Increase Your Underwriting Dollars Through Co-Op!
by J.C. Patrick
What is co-op?
So why look at co-op?
These funds can be used to clinch the underwriting deal and/or to encourage a client to increase the budget for a repeat order.
Is it "okay" to do co-op?
Yes, if the relevant legal considerations are understood and addressed. These can be tricky. As a general FCC matter, if station programming is underwritten by two entities — a manufacturer and a retailer — the support of both as funders can and should be acknowledged.
EX: “KABC is sponsored by Random House and Acme Books…”
On the other hand, if one of the two entities is the sole source of funding, then only the entity from which program support has been received should be acknowledged as the sponsor. The local retailer may be cited as the place where the product is available.
EX: “KABC is sponsored by Random House, offering x book, available at Acme Books.”
There are also tax issues. Whether the revenue associated with underwriting is taxable or tax exempt is determined under the Internal Revenue Code. Because station practices and individual circumstances vary, you should consult appropriate legal counsel to discuss your station's participation in co-ops.
Public radio stations are making money with co-op.
Some categories that have included public broadcasting in their co-op mix are book publishers, tire manufacturers, electronic equipment manufacturers, CD labels, computer manufacturers, furniture manufacturers, auto dealers, American Express and more. Most stations, rather than soliciting co-op dollars from the manufacturer, rely on the client to inform them when they are using co-op dollars.
For general research on co-op plans, the RAB (Radio Advertising Bureau) will help.
RAB member stations have access to over 5,000 current co-op programs on the member site. If your station is not a member of RAB, there is a representative list of co-op programs on the nprstations.org site for reference. Don't forget that co-op dollars apply to almost all businesses - even your local service providers. When we refer to "retailers", we're not just talking about retail stores.
Let's look at an example of how co-op works:
Your local bookstore buys books from Random House. Random House has multiple co-op opportunities. Here is an example of how they're listed in the co-op plan, and what they mean to your local business partner:
Juvenile: 100% up to 4% of previous year's net billings for Crown, RH, Knopf Juvenile books and cassettes. New and indirect retailers earn 6% of current year's billings of one supporting order per season. Expires 12/31.
What it means: If your local bookseller spent $50,000 on juvenile books last year, Random House provides $2000 (4% of their expenditure) to spend in promoting Crown, Random House and Knopf brands of books and cassettes. If your client is a new bookseller or a dealer of another type (not a bookseller), they have $3000 (6% of their purchase dollars) to spend based on a $50,000 order placed in spring, plus another 6% of subsequent dollars for orders placed in winter, summer and fall.
100% co-op plans pay for 100% of the underwriting. The local bookseller does not have to add any funds of their own. [If, however, this co-op was only a 50-50 plan, Random House would provide only half of the 4% (or 6%) figure - $1000 or $1500 - and the dealer would have to match that number with $1000 or $1500 from their budget.]
Bottom line, co-op stretches the retailer's dollars.
How can I work with my local business partners to help create a path for co-op dollars to come to my radio station?
THE EASY WAY: (Your client deals with the vendor)
THE HARDER WAY: (You deal with the vendor)
How do we get paid?
Alert your traffic or business manager that this is a co-op buy and as such, will need special attention. Incorrect paperwork can delay payment to the local business from the manufacturer, causing a late payment to the station.
After the schedule ends, you have a set number of days to provide WRITTEN proof that the schedule aired. In addition to billing the client, you must provide documentation to the manufacturer. This usually contains your station call letters, the client's name, the flight dates, a copy of the script, a notarized affidavit of the dates and times that it ran, the invoice number, number of spots, rate per spot and the total amount billed to the client. Keep a copy for your station files.
Check back with your local business partner for feedback on the schedule. If payment is slow in coming to the dealer, offer to call the manufacturer to expedite the process.
It takes a lot of time to put together a co-op buy.
That's why retailers release their programs well in advance of the deadline, and the RAB reports give you 4 - 6 months lead time. Almost every retailer or service provider will carry some products that will generate co-op dollars. However, it's not as difficult or time-consuming as it sounds. Once a relationship is established with a manufacturer, it's simply a matter of getting new information and doing the required paperwork.
Your underwriting reps will find that successful co-op deals afford them a better client relationship, a greater chance for repeat sales and valuable contacts with the manufacturer's reps.
When you position yourself as a market expert, you reinforce the partnership effort by making sure you help your clients maximize their marketing plan through their co-op dollars - and support public radio at the same time!
Questions? J.C. Patrick 713-504-6759 or jcpatrick421@gmail.com
by J.C. Patrick
What is co-op?
- Co-op is a system by which manufacturers and/or distributors agree to pay for a portion of the underwriting purchased by their retailers, thus reducing the retailers' cost.
- Retailers earn or accrue co-op dollars based on their purchases from the manufacturer. These accruals are usually a percentage of those purchases, generally 1 - 5%.
- Co-op plans may offer reimbursement ranging from 40 - 100%. If the dollars are not used by the expiration date of the co-op program, they are lost.
- There are rigid rules set in place that the dealer must follow. They can be complicated, and they are different for every manufacturer. If they are not followed to the letter, the co-op claim may be denied.
- There are thousands of co-op plans in existence. Almost every manufacturer has some form of co-op. However, since newspaper receives the largest share of co-op dollars, broadcast media in ANY form isn't top-of-mind for co-op programs, much less public radio. Second, co-op's tight restrictions could pose a problem with our tight restrictions on copy.
So why look at co-op?
These funds can be used to clinch the underwriting deal and/or to encourage a client to increase the budget for a repeat order.
Is it "okay" to do co-op?
