From the rocky Maine coastline to the Texas banks of the Rio Grande, radio’s top-growing markets of the decade represent a cross-section not only of the industry but also the American economy in which broadcasters operate. That, economists say, helps explain why some radio markets grew more than others.
“There is a correlation between retail sales, population growth and income growth and higher revenue in radio markets,” BIA/Kelsey chief economist Mark Fratrik said. He explains those key indictors weaved together help to reveal which cities’ economic fabric is stronger and that in turn enables radio stations to capitalize on the health of a market.
Between 2010 and 2016 the median growth rate for radio market revenue was 2.6% according to BIA/Kelsey. But many markets did much better than that. In the top 100 metros none did better than Portland, ME, which has posted 31.4% revenue growth so far this decade. Portland has been undergoing a transformation from a city based on industries such as fishing and manufacturing to a place where a number of financial services companies now operate alongside a revitalized port. As a result, the city’s income growth rate is nearly triple that of the population while retail sales are up by nearly one-third so far this decade.
Personal income growth also outpaced population growth in runners-up Monmouth-Ocean, NJ; McAllen-Brownsville, TX; and Louisville, KY. Each of those markets also experienced double-digit growth rates in retail sales between 2010 and 2016. “There isn’t any hard, fast rule with respect to economic variables but I do believe that local economic conditions play a major role,” Fratrik said.
After radio groups raced to establish footprints in the so-called Sun Belt states across the south for decades, the data suggests that acquisition strategy has run its course. While Jacksonville and Lakeland-Winter Haven, FL are among the fastest-growing, so is Des Moines, IA in the heart of the Midwest, and two New Jersey markets in the shadow of New York City.
But before any broadcaster thinks geography determines revenue fate, Fratrik said there are too many of what economists call “unexplained variants” which indicate there’s more than just economic factors are work. “While I’d like to believe economic forces dictate everything, individuals at stations and their actions in terms of adjusting programming and other factors could easily affect the revenue,” Fratrik said. “It could be that in a particular radio market there’s a new sales manager at the top stations and they became more aggressive and that’s had an effect on the entire market.” He points to the long-established ranking of Los Angeles as the industry’s largest revenue market even though it’s the No. 2 market behind New York. “The radio market in L.A. has always invested in new personalities and new formats and so on that I think it’s endogenous insofar as it builds upon itself.”
BIA/Kelsey data shows across markets of all sizes that Fargo, ND’s energy sector has powered that market to the top spot with Bismarck, ND ranked third. Both are benefiting from a population explosion and even larger personal income growth rates. “The North Dakota markets can be easily explained by the boom in shale oil and the resulting growth in population, income and retail sales in those markets.” Fratrik said.
Many of the best-performing metros have been in mid-size and smaller cities. Fratrik thinks that may be tied to the greater reliance in those markets on local advertisers, where local sales reps have far more ability to influence growth. “National advertising can be promoted, but radio stations don’t have as much impact on that growth as they have on local revenue,” he said. “They can go out to local businesses and really emphasize the importance of different types of campaigns whereas national—that’s a little bit harder.”
Just as noteworthy as the diversity of growth markets is the fact that none are west of the Continental Divide—with Billings, MT coming closest. Fratrik said there doesn’t appear to be a specific reason other than the region has come out of the Great Recession much more slowly than other parts of the country. In fact two markets in California’s Central Valley—Modesto (-18.8%) and Stockton (-19.7%)—have lived through some of the steepest revenue declines of any metro area this decade.
The data shows the West Coast hasn’t had exclusive rights to post-recession pain either with the underperformers equally as scattered across the map. Stamford-Norwalk, CT had the steepest revenue drop of the decade with total billings in the radio market falling 29% between 2010 and 2014. BIA/Kelsey says Battle Creek, MI and York, PA lost roughly one-quarter of their revenue with Columbia, SC down by 21%. “The fact that it is so geographically dispersed is a good indication that the good and the bad are widespread across the country,” Fratrik said.
How should radio's sales reps respond to the numbers? Read Part 2 HERE.