The Core Costs of Radio

William F. raised a good point commenting on my recent post about the firing of WMAL radio personality Chris Core. He wrote:

I'd still like to know how much Core was paid. I'm sure a great deal of income came from his too many commercials that were constantly on his program.

I'm sure that Chris Core, holding down the morning slot in a major radio market (and delivering a good-sized chunk of that market on a daily basis) received a very large (for radio) salary. We get the barest hints of just how good his salary was in Mark Kaye's interview with Core.

But Core's salary alone didn't account for the high spot rate during his show. As Jerry Del Colliano recently pointed out,

Stations rely on morning shows to produce 40-50% of a stations revenue

So Chris Core was responsible for generating far more than his salary. Actually, the annoying amount of commercials William F. endured demonstrates -- as does Citadel's Bloody Friday -- another way current radio station owners fail to understand how radio functions.

In most business, there's a direct link between customers and products. For commercial radio, the link is indirect.

A store has products for sale; customers come in (either brick-and-morter or web) and buy them. The more the store serves the customers' needs either through selection or location or service, the more customers come in and the more they buy. The money flows from the person served by the store to the store.

For radio, the customer isn't the listener -- it's the advertiser. The listener is the product. The more listeners (products) a station has, the more advertisers it can do business with. Just like a store, bigger quantities (market share), wider selection (demographics) and/or customer service (ways in which stations can make spots more effective) all lead to increased ad revenue.

The trick is this: in a retail store, product is easy to stock. Place an order with the distributer, and if you can pay for it (and its in stock) the product arrives in the quantity you want.

Radio stations can't order audiences. They have to persuade people to listen. That means they have to offer programming and air personalities that people want to listen to. While radio programming can be quantitized to some extent, some of it remains an art. You can train someone how to be an on-air announcer. You can't train someone to be Chris Core.

A radio station's audience is its asset -- the value of that asset determines how successful it will be attracting advertisers (its customers) and how much they can charge for access to that asset (ad rates).

Currently, radio owners seem to have forgotten about the listener. If four ads in a break bring in X, then eight ads should bring in twice as much. By that logic, running commercials 24-7 should be like printing money. But as ad frequency increased, listenership declined.

And firing popular air personalities because they're highly paid simply accelerates audience decline. Imagine a store that scaled back both the quality and selection of its stock -- what direction would you expect their sales to go?

So how much did Chris Core make? We don't know.

A better question might be this.

How much revenue did he generate? When the next ratings come out, we may know the answer to that one.

- Ralph