June makes radio look back fondly on bleak forecasts

Wall Street was expecting radio revenues to sink 4% in June; unfortunately the reality was much worse. A pair of double-digit potholes snared radio companies, which suffered a loss of -10% in local business compared to June 2007 and a -13% loss in national, resulting in an overall loss of -10% in spot revenue. A +10% gain in non-spot revenue was enough to erase the stain of an overall double-digit loss for the month, but just barely – it infused just enough cash to bring June in with a -9% loss.

According to CL King analyst Jim Boyle, whose own prediction of -7% also turned out to be overly rosy, the June results come on the heels of a -8% May and should bring Q2 home at -6%. Q1 posted a -5% loss, and that is Boyle’s expectation for Q3 at this point.

The disappointing results for May and June are expected to be memorialized in the upcoming round of quarterly conference calls, when many companies will likely be forced to explain missed guidance issued prior to May.

Boyle says the split between large market operators and those in mid-to-small markets still seems to be in effect, very much to the benefit of the small groups. He expects that once all factors have been taken into account and the calculators have been given a chance to cool off that there will be a 13% bonus for being beyond the reach of the bigs.

RBR/TVBR observation: They say every cloud has a silver lining, but all we can see is that radio is setting up just about the easiest comps imaginable for 2009. That is, of course, no way to run a business. At least this time around, we think the case can be made that economic factors completely out of radio’s control are putting grotesque pressure on income. It’s probably not program quality or spotloads or anything else. It’s the rapid and unprecedented increase in fuel costs that affect the cost of just about everything, and sucks cash out of the wallets of consumers and businesses alike.

At some point, either prices will come down or we’ll all adjust to a new reality. Products will need to be sold in competition with other similar products, and advertising will be a key component of that ongoing battle. Radio must assure that it gets through this very rough patch with compelling local programming intact so it is ready to reap the rewards on the other side of the downturn.

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