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Radio's Change in Forecast

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The slowdown in radio advertising, first projected by analysts to last only through this year's first half, now appears to be heading well into the third quarter, if not beyond. Analysts last week reduced ad revenue growth estimates to low single digits from a high of 8 percent.

Signs pointing to a second-half resurgence are now dimming. "The softness in retail and domestic auto will go through third quarter," said Bonita LeFlore, executive vp of local broadcast for Zenith Media. "Retail could go into fourth quarter."

Jim Duncan, president of Duncan's American Radio, who has tracked revenue since 1984, predicted radio would grow 4 percent, down from the 6.9 percent projection he made just over two months ago.

The revised radio forecasts came partly as a response last week to Emmis Communications' decision to adjust its revenue estimates for the upcoming year. "We've seen shifts in the market and we've observed further deterioration in the advertising economy," said Jeff Smulyan, Emmis' CEO, during a conference call with analysts. "We saw it in December and it stayed that way in January and February."

Earlier this year, Gary Fries, Radio Advertising Bureau president, predicted 7 to 8 percent industry growth, but Smulyan last week lowered Emmis' estimates to 3 to 4 percent. "That's not a tweak," said Jim Boyle, First Union Securities analyst, referring to Smulyan's downgrade. "You'll continue to see other companies bring down their forecasts." Boyle added he is knocking his own radio forecast down to 4.5 percent from 6.9.

"Four percent sounds more realistic. The first quarter has not lived up to expectations and national is way down," noted Karen Agresti, senior vp/director of local broadcast at Hill, Holliday, Connors, Cosmopulos.

But it all depends on local advertising demand, said RAB's Fries, who is standing pat with his forecast for now. In January, local revenue grew 1 percent over the prior year, while national fell 15 percent, according to RAB estimates. "We need to see how much local will compensate [for the slowdown in national spending] over the next few months," Fries said.