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Page 1: Digital Innovations in Local Radio & Television (BIA/Kelsey Presentation to TAB 2014)

The Local Media & Advertising Experts

Digital Innovations in Local Radio and Television

Mark R. Fratrik, Ph.D.Senior VP, Chief Economist, BIA/Kelsey

Texas Association of BroadcastersAugust 7, 2014

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© 2014 BIA/Kelsey. All Rights Reserved.2

BIA/Kelsey at the Center of Local BIA/Kelsey is the leading research and advisory

company focused on the local advertising marketplace. Our goal is to help companies leverage the exceptional

business opportunities in local media to solidify their leadership position.

Our research-driven data helps our clients make the right decisions, every day. Industry Forecasts Local Market Ad Reports Consumer Research Advertiser Research Mobile, Social, Video Trends

U.S. Local MediaForecasts

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© 2014 BIA/Kelsey. All Rights Reserved.3

© 2014 BIA/Kelsey. All Rights Reserved.

Overview of TalkLocal Media Market Forecast: Where will Radio and TV be in 5 Years? What will be the top Business Categories Spending on Local Radio and TV Stations.Drivers of Ad Revenues: What is the growing importance of SMBs?Cross-Platform Selling: What are Radio and TV stations doing to capitalize?Mobile: Its growing importance and how Radio and TV stations can take advantage of it.

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© 2014 BIA/Kelsey. All Rights Reserved.4

National OverviewTotal U.S. Spending In Local Markets

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© 2014 BIA/Kelsey. All Rights Reserved.5

DefinitionBIA/Kelsey defines the local media advertising marketplace as all media generating revenues by selling paid media access to local audiences to all types of advertisers. “Local” audience advertising sales include buys specifying local and regional markets.

Newspapers Radio Local Video Over-the-Air Television Cable Television Out-Of-Home

Direct Mail Directories Local Magazines Online Mobile Social

Categories

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Local Media Five-Year Forecast

2013 2014 2015 2016 2017 2018$120

$125

$130

$135

$140

$145

$150

$155

$160

$165

$133.2$138.0

$140.7

$147.1$151.5

$158.6

US$

Billio

ns

Source: BIA/Kelsey U.S. Local Media Forecast (2013-2018)

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Local Ad Market Currently Dominated by Traditional Media

Newspapers Print13.5%

Newspapers Online2.4%

Direct Mail27.9%

TV O-T-A13.8%

TV Online0.5%Radio O-T-A

10.7%

Radio Online0.4%

Print Yellow Pages3.4%

Internet YP1.6%

OOH5.8%

Cable4.8%

Magazine1.5%

Magazine Online0.2% Online/Interactive

9.9% Email1.4%

Mobile2.2%

2013 U.S. Local Media Revenues — $133.2 Billion

Source: BIA/Kelsey U.S. Local Media Forecast (2013-2018)

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© 2014 BIA/Kelsey. All Rights Reserved.8

Continuing Shift Toward Digital Media

2013 2014 2015 2016 2017 2018$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$105.3 $106.3 $104.5 $106.4 $104.9 $105.9

$27.9 $31.7 $36.2 $40.7 $46.6 $52.7

Traditional Online/Digital

US$

Billio

ns

2013-2018CAGRs:

Total MediaCAGR 3.6%

Traditional Me-dia

CAGR 0.1%

Online/Digital Media

CAGR 13.6%

$138.0$133.2$140.7 $147.1 $151.5 $158.

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Note: Numbers are rounded.Source: BIA/Kelsey U.S. Local Media Forecast (2013-2018)

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© 2014 BIA/Kelsey. All Rights Reserved.

