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FRIDAY, JULY 31, 2015

Radio Too Strong To Be ‘Under-Monetized’—iHeart Exec. Recent Nielsen data showing radio surpassed TV in the first quarter as the nation’s top reach medium is likely to be a talking point during second-quarter earnings season. Rich Bressler, president, COO & CFO of iHeartMedia, used that finding during the company’s results call yesterday as evidence that radio is “under-monetized as a medium.” The new info, along with a Nielsen study from last year that showed radio delivered a 6-to-1 return on investment, was cited by Bressler as an important data point in demonstrating the medium’s power “as we continue to close the gap between radio’s consumer scale and engagement and its much lower share of advertising spend.” Nieslen data shows two-thirds of radio listening occurs out-of-home, while 66% of mobile media is consumed in-home, stats Bressler used to reinforce radio’s position as the “original mobile medium” at a time when marketers continue to shift dollars to mobile. Bressler also said the company is talking to advertisers about the power of sound. “Consumers are becoming increasingly mobile and we continue to take this message out to advertisers to help them understand why radio should become a bigger part of their media mix and why they should be asking themselves what is our company’s sound strategy?”

Events Push iHeart Revenue Growth. Automotive, medical, healthcare and financial services were the biggest advertising growth categories for iHeartMedia in the second quarter as the division that includes the company’s 858 radio stations swung to 4% growth with revenues of $840.7 million. The company says both local and national billings grew, along with its broadcast traffic and weather business. Events continued to help drive revenue, president, COO & CFO Rick Bressler said yesterday—not as a standalone profit center but as an “important, embedded part of our sales strategy.” Big tentpole concerts like the iHeartRadio Country Festival, along with some 20,000 smaller annual events staged in local markets, are having a positive impact on relationships with advertisers, the company says. Events are providing “a significant differentiator from a sales, branding and promotion perspective,” Bressler said. Early indicators point to what would be a fifth-consecutive quarter of growth on the horizon. Third-quarter pacings are up 3.3% but the company will face strong headwinds from political advertising in this non-election year, compared to the same period last year when iHeart put $10 million in political revenue on the books. As it continues to emphasize integrated multiplatform sales, Bressler said iHeartMedia will no longer report core station pacings. “The lines are getting increasingly blurred between local, regional and national spending across all disciplines,” he said, including spot, network, events and digital sales. With local and national sales forces selling integrated packages for advertisers, Bressler said overall pacing numbers better represent the company’s performance and it will no longer provide core station pacings.

Programmatic Could Elevate iHeart To Digital Gains. As it looks to extract a larger NEWS INSIDE >> piece of the advertising pie, iHeartMedia is making aggressive moves to build a programmatic ad exchange. Rich Bressler, iHeartMedia President, COO & CFO, said 5 QUESTIONS WITH... yesterday that the company’s alliance with marketing company Unified is part of a KRISTIN KOLODGE, larger effort to make the company more advertiser-friendly and data-driven. In June, J.D. POWER iHeart partnered with, and invested in, Unified to slice and dice the galaxy of audience

[email protected] | 800.275.2840 PG 1 NEWS insideradio.com FRIDAY, JULY 31, 2015 data it collects to deliver richer insights to advertisers. Programmatic, or automated buying, where data plays a larger role than with traditional ad sales, has become an expected way of buying in the digital world. Bressler said the goal is to bring radio into the digital world at scale. “Data driven solutions are transforming the ways we deliver new value to our marketing partners, providing the ease, measurability and precision of digital marketing at the incredible scale of broadcast,” he said, adding that it could help put the company “on par with the major digital players” while freeing up sellers to focus more on solution-based sales. The company also reported solid growth for its iHeartRadio streaming platform. Registered users jumped 40% year-over-year to 71 million in the second quarter, while total listening hours jumped 23% during the same period. A majority of digital listening (60%) now occurs on mobile devices.

Judge Denies Pandora Royalty Petition. A New York federal court judge, who has already deliberated for more than two years to determine a royalty rate Pandora must pay to BMI, on Wednesday succinctly turned down Pandora’s request to start the fight in his court again. The streaming music service asked for reconsideration of some aspects of the 2.5% rate U.S. District Court Judge Louis L. Stanton decreed earlier. Stanton answered the request in one short sentence: “Pandora’s motion to alter or amend the judgment dated June 29, 2015 [Dkt. No. 246] is denied.” Pandora wanted reconsideration because, while the court case to determine the BMI rate was going on, Pandora also was in the midst of purchasing KXMZ, Rapid City, SD (102.7) from Connoisseur Media. That purchase made it possible for the Internet music service to argue that it was now a broadcaster eligible for a lower radio rate of less than 2%, hammered out with BMI in 2012 by the Radio Music Licensing Committee, which represents radio broadcasters. With Stanton’s refusal to hear that argument it appears Pandora is headed for an appeals court. Some experts and court watchers said Wednesday’s decision was not a surprise, a sentiment echoed by a Pandora spokesman who said it was a “basic procedural step and we remain confident in our legal position.” Pandora is expected to take its case to an appeals court as it did earlier with a similar, but less tangled ASCAP royalty imbroglio. In the petition, Pandora’s attorneys argued that BMI itself had urged the court not to consider the KXMZ matter until after the station purchase had been completed, and then later said Pandora “did nothing but wait for the court’s judgment” to present its KXMZ claim.

