Back in the 60s, it wasn’t unusual for a radio station to have an operating profit margin greater than 50%. (Operating profit margin can be defined as the percentage of revenue that a company retains as income after the deduction of expenses.)
When I took over a major radio property in Atlantic City, New Jersey in the 80s, our operating profit margin targets were greater than 30%.
Being in the radio business at that time was often called “having a license to print money.”
That was then, what’s it like now?
Radio Profit Margins 2022
As we ended last year, the trades were carrying reports of operating profit margins like 8.73% (Radio One), 0.8% (Beasley Broadcast Group) and it made me wonder about the future of the radio industry.
This week the CEO of Townsquare was saying that they were “no longer a broadcast radio company,” because Townsquare was now deriving more than 50% of its total revenue and profits from digital.
In fact, digital delivered a profit margin of 30%.
In a February webinar with the Radio Advertising Bureau (RAB), Gordon Borrell told radio stations they should consider hiring digital-only sales representatives. Gordon presented research showing where advertisers were increasing their spending, and it was heavily in the digital realm.
This month, Larry Rosin of Edison Research, showed their research from “The Infinite Dial 2023” report showing that 75 million of America’s 214 million age 12+ population were now listening to their audio content online each month.
The big winners in this digital online streaming music marketplace are Spotify, YouTube Music, Pandora, Apple Music, Amazon Music and iHeart Radio.
While AM/FM radio still wins in the car, its audience is shrinking due to people listening to their own digital music libraries, or listening to podcasts, or listening to digital online audio; much of it made possible by connecting their smartphone to their car’s dashboard entertainment center.
In their annual “Year in Review” webinar, Comscore says that in America there are now 239 million digital users over the age of 18. That’s 91% of the total population, up from 88% three years ago.
While we’ve come to think of “digital” as the future for technology and innovation, the reality is it’s already matured, and as such, is now in a period of “consolidation, rent-seeking and regulatory capture,” says digital researcher Greg Satell.
The Monetization Challenge
Twenty-five years ago, Edison Research recognized how the AM/FM radio dial would be changed by internet streaming, when it began its research report called “The Infinite Dial.” But to think of the world only in terms of radio or audio misses the big picture; for while the future of media and entertainment is digital streaming, the challenge of making money in this infinite content media world has become increasingly difficult.
Ankler Media CEO Janice Min put it this way for Axios:
- “Hollywood’s calling card has always been that it makes the highest quality content in the world … And when you start to populate a fire hose, you lose some of that.”
- “Humans are not capable of putting in the same effort when you’re making 100 movies a year.”
Certainly, the quality of radio content has gone down with all the Reductions In Force (RIFs), as fewer people now have to produce more content for multiple radio stations; plus, podcasts, blogs and social media.
Bob Iger is back as Disney’s CEO and focused how to make the mouse’s streaming business profitable; he’s not alone, as every media company is in the same situation.
No one has a crystal ball, but one thing is clear,