A THIRD of ALL Local Media advertising will be Digital Media advertising by 2018

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Local Ad Market with More Players than Just Traditional Media in 2018

Newspapers Print8.5%

Newspapers Online2.5%

Direct Mail24.2%

TV O-T-A14.0%TV Online

0.7%Radio O-T-A

9.9%Radio Online

0.6%

Print Yellow Pages1.1%

Internet YP1.8%

OOH5.9%

Cable4.9%

Magazine1.0%

Magazine Online0.3%

Online/Interactive13.1%

Email1.5%

Mobile9.9%

2018 U.S. Local Media Revenues — $158.6 Billion

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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What’s Going on in Local Markets? Media Ad View Plus

Offers granular and vertical view of $138 billion local media industry

Provides a local and a nationwide comparative forecast

Allows for evaluation of opportunities across multiple dimensions:

Local Ad Markets Media and Ad Categories Business Categories

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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Auto 21.1%

Real Estate40.4%

Quick Service Restaurants

18.4%

Businesses Shifting Ad Spending to Online Business categories and their percent of all

spending in online media by 2018

$730.2M$1.4

B

Source: BIA/Kelsey’s Media Ad View Plus Forecast

$3.6 B

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Retail Advertising - 2014

Cable3.0%

Direct Mail43.3%

Email0.7%

IYP0.4%

Mags Print0.8%

Mags Online0.1%

Mobile1.4%

Newspaper Print

16.3%

Newspaper Online3.2%

Online7.4%

Out of Home2.7%

PYP0.5%

Radio OTA10.3%

Radio Online0.5%

TV OTA9.0% TV Online

0.4%

U.S - $25.9 Billion

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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National Furniture Consumers Spending Time With Media – The Media Audit

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© 2014 BIA/Kelsey. All Rights Reserved.

Health Care Advertising: +$500 Million by 2018

15Source: BIA/Kelsey’s Media Ad View Plus Forecast

2018

19.8%

2018

7.3%

Local Radio StationsLocal TV Stations

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Automotive Dealers Advertising

Cable TV7.7%

Direct Mail5.8%

Email0.7%

Internet YP0.7%

Magazines Print1.0%

Magazines Online0.2%

Mobile1.5%

Newspaper Print

16.3%

Newspaper Online3.2%

Online10.2%

OOH0.8% Print YP

0.8%

Radio OTA

11.7% Radio Online0.5%

Tele-vision OTA

37.4%Television Online1.4%

U.S. 2013 - $12.51 Billion

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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© 2014 BIA/Kelsey. All Rights Reserved.

Online Advertising Automobile Dealers:

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Classified/Verticals comprise over half of totals

2013

$2.2B

2018

$3.4B

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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Automobile Dealer Advertising – Austin, TX vs. Nationwide

Cable TV8.4% Direct Mail

6.4%

Email0.8%

Internet YP0.8%Magazines

Print1.0%

Magazines Online0.2%

Mobile1.6%

Newspaper Print

17.7%Newspaper

Online3.5%

Online11.0%

OOH0.8%

Print YP0.9%

Radio OTA11.6%

Radio Online0.5%

Television OTA

33.4%

Television Online1.3%

Austin, TX 2014 - $61.4 Million

Cable TV7.7%

Direct Mail5.8%Email

0.7%

Internet YP0.7%

Magazines Print1.0%

Magazines Online0.2%

Mobile1.5%

News-paper Print

16.3% Newspa-per Online

3.2%Online10.2%OOH

0.8%

Print YP0.8%

Radio OTA11.7%

Radio On-line0.5%

Television OTA

37.4%Television Online

1.4%

U.S. 2014 - $12.51 Billion

Source: BIA/Kelsey’s Media Ad View Plus Forecast

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Texas New Vehicle Consumer Spending Time With Media – The Media Audit

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Automobile Dealers Online Advertising - Austin, TX

Search32.4%

Video Dis-play11.2

%Other Display4.5%

Clas-sified/ Verti-cals52.0

%

Austin, TX 2017: $19.1 Million

Search32.9%

Video Display6.5%

Other Display7.3%

Clas-sified/ Verti-cals

55.7%

Austin, TX 2013: $12.7 Million

Source: BIA/Kelsey, 2014Source: BIA/Kelsey’s Media Ad View Plus Forecast

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© 2014 BIA/Kelsey. All Rights Reserved.

Importance of Small to Medium-Sized Businesses (SMBs)

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Total Local Media Advertising:SMB vs. Non-SMB Advertisers

.

