Plus Pages

Thursday, September 28, 2023

Digital Ad Growth Remains Radio's Strongest Revenue Potential


The US broadcast station industry is expected to reach $33.83 billion in total advertising revenue in 2023, down 7.0% from $36.39 billion in 2022, according to the latest forecast from S&P Global Market Intelligence.

The forecast details core ad categories including automotive, retail and travel categories, have mostly rebounded from pandemic-level declines although showing signs of softness as a result of high interest rates and inflationary pressures while pharmaceuticals, telecoms and professional services are still relatively strong in terms of ad spending.

The local ad market continues to be stronger than the national side of the spot ad business for broadcast stations with major brands and ad agencies shifting budgets to streaming, mobile and social media platforms. Our 2023 projection breaks down to $21.86 billion from TV stations — including core national and local spot, political and digital/online — and $11.97 billion from radio stations, which includes national and local spot and digital, excluding network and off-air.



The radio station advertising business with more of a localized focus and less political ad uptick is expected to decline 2.1% in 2023 to $11.97 billion and down 0.9% in 2024 to $11.86 billion, excluding network and off-air revenue. As national and potentially more local advertising continues to shift away from radio to streaming audio and podcasting alternatives, we expect continued low single-digit declines in radio national, local spot ad revenue with digital and off-air as the only bright spots with total radio ad revenue dipping to $11.16 billion by the end of the projection period in 2028.


Radio ads are predominantly local and focused on the auto, retail, travel and entertainment categories, which were heavily impacted by the pandemic-influenced advertising pullback and now are suffering from higher interest rates and price inflation primarily from higher labor costs. Consumer spending that rebounded post-pandemic with shelter-in-place and masking orders being lifted has now come under pressure although has not dipped into recessionary levels yet.

In addition, radio owners must compete with streaming audio and on-demand options for music and talk, such as Spotify Technology SA and Pandora Media LLC, and overall radio listenership has been on the decline as more remote work and less commute time has impacted prime in-car radio time during rush hours. Another radio challenge is new cars, specifically EVs and hybrids, that deprioritize radio in the dashboard and in some cases lack an AM antenna.



Radio's core local spot ad market is projected to decline by 3.0% to $8.49 billion in 2023, down 1.0% in 2024, down 3.0% in 2025 and then slightly declining by 1% to 2% over the remaining forecast period to $7.85 billion by 2028. National radio ad revenues are forecast to decline by 4.5% to $1.97 billion in 2023 and by 6.0% to $1.85 billion in 2024, and then start to decline by 7.0% to 8.5% over the remaining years in the forecast period to $1.33 billion by 2028.

The forecast projects digital gains of 6.5% in 2023, 6.0% in 2024 and a range of 5.7% to 5.1% growth through the rest of the projection period. Radio station owners are continuing to invest in streaming, podcast and digital marketing service initiatives, with digital revenues expected to rise to $1.98 billion by the end of 2028. Off-air is forecast to grow 3.0% in 2023 and 2.3% in 2024 with live events a growing segment for the radio industry reaching $2.45 billion by the end of 2028.

Radio's lower ad cost, local audience and relatively high return on investment compared to other media will keep it relevant, although digital investments point to future growth opportunities with the spot ad market for radio expected to decline over the forecast period.

Between 2023 and 2028, S&P Global expects radio station local and national spot ad revenues, including digital, to decline at a CAGR of 0.98% in rated markets, with non-rated markets declining, at a CAGR of negative 2.68%.

Total radio revenue, including national and local spot, digital, off-air and network revenue, is expected to decline slightly at a five-year negative CAGR of 1.20% from an estimated $15.15 billion in 2023 to $14.26 billion by the end of 2028.

Based on our radio market-level ad projections, the top five fastest-growing US markets by 2023-2028 CAGR are Boise, Idaho, at 0.32%; Myrtle Beach, SC, at 0.16%, Seattle-Tacoma, Wash., at 0.05%; Denver-Boulder, Colo., at -0.07%; and Austin, Texas at -0.12%

No comments:

Post a Comment