Radio, Television, and Publishers' Advertising Representatives

SIC 7313

Companies in this industry

Industry report:

Establishments primarily engaged in soliciting advertising on a contract or fee basis for newspapers, magazines, and other publications or for radio and television stations. Separate offices of newspapers, magazine, and radio and television stations engaged in soliciting advertising are classified as auxiliaries.

Industry Snapshot

Companies included in this industry are called "rep firms." They sell advertising time or space on radio, broadcast television, cable television, and in print. Most rep firms specialize in a single medium. Company leaders per medium dominated their respective industries, as rep firm consolidation occurred throughout 2000s.

Advertising reps faced many challenges in the late 2000s as economic recession took hold. According to the Radio Advertising Bureau (RAB), radio advertising revenue reached $16 billion in 2009, a decline of 18 percent from 2008. The previous two years had also seen declines, of 9 percent and 2 percent, respectively. Of the total radio ad revenue, 7 percent came from network advertising, 15 percent from national advertising, and about 68 percent from local advertising. In addition, off-air ads accounted for 8 percent of revenues and digital ads, a new category created by the RAB in 2009, made up about 3 percent.

In contrast, television brought in $22.1 billion in revenues in the first half of 2010 alone, according to the Television Bureau of Advertising (TBV). Network TV accounted for 60 percent of revenues; spot TV and syndicated TV brought in the remaining 31 percent and 9 percent, respectively. Total broadcast TV ad revenues were $40.4 billion in 2009.

Meanwhile, newspapers and magazines struggled to compete with television and the newest forms of technology-enhanced advertising available via the Internet. Still, magazine advertising posted gains in 2010, with toiletries and cosmetics ads accounting for the largest share of revenues.

Organization and Structure

Most television stations, radio stations, and newspapers have their own personnel to handle sales within their respective markets. However, national media representatives are called in to sell commercial time or print space to clients outside a local market. This sales arrangement has been based on economy, since it would be too costly for every television station, radio station, and newspaper to have its own sales staff in every major market across the country.

Radio networks are arranged in a fashion similar to their television counterparts, such as ABC, CBS, and NBC. The network provides programming to stations throughout the country and receives advertising time in exchange. Unlike national spots, network ads run simultaneously on a particular network throughout the country.

Media reps sell national spots that can be placed in any market in any combination of U.S. markets. Other kinds of advertising include local spots and network ads. Local spots are advertisements that usually are solicited by the local staff of a television station, radio station, or newspaper. Network advertising refers to those ads that run on network television or network radio.

Background and Development

The media rep business began with the original form of mass communication in the United States, the newspaper. Emanuel Katz started one of the first rep companies in 1886. At the request of William Randolph Hearst, Katz went to New York to convince advertisers to purchase ads in Heart's newspapers in San Francisco. When this venture proved successful, Katz opened his own media rep firm in 1888, the E. Katz Special Advertising Agency.

Media rep firms like Katz's expanded their client lists to include radio and television during the late 1940s and early 1950s. Many rep firms decided to specialize in one kind of medium. For example, Katz dropped all newspaper representation in 1969 in order to focus on broadcast media. Others, like The Interep Radio Store, later known as Interep National Radio Sales, remained loyal to their traditional medium.

In 1996, President Clinton approved the Telecommunications Act, which had great implications on many industries, including that of media representation. Some key provisions of the Act included: discontinuation of limits on television station ownership; removal of barriers to ownership of TV stations and cable systems serving the same market; relaxation of limits on radio station ownership; and de-regulation of cable service rates.

Radio.
After a period of growth in the late 1990s, radio advertising began to level out. Despite the fact that radio stations and networks topped the $20 billion mark in advertising revenue in 2004, its biggest year ever, it represented only a 2 percent growth rate over the previous year. The advent and growth of satellite radio services, such as XM Satellite Radio, which provides commercial-free radio service for a fee, affected this segment of the industry. By 2009 the radio advertising industry had experienced an 18 percent drop in sales. Any future growth was expected to come from the rise of digital radio.

Television.
The Television Bureau of Advertising (TVB) reported that total advertising expenditures for local, national, cable, and syndicated television reached $67.8 billion in 2004, accounting for 25.7 percent of the nation's total advertising. That year, 98.2 percent of the nation's households had at least one television, compared to 87.1 percent in 1960, 64.5 percent in 1955, and 9.0 percent in 1950.

