The good news
among the bad for radio
This year will see something of an ad revival
By Diego Vasquez
Apr 1, 2010
Here's the good news for radio: Ad spending will finally be up in 2010 after a couple of terrible years that saw revenue decline to 1990s levels. Already station groups across the country are saying that first quarter demand has really picked up. The bad news is that this recovery will be very, very slow, and four years from now revenue will still be below its 2008 level. That's according to a new forecast out from BIA/Kelsey, which finds that radio revenue plummeted 19 percent last year, to $13.7 billion. This year spending will rise 1.5 percent, to $13.9 billion, and continue to grow each of the next four years, hitting $16 billion in 2014, $800 million less than in 2008. Online will goose a small bit of that growth but will still remain a very low percentage of radio's overall take, peaking at $800 million in 2014. Still, if radio hopes to return to the $20 billion revenue level, it will have to branch into new media more aggressively, says BIA/Kelsey vice president Mark Fratrik, Ph.D. He talks to Media Life about the categories that will drive radio's growth, the importance of the web, and the impact of HD radio.
How does this year compare to prior years? When’s the last time revenue was at $13.9 billion? How many years had it been down?
The last time it was at this level was sometime in the 1990s. We were at the $18- $19 and $20 billion number for many, many years. And back in the ‘90s that was just for broadcast revenue, no online. In 2007 and 2008 we saw negative revenue growth, while 2005 and 2006 saw less than half-percent increases.
So it was basically steady for ‘05 and ‘06 and then we saw decreasing in 2007, ‘08 and ‘09.
Is this the beginning of a slow recovery? What’s it mean for 2011? 2012?
It’s obviously a slow recovery because we project just a 1.5 percent increase, so that’s not keeping up with the growth in the economy. So it is a slow recovery.
We see a little bit better in future years. Over the next four years we see anywhere between 2 and 4 percent increases. So it isn’t’ gangbusters, but it’s a little bit healthier than it has been in the past.
What was the peak year? Will it ever get to that level again? If so, when?
What ended up happening, after the 1996 telecom act, which relaxed local and national ownership rules, radio stations saw some double-digit percent increases in revenues. When we get into 2000 and 2001, there was another mild recession. But in the late 1990s we were seeing some really strong growth as stations took advantage of the efficiencies of more ownership. The peak was around $20 billion.
I think over time it will get closer to that number. I think radio broadcasters, and this is the emphasis we make, have to think of themselves as more than just over-the-air broadcasters.
I think over time we’ll get there, but it will take a lot more years. If more broadcasters get involved and start getting into other activities, such as online, then it has more of a chance to get back to that level.
What categories are driving the growth? Which will come into play down the line?
Automobile isn’t as important to radio as it is to TV, but it’s still important, so it will help. Telecommunications is an important category, and insurance is an important category.
The new online businesses—I’m always struck by listening to radio and hearing ads for Google or Yahoo—so any new business category [will come into play in the future]. Telecom wasn’t that important 10 years ago, but now there are many services and they compete with advertising. So whatever new business you can think of, especially locally based businesses, they’ll want to use local radio.
Is this total revenue or is online included?
It includes online, which is ads on the webcast, podcast or web site; it’s all part of digital online activities.
What are the expectations of radio getting a larger share of local digital spending on stations’ web sites?
I think it’s very strong. I think local radio stations and local TV stations have unique advantages in selling advertising. Everyone knows the brand name, the call letters. Also many stations have local content on their web sites—local events, local news, local weather, etc.
Another advantage is they have a great cross-promotional vehicle. They can cross-promote online activities on their own stations and drive people to it. And they have a local sales staff out there that has relationships with local advertisers.
How much of the 2010 boost is due to election spending?
Radio stations will benefit somewhat from the political campaigns, but unlike TV, radio doesn’t get a very large amount of political advertising. Sometimes candidates want to target a particular demographic group that radio can provide, but it’s not the big bumps that TV can get.
How much of the growth of radio will be due to new technologies?
The annual growth of online is around 16.5 percent, whereas the other revenues don’t grow as fast. But online is a small percentage of the total amount.
HD radio is a great technology, and lots and lots of stations are doing it because they improve their audio quality and add program streams, but unfortunately there hasn’t been a great increase in the number of receivers, so it’s not too much of an impact. A lot of broadcasters are broadcasting their HD radio signal online, so that’s encouraging. But no noticeable income yet, just because there aren’t that many receivers.
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