Another Lousy Year for Radio Advertising

Implications: Total advertising revenues for the radio industry dropped 2.6% from 2006 to $19.6 billion, indicating another bad year for the radio industry. The industry as a whole has not posted gains above $20 billion since 1999. Can anything be done to reverse this trend?

Analysis: The radio industry is getting hammered from all sides, and the 2007 numbers for total advertising released by the Radio Advertising Bureau showed another dismal year, with radio revenues dropping back to 2003 benchmarks.  The radio industry has had flat revenues since 2000, when it earned slightly over $20 billion. 

The reasons for the bad numbers?  There are lots of them.  Competition with other media (iPods, satellite radio, Internet radio) has fragmented audiences, even though an estimated 225 million people still listen to the radio at least once a week.

Failure to monetize the web and the emerging digital spectrum (HD).  While TV and newspapers are learning, albeit slowly, how to draw revenues from the Internet, radio is way behind the curve.  In 2007 Internet and other "off-air revenue" which is really the category of non-traditional revenues (think health and job fairs, community events, dances, etc.) was around $1 billion; I venture to say little of that was truly Internet revenue.

Undercutting their own prices.  In my view, the real culprit.  Not only does radio tend to compete just with other radio, market after market caves in over price, accepting a lower price for their product.  This has to change, and a number of radio execs (like Saga Communications Ed Christian and Citadel's Suleman) have recently said enough is enough in so many words.  How will advertisers take the medium seriously when the people selling radio undercut the price of the product?

Everybody seems down on radio these days.  Even Jon Fine, writing in the current BusinessWeek, blasts radio as an industry for being victims of their own ills.

How to right the ship?  A few back to basics ideas:

1.  The radio industry draws millions of people every day, but fails to leverage this audience with advertisers.  Satellite Radio at best is around 14 million people.  There are lots of iPods, but most are owned by people 18-25.  Reconnect with the audience and give them a reason to listen locally, instead of a homogeneous presentation you can find in any size market in the US.

2.  Get passionate about the industry once again, and quit selling against yourself.  Don't give away your inventory, and recognize the competition is much more than other radio stations.

3.  Get a game plan for how to monetize the Internet.  If newspapers and TV stations can do it, so can radio.

4.  Accountability.  Why are radio companies paying CEOs millions of dollars in compensation and bonuses for lousy performance?  How come we never hear of anyone getting fired or replaced? Many radio stocks now look like penny stocks.

The sad part is the radio industry is slowly killing itself.  And only the radio industry can change this scenario.