Interep National Radio Sales Inc.

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Interep National Radio Sales Inc.

100 Park Avenue
New York, New York 10017
U.S.A.
Telephone: (212) 916-0700
Fax: (212) 916-0772
Web site: http://www.interep.com

Public Company
Incorporated: 1982 as The Interep Radio Store
Employees: 650
Sales: $103.4 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: IREP
NAIC: 541840 Media Representatives

Interep National Radio Sales Inc., formerly the Interep Radio Store, specializes in representing radio stations and selling broadcast time for national spot advertising, which is separate from local advertising and network advertising, which is broad-cast simultaneously in network-affiliated stations. According to Interep, national spot advertising typically accounts for 20 percent of a radio station’s revenues. It is usually purchased by advertising agencies or media buying services on behalf of their clients. Interep is organized as the parent company of eight radio representation firms that in total represent more than 2,000 radio stations. In 1999 Interep founded Interep Interactive to focus on selling and marketing online advertising on the World Wide Web. In addition to representing radio stations, Interep provides a variety of marketing support services to advertisers and advertising agencies. Among other things, it conducts industry studies designed to promote the use of radio as an advertising medium, and over the years Interep has positioned itself as a company that is concerned with the long-term health of radio as an advertising medium.

From Regional to National Rep Firm: 1953-90

Interep National Radio Sales Inc. has its roots in the 1950s, when Darren McGavren purchased Western Radio, a regional advertising representation firm with client stations throughout California and the Pacific Northwest, in 1953. The Darren McGavren Company grew steadily in the 1950s and 1960s. In the 1960s the company took on a partner, Ralph Guild, and the company was renamed McGavren Guild Radio. To handle its growth, the company was restructured into regional offices to serve major advertising agencies. In the 1970s McGavren Guild Radio became an employee-owned company through an Employee Stock Ownership Plan (ESOP) that would remain in effect into the year 2000.

During the early 1980s ad rep firms began to consolidate. National spot radio advertising revenues were growing at double-digit rates. In 1982 The Interep Radio Store was established as the parent company of McGavren Guild and began acquiring smaller rep firms. Between 1982 and 1984 Interep purchased the firms Weiss & Powell, Major Market Radio, and others to form a “nonwired network” of about 1,000 client radio stations. Such networks made it easier for advertising agencies to purchase national spots in several markets at once for their clients.

Interep continued to acquire other firms throughout the 1980s. Toward the end of the 1980s it created Group W Radio Sales, a firm that represented all Westinghouse radio stations. This marked the first time that a rep firm was dedicated solely to one broadcast group. Dedicated rep firms subsequently became more widespread in the 1990s.

In 1986 and 1987 national spot radio revenues were flat. In 1988 and 1989 they increased by about seven to eight percent. Interep changed its internal structure in order to develop more national sales, creating Marketing Service Teams (MSTs) and Account Management Teams (AMTs). An MST consisted of one person from each of Interep’s six companies. Together, the team would call on major advertising agencies, targeting different levels such as the media department, account management, and the creative department. The AMTs would then follow up and work with the client to develop new business ideas.

Innovative Programs in the 1990s

In 1990 and 1991 Interep Radio Store announced its Radio 2000 strategy, a long-term marketing initiative designed to in-crease radio advertising. Among the goals of Radio 2000 were to increase radio’s share of overall advertising revenue from seven percent to nine percent by targeting national advertisers who were potential users of radio. Such an increase in market share would represent a 28 percent increase in radio’s annual advertising revenue. The overall radio advertising market was estimated at $8.8 billion, of which $2.1 billion (24 percent) was from national sales and $6.7 billion (76 percent) came from local advertising. Radio 2000 later became the Interep Marketing Group and was headed by Marc Guild, son of Interep’s co-founder, chairman, and CEO Ralph Guild.

As part of its Radio 2000 industry-wide campaign, Interep released the results of its study of the teen market’s media and spending habits. The study revealed that teens were heavy radio users. Another Interep study claimed that radio advertising was the best way to reach the growing market of black consumers, suggesting that the Urban Contemporary format, with its 69 percent black audience, represented one of the strongest growth markets in radio for the coming decade.

