Radios Serving Minorities Lag in Revenue Performance

More listeners tune in to WGCI-FM than any other radio station in Chicago. But the station, which has ranked number one for the past four years, has never reached the top of the chart in another important category: advertising revenue.

From 1997 through 2000, WGCI’s revenues averaged $30.3 million per year. WGN-AM, long number one in revenue, brought in an average of $36.4 million, according to an analysis by The Chicago Reporter of data compiled by Duncan’s American Radio. The Cincinnati-based industry analyst publishes annual revenues of the top-billing stations in major U.S. cities.

WGCI may be closing the gap, however. The station’s 2000 revenues hit $41 million–”its highest ever–”right behind WGN’s $42.3 million. New to the top revenue performers in 2000 is WUSN-FM, which pulled ahead of WGN for the first time last year, with $46.1 million. WUSN’s country music format ranked ninth in audience share in fall 2000, the most recent ratings period.

But while the city’s two most popular stations share the same playing field in the competition for audience share and billings, their listeners are very different. About 97 percent of WGN’s news and talk audience is white. Ninety-one percent of WGCI’s listeners, whose music format is known as “urban,” are African American.

About 13 percent of WGCI’s listeners were over 44 years old in 1999, the most recent year for which demographics are available. Eighty-seven percent of WGN’s listeners were that age. On the other end of the spectrum, 1 percent of WGN’s listeners were under 25, compared to 44 percent of WGCI’s listeners. When you compare the two stations, “it’s so clearly –˜young black’ versus –˜old white,'” said Mindy Sherman, director of broadcast buying at Hampel Stefanides, a New York-based advertising agency that handles local and national ad placements.

“Old white” wins when it comes to the important measure of “power ratio,” which is calculated through a formula that compares audience share to revenue share. Radio stations with a power ratio greater than one earn more money per listener than those with a ratio of one or lower. Industry experts say stations with power ratios of less than one are underselling their audiences. WGN had an average power ratio of 1.32 from 1995 to 1999, and WGCI’s average power ratio was .81. Complete data for 2000 is not yet available.

The difference means that advertisers are willing to pay more for WGN’s audience than for WGCI’s. And some in the broadcasting business believe minority stations get less revenue because their audiences are discriminated against.

According to WGCI-FM General Manager and President Marv Dyson, an African American who holds the same post at WGCI-AM and WVAZ-FM, “African Americans in a lot of major markets across the country are undervalued. They are perceived as not being able to afford certain things or to live a particular lifestyle.”

He added, “We work to get advertisers to see it as good business to reach the African American market on urban radio.”

The Reporter analyzed the revenue and audience shares of the 19 most-listened to local radio stations. The two stations with majority black listenerships, WVAZ and WGCI, ranked 13th and 15th, respectively, in power ratio. Two other stations, WOJO-FM and WLEY-FM, had majority Latino listeners. WOJO ranked 11th in power ratio, and WLEY ranked 24th.

These findings mirror those of the 1999 Federal Communications Commission study, which reported disparities in revenue performance between stations that target minorities and those that cater to white listeners. The FCC found that nationally, non-minority format stations had an average power ratio of 1.16 and minority formats posted a .91 ratio.

The study, “When Being No. 1 is Not Enough,” which used 1996 data, did not address whether the underperformance of stations that target Latinos and blacks stems from discrimination. Industry insiders and experts interviewed by the Reporter pointed out that factors such as the station’s format, and the income and age of listeners also play an important role.

Nevertheless, “the cultural lines that separate us as a race are the same that separate the stations,” said Deana Balfour Williamson, public relations manager at R.J. Dale and Associates, a black-owned advertising agency in Chicago. She noted that advertising buys are based on the client’s budget and its target audience. There is no question that race is a factor in determining audience, Williamson said. “Our music is different; our approach to life is different.”

Sherman, of Hampel Stefanides, agreed that advertising revenues depend on “how many demographics a station can deliver.” She said that gender and age are the most important factors when companies decide where to advertise.

“They’re different in more ways than just the color of their [listeners’] skin,” Sherman said, referring to WGN and WGCI. “WGCI will not be considered for a 45-year-old-and-up buy. I don’t care if they [listeners] are black, white or blue.”

Market Barriers

The 1999 study was required under the landmark 1996 Telecommunications Act. The federal law, which removed many of the restrictions that had governed media ownership and competition, required that the FCC identify market barriers for minorities and women in the communications industry. The study was one of six commissioned by former FCC Chairman William E. Kennard, the first African American to head the agency.

