Summary
The price of oil continues to hit record highs. As the price of oil escalates along with gasoline prices, this will negatively impact the local advertising for radio and television. Advertising tends to move inversely with oil prices, especially for local radio advertising.
Analysis
The rising price of oil will harm the outlook for local radio and television advertising. The broadcast industry knows that when oil and gas prices rise advertising suffers, as consumers allocate more to gasoline at the cost of other goods and services, which results in business clipping ad budgets.
The radio and television broadcasters certainly don't need more challenges. 2007 has been a tough year, and much hope is penned on 2008 for the dual gift of the political races and the Olympics--the latter primarily a television event. The threat of a possible oil-driven recession could wipe out a strong 2008.
Automobile dealerships are also hit hard by rising oil and gas prices, and they are among the broadcasters most consistent clients. Auto sales have suffered for months. Things just do not look good.
Who loses in this scenario? Virtually every local radio and television operation in the country if these prices continue to rise unabated. Companies like CBS, Cumulus, Sinclair, Nexstar, Belo, Radio One--you name it--will all be hit by contracting consumer and business wallets if oil prices continue to grow.