2013 2014 2015 2016 2017 2018$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$47.2 $49.0 $50.1 $52.6 $54.4 $57.2

$86.0 $89.0 $90.6 $94.5 $97.1 $101.4

SMB Local Ad Spend Non-SMB Local Ad Spend

Billio

ns

34.2%

% SMB

Source: BIA/Kelsey U.S. Local Media Forecast (2013-2018)

33.0% 33.6%36.0%

34.8% 35.4%

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Our Local Commerce Monitor (LCM) Surveys

SMB media usage, ROI assessments of marketing channels, and the use of mobile, social and loyalty programs.

The longest running survey of SMB marketing and advertising to our knowledge, since 1999.

Two cuts of data: Core Sample (All); Plus Sample (>$25K ad spend).

Results based on 600 responses have a confidence interval of +/- 4.0% at the 95% confidence level. The confidence interval is larger for those questions that were asked of just a subset of the full sample.

Source: BIA/Kelsey’s Local Commerce Monitor™ (LCM) Wave 17, Q3/2013 (and prior waves, if relevant). Methodology: Online panels.

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Benchmark: Media Spend on Advertising & Promotion (Declined)

Total Spend on Advertising & Promotion Declined

Source: BIA/Kelsey’s Local Commerce Monitor™ (LCM) Waves 15-17 (Q3/2013)

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Number of Media Used Declined

Average Number of Different Media Used for Advertising &

Promotion

Biggest Losers (in SMB usage): Directories Cable TV Newspapers Outdoor

Source: BIA/Kelsey’s Local Commerce Monitor™ (LCM) Waves 15-17 (Q3/2013) and prior waves, if relevant. Methodology: Online panels.

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Online FootprintPercentage of SMBs Using Each Channel

Source: BIA/Kelsey’s Local Commerce Monitor™(LCM) Wave 17, Q3/2013 (and prior waves, if relevant). Methodology: Online panels.

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Mobile: On a Roll (More Mobile Advertising)

Used Mobile A Year Ago(Wave 16 Q3/2012)

Using Mobile Now(Wave 17 Q3/2013)

Increase in use by Plus Spenders: 40% (Wave 16) to 53% (Wave 17). Source: BIA/Kelsey’s Local Commerce Monitor™(LCM) Wave 17, Q3/2012 and Wave 16 (and prior waves, if relevant). Methodology:

Online panels.

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© 2014 BIA/Kelsey. All Rights Reserved.

Radio Advertisers

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Distribution of Spending by Radio Advertisers – Small & Medium-Sized Businesses

Online25.4%

Radio12.5%

Mobile8.0%

Sponsorships/ Giveaways

7.1%

Deals & Coupons

6.5%

PYP6.2%

News-papers5.5%

Direct Mail5.2%

Email Mktg.5.1%

TV4.9%

Cable 3.4% Other

10.2%

26 additional categories of advertising and marketing spent by radio advertisers

Source: BIA/Kelsey’s Local Commerce Monitor™(LCM) Wave 17, Q3/2013 (and prior waves, if relevant). Methodology: Online panels.

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Digital Media Used For Advertising & Promotion By Radio Advertisers

Online Coupons

LinkedIn

IYP

Facebook Ad

Twitter

Google

Video You Tube

Video Website

Email Mktg.

Facebook Page

0% 20% 40% 60% 80%

26.4%

29.6%

32.0%

34.4%

36.0%

36.0%

36.8%

44.8%

52.0%

71.2%

Source: BIA/Kelsey’s Local Commerce Monitor™ (LCM) Wave 17, Q3/2013 (and prior waves, if relevant). Methodology: Online panels.

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© 2014 BIA/Kelsey. All Rights Reserved.

32.9% Percentage of Advertising Budget for Digital / Online for next 12 months

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© 2014 BIA/Kelsey. All Rights Reserved.

Cross-Platform Selling

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© 2014 BIA/Kelsey. All Rights Reserved.

Digital AgencyX

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Hello, I’m from [your company], and I’m here to help your business. And so are 38 of your closest friends.

Solution to Help You Grow Your Business!

We Provide It!

