The radio business is undergoing a transformation. As I mentioned in in my opening comments at Radio Ink's Forecast '12 conference held last week, radio is an industry that's embracing change, with an established and engaged audience and a distribution model that's moving more and more digital. Ad revenues for 2011 are significantly greater than most economists and forecasters anticipated, with Myers' 2011 estimates increasing to +1.8 for legacy revenues and digital revenues growing 20%. With political tail winds and strong category growth for both local and national advertising anticipated for 2012, we are increasing our forecasts to +6.1%, including 5.4% legacy revenue growth and 25% digital advertising growth. Consumers continue to engage with radio, with more than 95% of all radio and online listening to traditional AM/FM signals. While new digital technologies and competitors are impacting how and where audio is consumed, the radio industry is actively responding, with Clear Channel and CBS in the lead, followed closely by most of the industry's station group owners.
The Year That Was, Looking Ahead
The Radio Ad Bureau (RAB) reported last week that radio revenues for 2011 through September were up a modest 2.0%, to $12.89 billion, "capping seven consecutive quarters of upward momentum." Digital was clearly supporting this growth, up 18% year to date. Off-air also posted strong results, rising 8% through September 2011. Compared to the double-digit declines that some forecasters projected for 2011 ad revenues as recently as late 2009, the medium has proven to be impressively resilient. Fourth quarter revenues should be strong with Black Friday giving marketers optimism and with consumers ignoring their low economic confidence political uncertainty.
My forecasts for 2012 at +6.1% are comparatively bullish, compared to the forecasts profiled below and to the 3.0% growth estimated by Wells Fargo's Marci Ryvicker. My more bullish forecasts are based on stronger digital growth expectations resulting from the aggressive initiatives launched by Clear Channel, Cumulus and CBS, along with most leading industry players. Significant inroads made by the Radio Advertising Bureau and Katz Radio, along with other national sales organizations, have been generating positive results with agencies and marketers. As marketers hold budgets back until the last minute before making commitments, radio is the leading beneficiary. The medium actively promotes its ability to deliver mass reach among concentrated demographic groups with targeted creative messaging. As I commented at the Radio Ink conference, radio still has a targeting advantage over other media and advertisers still appreciate the ability to reach specific markets with specific messages.
At the Radio Ink conference, station executives heard pitches from Group Commerce CEO Jonty Kelt, Live Gamer president Andrew Schneider and Linkable CEO Tom Burgess, who outlined their offers to actively invest in radio stations' digital initiatives in the commerce, gaming and social spheres. Radio stations, I pointed out, are uniquely positioned to partner with VC-funded firms that are eager to establish their beachhead with the huge radio audience. Station groups can venture into digital businesses with limited investment or risk and significant upside potential.
The key political constituencies driving increased spending in 2012 will not be politicians themselves but political advocacy groups (PACs), coming off an almost negligible spending base in previous years.
Media Agency and Wall Street Forecasts for Radio
How a Couple of the Major Players Performed
ClearChannel (CCMO.pk): The radio giant, continues to right-size its company, recently cutting dozens of DJs, part of the restructuring of more than 600 regional stations. The company's stock has suffered, down 50% so far in 2011. With Bob Pittman, ex of MTV, AOL, and Time Warner, recently elevated to CEO, the company is trying to reinvent itself with its iHeartRadio as its digital backbone. The industry is betting on Pittman's success, with good reason. He wasted little time in launching iHeartRadio and striking a group commerce deal with Cumulus Radio to offer discounted deals to listeners and compete with Groupon and Living Social.
CBS (CBS): The media conglomerate is also sorting out its radio strategy. Its expansion into added sports content appears to be working, now with presence in nine out of the top 11 markets. While radio revenues haven't grown significantly for CBS over the past year, the company still believes its terrestrial assets are core for its business. When asked about a potential sale of its radio business, CBS' Les Moonves replied, "Highly doubtful, highly doubtful. We like the way they're performing ... we're pretty pleased with what we have right now."
Summary: Radio in 2012
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