• by Paul Gough , October 2, 2003

Radio's recovery is taking longer to achieve than many had hoped, with local advertising continuing to trail national in most markets, a development that appears to be emblematic of the overall media marketplace, where national TV and newspaper options are outpacing growth of local ones.

Earlier this week, Goldman Sachs lowered its radio ad spending estimates for the rest of 2003 and into 2004. Goldman Sachs said ad growth among radio companies would be between 1% and 2% for 2003 and between 6% and 7% for 2004. Companies that depend more on local advertising like Cumulus Media won't do as well as others like Citadel Broadcasting, the analysts said.

"Contrary to earlier expectations, industry conditions have not improved in the third quarter, compared with the second quarter's 2% increase," Goldman Sachs said.

The strong national and weak local dynamic is being seen throughout the media industry, from the robust upfront to the lagging local spot TV market and the boost in national newspaper ads at the same time the papers are finding lagging local ads.

In a report released Thursday following the first day of the National Association of Broadcasters' 2003 Radio Show, CIBC World Markets said September radio revenues would be up 1%-2% with October revenues projected to be flat.

"And that while we have heard that November pacings are currently flat, we expect the month to finish up 3%, as pacings are misleading at this point since the month booked earlier last year," CIBC said. Analysts expect that December will be up 3%.

While some sectors of the radio industry are doing well, the lackluster fortunes of local advertising are dampening what are mostly across-the-board national increases. Viacom, the nation's second-biggest radio station owner through its Infinity Broadcasting unit, recently revised downward third- quarter revenue expectations on worse-than-anticipated local returns. Clear Channel Communications, by far the biggest radio station owner, have strong national sales but local performance is spotty.

John Hare, president of ABC Radio, said Thursday afternoon that pacings for its 69 local radio stations for October through December are roughly 2.5% more than last year but December pacings are beginning to slow down. That's the opposite of what's happening at ABC's network business, which Hare said is aggressive right now and "a little more robust in pacings than [the] radio stations." Strong categories for ABC Radio include pharmaceutical, retail, TV and auto aftermarket on the network side and automotive, TV and banking/financial on the local stations. ABC Radio's cold spots in both network and local are travel/tourism, fast food and telecom.

Hare said he wasn't sure what was happening in the marketplace and why national was stronger than local revenues. Goldman Sachs, in revising its revenue projections, thinks that the lack of a rebound in employment may be putting the damper on radio advertising. Goldman Sachs still expects local radio advertising to recover in 2004.

In a presentation to Goldman Sachs Communicopia XII conference Tuesday, Viacom Chief Operating Officer Mel Karmazin spent a lot of time pitching radio, saying it had been undervalued.

"I think we're giving advertisers too much of a bargain for all the value we're giving them" Karmazin said.

Karmazin said if advertisers were convinced to buy earlier, and prices firm up across the board, it might become like "the old days of radio."