The outlook for radio this year is one of modest growth. BIA/Kelsey is revising its full-year 2017 forecast down slightly, calling for a 1.0% total increase in local radio revenue. But the growth will be propelled, in large part, from a now-familiar formula: revenue gains from digital and other off-air platforms.
It was a challenging first quarter for all traditional media, thus BIA/Kelsey’s forecast revise. But radio’s digital dollars will grow 17 times faster than over the air, with BIA’s forecast calling for an 8.4% uptick in digital but just a 0.5% increase in over the air.
That 8.4% average digital increase is just that, an average. The New York radio market, for example, is seeing low double-digit growth in digital dollars.
Along with radio, BIA is revising downward its forecasts for broadcast and cable TV. The rationale behind the tweaks, according to BIA chief economist Mark Fratrik, is lower-than-expected first-quarter growth in the U.S economy, which inched up just 1.2% in Q1, despite lower unemployment and other healthy indicators. “The first quarter was lackluster at best and it had a lot to do with the overall lackluster economy and lack of consumer spending in Q1,” Fratrik says.
But looking ahead, economic indicators offer plenty of reasons for optimism. In early June, unemployment hit 4.3%, its lowest level since 2001, and signs indicate positive growth as the year moves on—a generally typical scenario to begin with. “We are seeing signs of consumer spending increasing, employment gains are coming pretty strong, and growth in wages is creeping up,” says Fratrik. That, in theory, should lead to higher consumer confidence, courtesy of stronger employment growth and wage gains. “And as a result, advertisers should continue to invest and increase their sales both with radio and other ad media platforms,” says Fratrik.
Radio’s prognosis doesn’t vary all that much by region. The prevalence of national retail chains has reduced regional variations in radio ad sales to within a plus-or-minus 2% variance against industry benchmarks, sources say.
In radio’s largest market of New York, Q1 radio revenues were flat when political spending is factored out, according to New York Market Radio (NYMRAD). That trend was largely mirrored across the country, sources tell Inside Radio, as growth in digital and event revenue generally compensated for declines in spot revenue. This has been the scenario across the industry for the past several years. However, markets in states that had heavily contested primaries in 2016 experienced greater spot declines than in other markets.
New Business Leads To Higher NY Growth
Much of the New York market’s resilience was driven by new business. A total of 149 new advertisers poured more than $14 million into New York radio in the first quarter, with internet/ecommerce the strongest category for new advertisers, accounting for more than $400,000, according to NYMRAD executive director Deb Beagan.
“Avail driven business is soft and it’s being led by a softness in national but the other parts of our business are growing,” says Mark Rayfield NYMRAD board chair and senior VP/market manager for CBS Radio New York. But challenging national sales aren’t confined to radio. Moffett Nathanson analysts expect national ad declines throughout the media sector to continue in the second quarter and throughout the year. “There is an inconsistency to national right now that will certainly correct itself at some point,” says Entercom-Boston market manager Phil Zachary. “If it were not for our direct-to-consumer, our digital and our ferocious focus on local, it would have been a different story for us in Q1.” The first quarter was a solid one for Entercom-Boston, Zachary adds, due in part to the New England Patriots Super Bowl win, which helped pump up ad sales and client activations for its sports WEEI-FM.
Rayfield also sees brightening skies in the second half. “We’re seeing low-single-digit growth for the marketplace in the back half of the year and that’s largely a function of the other revenue streams of our business,” he says. “It’s largely driven by our digital platforms and our experiential and influencer revenue streams.”
Upbeat Feel To 2017
Despite some softness in May, Zachary is upbeat about the remainder of 2017. His sales managers have shifted their emphasis to writing more long-term contracts with advertisers, which is helping with third and fourth quarter pacings. “We’ve done an exceptional job in getting extended contracts and commitments from our advertisers and avoiding the ‘try it out for two weeks and see what happens’ syndrome,” he says. “We went into 2017 saying we’d like to break that cycle a little bit and so far we have.” Zachary says his cluster’s digital extensions are “on fire” for a third consecutive year, thanks to Entercom’s Smart Reach Digital division.
In Phoenix, Hubbard Broadcasting’s cluster grew first-quarter revenues by 8%, outperforming a market that was down 0.6%, according to VP/market manager Trip Reeb. “Pacing looks very good in the Phoenix area but it’s way too early to tell,” Reeb says. “We’re just now getting a little glimpse of third-quarter as we look to July and so for that looks great but anything could happen.”
And in Philly, where the market was down sharply in Q1, Jim Loftus, president and CEO of Jerry Lee Broadcasting AC “More FM” WBEB Philadelphia, sees sales picking up. “Second quarter is a little better and third quarter better still in terms of forward pacing,” he says. “Radio is on the front line of retail and the economy is starting to break loose a little bit. I see the second half of the year being on target and a lot better than the first half.”
Growth categories cited by market managers interviewed by Inside Radio for this story include food and beverage, grocery, telecom/cable, health care, entertainment and home improvement/service. The home improvement and service sector, including heating/cooling, plumbing, home repair and emergency services, are especially well suited to the long-term, sustaining business strategy being deployed by Entercom in Boston. “I love those categories, whether legal or home services, emergency repair, auto collision—things that consumers don’t think they will need,” Zachary says. With consistent advertising schedules, radio can be an effective way to build top-of-mind awareness for these services. “If they’re branded properly, if they have that equity position in the mind of the consumer, when the consumer needs them, they’ll think of them first,” Zachary says.
Automotive, radio’s largest ad category, has been challenging across the media landscape, likely due to softer sales during the first four months of the year. “Automotive is a roller coaster right now,” Zachary says, since auto ad sales typically reflect how car sales are trending. April marked the fourth consecutive monthly setback for U.S. sales and extended the longest losing streak since the market bottomed out in 2009, according to Automotive News Daily. But May delivered a 7.5% improvement from April 2017, while analysts at Kelley Blue Book and Edmunds.com projected sales would rise 0.2% and 0.3%, respectively, year-over-year. And while new car sales fell in the first fourth months, used car sales grew and that helped radio rev up ad sales in the aftermarket and auto parts category. “How well auto does with us totally depends on how many units they’re selling,” says Hubbard’s Reeb. “It’s generally been a very strong category. In the last month or two it’s softened a bit but that can pop at any moment.”