SATELLITE RADIO COULD BE PROBLEM FOR ADVERTISERS WHO RELY ON CONVENTIONAL ADS Tara Perkins – CP Satellite radio won't spell the end of annoying radio jingles, but it could be a problem for companies that rely on conventional radio ads to reach their customers.
"Many companies have built their businesses on radio advertising," said Hugh Dow, president of media company M2 Universal. "It's a very important medium for many advertisers, particularly many retail advertisers."
On Thursday the national broadcasting regulator granted three licences for pay-radio services, but with Canadian content restrictions that opponents say are too stiff while others say don't go far enough.
"There will be limited, if no, opportunity for advertising on these services," Dow said.
Pay-radio services earn revenue from monthly subscription fees, unlike Canada's $1-billion conventional radio industry, which depends on advertising to pay the bills. Its major advertisers are companies like Sears Canada Inc. and Sleep Country Canada.
The Canadian Radio-television and Telecommunications Commission has banned the new radio services from carrying any local ads on Canadian channels, and is limiting national ads to six minutes per hour.
According to the Radio Marketing Bureau, many smaller companies like Sleeman Brewing owe much of their success to radio ads. "Sleeman was able to have a long-term dominant presence in the medium at a fraction of the cost of a television or other mass marketing approach," the board said in its 2005/06 radio marketing guide.
The report says that radio ads have been a key sales-driver for many companies recently, and "radio has the fastest response time between exposure to advertising and purchase than any other medium."
Dow notes that it will take some time for subscription radio to grab a large number of listeners, and conventional radio will put up a fight.
Toronto's Solutions Research Group predicts there will be one million satellite radio units in use in Canada by the end of 2007.
Twenty to 34-year-old car buyers and families with influential teens will be among the top adopters, it says.
Gary Slaight is the president of Standard Radio Inc., which runs conventional radio stations like Toronto's Mix 99.9, and has also been granted a pay-radio licence in partnership with the CBC and Sirius Satellite Radio.
He says he's optimistic about satellite radio, "and I'm not overly pessimistic about my other business, which is conventional radio."
Slaight said conventional radio in the United States, which adopted satellite radio three years ago, hasn't had trouble attracting advertisers.
"Not to say that in five to ten years we won't see some impact, but I don't think in the short term it's going to make a big difference," Slaight said.
Patrick Grierson, chair of Radio Marketing Bureau - which looks to attract advertisers to radio - said "I don't think it's going to be a huge challenge for some time to come."
He said it has been a boom year for conventional radio and he expects the growth to continue, although not at the same pace.
"Certainly the face of radio is changing, but I would suggest it's changing for the positive," he said.
The hype surrounding satellite radio actually draws attention to the medium, he said, "it increases the perceived value of radio."
"We've had enough trouble in the past getting people to look beyond television to radio for advertising spending," he said, noting that radio is now picking up an increasing proportion of Canada's advertising dollars.
Pay-radio "will have some effect," Grierson said. "But will it torpedo conventional radio? Not at all."
Dow said conventional radio is going to have to adapt and change. "Radio's answer is to become local and to become community-based, which is something that things like satellite radio and the iPod cannot provide." |