Search/SEM/SEO XDisplay XEmail marketing XSocial marketing XVideo marketing XElectronic Presence/Reputation Management

X

SMS Text/Mobile Apps XContests/Games XLoyalty XCoupons XWebsite hosting/responsive design XEtc., etc., etc. X

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Optimizing Sales Mandatory Companywide Certification and Training

Some media companies require that all sales reps become Google AdWords certified

Some often hires non-ads salespeople who are experienced in “truly consultative” business sales

Compensation & incentives for digital sales

Rules of Thumb: 4 legged calls for major accounts ($1500+/month) Long tail = single rep/telesales/self-serve Digital vs. Hybrid sales team debate continues

Verticals Focus: High-value leads + Bigger budgets = Better margins Auto, Medical, Education, Financial Services, Real Estate Long-tail SMB approaches are less proven & difficult to scale

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Fulfillment: We Recommend Partnering

Key Questions for Partner Vetting What Is Their Time-to-Market? Can They Scale Fulfillment as You Scale

Sales? How do they inform, train & empower your

sales teams? What’s the Cost Structure? Your Margins?

Why Outsource? Not Your Core Competency Expedite Time-to-Market Let Your Sales Team Focus On…SELLING

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Examples of Media Companies Successfully Cross-Selling

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© 2014 BIA/Kelsey. All Rights Reserved.

Consumer Use of Mobile Devices: Opportunities?

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Monthly Time of Viewing Spent by Medium – Users 2+, 1st Quarter

2010 2011 2012 20130

20

40

60

80

100

120

140

160Live TV Timeshifted TV Internet Video Mobile Video

Hour

s

Source: Nielsen, The Cross-Platform Report. 2011-2013

84.1% of all

viewing

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Monthly Time Spent of Viewing by Medium – Users 2+, 1st Quarter

2010 2011 2012 20130

2

4

6

8

10

12

14

16

9.510.8

12.213.4

4.2 4.65.4

8.3

4.3 4.8 5.0 5.5

Timeshifted TV Internet Video Mobile Video

Hour

s

2010-2013:40.3%

Increase

2010-2013:26.5%

Increase

Source: Nielsen, The Cross-Platform Report, 2011-2013

2010-2013:97.6%

Increase

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Sources of News:Where People Got News Yesterday

Large decreases in news sources for traditional media

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Daily and Regular News Consumption

Local TV news saw nearly 30% drop in daily news consumption

Source: Pew Research Center, Trends in News Consumption: 1991-2012

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© 2014 BIA/Kelsey. All Rights Reserved.

More Usage of News Websites or Apps:Respondents using a smartphone/tablet to consume digital content with news website or app:

Source: Donald W. Reynolds Journalism Institute, University of Missouri, July 22, 2013 45

201262%

2013

70%

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Texas TV & Radio Integrating Over-the-Air Content with Online & Mobile

KLBJ

KASE

KVUE-TV

Radio Television

KXAN-TV

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© 2014 BIA/Kelsey. All Rights Reserved.

Conclusions

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© 2014 BIA/Kelsey. All Rights Reserved.

Texas radio and television stations find themselves in an

incredibly competitive and changing marketplace

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© 2014 BIA/Kelsey. All Rights Reserved.

YET viewers and advertisers have more cross-platform opportunities to consider

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© 2014 BIA/Kelsey. All Rights Reserved.

Broadcasters must use their strengths to pivot and take advantage of opportunities:

Local Sales Force: Boots on

Ground

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Local Image

Local Info and Programming

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© 2014 BIA/Kelsey. All Rights Reserved.

BIA/Kelsey Helps Clients Succeed Every Step of the Way

UNDERSTAND marketplace dynamics

IDENTIFY & MANAGE the competition

BASE DECISIONS on reliable, actionable market data & insights

ALIGN PRODUCTS & RESOURCES to drive operations

MAKE INVESTMENTS in growth opportunities

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The Local Media & Advertising Experts

© 2014 BIA/Kelsey. All Rights Reserved. This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any

unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under federal law. BIA/Kelsey disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential

damages that may result from the use or interpretation of this information.

Questions & Comments:Mark R. Fratrik, Ph.D.Sr. Vice President, Chief Economist(703) [email protected]