Over-the-air ad dollars are forecast to grow at a compound annual growth rate of 0.5% from 2014 through 2019, according to a new report from PwC. Online ad dollars for radio broadcasters will grow at a much faster 8.6% annual clip during the same period.
Bundling broadcast and satellite radio together, PwC reports total U.S. radio revenue grew 3.4% between 2013 and 2014, the fastest growth since the market dips of 2009 and 2010. What PwC calls “the reawakening of advertiser confidence” brought a 2.6% increase in radio ad revenue in 2014 while the smaller satellite and online radio sectors enjoyed higher growth rates of 9.4% and 12.4%, respectively.
Radio growth has been slowing steadily due to competition from online audio alternatives like Pandora, and YouTube, the report says, and that continued disruption will see the rate of growth continue to slow every year until 2019. With a projected 1.8% compound annual growth rate, total radio revenue (including satellite radio) will reach $22.63 billion by 2019, with satellite accounting for 20% of the total, up from 17% in 2014.
“Internet radio continues to eat away at radio advertising dollars and the radio audience,” says Greg Boyer, PwC’s principle U.S. lead for entertainment. “Whenever there are more choices for consumers, the result will be a disruption in the traditional business models.”
To grow, radio needs to innovate, Boyer says. Radio needs to ask, “How can we innovate around the customer experience and fortify the experience they have today,” he says.
Aiming to be everywhere the consumer is, many broadcasters have made growing online listening a top priority. But PwC’s Entertainment & Media Outlook 2015-2019 report hints at “an inherent tension” in broadcast radio’s online migration strategies.
Here’s how PwC describes radio’s conundrum: The better it gets at moving more of its consumption online, the more those audiences become exposed to digital alternatives that offer less (or no) advertising, along with greater user flexibility and control. There’s also a different ad load expectation among some online listeners.
According to Edison Research, 80% of weekly broadcast radio listeners describe advertising as “a fair price to pay for free programming”, but the rate falls to 75% of online listeners. Online audio consumers are accustomed to a “bewildering degree of choice” and substantially lower spotloads, the report states.
But Boyer says it’s not too late for broadcasters to seize the interactive opportunity awaiting online. “One thing radio can do is move much more aggressively to the internet space and convert the experience to digital,” he tells Inside Radio. “Radio should build a moat around their listener base and serve them well. Create a stickiness and loyalty among listeners and transition to a more digital experience.”
To retain relevance in the digital era, traditional broadcasters will need to lean more on their unique assets, like live personalities and spoken-word programming, PwC says. “But streaming music services also recognize the importance of investing in spoken-word content of their own to broaden out their proposition,” the report says.