Radio raves: L.A. commuters bring riches to station owners.

L.A COMMUTERS BRING RICHES TO STATION OWNERS

PICTURE L.A. at rush hour - all those cars locked up in traffic, all those motorists going nowhere fast.

And everybody listening to the radio.

Talk about a captive audience.

More than 3 million cars are within reach of Los Angeles-area radio stations during commuting hours - helping make this the richest radio market in the country.

"People have nothing to do on the road but stay alive and listen to the radio." said Gordon Mason, president of the Southern California Broadcasting Association. "Traffic is a major reason why the radio industry does so well in L.A."

New York has the largest listening audience - 2.6 million listeners in any 15-minute period, compared to No. 2 Los Angeles with 1.7 million.

But L.A. is tops in radio ad revenue $526 million to New York's $475 million, according to the Duncan Radio Market Guide.

Some analysts attribute L.A.'s dominance to the "quality" of the listening time - saying that a greater proportion of L.A. listeners are in their cars, where the ads get a better reception than those heard on radios played as background noise in homes and offices.

Whatever the reason, the radio industry is on a roll. Through August. L.A. ad revenues are up 7 percent from the like period in 1996, which was up 5.4 percent from 1995, according to Miller, Kaplan, Arase & Co., an L.A.-based accounting firm.

One reason behind radio's rise in revenue: advertisers' long-standing love affair with television is coming to an end. The network audience has been undermined by cable, and as stations continue to charge premium prices for access to a shrinking market, advertisers are looking elsewhere.

Radio remains a broadcast medium with audience loyalty.

"On TV, people's loyalty is to a program," said Allen Klein, president of L.A.-based Media Research Graphics Inc. "But in radio, people's loyalty is to a station."

According to Klein's data, average radio listeners tune into a single station for 70 percent of their listening time.

That means listeners likely will hear an ad over and over again. For many advertisers, it's too expensive to buy that kind of saturation advertising on television.

Moreover, experts say, radio ads cut across geographic and demographic lines in a way that newspaper ads do not.

"L.A. is a fragmented market as far as other media are concerned," said Mason. "So when national products come to L.A., they use radio."

Accompanying the record advertising revenues is a stiffening competition among station managers as they fight for a piece of the pie.

As station ownership is consolidated prompted by the lifting of national ownership limits under the 1996 Telecommunications Act there is an increased emphasis on financial performance.

The companies bought the stations at retail prices, and expect to see returns on their investment quickly. Consequently, they are setting revenue goals for stations at a higher level.

And station managers are under mounting pressure to meet the bottom line.

"We're in an increasingly business-driven environment," said Pat Duffy, station manager of KRTH-FM 101, which has been sold three times in six years, most recently to CBS Radio in January. "We're under mounting pressure to attract higher ratings, sell more ads, run the business more cost-effectively and make our shares more valuable."

Other station managers agree with Duffy's assessment.

"We're just starting to see what is happening in the market due to the recent consolidation," said Marie Cordis, station manager for KPWRFM 106, which garners the second largest audience share in Los Angeles and is owned by Chancellor Media Corp. "There is a lot of pressure to meet revenue goals that are only getting higher, so we're facing sfiffening competition."

Stations are adjusting their marketing strategies accordingly.

Top Radio Stations

Numbers reflect the average percentage of people aged 12 and up
listening to the station for at least 5 minutes in any 15-minute
period during the summer quarter.

FM AM

Station            Share         Station         Share

KLVE-107.5          6.0          KFI-640          4.0
KPWR-105.9          4.6          KABC-790         3.1
KSCA-101.9          4.5          KLAC-570         2.6
KKBT-92.3           4.0          KNX-1070         2.2
KRTH-101            4.0          KTNQ-1020        2.0
KOST-103.1          3.9          KFWB-980         1.8
KIIS-102.7          3.9          KXMG-1540        1.3
KROQ-106.7          3.6          KRLA-1110        1.2
KBIG-104.3          2.6          KWKW-1330        0.9
KTWV-94.7           3.6          KKHJ-930         0.8

Source: The Arbitron Co.

"Large companies with smart people behind them are identifying niches and aggressively going after them," said Trip Reeb, general manager of KROQ-FM 106.7. "We won't change our format or what we're doing, since we have a brand name in L.A, but we're working harder to protect our market position by reinforcing our reputation on the air."

A handful of large companies, such as Westinghouse Electric Co. and Chancellor, have garnered a strong position in the L.A. market. CBS Radio, a unit of Westinghouse, owns eight stations in L.A., including KLSX-FM 97.1, KNXAM 1070, and KRTH-FM 101.1.

Chancellor owns five, including KKBT-FM 92.3 and KBIG-FM 104.3.

With multiple stations under one umbrella, companies plan to approach advertisers that have not traditionally utilized radio.

"Cumulative audience projections show that a radio format now competes directly with newspapers in terms of the number of people reached by the ads," said Klein.

Although no radio station has yet offered a package deal, the owners are looking into it. CBS Radio recently hired Earl Bear to the newly created position of director of business development to sell "the CBS radio concept" to advertisers. At this point, however, CBS stations retain autonomous sales departments.

Chancellor Media stations also sell advertising independently, but the company is planning to form a committee of sales managers from its five L.A. stations, said Craig Wilbraham, the general manager of Chancellor-owned KKBT.

"We can present our cumulative audience projection of our five stations, and show that we compete with the audience reached by newspapers," he said.

But as the industry begins to sound out the ramifications of the consolidations, analysts say that the boom in radio shows no sign of abating remarkable for a market that is already No. 1 in the nation.