Amidst Report, Cumulus Anticipates Lift. Taking a few knocks from analysts yesterday while reporting an 8.8% second- quarter revenue decline, Cumulus Media CEO Lew Dickey characterized 2015 as an “important building year to set up for 2016 and beyond.” After focusing on recruitment and building out its proprietary platform, Dickey said the company is “now competing with our strongest team ever.” Dickey pointed to key executive hires, such as Pierre Bouvard as chief marketing officer and Tommy Page as senior VP of brand partnerships, and to scores of new market managers that are “learning the Cumulus playbook and recruiting sellers to the team.” Dickey himself has been spending three or more days a week in the field, he said, coaching, assessing and refining since assuming more of an operational role nine months ago. Amidst a challenging second quarter, Dickey pointed to bright spots: Revenue at the company’s Chicago cluster is up 16% year to date. In New York, hot AC WPLJ is delivering its highest ratings in a year while country “94.7 Nash FM” WNSH had its highest ever cume. Ratings for the Cumulus cluster in San Francisco are up 30% YOY, beating the market. And the “Nash” country format is racked up ratings gains in Des Moines, Nashville, Harrisburg and other markets. The steepest revenue decline for Cumulus was at its Westwood One network but conditions have improved considerably, Dickey said. Based on third-quarter pacings, Westwood’s revenue decline for the current quarter is almost two-thirds less than in the second quarter. The network’s sports business is pacing up double-digits in the second half of the year on the strength of its NFL primetime schedule and 24/7 sports products. Bright Spots: Find out the other reasons for Cumulus’ optimism at insideradio.com

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Proactiv Study Suggests Radio’s Role in Online Purchasing Power. A customer may be buying skin care products online, but that doesn’t mean online deserves all the credit for setting up the sale. This comes according to new analysis of skin care product line Proactiv by AdAge, which suggests radio and TV play an important role as an online purchase table setter. The numbers indicated that traditional media advertising is vital to online shopping. Proactiv, owned by Guthy-Renker, is a heavy direct marketer and uses online, TV and radio to promote its sales. With both direct marketing and traditional product advertising, conventional wisdom often says that the last medium to deliver an advertising message can drive a sale. That concept of recency has long been one of radio’s major selling points, particularly given its ability to reach listeners in their cars on their way to stores. In online advertising, the equivalent is clicking through on a search ad, or “last-click attribution,” which gets credit as the driving force for an online sale. Skeptics have long argued that online purchasing decisions are much more complicated, akin to the salesman who does all the work with one customer, only to see another salesman swoop in to get the final sales commission. A look at Proactiv’s online sales by Facebook’s Atlas ad serving and analytics unit, published in AdAge, suggests the theory isn’t quite so cut and dry. Atlas found that while 43% of online sales came directly from clicks on a display ad, with 41% coming straight from search ads, another 16% of sales came from a mix of the two, meaning the buyer searched for a product after first getting the idea from a separate display ad. First Responder: See how radio’s ad influence might fit into this mix at insideradio.com

Second-Year Spend Crucial For Success—Nielsen. Anyone in radio sales looking for a good stat to suggest the advantage of a long-term contract received a gift that keeps on giving from Nielsen. According to a new research report, successful growing brands are the ones that maintain 94% of their year-one media spend into the second year—a crucial stat compared to brands that don’t. In the report, Nielsen asserts that sales for 55% of all new products start to slide as they enter the second year in the market and by year three, 69% of all new products experience declines. The measuring giant’s new “How to Succeed In Years Two and Three” study also says that among businesses that start to falter, the majority see sales decline of 30% or more following year one. The way to prevent that? Keep your year-two media spend just about what it was in year one, when new businesses usually spend the most. Brands that decline tend to cut their budgets 80% in year-two, on average. The ones that don’t maintain that year-one growth, leading Nielsen to further suggest that it might be better to delay second-year product launches to spend the money making sure the original product line gets solid year-two support. The research is based on 600 case studies.

