UK radio revenue growth will be subdued for most of this year, as visibility remains poor. That is the prognosis from Merrill Lynch analysts, following a radio industry dinner last week.
Revenue growth last year of 2% to 3% was driven mostly by the sponsorship and promotions sector (see
UK Radio Beats Revenue Forecasts In Third Quarter) and was fairly flat when this has been stripped out.
The broker predicts that 2003 growth will be similar, that is 2% to 3%; current forecasts are in the range of 2.5% to 6.0%. The report says that there are few short-term catalysts for above market growth and that poor ITV airtime trading is likely to have a dampening effect (see ITV Revenues Drop As Audiences Improve).
Separate forecasts from ABN AMRO put FY 2002 radio growth at 2.0%, with 2003 expected to show a 4.0% rise.
Longer-term growth for the commercial radio industry is seen in digital broadcasting. Merrill says that digital radio puts the commercial sector on a level playing field with the BBC and adds listener choice. However, most consider the impact of digital to be some years away yet.
Consolidation The industry is sceptical about any short-term involvement of a US group in the UK radio sector, although this is seen as more likely in the medium-term. Within the UK players, assets swaps are more likely at the present time than take-overs, given “limited financial firepower and uncertainty on valuations.”
Nevertheless, consolidation is seen as vital by the commercial sector. The main uncertainty lies with competition law. The recent referral of the acquisition of Bristol’s Galaxy 101 by Vibe Radio was seen by GWR Group as somewhat contradictory to the Government’s policy of regulatory relaxation (see GWR Questions Competition Referral Of Vibe’s Galaxy Acquisition).
ABN says that the referral does seem to send a “warning to the industry regarding the degree of concentration at a local level that will raise competition concerns.” As a result, overseas buyers may prefer to wait until the regulatory landscape becomes clearer before making a move.
