Wall Street analysts were not surprised by the 1% drop in radio revenues for August (10/11/07 RBR #199), nor are they encouraged by what they see in the advertising marketplace now.
At Bank of America, Jonathan Jacoby has lowered his September estimate to down 1% and sees that trend continuing into October and Q4. From checking with his sources in various markets, Jacoby told investors that Q4 is off to a soft start. He sees the biggest earnings risk at Clear Channel and CBS Radio, with the least at Citadel. "From our checks, we are hearing of continued large market weakness at CCU and CBS. Interestingly, we are hearing of some recent strength at Citadel’s stations in NYC and LA. Lastly, we believe that Entercom is seeing some positive gains in Boston from the changes made to its sports lineup at WEEI & WRKO," Jacoby wrote.
At CL King, Jim Boyle says early September pacings appear to be weak. "We have not seen enough individual markets’ pacings or bookings data for September to gauge if ours and the Street’s often reduced expectations are due for another trim. Nevertheless, the markets’ pacings so far are noticeably weak, which is not encouraging as the business approaches the start of the holiday advertising season (Halloween-Thanksgiving-December holidays)," he noted. Boyle also says the gap he had previously noted between small to mid markets and large markets has disappeared. And that’s bad news for companies outside the large markets, who had been outperforming the big guys. "What dragged the mid-small markets’ slightly negative growth back to the big markets’ noticeably negative growth in August was the mid-markets [#26 – #75] were down 2.5%, on average. The last four months has seen the average mid-sized market in our sample go from up 2%, to up 0.5% for two months, and now down 2.5% in August," Boyle said.
RBR observation: So far 2007 has produced only three months where radio revenues were up from a year earlier. If Jacoby’s predictions come true, the best we will see for the rest of the year is a flat December. That would take the tally for the year to eight down, three up and one flat. Ouch!