The Radio Industry Isn't Dead, it's Just Taking A Disco Nap



(image via madisonavenuejournal)

Much ado has been made of the death of radio. iPods, iTunes, satellite radio all compete for an increasingly smaller piece of earshare. But reports of radio's impending doom are exaggerated. Satellite radio, which relies much on car sales (and is $3.4 billion in debt)is clearly in for a rough time in 2009. At post time, Sirius shares are selling for less than a dollar!

Terrestrial radio is doing a bit better than satellite. But it will have a rough next year because their business model also relies much on car ads. Radio station sales are at their lowest levels in 5 years according to financial consulting company BIA Advisory Services. From Medialifemagazine:

"For sure, this is a terrible time for radio, with ad revenues plummeting. But as bad as things look radio is not about to go through a Wall Street meltdown in which stations shut down by the hundreds, throwing thousands out of work.

"As an ad medium, radio is a lot sturdier than it may look, and leading industry-watchers expect it to rebound with the rest of the media industry, likely in 2010. And if it doesn't see the double-digit growth of the 1990s, it will at least return to positive territory.

"One reason why is the most important reason of all. Advertisers, especially retailers, like radio. It can target specific demographic groups, listener levels have remained strong even with rise of newer competing media, like the Internet and mobile devices like cell phones, and buyers regard it as an effective medium that’s generally less expensive than local television.

"'The value of a medium to an advertiser is the audience and the cost you pay for it,' says Bill Reynolds, vice president and head of media for IPG agency Erwin-Penland. 'Radio will come back. But whether it’ll come back as high as it was before, I’m less confident about that.'

"Radio's biggest problem is a glut of inventory, which has kept prices down and hurt the bottom line for station owners, and that hurt has worsened in the past two years as ad spending has declined as key ad categories like retail and auto dealers slashed budgets and others like telecom have undergone consolidations that have left fewer advertisers in the market."

One also wonders what Howard Stern, the 800-lb gorilla in the industry, will do after his contract with Sirius radio expires in 2010? It will end in a down market, so clearly he won't be able to continue earning $80 million dollars a year. At least not on satellite radio. But a return to terrestrial would be considered a defeat. Would Howard Stern take a pay cut to defend an institution that may, in this terrible economy, be in an hour of the wolf? Or would Howard take the money and run and just retire without fighting for his baby -- satellite radio -- in its hour of need (also a signal of defeat). More here.