Wachovia: Radio Revenues To Drop 13% In '09

The hits just keep on coming. In her latest note to investors, Wachovia analyst Marci Ryvicker revised her already negative prediction of 8% for 2009 revenues sharply downward, now forecasting a 13% drop--if the radio industry is lucky.

Warning that this dreadful forecast may itself be "too optimistic," Ryvicker painted a picture of an industry in freefall, with no chance of a turnaround until the economy recovers or credit markets improve.

Moreover, radio stocks have bottomed out, but only because they can't get much lower, according to Ryvicker. She blames "penny stocks" on "significant debt levels, nonexistent credit and significant revenue and EBITDA declines."

This discouraging forecast follows a broader vision of doom outlined by Mark Hubbard, a radio veteran and self-professed partisan for the medium who held various key positions during his career, including senior vice president of corporate development for Clear Channel.

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In his essay on the outlook for radio, published online by the Radio Ink Web site, Hubbard asserts: "Commercial radio has never been more challenged since its creation in the 1920s," adding: "The business is no longer a growth industry."

Hubbard identified the proximate causes of the medium's long-term and likely irreversible decline--including the loss of listeners under the age of 25, who have migrated to new devices like iPods and MP3 players, and erosion of the older audience by competitors like satellite radio. He also warned that greater ratings transparency offered by Arbitron's Portable People Meter, while a boon to advertisers, probably won't benefit the medium--as media buyers use the new data to puncture overly generous audience estimates and further deflate ad prices.

Stepping back, Hubbard also identified some broader macroeconomic factors that are working against radio. First, as the price of gas increases over the long-term, "fewer people will use cars for shopping, dining, entertainment and vacations. That will hurt all of these prime candidates of advertisers for local radio," as well as carmakers themselves. He believes that consumers will actually spend less time in cars, resulting in lower net radio listening.

Of course radio--like virtually every industry--is suffering the effects of the financial meltdown and paralysis in the credit markets, which make it impossible to finance acquisitions. But it's also hurting itself by failing to innovate and adapt to the changing content demands of American consumers, notes Hubbard. Nowadays, he says, "even personality radio is boring."

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