“There is a disconnect between advertisers and the markets they want to reach,” Kennard told the Reporter. “Advertisers put a lot of effort into measuring the market’s potential, yet minorities often get overlooked. With America becoming more diverse and multicultural, you better find ways to count and reach these markets.”

The report was conducted for the FCC by the Civil Rights Forum on Communications Policy, a Washington, D.C.-based non-profit. Based on data, interviews with radio industry executives and a survey of minority-owned radio stations, the study suggested that certain advertising practices may contribute to revenue disparities.

For example, the study found evidence that advertisers pay less for commercial time on stations that target minority listeners, regardless of the stations’ ratings or audience demographics. These “minority discounts” may play a role in how much revenue urban-formatted stations are able to generate, the report said.

Researchers also surveyed general managers of 64 minority-owned stations nationwide, who estimated that 61 percent of the advertisements purchased on their stations were discounted. Another 220 broadcasters were polled but did not respond.

Advertisers who refuse to place commercials on stations that program primarily to black or Latino communities are practicing what are known as the “no-Urban” and “no-Spanish” dictates. Despite indications that Latinos and blacks are substantial and growing segments of the economy, “the anecdotal data provided evidence that –˜no-Urban/Spanish dictates’ and –˜minority discounts’ are still practiced in the radio marketplace,” the study said.

Overall, the data suggests that minority discounts and no-Urban/ Spanish dictates “constitute considerable barriers to competition for minority-owned and minority-formatted broadcasters,” according to the study.

Minority discounts are a problem in the Chicago market, said Melody Spann-Cooper, president and general manager of WVON-AM, which offers news and information geared to the black community. “We have to sweeten the pot” by providing extra air time or lowering rates to land certain buys in this market, Cooper said. “We are constantly having to prove our worth.”

WVON and WBEE-AM, based in south suburban Harvey, are the only black-owned radio stations in the Chicago area. While WGCI and WVAZ also offer an urban format and post much higher audience and revenue shares, they are not black-owned.

Following the release of the study, Kennard drew up recommendations detailing a voluntary code of conduct for ad agencies and the federal government. They stressed fair access to information, the promotion of fair competition and equal opportunity.

“It is in no company’s business interest to make advertising decisions based on outdated demographic information or stereotyped assumptions about minorities’ purchasing power,” Kennard said in a 1999 address to the American Advertising Federation.

Advertising agencies should address the problem on their own, rather than being mandated to solve it by federal regulations, according to Kennard, now a senior fellow at The Aspen Institute in Washington, D.C.

On Jan. 22, Michael Powell, son of Secretary of State Colin Powell, replaced Kennard. In his first news conference on Feb. 6, Powell said his goals include making the agency more responsive and more efficient. According to David H. Fiske, acting director of the FCC’s office of media relations, the FCC studies are under review.

When asked about the Chicago radio market, principal investigator of the study, Kofi Ofori, said, “In looking at the two stations, WGN and WGCI, when you measure the performance of the two, it raises questions in my mind.” Ofori is an attorney at the Technology, Entertainment and Communications Law Group, a law firm based in Washington, D.C.

Top Guns

Since 1995, WGN and WGCI have either shared or exchanged the number one spot in audience share, according to Arbitron, a New York City-based media research company that provides ratings information for radio stations in 283 U.S. cities. WGCI’s average audience share over four quarters in 2000 was 6.9, while WGN posted a 6.1.

Third place in 2000 was held by WBBM-FM, whose contemporary hit format appeals to a young, racially mixed audience. Forty-five percent of its listeners are black or Latino; about 55 percent are white. Nearly two-thirds of the station’s audience is under age 25.

But WGN has translated its listeners into dollars more effectively than other stations. Between 1995 and 1999, WBBM-FM’s average power ratio of .83 ranked 14th in the market, just above WGCI, at 15.

WGCI is owned by San Antonio-based Clear Channel Communications. Tune in and you’re likely to hear music by such hip-hop or rhythm-and-blues artists as Outkast, Erykah Badu and R. Kelly, with plenty of humor from personalities such as morning disc jockey “Crazy” Howard McGee. The top 10 hits the week of Feb. 25 included “Just Friends” by Musiq.

WGCI also promotes community involvement, Dyson said. The station raises money for the needy and sponsors food drives, he said. And disc jockeys Mike Love and The Diz, known as the “Bad Boyz,” host the quarterly “Stopping the Hits” program that invites listeners to call in and discuss issues such as AIDS, sexual abuse and domestic violence.

