The NAB Radio Show conference, being held in Philadelphia USA, opened today with a pessimistic outlook for the coming 12 months and some interesting precedents for the Australia radio scene.
Delegates were told during an economic briefing by Drew Marcus of Deutsche Bank that the revenue outlook was still weak for the radio sector and that the new FCC rules (which have been put in doubt by court proceedings) are not necessarily positive, creating a set of “new market realities.”
“There are sluggish growth expectations… Radio’s ten year winning streak has ended,” said Marcus, who explained that, while the economy may have recovered, Ad Revenue had not. He put some of this down to the fact that major networks, who have recently gained many stations and consolidated operations, are rate cutting to sell their inventory.
“The bigger groups have driven down prices,” he said.
In a trend that could see US investors turning their interest to other countries such as Australia, Marcus said there is a lot of pent up demand from investors to acquire radio properties but that there are not a lot of stations, or clusters of stations, likely to come on the US market in the near future.
The top 5 radio groups now own 44% of the US radio industry. Clear Channel is the biggest player with over 1200 stations. There are 11,000 stations in the USA.
Marcus, and a panel of owners and investment analysts, believe that there is room for 2 main operators (with a cluster of several stations each) in smaller markets, and that those markets would also sustain some independent family owned stations.
In larger markets the analysts thought there would be room for up to 4 main operators owning a cluster of stations each, plus independents.
Operators should be concentrating on “building viable clusters because with 4 stations in a market you don’t want to compete against yourself,” advised the panel members.
Advertisers have, of course, benefited by the rate cutting, a fact that some speakers believe can be used to prove to buyers that radio is good value. “The cost per thousand is $15-16, which is one tenth of the cost per thousand of newspapers,” said Marcus.
Asked about the impact of IBOC and Satellite Radio, the speakers ruled out any effect from IBOC in the near future, but said that satellite radio would be like cable tv – “cable didn’t destroy broadcast tv, but it has impacted on its audience over time… satellite radio will do the same over time if its business plan and price point are right.”
One speakers commented that satellite radio cannot be local and that it would therefore be impossible for it to serve local advertising clients. He urged existing stations to continue to serve their local audiences well so that satellite radio would not be attractive.
The conference continues tomorrow with a keynote opening address from Rush Limbaugh.