Scott Shannon Deal Good Business For WCBS-FM. If everybody loves a winner, than CBS Radio inking Hall of Fame morning man Scott Shannon to a new, multi-year contract that will keep the nearly 30-year New York morning man at classic hits WCBS-FM (101.1) is as winning a strategy as they come. Shannon joined the station in March 2014 from crosstown Cumulus Media hot AC WPLJ (95.5). Best known for taking CHR “Z100” WHTZ “from worst to first” in the ‘80s and altering the sound of morning radio with “The Morning Zoo,” Shannon spent a record-setting 22 years as morning cohost on WPLJ until abruptly leaving in February 2014. Three weeks later he landed across the street as morning man at WCBS-FM. Since then, “Scott Shannon in the Morning” has had a similar kind of impact on the station’s ratings. CBS says weekly cume for WCBS-FM has grown nearly 20% to about four million listeners since Shannon came on board. “Scott has been more than just a great addition to WCBS-FM’s morning line-up—he has had a tremendous impact in elevating the station to its premier position in New York,” newly named COO Scott Herman said in a statement. Added senior VP of programming Jim Ryan, “He has created a new awareness of WCBS-FM in the market, and we couldn’t be more thrilled he will be with us for years to come.”

Brittain, Loftus Leaving Philly’s WOGL. A pair of names synonymous with Philadelphia’s WOGL for the past decade areleaving the CBS Radio classic hits station. Ross Brittain, who anchored the station’s morning show since 2004, will host his final

[email protected] | 800.275.2840 PG 3 NEWS insideradio.com FRIDAY, JULY 31, 2015 show on Friday. Also exiting is general manager Jim Loftus. Brittain has hosted mornings at WOGL since mid-2004. His radio career spans 39 years in New York, Atlanta, New Orleans, Cleveland and Hartford and includes two stretches in Philly. In Atlanta, he worked for CNN as a feature reporter and was a talk & game show host for a local TV station. Brittain hosted the syndicated radio shows “National Lampoon True Fact,” “Rockin’ America,” and “Trivia Quiz” and has been the editor and publisher of a daily newsletter for radio personalities since 1995. Loftus joined WOGL around the same time and also worked as director of sales across the company’s Philly cluster. “There is a time and a season for everything, and for me, my time at CBS Radio/Philly has come to its completion,” Loftus said in an email to colleagues. “I am very grateful to [COO] Scott Herman for the terrific new opportunities he presented to me, and especially appreciative of the gift of time to review them with my family and advisors.” Loftus said he plans to take some time off before he “hits the re-set button” to pursue new opportunities.

Berkett Trades Townsquare For Viacom. After five years of dealmaking at Townsquare Media, Alex Berkett will join Viacom as senior VP of corporate development. Based in New York and reporting to CFO Wade Davis, Berkett will lead the media giant’s global corporate development and mergers and acquisitions functions. Viacom says Berkett will identify and develop growth opportunities for the company, including partnerships, acquisitions, investments and joint ventures. He’ll also work with senior executives to advise on and lead deal negotiations. Berkett joins Viacom from Townsquare Media, which he joined in June 2010, shortly after the company was born out of the ashes of the former Regent Communications under new owners Oaktree Capital Partners and FiveWire Ventures. As EVP, he led the M&A team that took Townsquare from 60 radio stations to 310 in five years while adding 30 digital and live events companies. Berkett earlier worked in J.P. Morgan’s Technology, Media & Telecom Investment Banking Group, which he joined following the firm’s acquisition of Bear, Stearns & Co. Berkett spent eleven years in the investment banking division of Bear Stearns, rising to Managing Director, where he focused on merger and acquisition advisory for media and entertainment companies.

Advertiser News: Procter & Gamble, which has been making a big deal of saving on advertising costs by diverting money from traditional media to digital, reported that net sales for its fiscal year ended June 30 were down 5% to $76.3 billion. After adjusting for foreign exchange, P&G says organic sales grew, but only by 1%. Organic sales were flat in the final quarter of the year. For the new fiscal year now underway P&G is projecting organic sales to be flat to up in the low-single-digits. P&G’s CFO says the company cut overall spending on agencies last year by reducing the number of advertising agencies it works with. P&G, still the world’s largest advertiser, claims its marketing efforts are delivering greater reach, higher frequency and more advertising at a lower overall cost. You’d be hard-pressed to prove that from the results..... Microsoft has officially launched Windows 10, but without the amount of fanfare that accompanied past generational changes of its operating system. For one thing, the world is rapidly moving to smartphones. That will come later for Windows 10, but for now it is for PCs and tablets. So the launch of Windows 10 was greeted by a yawn in the Wired story: “How much does that really matter? All things considered, not that much”……Staples is trying to stir up some interest in the Windows 10 launch by promoting free upgrades by their in-store Staples EasyTech associates for any eligible device. That includes devices purchased from any retailer which are eligible for the Windows 10 upgrade. And, of course, Staples is offering special deals on some laptops equipped with the new operating system.