By 1991 Interep represented more than 2,000 radio stations and accounted for about half of national advertising sales. Its primary competitor was the Katz Radio Group, which accounted for the other half. Interep launched a national sales and marketing network called the Country Radio Format Network to draw advertisers into country radio. Interep convened the first meeting of the network in New York City in November 1991. At this meeting, representatives from individual country music stations developed a plan to promote the use of country radio to advertising agencies and their clients.

The outlook for national spot radio advertising looked flat for 1992 after national spot radio sales for the fourth quarter of 1991 declined as much as 15 percent. National spot radio sales for 1991 fell by about seven percent compared to 1990. Advertisers appeared to be spending more in the top ten markets, and within the top ten only Los Angeles, New York, Chicago, San Francisco, and Dallas showed increases in spot radio ads in 1991. Another factor affecting spot radio sales was network radio, which offered an inexpensive alternative to spot radio. Later in 1992 both Katz and Interep joined to urge the presidential candidates Bill Clinton and George Bush to use spot radio advertising in their campaigns.

As part of a strategic reorganization, Interep dropped 200 stations it represented and combined two of its seven companies into a single entity in 1992. Interep president Les Goldberg noted that with the increasing consolidation of station owner-ship, there would be fewer station owners to represent in each market. The moves left Interep with about 1,200 stations that it represented.

One concept that Interep marketed in 1993 was called Coupon Radio. Although it never caught on, the system envisioned an electronic memory card that listeners could insert into specially made radios during commercials. Listeners would then take the card to a participating retailer and insert it into a machine there that would print out a discount coupon. The coupon would also serve to demonstrate the commercial’s results to the advertiser.

Also in 1993 Interep developed a software package called BrandNet for advertising agencies and advertisers. The system would match a brand’s consumer profile with radio station format profiles to determine which stations’ audiences had the highest purchase potential for the brand. Interep claimed the software was not biased toward stations that Interep represented, but many buyers remained skeptical.

Many of Interep’s efforts, such as conducting industry studies and developing special software systems, were designed to position the company as a forward-looking firm concerned with the long-term future of radio, not just with making a sale. In 1992 Interep began a training program for its sales people and researchers to make them radio marketing specialists. The pro-gram included a Harvard Business School course in marketing. Interep claimed the program led to $14 million in new radio business in one year.

In 1994 Interep expanded its Format and Demographic Net-work program, which was launched in 1992 to change the way that radio advertising was sold. By 1994 the marketing program had four networks: News-Talk Radio, Country Radio, Urban Radio, and 12-24 Radio. Interep claimed that the program resulted in $10 million in new radio advertising. Under the program, Interep sales reps would determine which format best suited the needs of the client and then book time on the appropriate stations, whether or not the stations were represented by Interep.

Early in 1994 the company planned to add Hispanic, direct response, and infomercial format networks to the program. Each network was designed to promote the strength of a particular format to advertisers. Later in 1994 it added more formats, including classic rock, “mature music,” oldies, album rock, and interactive radio promotion. Ad revenues for the first half of 1994 grew by 11 percent over the same period in 1993, signaling a comeback after years of flat or declining advertising revenue. At the start of 1995 Interep launched Best of Oldies Music (BOOM), a marketing network of 110 stations that had contracted with Interep to represent their national ad sales.

In October 1994 Interep signed an exclusive agreement with radio station owner Infinity Broadcasting that gave Interep sole representation of national advertising sales for 24 Infinity-owned stations. As part of the agreement Interep would create a new company, Infinity Radio Sales, in January 1995 with 50 sales representatives, headquarters in New York City, and offices in eight other cities. Previously, Katz Radio and its affiliates had represented 11 of the 24 stations, and Interep and its affiliates the other 13 stations. As a result of its agreement with Infinity, Interep pulled ahead of Katz as the leading U.S. radio advertising rep firm.

