Ad Recovery Remains Erratic, Demand For Radio Erodes, Outdoor Builds

The U.S. ad recovery may be boosting results for the media industry overall, but it continues to reflect erratic results for individual media. That was evident Tuesday, when the Radio Advertising Bureau released its much-anticipated figures for May advertising sales, which showed erosion, not a strengthening of both local and national advertising demand. The disclosure is the latest in a series of mixed advertising signals within the media industry. Earlier this week, the Magazine Publishers of America released data indicating that consumer magazines finally appear to be getting traction in terms of demand for advertising pages, while recent data from the American Business Media shows demand for business publications remains weak. While the TV marketplace is benefiting from a bonanza of political ad spending, campaign ad budgets don't appear to have boon - yet - for other local media, especially radio or newspapers. Demand for online media continues to surge.

"Diving for dollars continues as a radio practice," said Laraine Mancini, an equities research analyst at Merrill Lynch in a note issued today following the RAB's revenue release. "National category weakness appears to be across the board and most pronounced in two of the largest categories - Auto and Telecom. Weak price integrity is to blame as radio stations continue to bid aggressively for national ad business."

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That sentiment was reflected in the figures released Tuesday by the RAB, which are based on a compilation of self-reported data from radio stations. National radio ad sales declined 1 percent in May vs. May 2003, while local sales climbed only 1%. These figures compare with year-to-date growth rates of 2 percent for national and 4 percent of local advertising sales, which reflect a year of ups and downs for radio ad demand (see table below).

"The recovery continues to be without big energy, but comments from advertisers indicate that there is a lot of optimism for the fall on the planning table," stated Gary Fries, president-CEO of the RAB. "For the shorter term, June is shaping up for enhanced growth, with local continuing to lead ahead of national."

Interestingly, as radio's fortune sag, Wall Street has grown increasingly bullish on prospects for outdoor media, a medium that many on Madison Avenue still see as moribund, but which is being rejuvenated by advances in technology, audience measurement, as well as the comparative erosion of other media options.

"We continue to recommend investors place new money into the outdoor advertising sector," said Merrill Lynch's Mancini, citing the firm's belief that outdoor "will steal advertising share from competing media as the medium becomes more professional and accountable. Specifically, she noted that outdoor is "immune from audience fragmentation," is undergoing technological innovation (digital billboards), has promising new audience measurement. As a result, she projected outdoor's share of ad spending would rise to "3 to 4 percent" up from Merrill Lynch's estimates of "2 percent today."

While newspapers continue to demonstrate erratic results, one of the nation's largest newspapers publisher, Gannett, reported a 9.9 percent rise in advertising sales, thanks in part to strong results from flagship USA Today.

Radio Advertising Revenues


National Local Total
January 0% 0% 0%
February -4% +3% +1%
March +5% +11% +10%
April +6% +4% +4%
May -1% +1% +1%

Year-To-Date +2% +4% +3%

Source: Radio Advertising Bureau.
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