Radio revenues were up small single digits in each of the three quarters already reported for 2011. The way the high yield bond analysts at Wells Fargo Securities see it, the pattern is likely to repeat this year.
“2012 revenue could be up modestly year-over-year, but still a ways from peak. We think the radio business will plug along this low-single-digit growth rate, as cyclical trends ebb and flow,” wrote Bishop Cheen (pictured) and Davis Hebert in their latest research report.
“The back half of 2011 was choppy in Q3 and down for Q4, as the industry lost political revenue, while the first half of 2011 made a decent showing. The outlook for general advertising calls for low-single-digit growth in 2012, and we do not think radio can outperform this year, as the economy remains in a weak recovery and listenership continues to be fragmented. Radio does not get the benefit of incremental revenue streams (such as retrans for TV), and its multimedia platform, which involves both online and mobile streaming, is not paying dividends yet (still early in the game). Although still small on a local scale, Pandora is reporting impressive advertising revenue gains, while recent music purchasing trends imply streaming services are taking hold,” the analysts told clients.
But there is reason to believe that radio is still a good business.
“We think radio’s value as a low-CPM medium will continue to serve the industry well, and the incremental political revenue should result in a positive growth year — the third consecutive for the industry since the recession in 2009. In 2012, we are forecasting that radio industry revenue increases 2% higher than the prior year, placing industry revenue at $17.8 billion, still well below the $19.5 billion seen in 2008 and the peak of $21.7 billion in 2006,” Cheen and Hebert concluded.
RBR-TVBR observation: Maybe we should all get together on a pool to pick the year when radio revenues again beat that 2006 peak. Ah the memories. Still, it’s a better scenario than looking at what’s still happening to the newspaper business.