Network, including cable network, advertising accounted for the largest share of television's total, $33.13 billion. Local spot was the second largest generator of advertising revenue, accounting for $14.5 billion. It was followed by national spot ($11.3 billion), non-network cable ($5.1 billion), and syndication ($3.6 billion).

Consolidation marked the media rep industry during the 2000s. However, an obstacle to this trend was client stations that continued to object to dual representation--having the same company represent competing stations within a market. Yet some stations started to reconsider the parameters of dual representation, opening the door to the possibility of future structural changes. For example, NBC decided to seek outside representation for its national spot business, and rep firm Petry tried to win the entire $230 million NBC account. The firm already represented Fox stations in New York, Los Angeles, and Chicago, where NBC also has stations. To avoid direct confrontation between Fox and NBC, Petry suggested that the firm create a separate division for NBC. In the end, Fox opposed the arrangement, and Petry was awarded only a portion of the NBC account.

One possible explanation for TV broadcasters' willingness to explore alternative sales representation could be the emergence and growing strength of cable television. More than 73 million or 67.5 percent of the nation's total households in the United States had basic cable in 2005. Cable television's share of total TV advertising rose from 3.4 percent in 1985 to 6.3 percent in 1990 and to about 17.0 percent in 1998. Between 1990 and 1998, total advertising revenues on cable television grew from $2.4 billion to an estimated $8.3 billion, reaching $21.5 billion in 2004. Yet the growth of cable television itself was slowed due to competing services, such as direct-broadcast satellite (DBS) and alternative access into the consumers' homes through telephone lines or computer modems.

Just like radio, television advertising had its share of challenges due to the rise of "personal media" over "mass media." Digital video recorders (DVRs, including TiVo), video on demand, and similar products allowed users to control their viewing and screen out advertising messages. By the early 2010s, TV via the Internet and cell phones was having a direct impact on the way companies spent their money on TV advertising.

Newspapers.
The newspaper industry began to recover from the poor showing of the late 1980s and early 1990s as the total dollar value of advertising placed in the nation's newspapers started growing in 1993. In 2004, newspaper-advertising revenues approached $47 billion, accounting for a 17.7 percent share of the nation's total advertising. However, many industry experts believed that some advertising will never return to the newspaper. Beyond a sluggish economy and poor consumer spending, the changing dynamics of the marketplace may have affected newspaper advertising permanently.

Most major department stores shifted some of their newspaper advertising dollars into local television and radio spots. Packaged goods marketers traded newspapers ad dollars for coupons and other kinds of promotions, and large discounters that have taken the lead from department stores and specialty retailers do not buy much advertising. Moreover, the existing purchasing system--one lacking in standard advertising billing and rate practices--made it difficult for newspapers to retain national and retail chain advertisers.

Perhaps more significant, however, was the decline in newspaper readership. According to the RAB, newspapers experienced a decline in readership during the 2000s. Much of this decline was cited as attributable to the availability of news, classified ads, and employment ads on the Internet.

Magazines.
Magazines, particularly consumer publications, suffered the same competition from the Internet as newspapers. Still, like newspapers, in the 2000s magazine advertising revenues continued to grow, even though readership had largely stalled. The TVB reported that magazines posted more than $12.2 billion in ad revenue in 2004.

Current Conditions

The advertising sales industry overall suffered a decline in the late 2000s due to the economic recession; however, by 2010, many looked forward to a recovery in the industry. According to Advertising Age, advertising revenues in the first quarter of 2010 for the first time since early 2008. Internet display ad spending rose 5 percent, spot TV ad spending increased 22 percent, and spot radio ads were up 19 percent. According to Jon Swallen of research group Kantar, "With the economy turning from recession towards growth, marketers appear to be more confident about a pickup in consumer activity and have increased ad budgets to support their brands."

Challenges in the industry in the early 2010s came from changes in Americans' media consumption habits. Reps that sold air time on TV and radio--and especially those that sold print ads such as in magazines--faced increased competition from the Internet. The largest area of growth in the industry was indeed expected to be the mobile and online advertising segment although, according to the Bureau of Labor Statistics, "Growth in new media outlets [in the 2010s], such as the Internet, will be partially offset by a decline in print media."