“We have an emotional bond to the African American community. It’s our base and who we want to reach,” said Launa Thompson, general sales manager of WGCI.

WGN, which is owned by the Tribune Co., positions itself as the city’s premiere personality, news and talk radio station. It has provided the city with local news and general information for 76 years.

A typical weekday morning starts with host Spike O’Dell talking with local newsmakers. In recent months, O’Dell discussed the electoral college, the death penalty and plans to renovate Soldier Field. WGN, a 50,000 watt-station that can reach up to 38 states at night, also carries the Chicago Cubs baseball games and Northwestern University football and basketball.

“The station has a very broad appeal,” said WGN-AM Director of Sales Mark Krieschen. But fewer than 5 percent of WGN listeners were black or Latino in the fall of 2000, the most recent ratings period, Krieschen said.

“I wouldn’t say we have tried to market to them [blacks and Latinos],” said WGN-AM Vice President and General Manager Steve Carver. “Anyone who is interested can listen –¦ we are a topical station,” he added.

The sports broadcasts are popular with advertisers seeking male listeners. “With our Cub games and Northwestern University football, that’s advertising dollars that WGCI can’t compete with. These tend to skew our revenues,” Krieschen said. “The bottom line is we go after a different advertising dollar.”

Dyson of WGCI agreed, and added, “That’s business we don’t have the time to go after; it’s not consistent with our format.”

Demographics Matters

Experts and industry insiders say that audience demographics such as age, gender and income are critical in determining where advertisers and their media buyers choose to buy time. How race fits into this equation is difficult to measure.

Research on a product and who buys it defines the target audience, said Kevin Gallagher, director of local broadcast buying at Starcom, the media services division of Leo Burnett Inc., a Chicago-based advertising agency. “We use a lot of detailed demographic information,” he said. “The station you place the ad with does matter.”

Nevertheless, Gallagher acknowledged media buying is subjective. “WGN has a strong heritage, personalities you grew up with,” explained Gallagher, who said he remembers listening to WGN announcer Wally Phillips as a child. “To some advertisers, they just feel good about being on WGN. [To them] it feels right,” he said.

“A lot of times the target will be for the general population. If the target audience is general market, the Chicago buyer will look at WGN,” Gallagher said.

“African Americans and Hispanics are all a part of the general market,” said Linda Jefferson, senior vice president and group media director at Burrell Communications Group Inc., a black-owned communications agency. “There are biases that need to be changed,” she added. Assuming that the general market means white people “is a Eurocentric viewpoint that’s a reflection of our society.”

According to Dyson, who’s been general manager at WGCI for 19 years, advertising executives “will buy formats that they are comfortable with. Most of the individuals making the decisions haven’t listened to urban music and may not be familiar with the lifestyles or the people who do listen.”

A snapshot of commercials airing on WGCI and WGN one recent morning underscored that the two stations appeal to different advertisers. On Feb.13, the Reporter tracked commercials airing on WGN and WGCI between 6 a.m. and 9 a.m. Of 57 advertisers, only two, Carson Pirie Scott & Co., the Milwaukee, Wis.-based department store, and Dominick’s Finer Foods, a grocery chain headquartered in west suburban Oak Brook, ran ads on both stations.

Buying Power

Advertising is the lifeblood of the broadcasting industry. And according to the FCC study, advertisers have a profound effect on a station’s ability to serve its community. “There are advertisers out there that aren’t interested in reaching the minority community or want to discount their value,” Kennard said. “That should concern any community of color.”

Kennard, a 44-year-old lawyer, said he has spent most of his professional life addressing social and economic injustice in the broadcast and communications industry. He acknowledged that it’s “not a fair system,” but said some media buyers are trying to correct this. “The advertising community is starting to become more sensitive [to the issue], but there’s still a ways to go,” Kennard said.

Some advertisers may not recognize the purchasing power of African American consumers. In 1999, black buying power in the Chicago area reached $11 billion, according to Neighborhood Market Intelligence, a division of Chicago-based Shorebank, a community development bank. There are more than 115,000 African American households in Chicago who earn $50,000 plus per year, the report said. Blacks represent roughly 40 percent of the Chicago population, according to estimates from Claritas Inc., an Ithaca, NY.-based research firm.

“We are living in the 21st century and there is nothing that the African American market can’t buy these days,” said Spann-Cooper of WVON. “It’s a matter of respect.”

Tim Hollander, Micah Holmquist, Eric W. Luchman, Kimiyo Naka and John Stanovich helped research this article.

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