What kind of ratings bump would justify paying jocks?

[KYYX_fan]

In an earlier thread, I jokingly suggested that Jim Keller, Bill Reid, Andy Savage, Robin / Maynard and others be rounded up and put on the air in a real alt station.  I was listening to the radio today and heard Bill Reid doing an appearance at a NAPA(?) store on behalf of JACK-FM.  I'm guessing this is some sort of a sideline that sister station KZOK lets him do.  But it got me wondering...

What kind of a ratings bump (and commensurate rate / revenue increase) would JACK-FM need to have in order to cover salaries of an airstaff and maintain the same profit margins?  As an old biz school prof once taught me, any decision that gets you one more dollar of marginal revenue is a decision worth making.  Now, of course, that is an oversimplification that doesn't take into account risk, opportunity cost, etc.  I would imagine that a station with airstaff has a much greater upside than a station that just plays music -- especially if said music is not hot off the Billboard charts.  Personality is the difference between radio and an iPod.  Without something else, there is no marginal benefit to just music.  I think that is why they have those pseudo-comedy bits between songs on JACK.

I don't know if DJDAN (one of my favorite posters) or someone else who knows the revenue side of things can answer the question, but I'm not looking for a real business plan -- just some sort of a napkin-sketch estimate.  In other words, something like: "Talent A, B and C would probably cost you xxx dollars a year.  Right now JACK has yyy ratings and bills around xxx dollars annually.  Assuming no increase in inventory, the ratings would have to go up zzz percent to justify the rate increase needed."  Or maybe having airstaff either increases or decreases the revenue opportunities for a station.  I don't know.  I also don't know how the particular egos or politics would play into the mix.

If we simply take JACK and add airstaff, the music mix doesn't seem too off for the personalities I have in mind.  I'm thinking that Andy Savage's contract is already a sunk cost for CBS, right?  Put him back in the morning.  Don't know if you could afford a Robin & Maynard show for a PM drive slot, but it would sure make rush hour more interesting.  Add in Jim Keller, Bill Reid, Dick Rosetti...  maybe DJ No Name...  Not sure who exactly you put where, but I, personally, would at least want Keller's Sunday a.m. show back.

How would you configure the shifts?

What would a barebones airstaff look like?

What would a top-quality airstaff look like?

And, again, how much of a ratings bump would you need (and could you reasonably expect) for a given staff?

[TU1]

KYYX_fan,

First off, I don't believe CBS is still paying Andy Savage. If I remember correctly, the PI article back in 2005 mentioned he was under contract for another 2 years after KRQI was blown up. He's been out of work for around 3 now, so I would imagine CBS stopped paying him sometime in 2007.

Secondly, I think all the jocks you mentioned (even Savage) would be extremely cheap for you to get now. Granted folks like him, bill reid, robyn/maynard, dick rosetti, jim keller have years and years of market experience, but the fact is most of them have NO on-air job right now (except the ocassional weekend gig for Bill Reid) and I'm sure they would welcome the opportunity to prove their worth again if a station was willing to give them a chance.

But as far as a ratings/revenue standpoint, I'll let people like djdan answer that.

[djdan]

Rule of thumb for a promotion or trade value is 8-1 or 10-1.  That means if a promotion costs 100,000, it better bring in 800,000 to make it worthwhile.  You have cost of sale at 30-35% (regular commission, plus agency commission) hard cost of promotion, administration and operating costs and you get a margin of 30-40%. 

I would assume the same holds true for air-talent.   If you were to pay a morning show 500,000.00 they would need to bring in 4,000,000 to make it worthwhile.  KZOK is the best Seattle example.  The station was billing 5 million a year.  1-2 million in extra talent costs were added and now the station bills 15 million a year.   It makes sense.

A station like KQMV or JACK bills around six million a year and cash-flow about 2 million.   If you add airstaff and promotion at about two million in expense can you bill an addition 6-8 million?  They would need to bill around 12-13 million to make it pay off.  Remember talent needs to be promoted, otherwise why have them.  In the case of KRQI, they were billing about 5 million, added three million in talent and promotion and ended up billing around 6 million.  It didn't work.  High risk, but high reward if it works like KZOK.

That is the sales point of view.

[KYYX_fan]

djdan,

I assume that ratings drive rates to some extent, right?  Knowing what JACK's ratings are now and assuming the inventory stays the same, what kind of bump in ratings would they need to double the rates?

