Happy days are here again. The latest revenue predictions are out, and they are up. In March, BIA/Kelsey forecasted a 1.5% increase for 2010, and 2-4% gains over the next few years. Their prediction came right after a 1% gain in radio revenue was announced for January.
Barclays Capital’s team of analysts are now even more optimistic. They think revenue may increase 7.4% for the year. Their prediction came right after a 6% gain in radio revenue for February.
Predictions are a funny thing. When things are going well, predictions generally predict more of the same. When things are going poorly, predictions generally predict more of the same. It’s like a weather forecaster looking outside, seeing clouds, and predicting cloudy weather.
The graph above shows the Barclays predictions for 2010 going back to December 2008. They were predicting a 10% drop for 2009, with things still negative but improving this year, to a 2% drop in 2010.
As we know, 2009 was a brutal year with revenue dropping 18%. As things headed south, Barclays’ predictions became more pessimistic. Their 2010 prediction was revised to -4.0% in March.
Revenue bottomed out in May at -25%. Then things started to turn around. By September revenues were down “only” 13%, and by December revenues were essentially flat with 2008.
In January Barclays predicted 2010 would be up by 2.2%. Now just three months later, the analysts think radio will gain over 7% this year.
In one year their prediction has swung from -4.0% to +7.4%. That doesn’t say much about their long-range predictive ability.
This level of uncertainty is not limited to Barclays. We can find a similar pattern with others that predict radio revenues. When things are going well, they predict growth. When things are going poorly, they predict declines.
It means that when the industry faces an inflection point like 2005 when growth suddenly stopped, or today’s break after three years of precipitous declines, the analysts are essentially punting. They really don’t know where things are headed.
During times like these radio needs analysts who do more than look outside. These are turbulent times. Radio could use analysts who study the cross-currents impacting radio and tell us something we don’t know.
–Glenda Shrader Bos & Richard Harker of Harker Research