Tag Archives: radio revenues

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

 

 

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Watch the Media

John ShraderI was recently invited to be a guest on the radio show and podcast “Watch the Media with John Shrader.” The program airs on the University of Nebraska-Lincoln campus radio station and the podcast of the show can be heard on SoundCloud.

John had some interesting questions and I thought I’d share them, along with my answers in this week’s blog article.

What is the State of Terrestrial Radio?

If we look at the topline number of how many Americans listen to terrestrial radio today versus the last ten years or so, that number is remarkably stable. Unfortunately, what has changed are the TSL (Time Spent Listening) and PUR (Persons Using Radio) numbers. They’ve been in a steady decline since 2007. That’s 11-years of erosion.

What’s not pretty is the accompanying loss of revenue that comes with losing 30% of your TSL.

Radio revenues today are characterized with such phrases as “flat is the new up.”

In 2017, U.S. commercial radio’s over-the-air income declined 2% year-over-year, according to BIA Advisory Services’ Q1 2018 “Investing in Radio Market Report.”

In should be noted that, the same report showed that radio stations reported a 9.7% increase in online revenues over the same period.

Radio Revenue Recent History

During the 1990s, ratings and ad revenue rose rapidly. According to the Radio Advertising Bureau, industry revenues grew from around $11 Billion per year to nearly $20 Billion between 1994 and 2000. After 1996, revenues grew by double digit percentages every year until 2001.dollar sign

PBS reported that “The collapse of advertising budgets that came in 2001 after 9/11 hit radio hard, cutting revenues by 8-percent that year to $18.4 Billion.”

In February 2005, then Viacom (today CBS) President Leslie Moonves told the L.A. Times this his top priority was returning the business to a “growth path.” Moonves recently sold off all of CBS radio stations to Entercom.

2017 Radio Revenues

In 2017, radio revenues ended at $13.87 Billion; not exactly a “growth path.”

BIA SVP and Chief Economist Mark Fratrik summarized the situation for American radio this way:

“Revenues are growing for broadcasters online but not over-the-air. We do not expect over-the-air advertising revenue of U.S. radio stations to grow much this year or in the near future. There is an unprecedented number of new audio entertainment and information sources and new advertising platforms competing with radio, including many that are unregulated. It’s an aggressive environment that competes for audiences with local radio.”

Who are Radio’s Listeners and Where do They Listen?

In general, today’s radio listeners are on the backside of Everett Rogers “Diffusion of Innovation Curve.” diff-of-innovationThey are part of the Late Majority and Laggards.

car radio.jpgThe primary way people access radio today is in their car. But by 2020, it is estimated that 75% of the cars sold will be connected to digital services.

Today’s heaviest radio listeners are reported to be Black or Hispanic.

Radio’s best listeners tend to be employed full-time versus unemployed. That’s great news for radio sales people to share.

What’s alarming is the fact that recent research showed that 29% of all American households don’t have a single AM or FM radio in them and even more alarming, 18-34 year old households are now at the tipping point of radio ownership. 50% of those household don’t have a single AM or FM radio in them. That probably explains how monthly online audio listening reportedly increased from 5% in 2000 to 64% in 2018.

Edison Research has more HERE

What’s the Future for Podcasting?

Podcasting is still growing. About 26% of people over the age of 12 have listened to any podcast in the past 30-days. However, 36% of Americans still don’t have a clue as to what podcasting even is. So, it would appear there’s a lot of growth potential.

Great podcasts, like great radio personalities, tell great stories.

Something to watch is Amazon. It laid off its entire original podcast staff in August.

What’s the Impact of Smart Speakers on Radio?

Tom Webster at Edison Research says “smart speaker adoption is the fastest tech adoption we’ve ever tracked in the Infinite Dial research. It went from 7% to 18% in a year.” echo

Smart speaker growth isn’t slowing and these new devices are replacing radios in the home.

I got my first Amazon Echo for Christmas 2017. By the end of Q1 2018, I owned three of them. 100% of my in-home radio listening now occurs via a smart speaker.

These things are addictive.

65% of people who own a smart speaker say they wouldn’t give them up.

What’s Radio’s Future?

People my age grew up with radio. Our parents controlled our home’s only television back in the 60s/70s. Radio was a way we could escape and connect with people our own age and the music of our generation.

Much as we created radio for our generation of listeners, today’s future broadcasters will need to mold it for their generation.

We are living in the days of a communications revolution. Not since the invention of the printing press and movable type has the world of communication been so rocked by change. Revolutions are messy, the future is not always clear, major disruption is par for the course.

New ways of communicating are being created.

Radio, as we knew it, is not coming back.

ON DEMAND

We now live in an ON DEMAND world. It has changed the way we use all forms of mass media. People going forward will want what they want, when they want it.on-demand-cpe

Netflix created the new phenomena of binge-watching TV shows. I do that now too. I also binge-listened to the podcast SERIAL on a long car drive after that weekly podcast had completed season one.

What Won’t Change?

What we know is that people will always be drawn to great story telling. Our brains are wired for stories. We also know that people will want to be connected to others like themselves.

Dan Mason puts it this way, radio is all about community and companionship.

I don’t see that changing, do you?

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