• by Erik Sass  @eriksass1, August 17, 2006

The radio business is in bad shape--and shows no signs of getting better, says a report from industry analyst firm CL King and Associates. The report found July ad revenue in large, medium, and small markets all flat or slightly down. Meanwhile, potential spurs to growth like the rollout of HD radio and Clear Channel's "Less Is More" initiative are promising but still unproven, according to CL King analyst Jim Boyle.

Working with preliminary numbers from industry accounting firm Miller Kaplan, the CL King report has radio revenue in the top 25 markets rising 1 percent in July 2006 compared to the same month last year, revenue in the next 50 biggest sinking 1 percent, and revenue in the smaller markets at zero for an overall flat growth rate. In combination with previous overall year-over-year declines of .4 percent in the first quarter and 1 percent in the second quarter, things are looking grim, Boyle said. Noting that 2005 was "not a hard year to beat," Boyle expressed doubt about "radio execs sitting there and saying 'this year it's going to be different' when the industry's been moving in a sideways-type growth for five years now."

"You can point to HD radio, and that could be a good offensive-defensive move," Boyle said, speaking shortly after the HD Digital Radio Alliance announced the rollout of 140 new digital side channels. But he also warned that this could be a major problem: "You already have a substantial amount of supply for adult contemporary stations, for example--and if they do not discipline themselves with the HD channels, you could suddenly have massive over-supply of inventory." To avoid cannibalizing their ad revenue, Boyle said, the key is execution--but it's too soon to tell.

Meanwhile, Clear Channel's "Less Is More" anti-clutter initiative is "admirable in its intent," according to Boyle, but it remains to be seen whether it has the intended impact on consumer perceptions. Although the average amount of minutes dipped around 5 percent in 2005, more units were added. Consumers may take more notice of the number of units than overall pod length, Boyle cautioned--meaning that the initiative may be less effective than Clear Channel hopes. Although skeptical, Boyle ultimately conceded that "it's a jump ball"--with "Clear Channel saying one thing, and a bunch of analysts saying another."