Media Outlook 2011: Radio

Early this year, following 31 months of negative revenue, the radio market began to climb out of its double-digit holes. For the first time since 2006, radio will post positive growth in 2010, a trend that is likely to continue for 2011.

Radio forecasts vary, but experts agree that radio’s recovery will continue to be modest, about a 3 percent gain next year. Veronis Suhler Stevenson is the most optimistic, predicting 4.4 percent growth, while Magna Global and Wells Fargo have the most pessimistic predictions at 0.6 percent and 2 percent, respectively. Although only a small fraction of the revenue, radio’s digital platforms will continue to outpace traditional radio next year, up 17 percent, per BIA/Kelsey.

Any growth is good after the nearly 20 percent drop in 2009, but 2010 and 2011 won’t come close to making up the several billion lost since 2006 when radio revenue peaked. None of the analysts expect radio to reach that point until some time after 2014.

Through the first half of the year, national spot was up 17 percent to $1.3 billion, per the Radio Advertising Bureau. Local’s performance (about 80 percent of radio’s total take) was up 3 percent to $5.5 billion in the first half. Digital was up 22 percent to $280 million. Network, a segment that seemed to hold up better than others in radio, has been running flat in the first half of the year; a lot of inventory, about 10 to 15 percent, was shifted back to the stations. That could result in increased network demand in 2011.

The economy willing, the momentum from 2010 is likely to continue into 2011, indicating a resurgence in broadcast.

“Radio historically has been a strong performer out of a recession because it’s cheap to advertise and easy to get on air. Some of those dynamics are still in place,” says Leo Kivijarv, vp of research for PQ Media. “And when national advertisers spend, local advertisers feel better about spending, so that should be better.”

Of course, no one expects the kind of double-digit increases the national spot business enjoyed in 2010.

Stu Olds, president of Katz Media, remains optimistic the market will be up in the midsingle digits. “We’ll continue to grow in 2011. The question is how high. We’ll be up midsingle digits, but it might be better,” Olds says. “There are still a lot of things that are unsettled.”

Part of the reason for the optimism is that unlike TV, radio is not as dependent on the auto category, drawing more equally on a broader range of categories, including being the go-to medium for the auto aftermarket. “The seven categories [retail, auto, finance (insurance), entertainment, telecom, consumer products, professional services] that represent 80 to 87 percent of our business are up,” says Olds—a trend he expects to continue.

Advertisers are budgeting at least what they spent in 2010. “It will remain at current levels or will slightly increase,” says Lauren Russo, vp and managing director, audio and promotions for Horizon Media, who expects to pay about the same rates, or a little higher. “Currently there is greater demand in the marketplace. But we are nowhere near 2008 levels, and I anticipate the same pattern as we enter 2011.”

Ellen Drury, president of local broadcast for GroupM Matrix, believes budgets will be “a little down. There’s still a lot of uncertainty out there,” she adds.

Buying practices are unlikely to change in 2011, with most buys coming down close to airdate and groups, anxious for the cash, willing to negotiate. “Radio groups are far more overleveraged, so it’s harder for them to get rate traction,” says Robin Flynn, senior analyst for SNL Kagan.