What radio market generates more revenue per person than any other in the U.S.? If you’re thinking New York, L.A. or another major, think again. The market with the biggest radio spend per person is – drum roll, please – Fargo, ND. The city best known for the 1996 Oscar-winning black comedy thriller of the same name produces $91.54 in radio ad sales per person, according to data supplied to Inside Radio by BIA/Kelsey.
Fargo-Moorhead, ND-MN, Nielsen market No. 197 with a population of 246,900, has plenty of company among small markets when it comes to highest radio revenue per capita. Every city in BIA’s Top 10 billing markets based on revenue per population happens to be outside the Top 150 largest markets, with seven located in the Midwest. Jackson, TN, with a population of just 98,600, is second, with $74.04 in radio revenue per capita, followed by Bismarck, ND ($72.26), Cedar Rapids, IA ($69.43) and Harrisonburg, VA ($66.67). Poughkeepsie, NY (Nielsen market No. 168 with a population of 297,300) is the largest market on the list.
Fulfilling A Local Need
Why do small markets dominate? “Local radio in these smaller markets really fulfills a need for local merchants to reach their consumers,” offers Mark Fratrik, Chief Economist at BIA/Kelsey. “The other traditional media may not be as strong in those markets.” Radio, after all, can target a smaller geographic area than TV stations – which often operate in larger areas, encompassing larger populations – making television a less efficient advertising vehicle. Small markets typically don’t have strong daily newspapers anymore and some may not have robust internet service, making online and mobile advertising platforms less of a factor. These competitive factors all play in radio’s favor, Fratrik reasons.
Townsquare Media, a dominant player in three of the Top 10 markets on the list, actually prefers markets outside the top 50 because it considers them less competitive. And with its national footprint, iHeartMedia is also a strong force in half of these markets. Other dominant players in these 10 markets are companies that specialize in small markets or specific regions, including Midwest Communications (Fargo, Sioux Falls, SD), Southern Stone and Forever Media (Jackson), NRG Media (Cedar Rapids), Saga (Harrisonburg), Homeslice Media Group (Rapid City, SD) and Mid-West Family (Eau Claire, WI).
“The ones that are strongest in these smaller markets are operating in multiple markets and have great efficiencies,” Fratrik observes. “There are a number of really good broadcasters that operate in multiple medium and small markets that are the market leaders. But there are other independently owned stations in those markets that are far less viable.”
Exactly what about these specific markets puts them near the top of the list? Fratik says there isn’t any one thing these 10 markets have in common. In some cases they may have stronger local economies. For instance, Fargo and Bismarck have benefited from the shale oil boom over the last few years. Cedar Rapids profits from higher political spending in Iowa; likewise North Dakota and Wisconsin also saw significant political spending in 2018.
But just because these markets enjoy high radio revenue per capita doesn’t make them a cakewalk to operate in. Quite the opposite, in fact: “Radio is a high fixed-cost industry, so while the radio revenue per pop is high in these markets, total revenues are low and as a result it’s still a very big challenge to succeed in these markets,” Fratrik explains. And though air talent and real estate may be less expensive in Fargo, a transmitter costs the same as it does in L.A., which has 30 times the radio revenue. In addition, some of these markets are “over-radioed.” Due to their remote locations, they are home to a lot of stations because they don’t adjoin neighboring cities where their signals would interfere with other stations. “It’s a lot of stations for a low population market,” Fratrik points out.
The bottom line on the top 10: “It shows that radio stations are very valuable players in many medium and small markets and they’re able to compete in terms of generating revenue,” Fratrik surmises. “But there’s always the issue of viability over the long run.”
And just because they are able to wring more revenue out of their markets than other comparably sized metros does not mean these radio operators can sit back and rely exclusively on over-the-air sales to keep them afloat. Witness the investments that Townsquare, iHeart and other small market players have made in digital to increase the financial profitability of their local radio stations. “Over the air is not going to be enough,” Fratrik insists. “It’s still very challenging to operate radio stations in medium and small markets.” – Paul Heine