Social Media; Facebook Gains, Facebook Loses Luster. Customers are more satisfied with e-business as social media hits its stride, according to new data from the American Customer Satisfaction Index (ACSI). Only a year ago, social media ranked among the worst industries in the Index, but now climbs 4.2% to a score of 74 on a 100-point scale, overtaking Internet news and opinion websites (-1.4% to 73). Meanwhile, customer satisfaction with search engines and information websites is down 5% to 76. Google is still a giant at 78, but that ACSI score is down 6% from last year, with search engines struggling to deal with mobile demands. Facebook registers the most improvement in the social media category, soaring 12% to an ACSI score of 75, ahead of the industry average. Leading the social media industry for a second year in a row, social bookmarking site Pinterest continues to improve with a 3% increase to an ACSI score of 78.

[email protected] | 800.275.2840 PG 4 5 QUESTIONS WITH... insideradio.com FRIDAY, JULY 31, 2015 5 Questions With…Kristin Kolodge When it comes to audio in cars, technology is a double-edge sword. With each new development, there are attendant issues of convenience, preference and safety, from the development of navigation entertainment systems, to touchscreen digital features that include radio and competing media. Kristin Kilodge is very familiar with the whole territory. In this exclusive interview, Kolodge, executive director of driver interaction and human machine interface (HMI) at the J.D. Power consumer research company, talks about what’s happening with information, entertainment and navigation systems in new cars, and where the industry is headed.

IR: There are people in the radio business who think radio is being forgotten in new cars. Is that the case? KK: I can understand that sentiment. I have data that demonstrates the frequency of people bringing in portable media, you know, hooking up their iPod, and demonstrating how often people are listening to radio. The question that was asked was: What percentage were using ‘portable media’ every time they drove? And that percentage was 22%. And for radio that was 71%. This particular question is a new question we’ve never asked before. We are asking this in a pilot study, so I can’t compare. This is an area we’re looking to explore. In this initial study we also really aren’t separating the AM/FM audience vs. satellite usage of Sirius.

IR: But as I’ve read, audio complaints and problems are not as severe as some other things. KK: That’s correct. In J.D. Power APEAL and initial quality reports, it’s the voice recognition that is the top industry issue and No. 2 is the built-in mobile phone connectivity issues. Another one relevant is the media device port. Customers say that they’re difficult to use and in poor locations. That starts to go back to how often people are using their portable device for alternative music. It’s the port itself. It’s the location of the port, the difficulty of using it when you are driving.

IR: There has been some talk that Google or Apple would take over those navigation and entertainment systems so car manufacturers wouldn’t have to sweat it out. What do you think? KK: It’s definitely a strategic question for these companies...What we have seen is that customers are very loyal to their smartphone brand. If a manufacturer is thinking about putting either an Apple or Android brand system in their vehicle, they should consider both, a kind of both-or-nothing strategy. To put it more clearly if I were a loyal Ford person and I used Android and Ford chose to put only the Apple car-play system in their vehicle, I would most likely defect from Ford.

IR: With all this turmoil going on in the audio business, would you have any advice? Any new developments that would be good for radio to push to make listening easier for consumers? KK: One of the things I’m seeing more and more is where the audio system is able to learn and build a relationship with the user. So it’s that concept that is going to create elements of satisfaction going forward and simplify the user experience. So to give you an example, let’s say you have your presets on the radio and maybe you have country stations selected. [Let’s say] in your new car, it’s hard to drive through a new city and effectively scan. But a system could know your preference is that country genre, so it could simplify your scanning process. It starts to learn you and get to your desired selection faster. That’s just one example. We’re on the verge of it. There are some manufacturers that are starting to come out with it. There are some where you can make genre selections so when you scan, it will only search certain genres. The next stage we have to come to is when it actually gets predictive. It starts to learn your behavior. That’s something that’s far forward. It’s really that predictive element that is the future, building a relationship between the user and the machine. There could be elements where radio would make a distinction between drivers, so maybe you and your spouse have different tastes, and the radio can distinguish that. It’s building a new concept: I know who you are and I know what you like.

IR: Meanwhile, in the present, there is continued concern about the changes happening in new cars. What do consumers think? KK: When we do our quality study, we categorize parts of the vehicle. One of the categories is audio communications/ entertainment navigation. That has been the single category year-over-year that has been increasing in problem count where other categories like exterior appearance or interior quality are improving. This is from a problem count—what has gone wrong—and also from what customers like about their vehicle.

Bonus Round: Kolodge talks more about current concerns related to cars and audio, only at InsideRadio.com.

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