Will 2017 Be Better For Radio?


2016 will probably go down in history as an “OK” year for radio. Revenue was basically flat, political ad spending did not deliver the numbers most executives were expecting, and the deal volume was below average.

So the radio industry looks forward to 2017. But what will it bring? The two largest radio companies are dealing with massive amounts of debt — will that continue to be a drag on the entire industry, as many have suggested? Or does it even matter? Automotive sales are starting to tail off after years of tremendous growth. Will that have an impact on top-line radio revenue? Or if the economy makes a spectacular turn for the better, does that mean radio revenue will follow?

We’ve assembled a panel of experts who spend a lot of their time predicting and projecting economic numbers. We asked them all to look into their 2017 crystal ball and fill us in on what they expect for the year to come — a year that follows one of the craziest presidential elections in American history.

Here’s our esteemed panel: Corey Elliot, Director of Research at Borrell Associates. Scott Flick, Partner at Pillsbury Winthrop Shaw Pittman. Mark Fratrik, SVP/Chief Economist for BIA/Kelsey. Jack Myers, Media Ecologist and CEO of MyersBizNet

mark-fratrickMARK FRATRIK
RI: What is your take on the economy as we close out 2016 and head into 2017?
Mark Fratrik: I think the economy is showing a little bit stronger growth than the first part of this year, which was very disappointing. I think we will see some decent growth — and our measure for “decent” is actually a decrease over the last few years.

Decent growth was always 3 to 4 percent; now, decent growth is 2.5 to 2.7 percent. One of the most encouraging things in the recent employment numbers was the increased participation rate, with the unemployment rate going up plus the number of jobs going up at the same time. It’s encouraging to see people coming back into the workforce. I’m slightly more bullish than I was a few weeks ago. I think the economy is OK.

RI: How will 2016 finish for radio?
Fratrik: I think we are going to see around 1 percent overall growth in total local radio station advertising revenues. Over-the-air revenue growth will be slightly lower, 0.8 percent. But I still see strong growth in radio’s digital revenue, 11.5 percent. Double-digit increases every year for digital are expected to continue for a few more years.

RI: Is that OK? Flat seems to be acceptable these days.
Fratrik: It was OK after 2015, with a negative. But of course it’s not OK. It doesn’t keep up with inflation. It doesn’t keep up with the growth of the economy, the nominal GDP. Radio is lagging behind other advertising media. But it’s doing better than other traditional media, particularly newspapers. Is it OK? Not really. But on the other hand, it suggests that radio is still a very important part of the advertising mix.

RI: It appears the radio industry will once again be disappointed with political advertising revenue.
Fratrik: They are obviously always disappointed. So let’s start off that they are always disappointed, and I think for good reason. They’re just never able to crack that nut insofar as generating any substantial radio political advertising revenue.

Obviously, there are exceptions, in markets where there are strong races and big issues. But generally they tend to always be disappointed. So I think they will continue to be disappointed about the lack of use of radio as a targeted political advertising vehicle.

RI: Are consumers growing weary, with all the new digital gadgets out there?
Fratrik: No, I don’t think consumers are dooming radio. We are very bullish in our overall advertising forecast on mobile and video advertising, whether it’s online or mobile video. Social is obviously still growing. We are somewhat bullish about the digital online activity and advertising platforms.

I think it’s encouraging that even with this growth of online digital advertising platforms that we see continuing now for many years, radio still retains its position in the marketplace. It is still a good complement to very targeted online digital advertising platforms.

Radio Ink: What does radio need to improve on?
Fratrik: That’s a good question. What would I do? I think it’s really honing in on the things they do well, insofar as providing interesting and localized programming. Everybody has been saying for many years, in this marketplace of thousands of opportunities, how do you distinguish yourself? Well, you have to distinguish yourself with what you do well, and that is some sort of localism — local news, local personalities.

Some do it well, and that’s a challenge, because it’s expensive. That means not cutting back on expenses. It means investing in more news programming. But I think in the long term, you get the return on that and you maintain your position in the marketplace.

Radio Ink: How do you project 2016 will wind up for radio?
Jack Myers: Five percent growth, with 2.6 percent growth in linear/legacy revenues and 28 percent growth in radio digital revenues, representing a 3 percent share of total ad spending, and $16.5 billion overall ($14.6 billion linear/ legacy and $1.9 billion in digital revenues).

Radio Ink: What were the main factors that put us where we are in 2016?

Myers: Political advertising is an obvious factor, auto advertising was generally favorable, and sustained positive economic indicators drove retail, QSR, telecom. Media/entertainment also showed growth.

Radio Ink: How does the overall economy look for 2017?
Myers: This is an increasingly uncertain economic period. With the hostile political environment promising to extend into the next administration, the composition of Congress will have a major influence on economics. I have been forecasting an economic downturn for 2017, with overall total advertising growth of 2.9 percent.

Radio Ink: What is your projection for radio in 2017, and why?
Myers: I’m projecting flat performance for radio in 2017, with a 2 percent decline in legacy/linear revenues and 15 percent growth in digital revenues, representing stability with a 3 percent share of total advertising investments.

Radio Ink: You have always been a big proponent of digital. How can radio get a larger share of that growing advertising segment? Which digital products should they be selling to their advertisers?
Myers: A few years ago at Forecast, I was asked for the one thing radio should invest in for the future and I said, “Video, video, video.” There is also a resurgence of interest in audio advertising through podcasts; local radio stations can develop local audio podcasts and short video content series focused on local human interest stories, local politics and government, educational, interviews with visiting celebrities, etc.

Radio Ink: What do radio executives need to do better to gain a larger share of the market?
Myers: The biggest and most sustainable opportunity is to target large local retail grocers and other retail operations that generate the majority of their ad budgets through co-op and vendor funds. Developing vendor support programs and initiatives designed to generate short-term sales for the retailers is a majoropportunity, but it requires specialty competencies and experienced professionals who understand below-the-line shopper marketing. This is also a leading-edge national radio opportunity.

It’s critical that stations double down in their support of digital initiatives such as those developed by iHeartRadio, and invest in enhanced mobile resources, beacon tie-ins, and the necessary array of digital distribution assets.

We will have more from our panel of experts in Monday’s headlines.


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