• by Erik Sass , April 4, 2006

Amid reports of stagnant or declining radio ad revenues, the Radio Advertising Bureau claimed a small victory as national sales climbed 4 percent in February 2006 over the same month last year. But local ad dollars--radio's main source of revenue--dropped 3 percent compared to last year, dragging total ad revenues down for a 2 percent overall decline from 2005.

The disclosure prompted Wall Street equities firm Merrill Lynch to downgrade its first-quarter radio outlook to no growth from an earlier forecast of a 1 percent gain. The full-year 2006 outlook was lowered to a gain of 2.2 percent from 2.4 percent previously.

Merrill Lynch analyst Laraine Mancini singled out sagging automotive ad spending as a major factor in the revisions.

"With auto advertising accounting for 15 to 20 percent of total radio advertising, the fate of this category is critical to the radio industry's overall growth," she noted, adding: "If a Delphi strike disrupts auto production, we believe that auto advertising could be negatively impacted. Although most of a radio station's revenue comes from local dealers, a prolonged disruption could shrink the inventory on dealer lots and reduce ad budgets for local radio."