Company Perspectives:

Interep is the nation’s largest independent advertising sales and marketing company specializing in radio, the Internet and new media. We offer the most innovative marketing solutions designed to help national and regional advertisers achieve their business goals utilizing radio, the Internet and other emerging media technologies.

In another deal similar to the one with Infinity, Interep announced in January 1995 that it would form a new company, Shamrock Radio Sales, dedicated to representing national advertising sales for Shamrock Broadcasting’s 19 major-market radio stations. Previously, the majority of Shamrock’s stations had been represented by Katz Radio Group and its affiliates. Once Shamrock was acquired by Chancellor Broadcasting in fall 1995, however, Shamrock Radio Sales ceased to exist.

Later in 1995 Caballero Spanish Media merged with Interep to become the company’s ninth national advertising rep firm. Caballero represented national advertising sales for 140 Spanish-language radio stations and had an estimated $30 million in annual billings.

Around this time Interep announced it would debut a new interactive services division in 1996 to offer radio stations and advertisers more information about their markets and interactive communications involving the World Wide Web. The company also planned to expand its RadioSite, which developed and maintained web pages for its client stations. As online advertising grew over the next few years, Interep created Interep Interactive in 1999 to focus on selling and marketing online advertising on the World Wide Web.

In February 1996 Interep and station owner Clear Channel Communications formed Clear Channel Radio Sales to handle national advertising sales for Clear Channel’s 36 stations in 12 markets. Clear Channel was expected to add about $35 million in gross annual billings for Interep. Interep signed two other exclusive representation agreements early in 1996, one with Philadelphia-based Entercom covering 11 radio stations and another with Key market Radio.

In May 1996 Interep adjusted its organizational structure by combining three managed rep firms—Major Market Radio Sales, Torbet Radio Group, and Concert Music Broadcast Sales—into Allied Radio Partners. The new group would allow account executives to represent national ad sales for multiple stations in a single city.

At the beginning of 1997 Interep became the exclusive national sales representative for all 79 CBS radio stations, including the former Infinity Broadcasting stations and those owned by Westinghouse Electric Corp. As a result, CBS folded its CBS Radio Representatives and Group W Radio Sales, which were two of the last major company-owned national advertising rep firms. The 79 stations represented about $250 million in annual advertising sales. With the CBS stations added to its roster, Interep now accounted for about half of the $1.6 billion national radio revenue market, with Katz accounting for the other half.

Later in 1998 Interep was hired by the Theater Radio Net-work to place its service in theaters. It was only the second non-broadcast client for Interep. Theater Radio Network was launched in 1997 and provided audio programming in 15-minute blocks for movie theaters.

Interep completed its initial public offering (IPO) of 5.4 million shares at $12 a share on December 9, 1999. At the time of its IPO Interep, which changed its name to Interep National Radio Sales Inc., was the exclusive advertising rep firm for more than 2,000 radio stations. The company had 15 offices in the major advertising cities in the United States as well as six satellite locations in other key locations.

For the future, Interep’s strategy was to build on its position as the leading independent national spot radio advertising rep firm in the United States. It planned to expand its market share through new clients and strategic alliances with the leading radio station groups. Interep was in a good position to benefit from the consolidation of station ownership that was taking place in the radio industry and already represented several large groups of stations.

Principal Divisions

ABC Radio Sales; Allied Radio Partners; Caballero Spanish Media; Cumulus Radio Sales; D&R Radio; Infinity Radio Sales; McGavren Guild Radio; McGavren Guild/Susquehanna.

Principal Competitors

Katz Media Group, Inc.

Key Dates:

1953:: Darren McGavren acquires Western Radio, a regional advertising representation firm, and forms the Darren McGavren Company.
1960s:: Ralph Guild becomes McGavren’s partner, and the firm is renamed McGavren Guild Radio.
1982:: The Interep Radio Store is formed as the parent company of McGavren Guild and begins acquiring other ad rep firms.
1990:: Interep launches Radio 2000, a long-term marketing plan.
1999:: Interep changes its name to Interep National Radio Sales Inc. and completes its initial public offering.