How "Radio" Can Capture A Bigger Piece Of The $12B Political Ad Pie

 

Story by Inside RadioWritten by Paul Heine

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Radio is forecast to book $400 million in political advertising in the 2024 election cycle, according to Vivvix CMAG, which has been tracking election ad spend since 1996. That amounts to just over 3% of the projected $12 billion to be invested across all media, far less than the share radio gets from other major categories.

To capture a bigger piece of the pie, the radio industry needs to collaborate in a more unified way to elevate its message to campaigns and political consultants, according to Steve Passwaiter, VP, Growth and Strategy and Senior Advisor to Vivvix CMAG. “There's enough money in this vertical now that it deserves a strategy and a plan with milestones,” says Passwaiter, a former radio ad seller.

Pat McGee, Executive VP of Political Strategies at Katz Radio Group, says the rep firm continues to collaborate with its broadcast partners, consultants and buyers to advocate for increased radio spend. “All indicators show a healthy demand for audio this upcoming election cycle,” he says. “There is no better reach vehicle than what radio offers, and I think campaigns are realizing that more and more.”

Passwaiter suggests radio take a page from the TVB playbook. The trade association for the local broadcast television industry has a consistent presence in DC among the political advertising decision makers. Convincing them of radio’s ability to reach and motivate swing voters requires going beyond the political ad agencies to meet with members of the political parties and their consultants. “There's so much money here in Washington, but it's going to take a different effort to pry it loose,” he says.

Developing Relationships In Washington

McGee says Katz spends a lot of time and resources working with key influencers like the American Association of Political Consultants and organizations “working to affirm that audio has its seat at the table and our story is being told. It’s an ongoing process of relationship development, working to be a sought-after source of both information and a pathway to victory. We spend time at many annual and regional conferences integrating our platform into political ecosystem to make sure we are aligned to part of any campaign’s media plan, and frankly, securing more of it.”

With Republicans having only a slight majority in the House and Democrats barely in control of the Senate, there’s a lot at stake for both major political parties. “That kind of competition, whether we're talking about automobiles or politicians, spurs spending,” Passwaiter says.

In the 2022 midterm election cycle, Nielsen VP of Cross Platform Insights Tony Hereau made the case to political operatives that they can communicate with difficult-to-reach swing voters by using radio. An over reliance on TV leads to campaigns becoming oversaturated with heavy TV viewers, who tend to be older registered voters, while missing light TV viewers and the growing number of Americans who watch zero broadcast or cable TV. These zero/light viewers accounted for 45% of all voters in the 2022 midterm elections, according to Nielsen Scarborough data. AM/FM radio, meanwhile, reaches 82% of voters who watch little to no TV, with higher reach among Black and Hispanic voters, and closer to nine in 10 working moms, dads, GenX-ers and baby boomers.

Getting campaigns to change their traditional playbook of allocating the largest piece of their budget to TV takes time, Bouvard says. “There is a herd mentality, not an innovator mentality of going somewhere else where we can stand out and get noticed.” After all it took Procter & Gamble to dive into radio for others in the consumer packaged goods industry to take notice of the medium. Says Bouvard, “Which political campaign is going to be the P&G that's going to say, there's amazing reach and incredibly affordable CPMs in radio?”

As with CPG and other categories, research and analytics plays a growing role in how political ad dollars are placed. “Cycle after cycle we learn more about what elements of a campaign drive the win and how audio plays a role,” says McGee. “We can then increase advocacy and showcase radio’s power to drive persuadable voters to their campaign or cause back to the political community.”

With political advertising pacing at twice the rate of the 2020 cycle, now is the time to get in front of the political decision makers in Washington. “These folks are going to start to get really busy and by the time you get into 2024, they just won’t have the time,” Passwaiter points out. “The time to sell the medium is in the off year, where you can get the full attention of people.” –

Paul Heine

FCC Greenlights Cox-Urban One Houston Deal With Conditions

 

Story by Inside RadioWritten by Scott Halleran

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Urban One has won approval from the Federal Communications Commission for its $27.5 million purchase of four FMs in Houston from Cox Media Group. To comply with the commission’s local ownership rules, the African American media specialist is spinning off two FMs in H-Town. Once the deal with CMG closes, the spin-offs will be placed in the Sugarland Trust on the condition that both stations be sold within two years.

In April, Urban One subsidiary Radio One inked a deal to acquire CMG’s entire Houston radio cluster: Country “93Q KKBQ-FM, the classic rock “Eagle 106.9 & 107.5” simulcast of KHPT-FM and KGLK-FM, and classic country “Country Legends 97.1” KTHT-FM.

Urban One already owns three FMs in H-Town, a market with 76 full-service radio stations, where the subcap is five FMs. So it will place two stations – KTHT and its own gospel “Praise 92.1” KROI – in the Sugarland Trust once the deal with Cox closes. That would leave Urban One with the maximum allowed five FMs.

In approving the deal, the FCC has given the Sugarland Trust two years to sell the two stations. That won’t be a problem for KROI since Urban One in April signed a deal to sell it to Spanish Broadcasting System for $7.5 million. Urban One has said it is “actively engaged in discussions to sell KTHT.”

