• by Erik Sass  @eriksass1, February 3, 2006

Despite the promise of new high-definition digital technologies and more accurate audience measurement systems, the radio industry ended 2005 on a sour note, reporting a 1 percent decrease in December ad sales and ending the year on a flat note. U.S. radio broadcasters took in $21.455 billion during 2005, essentially unchanged from $21.411 billion in 2004, according to estimates released Thursday by the Radio Advertising Bureau, which also happened to the second day of the RAB's annual conference in Dallas.

"2005 has not been the best year," ," Gary Fries, president-CEO, during an address to the conference's attendees. "It's been lackluster. Local ad sales were up 1 percent; national was down 2 percent, and total spot was flat. But before we become too concerned about that, let's look at what is going on in some categories." Fries noted that 14 percent of radio's advertising sales still come from the automotive industry, an ad category which itself has "been in flux." A study earlier in the week by the Polk Center for Automotive Research declared that traditional media such as radio have become "nearly obsolete" for new car shoppers, only 1.1 percent of whom cited radio as key to their car purchases.

"Fourteen percent of our billing comes from automotive, and they've been in a flux. That's $1 billion dollars of our revenue, and it's been down 1 percent. In spot TV, it's been down 10 percent. In fourth quarter 2005, newspapers experienced between a 15 percent and 20 percent drop in automotive."

Nonetheless, Fries said relative to other media, radio appears to be holding its own with carmakers, noting, "Compared to other media, we're down only one percent in automotive. That means we did something."

Some of Madison Avenue's top media buyers said the lackluster results reflected radio's "business-as-usual" approach, despite the rampant changes taking place around the medium.

"It's no surprise that the radio industry is struggling, for a couple of reasons," said Mary Barnas of Carat USA, who blamed a continuing lack of "accountability" in radio ratings as well as wrong-headed initiatives from industry biggies like Clear Channel for the decline.

The ratings accountability complaint comes as radio ratings firm Arbitron is promoting its new electronic Portable People Meter (PPM) as a replacement for antiquated paper "diaries" filled out by listeners, but the company has a long way to go before the PPM is adopted as a national industry standard. For example, Clear Channel has issued an RFP for electronic measurement devices that might provide alternatives to the PPM. But Arbitron's competitors are even further from testing, let alone implementation.

Meanwhile, lack of ratings transparency is just one complaint among many. "Clear Channel also took a hit with their 'less is more' idea," Barnas went on, referring to the company's attempt to shorten radio ad times and create an ad environment with less cross-messaging from other brands. Although correct in principle, according to Barnas, "they got a lot of pushback from the radio advertising community when they brought that on, because it meant less inventory for our clients, and raised rates across the board." In particular, many advertisers balked at Clear Channel's push to roll out more 30-second spots in place of traditional 60-second spots.

Worse still, the overall drop in network ad revenue seemed to be accelerating as the year closed, with the biggest drops coming in the fourth quarter: national ad spending fell 9 percent, and total national and local spending posted a 3 percent decline.

According to Mary Schiemel, senior vice president and director of local broadcast for TargetCast tcm, this presages another hard year for radio in 2006: "Any time a fourth quarter performs poorly, it sets a tone for an unenthusiastic outlook into the new year--and 2006 began with only lukewarm hopes for a low single-digit gain by year's end."

Striking an ominous note, Schiemel observed: "Many stations are still hungry moving into February as they try to find radio revenues in a month that has previously provided strong shelter during the first quarter of the new year."