overview and status of radio revenue july 16, 2008
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2008 Forecasts “… Because consumers’ disposable income has failed to improve … we have lowered the 2008 forecast…” – Bob Coen’s Insider’s Report, December 2007 and July 2008 “U.S. advertising cycle recovery unlikely before 2010.” – Lee Westerfield ‘s Broadcasting Report, November 2007 and July 2008TRANSCRIPT
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Overview and Status of Radio RevenueJuly 16, 2008
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AD SPENDING FORECAST LOWERED AGAINBy STUART ELLIOTT | July 9, 2008Leland Westerfield, a senior analyst at BMO Capital Markets in New York, sliced in halfhis forecast for growth in ad spending this year. In a report on Monday, Mr. Westerfieldrevised his prediction to a gain of 1.8 percent, compared with his previous forecast foran increase of 3.6 percent citing …
CONSUMER SPENDING SLIDE KILLING MADISON AVENUE By HOLLY M. SANDERS | July 9, 2008Coen predicts US ad spending will rise just 2 percent in 2008, down from his earlier estimate of 3.7 percent, despite the double boost of political spending and the Olympics. In a report released yesterday, Coen didn't mince words:
"The advertising industry is presently in a severe slump."
“… slowdowns in ad spending by major marketers in large categories like automobiles and financial services.”
MAGNA CUTS AD GROWTH FORECAST TO 2%By SUZANNE VRANICA | July 9th, 2008Among the marketers cutting ad spending are those whose businesses are being hit hard by higher gas prices or the housing-market downturn, such as automotive, retail and financial-services companies, ”according to TNS Media Intelligence. Magna says,“Ad-spending growth of 2% would make 2008 one
of the worst years for advertising since 1990.”
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2008 Forecasts
“… Because consumers’ disposable income has failed to improve … we have lowered the 2008 forecast…”
– Bob Coen’s Insider’s Report, December 2007 and July 2008
“U.S. advertising cycle recovery unlikely before 2010.” – Lee Westerfield ‘s Broadcasting Report, November 2007 and July
2008
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Sales Results: Q1 2008 vs. 2007
Source: Company Reports
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2003 20072003 2007
$190.3b
$337.7b
$213.4b
$164.9b
Traditional AdvertisingAlternative Advertising
and Marketing
Source: Veronis Suhler Stevenson, Communications Industry Forecast 2007-2011
Advertising and Marketing Growth+
+
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Radio Revenue 2004 to 2008Year Over Year Quarterly Revenue Change
Source: Miller, Kaplan, Arase & Co.
7%
-7%
0%
Q32%
Q4-1%
Q14%
Q22% Q3
1%Q41%
Q12%
Q20%
Q31%
Q4-3%
Q10%
Q2-1%
Q30%
Q43%
Q11%
Q2-1% Q3
-5%
Q4-4% Q1
-5% Q2-6%
2003 2004 2005 2006 2007 2008
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San Antonio Austin Las Vegas Sacramento
Housing Appreciation* 5.8% 2.0% -22.8% -8.2%
Overall*** 7.7% 15.1% -7.0% -14.9%
Real Estate ** -10.9% -9.9% -50.9% -46.1%
Financial Services** -24.7% 21.6% -29.6% -38.7%
Furniture** -3.8% 37.1% -13.1% -36.5%
Home Improvement** -18.5% -20.8% -38.1% -34.9%
Automotive** 15.1% 17.1% -10.2% -37.7%
Effect of Housing on Radio Revenue Growth
Source: Miller, Kaplan, Arase & Co. * Based on 02/08 data from FISERV ** X-Ray data for the 3 months ended March 2008*** Market revenue data for the 4 months ended April 2008
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• Represents $1B opportunity for Radio• Key categories of importance for the industry due to declining or disproportionate share/spend levels• Spent $3.5MM less in Radio in 1st half ‘07 vs. 1st half ’06• Spent $11.6MM more in Radio FY ‘07 vs. FY ’06• 2% key account total increase as compared to a 2% industry decline
Key Accounts
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• Since 2006, media spending by Key Advertiser Focus clients has decreased $773 million for the January through April time period.
• During that same 4 month time period, 2007 vs. 2008, AT&T's total media spend dropped by $88 million and Johnson & Johnson's by $61 million.
Key Accounts – Total Media Spending2006 - 2008
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Key Accounts
Allstate Corp. Miller BrewingAmerican Express Co. NestleAnheuser-Busch Cos Inc. Pepsico Inc.AT&T Inc. Procter & Gamble Co.Best Buy Co Inc. Sprint Nextel Corp.BMW Target Corp.Campbell Soup Co. Time Warner Cable Inc.Capital One Financial Corp. T-MobileCircuit City Stores Inc. ToyotaCoca-Cola Co. UnileverDIRECTV Group Inc. Visa USA Inc.Federated Wachovia CorpFord Wal-Mart Stores Inc.General Motors Washington Mutual Inc.Hewlett-Packard Co. Wendy’s Intl. Inc.Johnson & Johnson Wrigley Kraft (Altria) Yum Brands
Lowes Cos Inc.
“Advertising growth is
closely correlated with the
economy.”- Bob Coen’s Insider’s Report, July
2008
2004-2007 Dollar Diff: $828,019.5m2004-2007 Percent Diff: 3%
--
Source: TNS AdSpender
Key Accounts – Total Media Spending2004 - 2007
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Engagement Progress• Katz, Interep, RAB joint venture kicked off
– Hyundai/Kia– McDonald’s– Wal-Mart
• Goals:– Increase Radio’s share of budgets– Generate incremental revenue activity for National and Local
Radio• Strategies:
– Elevate the dialogue with clients and agencies– Immerse their corporate culture and infrastructure with the
power of Radio– Create innovative and impactful marketing programs born our
of their brand challenges
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Hyundai/Kia Progress• Hyundai Genesis Brand Launch
– The Art of Dollar$ & Sense– A New Beginning & Suite Ending– I Can’t Believe it’s a Hyundai!– Hyundai’s Genesis of Radio
• Kia Borrego Brand Launch– Drive-In Movie– Your DJ’s Favorite Ride– Summer of Surprises– Borrego at the Ballpark– Kia Borrego Adventure– Kia’s Ultimate Summer Friday
• Status:– Borrego “Drive-In Movie” idea well-received, not activating due to budget– Opportunity to expand a local Interep “win” on Hyundai to national
efforts– Currently exploring opportunities for 2009 model launches (4Q 2008
support)
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McDonald’s Progress
• “McCafe” Opportunity– McCafe Customer Network– The McCafe Show– McCafe Hot & Chillin’ Hangout
• Status:– McCafe Customer Network concept well-received by client
teams– Client is engaged and intrigued with the Nationally focused
possibilities– Working towards solidifying “National” relationship with OMD
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Wal-Mart Progress• Programs in Progress
– VOICES My Voice. My Story. My Wal-Mart– America I AM – Game Time
• Cookin’ for Game Time• Party in a Box• Ultimate Party Place
– Home• Radio Goes Wild for Wal-Mart Better Homes &
Gardens• Wal-Mart Home & Garden Radio Network• Save Money and Help Others Live Better
– Holiday• Random Acts of Holiday• Deck the Home• Holiday Music Network
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Wal-Mart Progress• Status:
– Significant increase in radio spend:• +139% (full year ’06 vs. ’07)• +135% (1Q ’07 vs. 1Q ’08)
– Increase in incremental assignments– Positive client feedback received by RAB lead
• “Radio is performing very well for us and as long as we continue to see strong ideas on activation our investment will continue to increase.” Stephen Quinn, CMO