If you walk into a CVS pharmacy, you will hear inoffensive music over the loudspeakers of the store, occasionally interspersed with ads and announcements about things on sale there. It’s the kind of thing that fades into the retail background until you stop and think about where it came from. In the case of CVS, and of thousands of stores around the country, the music gets its start at InStore Audio Network, a Roszel Road-based company founded by two businessmen who first met at their Dartmouth College radio station.

Jeff Shapiro had been actively involved with the radio station when he was a student at Dartmouth in the 1980s. Shapiro purchased his first radio station in 1985 and has owned, operated, and sold more than 70 radio stations since then. But one of his best moves was staying in touch with Gary Seem, one of his old Dartmouth radio friends. Seem had been working in sales and marketing roles for companies that sell advertising to the consumer packaged goods industry. One of these companies was Rupert Murdoch’s News Corp.

News Corp. had a product that played radio-style audio ads tied into the music played in retail stores across America. This was radio that was playing right at the point-of-purchase in supermarkets and drugstores around the country. But News Corp. was not paying much attention to this part of its business, and Seem saw this as a chance to buy the company.

Seem reached out to his old college radio friend Shapiro, and in 2003 Shapiro and his partner purchased this small division of News Corp. It has since become InStore Audio Network. At that time, InStore Audio had about 2,000 retail customers and has since grown to more than 33,000 stores.

But InStore Audio Network had an interesting history prior to Shapiro and Seem’s acquisition of it. InStore Audio Network had been originally founded in 1983 under the name POP Radio (as in point-of-purchase). As it grew during the 1980s, it had developed hundreds of clients who purchased advertising time from a staff of just 10 people.

In 1990 Heritage Media purchased InStore Audio for $100 million and integrated it into its in-store advertising and promotion division, ActMedia. The new combined entity was renamed ActRadio, but the company suffered a gradual erosion of revenue during the 1990s as it changed its marketing and sales approach several times. The sales team had lost its focus as a result of the ActRadio products becoming bundled with other consumer promotion and in-store media products. Revenue kept dropping.

In 1997 News America Marketing (News Corp.) purchased Heritage and its ActRadio division and added ActRadio to its existing roster of 16 consumer packaged goods products being sold. Once again this lack of focus led to a drop off in annual revenue.

That’s when Seem reached out to his old college friend Shapiro. In 2003 Shapiro and Seem purchased the assets of ActRadio from News Corp. They immediately began rebuilding the company’s sales efforts and increasing the retail store count, and within six months InStore Audio Network was returned to profitability. In fact, the company has experienced an average annual sales growth rate of about 20 percent since it was acquired in 2003.

Then in 2006 the company teamed with a major media investor, Alta Communications of Boston. The company’s principals had previous dealings with Alta and felt that Alta’s involvement could help to grow the company. At the same time the company engaged Westwood One, a prominent network radio advertising sales network, to sell national advertising on the InStore Audio Network. This proved to be a highly successful addition to the sales mix.

In 2014 the company moved from Salt Lake City to Princeton, where Seem has been living since his wife was in graduate school at Princeton University in the 1980s.

Today InStore Audio Network is the largest in-store audio advertising provider in the U.S. and delivers audio messages to shoppers in more than 33,000 grocery and drug stores. The company provides music programming and equipment, chain-specific messaging, and third-party ad sales. Its network includes nationally known retailers such as Kroger, Stop & Shop, CVS, Albertsons, Safeway, Winn Dixie, Wegmans, Rite Aid, and Food Lion, among others.

By reaching consumers at the point-of-purchase in a captive media environment with a compelling audio message, the InStore Audio Network is heard by more than 35.5 million adult shoppers a day and delivers a proven sales lift for participating advertisers. The total number of weekly impressions for a message that runs across the entire InStore Audio Network, in a standard buy, is 121 million. The total number of shoppers who visit at least one of the stores in the company’s network during a typical week is estimated to be 94 million.

Says Seem: “Our program is unique in getting our advertisers’ message heard right at the point-of-purchase by a captive audience — the holy grail of brand and shopper marketing.”

How does InStore Audio Network succeed in this age of Internet access to just about any type of music or advertising streaming that you could wish for?

