• by Erik Sass  @eriksass1, June 12, 2006

Despite posting sluggish results so far this year, demand for radio advertising in 2006 is expected to grow at moderate rates over 2005, according to projections released Friday by the bean counters at the BIA Financial Network, Inc., a financial and strategic consulting group serving the media industry. Total ad revenue at the nation's top 25 radio ad networks is now expected to rise 2.3 percent this year, marking a substantial improvement over ad results through early 2006 and over 2005's anemic 0.5 percent growth over 2004.

Although 2.3 is relatively moderate, Mark Fratrik, vice president of BIA, said, "While that's positive, we're still talking about numbers that are way below the overall growth of the economy, of [consumer price index], of retail."

The BIA's forecast markets a correction from other industry data reported so far this year. Recently, the Radio Advertising Bureau estimated radio ad spending fell 4 percent in April and was down 1 percent through the first four months of 2006.

The RAB said the April downturn offset "minor growth spurts from earlier in 2006."

The RAB data follows a report by TNS, which estimated local radio ad spending fell 1.1 percent, national spot declined 0.2 percent, and network radio plummeted 3.5 percent during the first quarter of 2006, a quarter when total measured media spending jumped 5.2 percent.

"You have a strong economy, for the most part. Obviously, people are concerned about gas prices--but it's still chugging along: people are getting employed, retailers are selling more clothing and packaged goods, and so on. There's economic activity out there," said BIA's Fratrik.

Having offered this guardedly optimistic forecast, Fratrik was quick to note that an economic downturn could hurt radio, which is also struggling demographically: "Young people aren't listening as much because of iPods, streaming audio--all that."

One exception is Clear Channel, the nation's largest radio network with 1,171 stations in all 50 states. According to BIA, Clear Channel's "Less Is More" anti-clutter initiative, aiming to reduce both the number and overall volume of ads and ad pods in airplay began to pay off in 2005 with $3.5 billion in annual revenue, and could yield even better results in 2006.

The fortunes of radio stations also seem to vary strongly by region, BIA noted, with Phoenix--the 15th largest radio market--forecasted to enjoy as much as 8 percent growth in 2006, followed by stations in other "sunbelt" states like Tulsa, Oklahoma (6.5), Lake Charles, Louisiana (6.0), and Augusta, Georgia, (5.5). Fratrik also said that "radio groups targeting Hispanic markets are also doing quite well--Hispanic marketing is big, and getting bigger."

Above all, however, the radio industry at large will have to show marked improvement in the area of local radio ad sales, Fratrik said: "Radio cannot show 2.3 percent growth with local being negative the whole year, since they're around 70-75 percent of total revenue sources."