Inside the Radio Industry: The Good, the Bad, and the Ugly

As I do every day, on March 18^th I received a breaking news email from Inside Radio. To me, the three headline stories for the day pretty much sum up the entire state of the radio industry right now. I have discussed my thoughts on all three in depth in other Seeking Alpha commentary, but they definitely fall into the categories of the Good, the Bad and the Ugly.

The Good:

Radio is not dead. It is still extremely relevant in the lives of most Americans, and targets highly desirable audiences for advertisers:

Radio's weekly audience: 235 million.
Forget fragmentation, radio still reaches 78% of the total U.S. population. The medium does even better among key advertiser demographic groups. Arbitron's (ARB) RADAR 96 report shows 95% of adults age 18-49 with a college degree and an annual household income of $50,000 or above, tune into radio over the course of a week. Among ethnic groups, radio reaches 95% of Hispanics and 94% of African-Americans.

The Bad:

Overall revenue growth continues to be negative year over year, though this loss is much better than previous months and new revenue streams from interactive efforts seem to be paying off industry-wide.

Revenue down 2% in February.
The RAB/Miller Kaplan monthly tally of radio revenues shows a smaller decline last month than in January. Local revenues were down 4% and national was off 1%. Where's money being made? Off-air. Non-spot revenues surged ahead 17% in February.

The Ugly:

There are simply too many radio licenses that have been issued by the FCC creating much more supply than the industry can support. This creates too many bottom feeders in the marketplace that drag down advertising rates for everyone else.

Record number of licensed stations.
The FCC reports the total number of licensed radio stations has risen to 13,977 - the highest number ever. Today's count is nearly 1,200 above the number of licensed stations a decade ago. The current total includes 6,309 commercial FMs and 4,776 AM stations. Not part of the count is the 831 licensed low-power FMs.

Disclosure: None

Comments

[spinetta:]

Methinks the ugliest fact about radio is the preponderance of homogeneous radio stations. There are far too many identical radio stations with no local content and no formatting beyond a jaunty first name ("Jack", "Alice", blah, blah, blah) and the wacky, nutty idea to sound like a musically inept cheapskate's iPod shuffle.

Additional frequencies were licensed with lip service given to diversity and local content. Station ownership restrictions gave way to faceless corporate radio, and the bland, "safe for advertising" drivel that followed led to declining revenues.

Try a healthy dose of local, original programming for a few of your surplus frequencies. Sure, you'll have to convince the locals that they'll hear genuine radio after years of selling them swill, but differentiation will initially win market share. Continue to excel through differentiation, and your market may even grow.

Media is about more than cost control and centralized advertising departments. Media is about content, and terrestrial radio is all about local content.

2008 Mar 25 01:36 PM