Radio revenue, which has held steady at $20 billion for the past few years, is going to come back, averaging 3.2% growth a year and hitting $28.7 billion in 2016, says research firm SNL Kagan.
Interesting: Just about everyone who doesn’t run a radio company or own shares in one is convinced that the industry is stagnant at best. What does SNL Kagan know that everyone else doesn’t?
We’re not sure. A summary of the report notes that radio stations have high margins and nice cash flow — true — and that investors have beaten up radio companies over the past few years — also true. But neither of those things explain why revenue is going to increase. So what will make it grow?
The recent bright spots in the revenue picture have been nontraditional revenues and initiatives, including HD channels and incremental growth in internet dollars: The internet generally makes up 3% to 5% of overall revenues for operators, who are hoping for growth of 7% next year and growth of up to 15% in 2016, according to the report.In addition, many stations are converting to HD, and significant revenue associated with the new technology is expected to emerge next year.
Ah. Well, radio boosters have been talking up the benefits of HD for many years, but as we’ve previously argued, even if HD devices do finally get some distribution in the near future, we don’t see how HD will increase the revenue pie — at best, it will just slice the existing one a bit thinner.
And while we’re personal fans of Internet radio, advertisers still haven’t really warmed to the medium — mostly because traditional radio advertising is almost entirely local, while Internet radio stations generally have audiences dispersed across the country or around the world. Maybe that will change. What won’t change — the increasing number of distractions/options competing for radio radio listeners’ attention, and the flow of advertising dollars away from the industry.
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