Yes, if the relevant legal considerations are understood and addressed. These can be tricky. As a general FCC matter, if station programming is underwritten by two entities — a manufacturer and a retailer — the support of both as funders can and should be acknowledged.
EX: “KABC is sponsored by Random House and Acme Books…”
On the other hand, if one of the two entities is the sole source of funding, then only the entity from which program support has been received should be acknowledged as the sponsor. The local retailer may be cited as the place where the product is available.
EX: “KABC is sponsored by Random House, offering x book, available at Acme Books.”
There are also tax issues. Whether the revenue associated with underwriting is taxable or tax exempt is determined under the Internal Revenue Code. Because station practices and individual circumstances vary, you should consult appropriate legal counsel to discuss your station's participation in co-ops.
Public radio stations are making money with co-op.
Some categories that have included public broadcasting in their co-op mix are book publishers, tire manufacturers, electronic equipment manufacturers, CD labels, computer manufacturers, furniture manufacturers, auto dealers, American Express and more. Most stations, rather than soliciting co-op dollars from the manufacturer, rely on the client to inform them when they are using co-op dollars.
For general research on co-op plans, the RAB (Radio Advertising Bureau) will help.
RAB member stations have access to over 5,000 current co-op programs on the member site. If your station is not a member of RAB, there is a representative list of co-op programs on the nprstations.org site for reference. Don't forget that co-op dollars apply to almost all businesses - even your local service providers. When we refer to "retailers", we're not just talking about retail stores.
Let's look at an example of how co-op works:
Your local bookstore buys books from Random House. Random House has multiple co-op opportunities. Here is an example of how they're listed in the co-op plan, and what they mean to your local business partner:
Juvenile: 100% up to 4% of previous year's net billings for Crown, RH, Knopf Juvenile books and cassettes. New and indirect retailers earn 6% of current year's billings of one supporting order per season. Expires 12/31.
What it means: If your local bookseller spent $50,000 on juvenile books last year, Random House provides $2000 (4% of their expenditure) to spend in promoting Crown, Random House and Knopf brands of books and cassettes. If your client is a new bookseller or a dealer of another type (not a bookseller), they have $3000 (6% of their purchase dollars) to spend based on a $50,000 order placed in spring, plus another 6% of subsequent dollars for orders placed in winter, summer and fall.
100% co-op plans pay for 100% of the underwriting. The local bookseller does not have to add any funds of their own. [If, however, this co-op was only a 50-50 plan, Random House would provide only half of the 4% (or 6%) figure - $1000 or $1500 - and the dealer would have to match that number with $1000 or $1500 from their budget.]
Bottom line, co-op stretches the retailer's dollars.
How can I work with my local business partners to help create a path for co-op dollars to come to my radio station?
THE EASY WAY: (Your client deals with the vendor)
- Ask your local business partner if they know what co-op plans their manufacturers offer.
- Review the guidelines and follow them EXACTLY as to copy and billing.
- Your client will have the copy approved by the vendor.
- You will follow billing instructions.
- Done!
THE HARDER WAY: (You deal with the vendor)
- Ask your local business partner if they know what co-op plans their manufacturers offer.
- Volunteer to write to the manufacturer directly on behalf of your radio station and your local business partner to obtain their co-op guidelines and the amount of your partner's available accrued dollars. Be sure you have a letter enclosed from your local business partner with their account number noted, authorizing the manufacturer to release the information to you.
- You can call the manufacturer directly and request a copy of their plan. Many will allow NO telephone calls from radio sales people, however. If allowed, make the call and have the local retailer's release letter ready to fax/email.
- After the accrual totals are made available to you, ask for a detailed copy of their plan. Then ask the dealer: Have their guidelines changed? Do they provide radio scripts and if not, does dealer copy need prior approval? Are there any one-time co-op opportunities? What kind of documentation is needed at the end of the schedule? Find out the address where the claims should be sent.
- Once you have the copy of the plan, create a proposal for your business partner and make sure those underwriting dollars are spent on your station! Assure your partner that you will handle all the paperwork and billing with the manufacturer. Verify your plan with the manufacturer before scheduling any co-op underwriting - plans change and are cancelled without notice.
- Write the copy according to the co-op guidelines and your FCC guidelines and get all required copy approvals.
How do we get paid?
Alert your traffic or business manager that this is a co-op buy and as such, will need special attention. Incorrect paperwork can delay payment to the local business from the manufacturer, causing a late payment to the station.
After the schedule ends, you have a set number of days to provide WRITTEN proof that the schedule aired. In addition to billing the client, you must provide documentation to the manufacturer. This usually contains your station call letters, the client's name, the flight dates, a copy of the script, a notarized affidavit of the dates and times that it ran, the invoice number, number of spots, rate per spot and the total amount billed to the client. Keep a copy for your station files.
Check back with your local business partner for feedback on the schedule. If payment is slow in coming to the dealer, offer to call the manufacturer to expedite the process.
It takes a lot of time to put together a co-op buy.
That's why retailers release their programs well in advance of the deadline, and the RAB reports give you 4 - 6 months lead time. Almost every retailer or service provider will carry some products that will generate co-op dollars. However, it's not as difficult or time-consuming as it sounds. Once a relationship is established with a manufacturer, it's simply a matter of getting new information and doing the required paperwork.
Your underwriting reps will find that successful co-op deals afford them a better client relationship, a greater chance for repeat sales and valuable contacts with the manufacturer's reps.
When you position yourself as a market expert, you reinforce the partnership effort by making sure you help your clients maximize their marketing plan through their co-op dollars - and support public radio at the same time!
Questions? J.C. Patrick 713-504-6759 or jcpatrick421@gmail.com