Radio’s $$$ Challenge

Revenues going downRadio, like all traditional media, is in the economic fight of its life.

In 2006, before the start of the Great Recession, the radio industry booked $18.1 Billion in advertising revenue. In 2006, the thought of earning digital dollars from doing anything on the internet was under development.

The Great Recession

Then America’s economy went catawampus. Radio’s ad dollars at the peak of the Great Recession dropped to $13.3 Billion in 2009.

Companies like Clear Channel began jettisoning employees, their biggest expense, by the boatloads. I sadly remember coming back from Clear Channel management meetings with a thumb drive and the dates that different spreadsheets would open and outline where the next employment cuts would be implemented.

John Hogan, Clear Channel CEO, told us at one of those meetings, “Never let a good crisis go to waste.” By that he meant, by using cloud of the Great Recession that the entire structure of the company could be changed.

Digital Dimes

In 2010, the radio industry began tracking the impact that the Internet of Things (IoT) began having on the total revenue of the business. That first year, $0.4 Billion was earned.

In those early years, traditional media talked about how they were converting traditional advertising dollars into “digital dimes.” In other words, for the same amount selling effort, the Return On Investment (ROI) for digital was minuscule.

U.S. Inflation Rate (2006 to 2018)

Not helping the radio industry chiefs was the inflation rate in America. A dollar in 2006 was only worth 75.44-cents in 2018.

How did radio revenues in 2018 compare to what they were in 2006? They were down $4.8 Billion. That’s comparing the same Over-The-Air (OTA) revenue of 2006, which had no digital income, to the OTA revenue produced in 2018.

But what about those digital initiatives?

From $0.4 Billion in 2010, they rose to $0.923 Billion in 2018.

So, comparing total revenues for the radio industry from 2006 to 2018, we see that radio is only down $3.9 Billion. But here’s the problem, just to stay even with 2006, and not grow in revenues, radio would need to have earned about $22.5 Billion in 2018. In other words, instead of being down $3.9 Billion, radio needed to be up about $4.4 Billion. That’s an $8.3 Billion gap!

A Look Ahead

Local radio is one of the top five advertising platforms in America today. BIA Advisory Services SVP and Chief Economist, Mark Fratrik, is predicting that OTA radio revenues will continue to decline one to two percent in 2019 and for the next few years.

Even adding in those digital revenues predicted to be $1 Billion for radio in 2020, Fratrik says total radio revenues are expected to remain flat for the next five years.

That’s why we’re continuing to see radio companies trimming their employment rosters every time we read the latest radio trade publications.

If misery loves company, the only bright spot – if you can call it one – is that the advertising dollar challenge for newspapers and television will be even greater.

Traditional media is converging on one delivery platform, the internet.

Today in China OTA radio trails streaming music for in-car listening. Even in America, for people who listen once or twice weekly, streaming and OTA listening are tied at 33%.

“The decision we have to make is

not whether this is the media environment we want to operate in,

it’s the one we’ve got.”

-Clay Shirky

 

 

4 Comments

Filed under Education, Mentor, Radio, Sales

4 responses to “Radio’s $$$ Challenge

  1. Les Bagley

    The challenge ALL local media face is finding sufficient local advertisers. Not just the 2009 recession, but can be traced back much earlier. The historic rise and subsequent demise of shopping malls with regional retailers drove the first nail in local ad revenue’s coffin as early as the 1970s. Since mall tenants’ contracts requires them to use the bulk of their ad dollars for “mall approved” advertising, the smaller local media got left out of the mall’s mostly regional media buys. Typically, though mistakenly, often the remaining mom and pops struggle to survive against the mall’s competition was to reduce their advertising budget.

    The advent and subsequent decline of big-box stores further exacerbated the local media’s problem. When Walmart came in, dozens of local mom and pop stores went out. Instead of $100 weekly from two dozen stores, the local newspaper or radio station might have gotten a $100 quarterly buy from the box’s local manager, but the rest went to regional or national ad buys. And now that the internet, where retail giants like Amazon are on the prowl, even the big box stores are dousing their lights and marquees.

    Walk through almost any small community’s downtown shopping district. The storefronts that once housed thriving locally owned groceries, menswear, ladies wear, pharmacies, shoe stores, banks and hardware stores are now either consignment shops, antique sales cooperatives, or abandoned altogether. Those missing merchants are the reason the local radio stations and newspapers are also missing. And the empty suburban shopping malls and abandoned big-box buildings are the reasons regional media company offices seem empty of employees as well.

    When a single company like Amazon is not only the message, but the medium owner/operator as well, the businesses that are left outside that parameter are just being left. We can bemoan the lack of people in those radio, television, and newspaper offices, but they are the direct result of the lack of local, regional, and even national businesses left to provide advertising revenue to pay their salaries.

    Liked by 1 person

  2. Interesting, Dick…. but something else is happening that I don’t think anyone is aware of. That is, the gap is quickly narrowing between losses in radio advertising and gains in digital. If the industry’s newfound aggressiveness continues in digital, all those dirty little dimes, my friend, start looking like gold dubloons to Wall Street. Those digital dimes are likely to make the industry grow again, quite soon. In fact, in the past 5 years, average annual losses in local revenue (digital+radio advertising) were $347 million.This year, it looks like the loss will be $72 million. Depending what political does next year, well…. we’ll see. I don’t think you’ll see net growth just yet, but the trend lines indicate the time may be nigh
    .

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s