The upturn in US radio advertising has been less pronounced than expected forcing media companies and analysts to rein in forecasts but the outlook is for steady, if not spectacular growth, moving into 2004.
Total revenues are up 3% in the year to date but local advertising continues to lag behind national advertising in most markets (see
US Radio Advertising Rises 3% In July). According to the US RAB, national revenues increased by 8% in the first seven months of the year while local revenues grew by just 1%.
This trend is symbolic of the broadcasting sector (see Sluggish Local Market Hits Broadcast Revenues) and indeed the media market as a whole. Only this week, Merrill Lynch cut its forecast for advertising revenue growth for 2003 and 2004, citing weak local advertising spending (see Top Broker Trims Advertising Forecasts, Blames Local Ads).
Merrill is predicting that radio ad revenues will increase by 2.4% this year and 8.2% in 2004. Goldman Sachs is more cautious, asserting that ad growth among radio companies will be between 1% and 2% in 2003 and between 6% and 7% next year.
After the upheaval cause by the war in Iraq, there had been high hopes that, like last year, the second half would see an uplift in radio ad spending (see Merrill Lynch Forecasts Improving H2 For US Radio). However, this has not been forthcoming.
“Contrary to earlier expectations, industry conditions have not improved in the third quarter, compared with the second quarter’s 2% increase,” said Goldman Sachs.
In a report issued on Thursday, CIBC World Markets said that September revenues would be up 1-2% with October predicted to be flat. The investment bank is forecasting growth of 3% for the final two months of the year.
Also this week, Clear Channel Communications, the largest US radio station group, said that it was on target to meet its third quarter cash flow target but Viacom, the second biggest player, has revised down revenue expectations as a result of weak local ad sales.
Despite this posturing, the long-term outlook is promising and it is reckoned that radio will have a 10% share of total US adspend by 2012 (see US Radio To Take 10% Share By 2012, Says Kagan).