Industry Leaders

New York-based Katz Media Group, Inc., a subsidiary of Clear Channel Communications, was the oldest media representation firm in the United States as of 2010. Operating in the United States and the United Kingdom, it sells advertising time for about 4,000 radio stations and 500 television stations, as well as Internet sites. In 1888, Emanuel Katz established the nation's first media representative firm. Initially operating in the newspaper market, the firm expanded into radio advertising during the 1930s and into television in 1949. By 1969, these later ventures proved more lucrative than print media did, so Katz abandoned newspaper representation to focus on electronic media. In 1992, the company became the nation's largest media rep organization when it acquired Seltel, a rival television representative. Also in 1992, Katz ventured into cable television by purchasing a stake in Cable Media Corp., which was merged with National Cable Advertising in 1994 to form National Cable Communications, the nation's largest cable rep firm. The following year, Katz began selling advertising on websites. In 1998, Katz, having been purchased by Chancellor Media the previous year, posted revenues of $192.8 million. Parent company Clear Channel posted total sales of almost $6.7 billion in 2009.

A former industry leader, Interep National Radio Sales, Inc., was the nation's largest independent representation firm devoted solely to radio in the mid-2000s. The firm sold radio advertising time for nearly 1,800 stations through its eight subsidiaries and was founded when Daren McGavren purchased a regional rep firm with radio stations in the Pacific Northwest. The Daren McGavren Company was established during the 1950s, when radio's identity was in flux due to the arrival of television. As other radio rep companies ventured into television during the 1960s, the Daren McGavren Company stuck with radio. McGavren soon expanded his company with the acquisition of Ralph Guild and his radio stations. Throughout the 1980s, radio rep firms consolidated through mergers and acquisitions, and by 1984, only two mega rep firms were in place--McGavren Guild and Katz Radio Store. McGavren Guild was renamed The Interep Radio Store in 1988 and adopted the Interep National Radio Sales name in 1997. Although Interep's sales were over $100 million in 2004, it suffered financial difficulties later in the decade and in 2008 declared Chapter 7 bankruptcy.

Workforce

According to the Bureau of Labor Statistics, there were 166,800 advertising sales agents in the United States in 2008. Of these, 33 percent were employed in the advertising, public relations, and related services sector; 32 percent were employed by newspaper, periodical, book, and directory publishers; and 17 percent were in radio and television broadcasting. The average annual salary of all advertising sales reps was $43,480, with much wage determination placed on performance and commission. Employment in the advertising industry overall was expected to grow throughout the 2010s, with demand for advertising sales agents increasing about 7 percent between 2008 and 2018.

Research and Technology

The introduction and usage of software packages in all aspects of the media representation industry produced increased productivity, efficiency, and ease in purchasing. Examples of computer software usage can be found in the cable TV and radio rep business. Turner Broadcasting Sales, along with other cable networks, began to use Cable Xchange, a software system created by Jefferson Pilot Data Service. This program provided up-to-the-minute information on inventory availability, generated sales proposals, and covered post-analysis work such as monitoring airtime and tracking audience guarantees.

"Cable Xchange is designed to take our entire sales process electronic, from proposal through post-analysis," said Rick Sirvaitis, executive vice president and chief operating officer for Turner Broadcasting Sales. "It will save not only time, but also cut down on errors from re-inputting orders."

Radio rep firms also relied on computer technology to automate their sales operations. Interep introduced an exclusive software package that could identify radio stations whose listeners are likely to purchase specific brands of consumer products. The BrandNET software program could localize a brand's consumer profile and then identify the radio station whose audience had the most similar profile and would have the highest purchase potential.

The sale of advertising on the Internet dates to the mid-1990s, when Katz created Millennium Marketing, a subsidiary dedicated to selling advertising and sponsorship on the Internet. Initial clients included the Sci-Fi Channel, Better Homes and Gardens Live, and Car Talk. By the late 1990s, the Internet had become a force to be reckoned with in virtually every advertising segment. Some media, such as radio and television, experienced notable increases in ad revenues from web marketers publicizing their sites. In a single year, television drew an 81 percent increase in Internet advertising revenues, from $120.3 million in 1997 to $217.2 million in 1998. Likewise, radio drew $44.5 million in Internet advertising revenue during the first nine months of 1998, compared to $15.6 million for the full-year 1997. In 2004, Internet advertising totaled $6.8 billion, holding a 2.6 percent market share and growing 21.3 percent over the previous year. By 2009, U.S. Internet advertising revenues had exceeded $22.6 billion. In the third quarter of 2010, revenues reached a record $6.4 billion, the highest ever quarterly total for the online advertising industry and a 17 percent increase from the same period in 2009, according to the Interactive Advertising Bureau.

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