s calculates that four percent of its national advertising spending currently goes to diverse-owned outlets. Within three years, it plans to bump that to ten percent. Specifically among Black-owned properties, McDonald’s says it will increase the share of national ad dollars from two percent today to five percent by 2024. The initiative will likely mean ad buyers at McDonald’s roster of ad agencies, including Lopez Negrete and Burrell Communications, will have larger budgets at their disposal.
While some of the spending will be on traditional ad flights, McDonald’s says it is looking for multiyear partnerships as well. The move will help those diverse-owned media companies have a more sustainable business model where they can bank on long-term growth. For McDonald’s it will offer the opportunity to embrace more inclusive storytelling that leads to a better connection with the audiences. That could mean not just radio buys promoting the dollar menu, but also a companion podcast that addresses an issue in the Black, Hispanic or Asian community.
“With this latest move, we’re taking action to advance diverse-owned companies across the marketing supply chain,” said McDonald’s Chief Marketing Officer Morgan Flatley in a statement. "We're using our resources to support these platforms and businesses, which keep the brand at the center of culture while creating deeper relationships with our diverse customers, crew and employees."
McDonald’s also said it will form an advisory board of outside marketing and advertising professionals to help it identify the biggest barriers to economic opportunity facing its media partners and how to use the company’s collective resources to get behind new programs and initiatives to eliminate them.
Unlike menu changes that often rile McDonald’s franchise owners, the group has announced it is on board with the marketing reallocation.
McDonald’s move is part of a growing trend in the ad community. General Motors, which uses Carat for media buys, has promised to increase ad spending on Black-owned media from its current two percent to four percent by 2022 and eight percent by 2025.
Last month, GroupM formed the Media Inclusion Initiative, an integrated investment strategy to support and grow diverse Black-owned media companies and creators. The program pushes clients to spend at least two percent of their budget on Black-owned media.
In March, IPG Mediabrands held the ad industry’s first Equity Upfront allowing Black-owned and Black-focused media companies set to pitch large brand advertisers And in February the ad agency network Dentsu launched Project Booker, which was geared toward brands creating new content and sponsorship opportunities tying marketing strategies to Black-owned radio.
Story by Inside Radio
Last year’s multi-market swap between Entercom (now Audacy) and Urban One allowed both companies to get stronger in one market in exchange for exiting another where they didn’t have much of a fighting chance. Urban One now has a seven-station cluster in Charlotte and Audacy has eight in St. Louis.
“It's been great. The business is just a lot more stable when you've got larger shares and you're in multiple formats,” said Urban One CEO Alfred Liggins.
Liggins has long said further consolidation in the industry is inevitable – and necessary for its financial health. Now he’s thinking Urban One would be better off if it merged with another group. “I think our assets should ultimately be combined with a larger radio platform to get more scale, particularly in the markets that we already operate in,” he said in response to an analyst question during the company’s quarterly earnings call last week.
Competing with large, scale-driven companies like iHeartMedia, Audacy and Cumulus Media, Liggins says Urban One would do better on a larger stage. “I think that now that there is not radio dereg on the horizon that our company probably is the best well positioned to be one of the central platforms in the consolidation. And that's absolutely what I think should happen in radio. I've said it before.”
The problem is that no one wants to sell in today’s environment. Coming off the COVID-powered ad downturn, “nobody has any idea what their real EBITDA is,” Liggins noted, making it next to impossible to determine a station’s current value. “Nobody wants to buy, nobody wants to sell right now because you just don't know what assets are worth. But as soon as we get through that, I think we should be focused on doing something.”
Buyer Or Seller?
All of which begs the question: Is Urban One a buyer or a seller? Is it ready to cash out of radio and invest more in the casino business?
“I have always said that we are willing… to be on either side of a transaction that created value and made sense,” Liggins said. “I like the radio business.”
But while he’s fond of the industry that he and his mother, Radio One founder Cathy Hughes, have played a pivotal role in for the past 36 years, he’s also a pragmatist. Before the swap with Entercom, Urban One owned just three FMs in Charlotte, all focused on the 23% of the market that is African American “The Entercom deal was interesting because I was like, we either need to leave Charlotte or you need to leave Charlotte,” Liggins explained. “And I said I'll do either.”
While he says he’s willing to be on either side of the deal table, he doesn’t sound like a chief executive ready or willing to exit the business anytime soon. “If I had to handicap it, there are not a lot of radio operators left who know the business, know how to run radio stations, like running radio stations [and] don't mind the business. So I would have to say that given the current landscape we would probably be the surviving entity,” Liggins said. “I'm happy to be the management solution for that because we like the business. We know the business. The radio business has actually helped us get into these other businesses.” In addition to radio, Urban One owns TV and digital assets, has a 7% stake in one casino and is one of two finalists bidding for the rights to build a second one.
So does that make Urban One more like a willing swap partner? “We would be a seller or a swapper of assets in order to create value of which we can then use to delever or deploy into other areas that we can grow faster,” he said.
Getting a bit more specific, Liggins said he’s looking for synergies in markets where Urban One doesn’t have a full boat of stations and where it could achieve significant cost savings, including Indianapolis, Dallas, Cincinnati and Washington DC. And he has his eye on a potential dance partner. “A company like a Cumulus, between corporate and the seven markets that we overlap in [including Atlanta, Cincinnati, Dallas, Houston, Indianapolis, Washington,] I think there's a lot of cost and revenue synergies there,” he continued. “I think that somebody needs to take advantage of that.”