Also...  If you're already producing and selling the spots, aren't your COGS the same for jock-less JACK and my theoretical JACK.  The only expenses I could see added would be salaries and related HR costs + promotion costs.  The staff is the only variable.  And by biz school logic, you should make the decision if the marginal gain is even $1.

I would imagine that a good sales manager could also figure out additional revenue streams that are only possible -- or are at least enhanced -- with talent.

TU1's post says you could likely pick up the staff I mention relatively cheaply.  Would Savage or Robin/Maynard still be $500K?  ROUGHLY, what kinds of salaries would a Keller, Rosetti or Reid command?  And could you fill the rest of the off hours (overnights, etc.) with pre-programmed JACK like there is now?

[TU1]

Would Savage or Robin/Maynard still be $500K?

$500k??? I can't speak for any talent, but I would imagine they would take a third of that if it meant being employed again. Sign a year contract to prove your worth and then head to the bargaining table after that. Keep in mind, some of these jocks have been out of work for quite some time. Maybe they are not interested in heading back to work or its possible nothing has come along for them. Just looking here in Seattle, what job openings have popped up lately where these jocks would be a good fit for? The only recent opening I can think of was the Movin' morning slot. I'm sure neither Robyn & Maynard nor Andy Savage even came up when discussing an ideal fit for a female targeted rythmic station.

As for the other jocks, I'm sure they were all well paid. Keller was the APD so I assume he was making a good salary. Like I said though the bottom line is this.....except for Bill Reid who does weekends (not even full-time on air) none of these talents are currently employed, so I would believe if the right situation came along here in Seattle, some if not all of them would consider it, even if it meant bringing in a significantly reduced salary compared to what they were making when they were on-air.

[spectacle]

"What kind of ratings bump would justify paying jocks?"

Maybe a better question would be "what justifies listening to radio at all"? Since increasingly it seems like everyone could do without it?

Questioning what to pay anyone kind of leaves the body of thought that suggested listeners were there for what and who they heard, not the station's fabulous engineering, consulting, sales office, positioning, etc.

How about "why should I listen to any radio station ever again?" How's that for paying or not paying anyone?

How about "what the h--- can you put on the air that can compete with everything else out there and MAKE people tune in?"

I wager none of you care and will go back to ridiculous formula arguments about ratings, payrolls, cluster budgets, etc.

I wager none of the listeners will care either and leave all that nonsense behind for something else.

[djdan]

I am answering these questions based on my years in sales and management at a rep firm.  Keep in mind that I disagree with the premise that radio needs to deliver a 40% margin to be viewed as successful on Wall Street.  Who made that call?  When I started, in the late eighties, radio in Seattle was owned largely by non-public companies like Ackerley, Golden West, SRO, KayeSmith,Fisher (non-public at that time) and others.  15% return on their money was pretty damn good.   Then radio got swallowed up and now stock holders get value, only if companies meet the 40% margin threshold.  That is what is killing radio.  A station that bills four million and delivers two is a wall-street success.  A station that bills ten million and delivers two is a wall street failure.  Yet they both deliver the same cash-flow, but one serves the community with talent, news and promotion.  Go figure!

To answer some of the above questions.  To create a "bump" a morning show must increase it's ratings in the 25-54 bracket by one full share point on a four-book.  That is worth about a million dollars. If a whole station goes up one share point in Seattle that is worth about three million dollars, provided they hold it over a four book.  Stations in Seattle in the 2 share range deliver 4-5 million in billing.  3 shares go to 6-7.  4 share delivers 10-12 and 5 shares 15-17.   All 25-54 numbers here and ratings as the only factor(which it is not as you will see below)  12+ is truly meaningless.

Sales 101 (now you are getting bored):  What drives revenue:

1.  Demand.   This is the biggest factor.  In first quarter demand was off 20% and cost per point in Seattle was off 20%.  Stations had to dive on rate to get business.  If there is no demand, due to recession, or a major tragedy like 9/11,  there is nothing you can do.   This is what is going on right now.  Let's hope second quarter improves.  In rep sales, my living depends on regional and national demand.

