Radio hopes political ads boost 2008

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With 2007 poised to be its seventh straight year of slow to no growth, the $20 billion U.S. radio industry hopes to break the trend with political advertising and revenues from nontraditional sources in 2008.

"I think it would be shortsighted to view the industry as hopeless," said Barrington Research analyst James Goss, noting that, despite slow growth and the "challenged" radio environment, these companies are strong cash generators. "Chances are 2008 will be better due to Internet dollars or nontraditional revenues and political dollars."

While revenue from Web sites, concert promotions and other nontraditional areas amount to less than 10% of the total radio industry revenue base, it has grown steadily over the past few years as the rest of the industry lagged in the face of increased competition from iPods, the Web, music- playing cellphones and other entertainment devices.

Radio industry officials believe these revenue sources will contribute more over time.

Large operators such as market leader Clear Channel Communications Inc, CBS Corp. and Emmis Communications Corp. have cited good traffic and ad revenue growth at radio station Web sites, which provides them with helpful audience data.

"We're having explosive growth in Web usage and it's indicative of where radio is going in the future," said CBS radio CEO Dan Mason.

He said CBS now ran online "Webisodes" of radio shows and was also entering the lucrative text messaging and ringtone businesses as part of its digital initiatives.

Some broadcasters and analysts view a deal for Web search giant Google Inc to sell somewhere less than 5% of Clear Channel's available ad inventory as pivotal, since Clear Channel Radio attracts more than 15% of all U.S. radio sales.

"There can't be industry growth unless these broadcasters get new advertisers that traditionally haven't used radio and that's why I think Google is the most important thing to watch," said RBC Capital Markets analyst David Bank.

Clear Channel Radio CEO John Hogan expects Google will draw new advertisers to radio.

"I know it will be additive to our business," he said, noting other company initiatives such as cutting the lengths of commercials have also paid off.

"It's not been a great year for radio, but Clear Channel has had a better year than the industry. I'm encouraged by our performance ... and that many of our initiatives are paying dividends."

Clear Channel, which is in the process of going private, is also experimenting with social networking by adding functions such as chat, personality pages and photo uploading to existing station Web sites in cities such as Chicago, New York and Dallas.

The company's Katz Media Group is also aggressively pursuing political ad dollars, which are expected to hit about $3 billion in 2008, up 40% from 2006.

"The opportunity for radio is huge, compared with 2006, when the industry got only 8% of the political dollars," said Stu Olds, CEO of Katz Media Group, forecasting radio would get more like 10% of the estimated $3 billion in 2008.

"There's a huge opportunity to more than double the dollars in radio ... to about $300 million in 2008. I think it's a realistic goal."

The radio industry will look to use its new digital muscle to integrate features such as polling, mobile marketing, text messaging and other interactive features into commercials.

"Most of the major radio companies are planning on providing political advertisers with a lot more tools in addition to radio commercials," said Mason of CBS.
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