Under terms of the license transfer approval, the trust is required to provide every six months a report describing the efforts to market those assets to third parties.

Because they create a “potential for abuse,” the Commission is selective about granting permission for divestiture trusts, saying it does so “only where necessary, and then to as limited an extent as possible.”

But Media Bureau Audio Division Chief Albert Shuldiner notes that the Urban One deal won’t diminish the number of voices in the Houston market since it has committed to trying to sell both spin-offs to in-market minority operators or new market entrants. Shuldiner points out that Urban One has already agreed to sell KROI to a minority-owned broadcaster that is a new entrant to the Houston market. And he says the trust will give Urban One and the trustee more time to find a buyer for KTHT. Both of the spin-offs are high powered Class C stations.

“Under these circumstances we conclude that the proposed use of the divestiture trust for a limited period is in the public interest,” Shuldiner concludes. “Based on our review of the assignment applications, we conclude that the applicants are fully qualified and that grant of the applications, subject to the conditions set forth below, will serve the public interest, convenience, and necessity.”

With A Pile Of Cash Ready To Invest, Urban One Aims For Diversified Asset Mix - by Inside Radio

 

Story by Inside RadioWritten by Frederick M. Brown

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Sitting on a mountain of money after cashing in its MGM National Harbor investment, Urban One is keeping its options open in an uncertain economy. The dry powder could go toward building a resort and casino in Richmond – CEO Alfred Liggins says there is a 50-50 chance of voters approving the Richmond referendum. Urban One and its investment partners are also among the bidders for BET Media Group (BET, VH1), which would fit nicely with its TV One cable unit. And with radio stations selling at attractive multiples, Urban One could continue its radio buying spree. The goal is a diversified asset mix.

“Radio is hanging in there,” Liggins said Friday, despite what he called “an advertising recession.” He’s more worried about TV One, where ad sales fell 8.4% in fourth quarter 2022, than he is concerned about the company’s radio division, which grew same-station revenue 5% (minus political). “There was a time when I was a lot more worried about radio and I felt really good that we were in the cable television business,” Liggins told analysts. “Today, I feel really good that we're diversified among all of these things.”

The elixir for its struggling cable TV unit might be “more distribution, programming, investments, some sort of consolidation opportunity,” Liggins said in his first conference call with analysts since November 2022. “We’ve got to figure that [out],” he said. The company’s manageable leverage level gives it time to invest without the pressure of having to operate in a non-strategic way, Liggins said. “I think that we’re going to have the runway to make the turn.”

‘Fantastic Investment’

While the direction of that turn remains unclear, Liggins used the African-American media specialist’s much delayed fourth quarter earnings call to gloat a bit about the “fantastic investment” the company made in MGM National Harbor. It received about $136.8 million after issuing a “put notice” in April that required MGM to buy back all of the media company’s minority investment in the gaming resort in suburban Washington. In addition to the settlement amount, Urban One says it received $8.7 million from its annual distribution from the casino for the 2022 fiscal year. That was a handsome payoff for the $40 million investment Urban One made in 2016. Since then it has received that $40 million back in dividends during the time it held the investment. Factor in the roughly $137 million check it cashed when selling its minority stake back to MGM and Liggins says they more than quadrupled their initial investment.

So why cash out? Last year was “a high watermark for the property,” Liggins said, adding that it wasn’t likely to perform better than that in the future. Plus he felt that investing the money in other areas would produce a higher ROI than the 6.4% return they were getting in MGM National dividends.

“We’ve got a number of things coming up where we may need to deploy that cash,” Liggins said, including debt buybacks, and the potential Richmond casino. “If we're successful with the referendum, we'll obviously need cash in order to fund that, although the partnership in Richmond is different now.” No longer the sole equity provider for the One Casino + Resort, Urban One and partner Churchill Downs have a 50-50 equity investment split in the proposed project.

Fresh from cutting a deal to buy four radio stations in Houston from Cox Media Group for $27.5 million, Liggins likes the idea of buying more stations in today’s marketplace. “We think there are a number of other potential radio acquisitions that are out there right now,” he said. With radio assets trading at a 5.5-times earnings multiple, radio approaches a 20% return, which is better than the 6.4% Urban One was getting on the MGM investment.

Choppy First Half

Urban One finally reported its fourth quarter and full year 2022 results last Thursday, six months after the year ended. The delay was caused by a need to restate all of 2021’s financial statements and most of 2022’s after it discovered it understated the value of the MGM investment and related tax effects. That involved bringing in a battery of outside accountants and financial consultants. By the time all the 2022 numbers were crunched and reported out, both the first and second quarters of 2023 were history. As such, Urban One gave a look into its first half 2023 performance. First quarter radio revenue, excluding digital, was up 2% on a same-station basis, or up 3.1% same-station, excluding political, CFO Peter Thompson said. The second quarter is currently pacing down 5%, excluding digital on a same station basis, or down 0.9% excluding political. “We're holding well on a same-station basis, ex-political,” Thompson said.