• by Joe Mandese  @mp_joemandese, February 22, 2005

Following a rocky end to 2004, radio ad spending got off to a mediocre start in 2005. According to estimates compiled by the Radio Advertising Bureau, January radio ad spending rose 3 percent over January 2004, a month that was flat relative to January 2003. Following the release, Merrill Lynch revised its projections for 2005 radio ad spending growth to 2.9 percent down from its previous forecast of 3.5 percent.

The Wall Street firm said its revision reflected flat growth projections for Clear Channel Communications and Infinity Broadcasting, which represent 18 percent and 11 percent of the radio ad marketplace, respectively.

"In our opinion, 2005 will be a slow but steady year for radio advertising, with fewer ebbs and flows from month to month, following several years of 'corrections' that smoothed out the erratic year-over-year comparisons," noted the securities firm's research group. "In other words, the year-over-year comparisons are more normalized in 2005 than the previous few years, creating a more consistent comparison base to grow from."

In an encouraging not, Merrill Lynch's analysts do not expect to the growth in satellite radio penetration or other digital media technologies to have an adverse impact on the radio marketplace during 2005, projecting that it would take a "decade" for satellite radio to accumulate 40 million subscribers.

Even at that, satellite would only account for 15 percent of the terrestrial radio audience, the analysts said, noting that is "hardly enough to put radio out of business on its own. Remember, the proliferation of cable did not make broadcast TV advertising obsolete. Rather, broadcast TV network and station advertising grew 4% since 1985 despite [the Big 3 networks'] audiences declining to 27% of households from 63% in 1985."