Size matters…and small is in


“The best predictor for radio revenue is market size, not regional or group differences,” he says.

“The various public radio groups have been stating for several quarters how diverse their market results had become, with some doing quite well and some quite poorly, with no overriding rationale like regional economy differences. However, the data over the last several quarters suggests market size has become a very good predictor, given the occasional exceptions, of whether an investor or an operator should expect good or bad news. For example, when one looks at a tight geographical area that has four markets in the central portion of a certain northeastern state one can see that the two mid markets in that area had year-over-year down revenue in each month of Q1 20008 while one small market was up in all three months and the other small one was up two out of three months in the quarter. Same region, similar economies, but there were less public radio groups (it is believed near-term pressure on public groups may lead to more price discounting for market share versus private groups that may have more patience to drive ad rates long-term), less national ad exposure, and more direct ad client relationships in those smaller markets,” Boyle said in his latest Radio Overview for clients.

It wasn’t just March, of course. Boyle notes that small markets have outperformed big markets for 22 of the last 26 months. Has Wall Street taken notice and bid up small market-focused groups, such as Saga, Regent and Cumulus? Nope. “Investors have ignored the better small market outperformance vs. overall radio industry’s cyclical and secular decline and will do so in a recession,” Boyle said. “This might change when the economy revives and investors eventually consider small market radio outperformance,” he added.