SIC 7313

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.

NAICS Code(s)

541840 (Media Representatives)

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 the 1990s.

According to the Radio Advertising Bureau (RAB), radio advertising reached a record $15.4 billion in 1998, a 13 percent increase over the previous year. Approximately $2.8 billion came from national spots, $11.9 billion from local spots, and the remaining $720 million from network advertising. Despite these results, radio comprised only about 7 percent of the $188 billion advertising industry in 1997.

In contrast, television—broadcast and cable—brought in about $47.5 billion in annual advertising revenue in 1998, accounting for a 23.5 percent share of all advertising. Networks (ABC, CBS, NBC, and FOX) garnered approximately 29 percent of broadcast television's annual advertising revenues.

Meanwhile, newspapers and magazines achieved more than $51.8 billion in annual advertising revenue—approximately 27.6 percent of the market in 1997. Direct mail and other media sources accounted for the remaining percentages.

Of the $188 billion spent for advertising in the United States in 1997, approximately $110 billion was spent on national spots. This represented about 59 percent of all expenditures. The media rep firms listed in this industry are responsible for the placement of these national ads, which can run in any market or combination of markets.

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.

Current Conditions

Radio. Recently rising from the shadow of television, radio advertising continues to increase in annual revenue. September, 1999, marked the 85th consecutive month of sales growth in the radio industry. Radio stations and networks reached a record $15.4 billion in advertising revenue in 1998, a 13 percent growth rate over the previous year.

Industry experts have attributed "dot-com" advertising as the impetus for much of this growth. Radio is an effective means of publicizing Web sites, both at the national and local level. Gary Fries, CEO of the RAB, identified this segment as an area of growth for radio. Quoted in an April, 1999, press release, he remarked, "Dot-com advertisers are using Radio overwhelmingly —more than 80 percent of their ad budgets in many cases—to build brand identity and to tell people where they are located."

Television. The Television Bureau of Advertising (TVB) reported that total advertising expenditures for local, national, and syndicated television reached $47.5 billion in 1998, accounting for 23.5 percent of the nation's total advertising. That year, 98.3 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 advertising accounted for the largest share of television's total, $13.7 billion. Local spot was the second largest generator of advertising revenue, accounting for $12.2 billion. It was followed by national spot ($10.6 billion), cable ($8.3 billion), and syndication ($2.6 billion).

Consolidation marked the media rep industry during the 1990s. However, an obstacle to this trend has been client stations that continue to object to dual representation — having the same company represent competing stations within a market. Yet some stations have 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 65.8 million or 67.2 percent of the nation's total households in the United States had basic cable in 1997. 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 have grown from $2.4 billion to an estimated $8.3 billion. Yet the growth of cable television itself may be slowed due to competing services, such as direct-broadcast satellite (DBS) and alternative access into the consumers' homes through telephone lines or computer modems.

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 1997, newspaper-advertising revenues approached $41.7 billion, accounting for a 22.2 percent share of the nation's total advertising. However, many industry experts believe 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 have shifted some of their newspaper advertising dollars into local television and radio spots. Packaged goods marketers have 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—has made it difficult for newspapers to retain national and retail chain advertisers.

Perhaps more significant, however, is the decline in newspaper readership by the late 1990s. According to the RAB, newspapers experienced a decline in some 5.5 million readers between 1986 and 1996. Part of this decline is attributable to the availability of news, classified ads, and employment ads on the Internet.

Magazines. Magazines, particularly consumer publications, suffer the same competition from the Internet as do newspapers. Still, like newspapers, magazine advertising revenues continue to grow, even though readership has largely stalled. The TVB reports that magazines posted more than $9.8 billion in ad revenue in 1997, at a 9 percent annual increase.

Industry Leaders

New York-based Katz Media Group, Inc., a subsidiary of AMFM Inc. (formerly Chancellor Media), is the oldest media representation firm in the United States. Operating in the United States and the U.K., it sells advertising time for more than 2,100 radio stations, 300 television stations, and 1,645 cable systems, 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.

Interep National Radio Sales, Inc. was the nation's largest representation firm devoted solely to radio by the late 1990s. The firm sold radio advertising time for nearly 2,300 stations through its eight subsidiaries—ABC Radio Sales, Allied Radio Partners, Caballero Spanish Media, Cumulus Radio Sales, Infinity Radio Sales, Clear Channel Radio Sales, D&R Radio, and McGavren Guild Radio. The company 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 its current name in 1997.

Research and Technology

The introduction and usage of software packages in all aspects of the media representation industry has 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 provides up-to-the-minute information on inventory availability, generates sales proposals, and covers 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," says 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 have been relying upon computer technology to automate their sales operations. Interep introduced an exclusive software package that can identify radio stations whose listeners are likely to purchase specific brands of consumer products. The BrandNET software program can localize a brand's consumer profile and then identify the radio station whose audience has the most similar profile and would have the highest purchase potential.

The Internet and World Wide Web sparked interest in 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.

Further Reading

Advertising Expenditures. Radio Advertising Bureau, 1 December 1999. Available at .

"Broadcasting & Cable." Standard & Poors Industry Surveys , 1 August 1996.

Interep National Radio Sales, Inc., 1 December 1999. Available at .

Katz Media Group, Inc., 1 December 1999. Available at .

"The Radio Industry Will Evolve More in the Next Five Years Than We Did in the Past Fifty." Radio Advertising Bureau, 23 April 1999. Available at .

Taylor, Cathy. "The Repping of the Web." AdWeek , 26 February 1996.

Trends in Advertising Volume, 1995-1997. Television Bureau of Advertising, 1 December 1999. Available at .

TV Basics. Television Bureau of Advertising, 1 December 1999. Available at .

U.S. Bureau of the Census, 1 December 1999. Available at .

Other articles you might like:

Follow Founder
on our Forum or Twitter

User Contributions:

Comment about this article, ask questions, or add new information about this topic: