AD AGE ARTICLE---Radio Gaining Audience -- but Not Ad Revenue

By Andrew Hampp
Published: October 20, 2008

NEW YORK (AdAge.com) -- Radio has been right behind newspapers as the old-school medium most adversely affected by digital developments. New research, however, shows that radio is actually gaining audience, even in spite of its closest competitor, the iPod.

A recent online study from Paragon Research polling more than 400 14- to 24-year-olds about their music-consumption habits found that the youth demo has increased its time spent listening to radio 11% this year, while its time spent listening to iPods has actually decreased 13%. The study coincides with the Radio Advertising Bureau's annual RADAR report, which shows that AM/FM radio listeners increased by 3 million in 2008, bringing the number of weekly radio listeners to 235 million.

But more listeners are not doing much to boost radio's fortunes. Industry revenue has been largely flat to down in the past five years due to the gradual migration of listeners to MP3 players and online radio -- not to mention advertisers' simultaneous migration to other niche media such as cable TV, web portals and, to a smaller extent, satellite radio. Its two core advertisers -- the automotive and retail industries -- are being slammed the hardest by the financial crisis, particularly at the local level, which is where radio makes more than 65% of its total ad revenue. Radio ad revenue was down 6.5% during the first two quarters of 2008, making it the second-most-declined medium next to newspapers, which suffered a 7.4% decrease in ad spending during the same period, according to TNS Media Intelligence's spending report on the first half of 2008. Internet spending was up 8%, a margin notably smaller than the increases it posted in recent years due to the stabilized growth of display advertising.

Jim Boyle, senior radio analyst for C.L. King & Associates, said although the iPod has had some affect on radio listening, its impact on radio ad revenue has been minimal at best. "It's not as though you have to compete with the iPod to go to the local auto dealer in Ohio for an ad," he said. "Even if they chew into your listenership, the pie is still a much bigger pie. You may only lose a very small percentage of your cost-per-thousand point."

Self-inflicted wounds
And as the industry's highest-ranked executives have readily admitted in recent years, radio hasn't done a good job of embracing new media. As Frank Flores, chairman of the New York Market Radio Association and VP-general manager of the Spanish Broadcasting System, put it, "We've let everybody brand us and put us in different places. The internet branded us as slow and a dinosaur, iPods and streaming just made us seem like your father's brand of communicating, and we've done nothing to dispel that."

RICK’S RESPONSE
Published: October 20, 2008

Radio is a survivor, still going strong after predictions of its demise to TV, satellite radio, internet radio, and portable music players. It’s great to hear about audiences growing as radio attracts them. But as Andrew Hampp’s article points out, radio ad revenue was down 6.5% during the first two quarters of 2008 and “listeners are not doing much to boost radio's fortunes.” Except for those stations that are adopting new concepts to monetize their audience. Expanding new revenue streams through their web sites is already being endorsed by the growing number of stations selling discounted gift certificates from local merchants. Done right, this new initiative brings in immediate cash to the radio station while creating an ongoing no cash promotion for the client, thanks the audience for listening to your station, and literally, has your listeners paying the client's advertising bill! A win-win-win situation. Cash flow starts the day you launch your first sale and continues to grow as your online store stocks up with local merchant's gift certificates. This program won't replace your cash business but, as stations promote their discount certificates program, traffic to their website increases, sales of certificates increases, and many of their new, non cash clients, impressed by the results will turn into cash customers. Help in making this program a success is available through fulfillment houses or with “turn key operations,” like ours, eager to set you up and get you rolling. It's local, provides solutions in a tough economy, and invents a new revenue stream for stations to build on, cash from the listeners.