The radio industry will see its over-the-air revenues in 2010 climb 4.4% over last year to $13.93 billion, with another $459.3 million in revenues coming from digital and online sources. This uptick comes from collective increases across the country in the various radio markets. Stations in top 10 market cities will average a 6.26% increase from 2009, while, notably, San Francisco and Philadelphia can expect overall revenue growth of eight percent due primarily to an increase in spending by national advertisers.
Scattered cities in a number of markets will hit 7.5% or greater growth this year, including Miami-Ft. Lauderdale-Hollywood, Florida (7.5%); Denver, Colorado (8.5%); Syracuse, New York, Little Rock, Arkansas, and Springfield, Massachusetts (8%); and New Haven, Connecticut (7.7%). Markets 11 to 25 will raise an average of 4.05%, while others will see average revenue increases of between 2.73% and 3.66%.
RBR-TVBR asked Mark Fratrik, Ph.D., VP of BIA/Kelsey:
Can you estimate what other factors might drive radio deals up or down for the rest of the year and next year?
“Obviously the big thing is availability of credit. I think what could happen if there are some deals that do go through, there will be some sort of more information of what values are at out there. There aren’t a lot of deals, so what is a multiple? I think a lot of people can tell you what they think, but there may be more information with more deals. It has a snowball effect. If something starts getting going, it may free up others to also start buying and selling.”
What is driving the ad growth in these major markets?
“In these major markets, it’s obviously the return to national. I think with some big national advertisers like auto manufacturers, because ’09 was such a bad year, these firms think consumers will come back. And when they are going to come back, they want them to buy their brand. It could be autos, appliances, and insurance is really important. It’s the expectation that as we come out of this recession into recovery, consumers will make purchases that they sort of postponed. And they just want their brand to be front and center in the consumers’ mind. Now the question is how much are we really coming out of this recovery? There still is great uncertainty on where the economy will go for the rest of this year, but the comps for the first half of this year are certainly better than ’09.”
These predictions are in the middle range of what Barclay’s Capital and Veronis Suhler recently predicted for 2010 Radio growth: 6.8% and 3.3%, respectively.
The chart below represents BIA/Kelsey’s updated five-year forecast for the radio industry:
BIA/Kelsey also notes that the small volume of radio station transactions this year have been a function of the revenue and profit decline experienced in recent years and a lack of bank financing. As of July there were only $168 million in transactions compared with $207 million in 2009.