2.  Ratings 25-54.  75% of all buys are based on the 25-54 demographic, whether it be adults, women or men.  Ratings in these three are most important.  That is why you see non-performing 12+ stations like KMTT and KPLZ do so well.  They highly target this demographic.   This is why KUBE, KBKS, KNDD, KQMV and others don't do as well despite higher 12+ numbers. Power ratio of formats is the word most used.  Highest power ratios belong to News, Hot/AC and AC.  Lowest belong to classical, rhythmic, hispanic, urban, alternative and active rock.

3.  Relationship.    This is huge.  Sales people and talent have built relationships with direct and regional clients.  This is why stations with air-talent, news talent or community service appeal do so well.  They build relationships with listeners and clients and deliver results.   This is bigger than most managers want to admit.  The ability to do live spots, remotes, help clients in other ways is critical to delivering results.   This is why stations like KOMO and KIRO bill in the top ten, despite low ratings.  The sales people and stations have built community relationships.  I see some FM stations with the same heritage sales people and talent.  Top of my list would be KMPS, KZOK, KPLZ, KCMS and KUBE.


Sorry this is full of sales rep crap, but someone asked.   End result is stations that have talent make more money.   It is higher risk though to make the 40% margin than just turning on automation and when demand is tight, automation and reducing costs is the easy way to 40% margin and wall street acceptance.   To repeat:  Who decided 40% was the perfect margin for broadcasting? Spectacle is right: broadcasting is about relationships and if you cut your way to a 40% margin, rather than take the risks to spend your way to a 40% margin, companies will kill the industry. 

[TakeItFromMe]

Okay cowboys, now we are talkin!  Good talent costs dollars but good talent can give ya success A good morning show in Seattle will cost ya about 2 million best as I can figure.
200K-500K for a straight up host and a sidekick for 50-70K.   A producer and a couple of character players for 100K combined and then some dollars to do some mornin show stuff.
Finally you got to promote the damn thing and in this market that runs about 500K a campaign and ya need a couple.  Add 40% for benefits, taxes and crap and it costs about two million for a morning show    Every other shift costs ya about 100K per talent with benefits already rolled in.  It takes a company with balls to go for it and most around here would rather watch automation

Great talent is gonna cost ya more.  The big shows in this Seattle party town run 1 million plus just for the main talent, maybe more.  But this cowboy sees the payoff in big ways for the stations that step up to plate.

[TakeItFromMe]

By the way I can tell ya that the days of Seattle morning hosts making 1-2 million a year are gone.    
a FEW cowboys in Seattle make that but you can count em on one hand that is missing a couple of fingers

[radioprofessor]

Compelling thread but somewhat off the mark in my humble view.  The parameter of 40% margin applies to a group or cluster not the individual station.  It is typical for a group to have one or two stations that have strong talent, serve the community and build relationships as suggested above.  To drive the 40% Wall Street parametric clusters must also have flanker stations that deliver high margins.   Take in the Infinity cluster. KMPS and KZOK have high talent and promotion expense and turn a nice cash flow.  JACK and KPTK have nice margins.  KBKS actually has a fine margin because they spend little on promotion and the talent is not expensive.  As a result the cluster does well.   I also have it on good authority that only two radio talent in this market make over 1 million per year based on industry comp reports.  Both of those shows have out of market syndication to help absorb cost. The parameter for success for a talent is that it must deliver 20% higher ratings when compared to the rest of the station.  Said talent would be entitled to 5-10% of the station gross billing for their success.  This is why the morning show at KISS in LA is paid 10 million a year.  The show performs at 20% higher (25-54) than the rest of the station and the station bills close to 100 million.   Same for KISS in Dallas and many more.  The KISS in Seattle morning show actually underperforms the station so they are not entitled to that kind of salary, in my humble view.   In Seattle as I have noted in previous posts very few talent achieve this 20% level.   Bob Rivers, Kent and Alan, BJ Shea are the only talent that fit that parameter.  All other morning shows fail to outperform their station by a significant parameter.   There are some syndicated shows that outperform the station like Rush but are slotted in less dollar generating dayparts.  In the environment of low demand radio groups are less likely to invest in talent on flanking stations in a cluster like KNDD or KBKS or KBSG or KQMV. Better to shore up your performing stations and automate the flankers.  When demand is high clusters will take risks and bring in talent for long term parameter plays.   For now groups are supporting the winning stations and downsizing the losers.  In my humble view, this is just a cycle and nothing more.