The Southern California Broadcasters Association (SCBA) is projecting a strong yet late-breaking fourth quarter for radio advertising for almost all of the categories it tracks. With retail entering its biggest quarter – 24% of average annual retail sales happen in November and December – and political advertising expected to reach unprecedented levels, the trade group is projecting “solid growth for our region, albeit, at a frenetic, and late-breaking business pace.”
The fourth quarter is critical to many businesses and SCBA President Thom Callahan is urging advertisers in the region to place their campaigns ASAP since commercial inventory will be tight. “With four major retail holidays, consumer spending at record highs, potential political revenue, and solid growth from many of our largest ad categories, Q4 revenue will be significant for Southern California Radio,” Callahan said in an announcement about its Quarterly Market Guidance Report. “Our members are prepared and positioned for a great finish to 2019, largely due to solid planning and strong client relationships.”
The report is aimed at its California member radio stations, clients, advertising agencies, media buying services and PR firms, and also includes extensive information about the region’s economic trends. The SCBA now represents 168 radio stations in the 10 most southern counties of California.
In addition, the report includes analysis of 30 key ad categories and industries, based on market and industry research, seasonality and historical revenue trends. Highlights follow:
Automotive: With new car sales declining for seven of the first eight months of 2019, SCBA projects double-digit Q4 declines for what has traditionally been radio’s largest category. For dealerships and dealership groups (Tiers 1 and 2), the forecast is for a 10.4% decrease in Los Angeles and a 13.2% drop in San Diego for Q4. “This decline is a direct result of disruptive forces impacting the industry as well as a disproportionate focus from dealers and associations on digital advertising,” the new report says. No forecast is offered for manufacturers (Tier 1) due to budgets being “planned and purchased largely out of the control of Southern California Radio so any projections are with risk.”
Political: Calling for “explosive” political ad growth in SoCal in 2020, SCBA projects L.A. radio alone will book up to $17 million next year, up from $14.6 million in 2018. But in an always-on election cycle, the money is already starting to flow. With a number of potential statewide propositions working their way through the state capital of Sacramento, “there could be an estimated potential of $200 million in total media spending over the next 15 months to influence voters and public opinion one way or the other in California,” per the report. The wild card is the independent expenditures, driven by groups that create new funding under separate entities to advance or oppose certain legislation. “It is clear this category will be meteoric in 2020 for Southern California,” SCBA says.
Financial Services: Consisting primarily of personal consumer credit counseling and debt relief consolidation firms, this category will retract in Q4 due to holiday spending as “debt management and the holiday consumer spending clash.” Look for an 8.3% decline for L.A. and a 5.3% decrease for San Diego.
Home Improvement: While the housing and affordability crisis in Southern California will continue in fourth quarter, its near peak in Q3 is just about over. With the holidays putting a temporary crimp on the category, the SCBA expects a seasonal 14.5% Q4 decrease for L.A. and a 16.2% drop in San Diego.
Cellular Carriers: After picking up in Q3, look for continued growth in this consolidating industry. “With the proposed merger of T-Mobile and Sprint now approved by the FTC, the hyper-competitive environment will produce more market share opportunities for the merged companies,” SCBA says. Factor in a new iPhone release on Sept. 20 and the SCBA projects a 7.4% increase in L.A. and a 9.4% jump for San Diego.
Restaurants: Fast food and casual restaurants will slow spending in Q4 due to what SCBA calls “a more regional approach to media placement by some clients and overall less consumer demand.” Still, this category should expand by 2.0% in L.A. and by 5.8% in San Diego.
Healthcare: This vertical and its related industries have seen a steep year-to-date decline of 12% for SoCal radio. However, that will change as the critical open enrollment period for coverage runs from Nov. 1–Dec. 15. Based on historical trending, the forecast is for a 2.7% lift in radio spending in L.A. and 2.2% bump in San Diego.
TV/Networks/Cable: After showing “considerable growth in less than 12 months, using SoCal radio,” look for strong Q4 ad spending by local TV stations, TV networks, cable providers and subscription video services. “Advertising is no longer limited to the traditional ‘sweep periods’ due to the increasing variety of programs and platforms.” The forecast: 5.1% growth for L.A., 4.3% for San Diego.
Groceries/Convenience: Another key category “in the midst of a significant turnaround in ad spending on radio,” grocery chains and convenience stores are being disrupted by Amazon’s purchase of Whole Foods, food stamps being accepted online, price deflation and intense competitive pricing. SCBA is calling for “this explosive category” to grow by 5.7% in L.A. and 5.0% in San Diego.
Department and Discount Stores: This retail sector is experiencing “solid ad growth for radio after considerable erosion in 2018,” the report explains. While some adjustment is anticipated in Q4, the SCBA projects Q4 2019 regional growth of 6.8%. But San Diego remains “the outlier in this equation” due to its proximity to Tijuana, Mexico.
Drug Stores/Pharmaceuticals: What SCBA calls “a substantial and growing category” for SoCal radio is poised to increase its spending on L.A. radio by 14.2% in Q4 and by 11.7% in San Diego.
Insurance: Encompassing life, health and property policies, L.A. will see growth of 4.8% while San Diego insurance advertising “will continue its hot streak with a 6.3% growth rate for Q4.”