State of Local Radio – Bad and Good News

People tend to want to hear the good news first, but let’s start with the opposite.

As we near the halfway point of the year, reports from the local radio industry reveal that growth has slowed more than expected. BIA/Kelsey now expects over-the-air local radio revenues to grow only 3.4 percent, down from 5.4 percent growth in 2010.

The good news is that online revenue growth is proving to be very strong for local radio stations. We now forecast that online revenue growth will be more than 15 percent for all of 2011 with double-digit increases for the following four years. These revised estimates are included in BIA/Kelsey’s 2nd edition of the 2011 Investing in Radio Market Report released today.

Several factors are causing the lower than expected revenue growth for local radio stations, with economic and new media having the biggest influence.

Clearly, the overall economy is not growing as fast as everyone had hoped and, in turn, advertisers are being cautious with their media buys. Plus, even with several months of overall employment gains, the overall unemployment rate is still over 9 percent and consumer confidence is still not overly strong. Now, where the local economy has proved to be more vibrant, radio has benefited from increased spending. Markets seeing growth of 6 percent in over-the-air-revenues this year include Houston-Galveston, TX, Pittsburgh, PA, Minneapolis-St. Paul, MN, Tampa-St. Petersburg-Clearwater, FL, and Austin, TX.

Beyond the economy, new media — especially social and mobile media — are becoming more prominent in national and local advertisers’ advertising plans, especially as the technology around these media explodes. The ability to target and segment audiences through these new options are very attractive and effective for advertisers looking to reach consumers in a local market.

All this works together to continue challenging local radio stations to work doubly hard to maintain their positions as a significant part of local advertisers’ media plans. The hope is that the economy will be robust enough to not make that task too difficult.

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