Digital Gabe
Cutting Edge Commentary On All Things Media

Radio Grapples With CPM Pricing

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Several weeks ago I posted an article about the potential ramifications of broadcast radio transitioning from a CPP-based pricing model to CPM pricing.  This has suddenly become a hot topic since several local TV broadcasters are moving towards CPM.  So should Radio try to go it alone with the legacy CPP pricing, or join the rest of the media universe with CPM?

Now we’re starting to get some perspective from the leadership of the major broadcasters in this summary from Inside Radio.  The general sentiment is a glass-half-full batch of upsides if they convert to CPM, including the ability to package up impressions on multiple stations, lesser-used dayparts, and terrestrial-stream combos.  If all impressions are created equal advertisers don’t just need to buy AM Drive/PM Drive on the top stations in the market, right?  Then there’s the ability for Radio to compete for digital ad budgets they’re currently boxed out of, because today’s budgets for TV and Radio are usually planned in a separate CPP swim lane.

The downside risk is lower rates.  CPM pricing will commoditize radio impressions across all stations – so why pay a premium to run during a top morning show when that same impression costs less in other parts of the week?  Then there’s the reach math of individual stations.  Radio broadcasters love to tout their collective 92% reach of the US population, however that number is spread out over 11,341 different commercial stations.  The average station has a few thousand people listening at any one time.  So let’s say an advertiser buys a :30 audio ad at a $10 CPM on a station with 5,000 people listening at that moment.  Yes, that ad will be priced at a whopping $50 . . . insert gulp sfx here!

At the end of the day I believe Radio’s leadership will eventually embrace CPM pricing as the path forward for the industry.  The only question is how much of a rate/revenue haircut will they take along the way.

 

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