Bunzel: Radio Needs More Digital Effort To Move the Revenue-Growth Needle

Reed Bunzel

Citing modest economic growth overall, BUNZEL MEDIA STRATEGIES forecast a 1% growth in radio in the first quarter of 2013 -- and the best way to fuel greater growth  would be a greater emphasis on generating digital revenues. The company predicts that "radio's Q3, Q4, and H2 2012 revenue growth will hover around the +1% range, and should continue at this same pace into the first quarter of 2013."

The reason for the radio's incremental growth: the overall economy is expected to grow 1.5% and 2.0% through the end of the year, the looming "fiscal cliff," potential foreign issues in the Euro Zone and also CHINA, and cautious hiring and retail sales growth. "Considering all these variables, there is very little reason to believe the radio industry will experience any sort of renaissance in over-the-air revenues any time soon,' BUNZEL reasoned. "Significant ad dollars continue to shift from traditional media to digital media, and even the television industry is anticipating the exodus of some advertisers as the usage of mobile devices continues to experience a significant growth surge. Radio broadcasters who are expecting a return to pre-2008 ad volumes or rates will be sadly disappointed, and should prepare for a continued transition from revenues that are tied strictly to an AM/FM business model.

One way to improve radio revenue fortunes is to adopt a more aggressive digital policy. "Since many radio broadcasters continue to view the medium as a content and distribution channel for the music industry, there remains an emphasis on so-called 'music discovery,,"  the report noted. "Many industry innovators, however, increasingly are looking to such applications as demographically targeted video news, interactive games, community portals, and other platforms to attract digital ad dollars.

"Until radio broadcasters accept that digital strategies are critical and meaningful to their bottom lines, the best over-the-air advertising performance the industry can hope to see will be static, with annual revenue gains (or losses) of one to three percentage points, depending on greater economic indicators. While radio's digital dollars increased 3% in the second quarter and 7% in the first half of 2012, these figures are subpar compared with overall growth rates of digital media, particularly in the video and mobile segments. Since digital dollars currently represent approximately 5% of the radio industry's total revenue, it takes 20% growth in digital to move the overall needle up one percentage point. It is quite clear, therefore, that if radio does not implement digital strategies designed for long-term growth, and if the industry continues to underachieve in this sector, it will suffer the fiscal consequences."

Read the entire report here.

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