For radio, a high price for fighting change
Ad revenues are in a slide as the medium struggles with digital
June 8, 2016
By the editors of Media Life
This is one in a number of stories on radio in Media Life’s ongoing series “The new face of radio in America,” examining all the changes taking place in the medium. Click here for earlier stories.
The radio industry has one thing going for it. It’s not the newspaper industry, which has been in a free fall for a decade now.
But it’s struggling from many of the same issues, chief among them an inability to get its arms around digital.
Digital would seem in so many ways the real future of radio—look at the stunning growth of Spotify and Pandora—but so many in traditional radio still see digital as the enemy. Witness the industry’s writhing over Pandora.
Radio is paying a price for that.
While it’s not tumbling like newspapers, radio is forecast to see its share of ad dollars shrinking by many media forecasters.
Borrell Associates, which tracks local ad spending, forecasts continued declines in on-air ad revenue over the coming five years, from $12.75 billion in 2016 to $12.08 billion to 2020, a decline of more than 5 percent.
Over the decade from 2010 to 2020, ad revenues will decline by $3 billion, projects Borrell.
1) Stiffer competition, with more media competing for what’s actually a shrinking pool of ad dollars.
2) Dated image. Radio is seen by advertisers as old and unhip compared to YouTube and Facebook.
3) Lack of digital expertise. Most sales reps aren’t all that savvy about digital media.
4) Cost. Radio spots are cheap, but audiences at any given moment are small and fleeting, so reaching a sizable cume requires high frequency, and thus high cost in the end.
5) Poor sales message. Many stations just aren’t telling their story well (a combination of Nos. 2 and 3).
The sad part of it all, says Borrell, is that radio remains a very powerful medium.
Two qualities stand out, he says. One is its ability to drive action. The other is its scrappy nature.
“Radio, more than other media, is willing to get creative and make advertising work. It’s an emotional medium that generates strong affinities in the community. And those affinities can extend to advertisers when, say, a favorite announcer on a country music station talks about how he loves shopping at Bob’s Country Clothes Emporium, or when a classic rock announcer tells everybody how much he loves cranking up the ZZ Top while driving his Chevy Silverado to work.”
The problem, what holds radio back, Borrell says, is not the medium but the executives who now manage the industry. It’s in their refusal to realize and take advantage of the potential of digital to bring in new listeners and advertisers.
“Radio will undergo a radical transformation into a more powerful entity as soon as longtime industry executives retire, ” he quips.
At this point, Borrell and Elliott estimate that a third of radio companies understand digital and are using it smartly to sell more spots.
“The smart ones are listening – and recommending. They look at what they can offer, understand how it plays into the consumer’s path to purchase, and recommend the right marketing mix,” says Elliott.
“Another third are giving it lip service, which is basically asking their reps to say, ‘Oh, and would you like a banner ad with those spots?'” says Borrell.
The remaining third are either ignoring digital or selling against it, says Borrell.
Elliott cautions media buyers not to lump everyone in the third group.
“Don’t paint radio with broad brush strokes. Some companies do indeed get it and will continue to drive remarkably strong results. They understand not only the power of a strong program in each market but also the need to deliver results for advertisers through a mix of on-air spots, promotions, and digital marketing.”
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