Radio's Revenue Recovery Is Slowing Down

Spot Radio Falls as Retailers and Import Auto Curb Buys

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The radio industry continued to see revenue recover in the first half of the year, but at a more sluggish pace.

Radio revenue in the second quarter increased 1% over the second quarter of 2010, a slowdown from its 3% year-over-year growth in the first quarter, according to Miller, Kaplan, Arase & Co. figures provided to the Radio Advertising Bureau.

Radio revenue in the first half increased 2% from the first half of 2010, to reach a total of $8.36 billion, the Radio Advertising Bureau said.

Last year radio was growing at a faster clip: Revenue grew 8% in the second quarter of 2010 and 6% in the first half of 2010 -- radio's first increases since 2007.

Why the slowed momentum? Spot radio, which accounts for more than 75% of radio's total revenue, declined 1% during the second quarter after key advertisers, particularly retailers and foreign auto brands, curbed spending in anticipation of economic challenges.

That trend is expected to continue into third quarter among categories such as retail, telecom and entertainment, which are on pace to decrease by 10.6%, 17.7% and 16.6%, respectively, according to a report issued Thursday by leading radio sales firm Katz Radio Group. Political spending is on track to decrease 65.3% in third quarter, per Katz's estimates, because it's an off year for major political races.

"We expect 2012 to be a monumental political year due to the much-anticipated presidential election and an abundance of congressional races," Katz Radio Group President Mark Gray said in Thursday's report. "Issue advertising focused on education, energy and the economy is also anticipated to continue making significant contributions."

Some bright spots showed themselves in 2011's first half, including network (or national radio), up 2% in the first two quarters; off-air revenue, up 7%; and digital, which saw a 19% boost during the time period. The combination of those three buckets helped major players such as CBS Radio outperform the market, said RAB CEO Jeff Haley.

"The smarter broadcasters are starting to see that combination pay off," Mr. Haley said. "The message is the depth in categories. We're seeing a lot of spending coming from the pizza wars, the insurance category. This isn't 2008, where people were getting caught with their pants down. There's still a lot of cash on hand and our business-development teams are getting a lot of calls."

In addition to insurance companies, which increased spending 29% to $187 million during the second quarter, financial marketers increased spending 11% to $296 million and beverage marketers increased spending 10% to $297 million, according to the RAB. Katz Radio also reported a 19.7% increase in spending from professional services during the time period.

Direct response is also embracing radio again in a big way. Buck Robinson, president-CEO of Robinson Radio, said he has seen direct-response clients such as Beachbody, makers of the P90X workout, commit tens of millions of dollars to radio this year as a way to complement TV spending. "It's not an either/or scenario for radio anymore," Mr. Robinson said. "It's an 'and.'"

The RAB's figures did not include leading streaming radio site Pandora, which does not report its revenue to Miller, Kaplan, Arase. Pandora Media Inc. CEO Joe Kennedy recently said that it has more demand from listeners than advertisers.

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