Since early on Seem viewed InStore Audio Network as an attractive business opportunity because it offered an electronic media product that did not have the weaknesses that traditional media — radio and TV — were suffering from. It serves a captive audience right at the point of purchase, so you can’t tune it out or “Tivo” it. Retailers can run “store specific” tests on just about any ad, then compare store to store for the result. As Seem pointed out, “you can run an ad in 20 test stores and not run it in 20 others, over any given time period, and then review the results of the experiment.” This approach provides clear, measurable, and valuable results.

At the same time, Seem and Shapiro understood the business model necessary to offer this type of highly effective point-of-purchase advertising media. In 2012 InStore Audio had acquired its largest competitor, IBN (In-store Broadcasting Network). IBN had provided a no-cost music service in exchange for the ability to sell advertising. This strictly advertising-supported revenue stream did not fully offset costs and IBN had experienced a slow financial decline since it started in 2004. When InStore Audio acquired IBN it added a significant footprint to it network of retailers. In addition, IBN’s network was complementary to that of InStore Audio, since each company had exclusive arrangements with their store chains.

Where did InStore Audio go right? Where did it succeed while others such as IBN could not make a go of it?

Once again InStore Audio understood the business model. Effective, measurable, testable point-of-purchase advertising requires a hardware component, a small server in each store, an expense that Internet services do not have. InStore Audio’s model is that the retailers pay a monthly subscription fee in return for having that server in each store. In exchange the retailers can then run those valuable “store specific” tests, as described earlier, and they still get a slice of the ad revenue.

InStore Audio has about 25 employees, with about half at its Princeton headquarters, and the other half scattered around the country. In addition to having several sales agents at the Princeton HQ, the remote team around the country is mostly sales, as well. The Princeton location is valuable because it has a strong talent pool and it is within an easy commute of New York and the world of ad agencies that it has to offer. In addition, within a 75-mile radius the company has access to many key advertisers.

Seem grew up in Pittsburgh, where his father worked for a steel trade publication and his mother was a substitute teacher who also sold advertising for Pittsburgh Magazine. After graduating from Dartmouth in 1984 (Shapiro graduated the year before) he moved to Princeton to follow his wife. Now, almost 35 years later, he and his wife live literally within the shadow of the Graduate School’s Cleveland Tower. Seem is an active golfer, skier, and a private pilot.

Shapiro, the chairman, grew up in northern New Jersey, where his father was an ophthalmologist. He spends most of his time in Hanover, New Hampshire, these days, sticking with the Ivy League town theme at Dartmouth. He also summers in Nantucket where he also owns and operates ACK-FM, Nantucket’s only commercial FM station. But Shapiro had originally grown up in Watchung, and his father had deep roots in Trenton, where he had grown up and later studied to become an ophthamologist. In his spare time, he is an avid skier, runner, and road biker.

The voice of InStore Audio, Steven Kamer, also works nationally in the voiceover field. Kamer is the voice of the CBS Morning News and frequently has been the announcer for NBC Sports. Recently he was the voice of the Winter Olympics in South Korea.

Steve Villa, the COO, is based in Charlotte, North Carolina. Villa manages the music licensing and playlists that air in the stores. Villa had started with Price Waterhouse Coopers and then spent 10 years with Muzak, first as the CFO and later as the CEO. He is a hockey enthusiast and even played for a short time with the New York Rangers.

But whatever the firm’s secret sauce, InStore Audio has managed to flourish where other, larger organizations had fallen short, including Heritage Media, News Corp., and IBN. At this point Seem believes that “no single competitor poses a significant threat to InStore Audio. The competition tends to be more on the music side than the advertising side.” As InStore Audio looks to the future, it envisions expanding into other types of retailers, such as Home Depot, Lowes, Dicks Sporting Goods, and others.

But the leadership team at InStore Audio Network has always had a good understanding of the business model that makes point-of-purchase advertising so valuable and effective, and they have stubbornly stuck to that script. Equally important, they stayed in touch with each other after their college days.

In Store Audio Network, 13 Roszel Road, Suite C202, Princeton 08540. 609-454-2815. Gary Seem, president and CEO. www.instoreaudionetwork.com

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