The Bright Side of Entercom/CBS Merger

Inside Radio has some information about the change in business practices now that Entercom has taken over CBS Radio. I applaud these moves. Listeners will notice a change right away. CBS radio stations in Chicago were NOTORIOUS for playing waaaaay too many commercials...

Entercom did more than flip formats at a trio of top 10 market stations on opening day of its new chapter as radio’s second largest company. It also said it would implement three new business policies, including an across the board 5% reduction in spotloads throughout its 244-station platform. New policies adopted by COO Weezie Kramer also prohibit cash infusion ad deals and eliminate future ad sales by spot resellers.

Cash infusion ad deals involve an agency allocating a large chunk of dollars up front for a significant number of spots, often in a two-to-one credit for the future. The upside is that a broadcaster gets the billing in advance, sometimes at the expense of its competitors. The downside is that they are often sold at lower rates than the station would normally charge, and can contribute to a so-called “race to the bottom” in ad rates. Cash infusion ad deals are sometimes booked at half cash, half trade. And stations may do more such deals before the agency has used up all of its two-to-one inventory. The station ends up owing the agency, which can go out and do third party deals to sell the time, which the agency bought at a 50% discount. That further floods the market with low rates and abundant inventory.