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Outlook 2008: Radio

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NEW YORK Dependent on local advertising for 80 percent of revenue, radio will need to pull out all the stops to offset projected declines of up to 2 percent, say experts. "Local media are more economically sensitive to retail sales and consumer spending," says Jon Swallen, svp, research at TNS Media Intelligence. "A couple of key categories—auto, home—are in the dumps right now, and that's affecting the volume of ad spend."

For the first time since 2002, radio revenue could slip below $20 billion, excluding nonspot sales, per SNL Kagan. "If 2008 doesn't pull some surprises, an eighth straight slow-to-no-growth year looms," says Jim Boyle, analyst at CL King & Associates.

To turn around business, radio has several initiatives in the pipeline, with aggressive forays online showing the greatest promise. Stations' Web intake in 2007 made up more than half of their nontraditional revenue, a trend likely to continue in 2008. Lee Westerfield, analyst at BMO Capital Markets, estimates that 3 to 5 percent of radio revenue (or $640 million to $1 billion) is generated by online ad sales.

To salvage the core business, the industry has, for the first time, made a push for political ad bucks. PQ Media estimates radio will ring up 6 percent of total campaign spending in 2008, hitting $272 million.

Radio also is figuring out how to best manage inventory. "Advertisers are looking for new options and choices," says John Hogan, CEO, Clear Channel Radio. "To think in today's competitive media environment that any single-length spot is right for all advertisers is pretty myopic."

Advertisers also are demanding more accountability, which hit a snag in November when Arbitron, pressured by several radio groups and the Media Rating Council to do a better job with its 18-34 sample, delayed the rollout of its PPM ratings service in the largest markets. "Radio may not be getting the consideration it deserves because it can't be looked at through the same lens as platforms with more data attached," says Maribeth Papuga, svp, local broadcast at MediaVest.