• by Erik Sass  @eriksass1, April 4, 2007

While confirming the bad news for 2006, a new analysis from BIAfn, a consultancy serving the media and technology industries, forecasts a glimmer of good news for 2007--with revenue set to grow 2.2% for the full year. The analysis, included in a quarterly report called "Investing in Radio," cites growth in mid-sized and small markets, where radio stations have been quicker in adapting to the changing media landscape.

2006 was indeed a mediocre year for radio, according to BIAfn--which pegs annual revenue at $18.1 billion, representing 0.4% growth over 2005. But there were also kernels of hope: 2006 marked the first time since 2000 that overall radio transactions exceeded volume of $22 billion, driven by the buying and selling of radio stations. Although this is partly attributed to the planned privatization of Clear Channel Radio, BIA Vice President Mark Fratrik said it's proof that radio remains an attractive investment in the long term.

Asked about the 2.2% forecast for 2007, Fratrik pointed to a collection of factors, such as the continued growth of Hispanic radio, including Spanish-language broadcasters, the slowdown in satellite radio subscription rates, and a leveling-off of radio ad inventory. Fratrik made particular mention of the "the beginning of electronic measurement," referring to the introduction of ratings from Arbitron's Portable People Meter, a passive electronic measurement device touted by Arbitron as a replacement for antiquated paper diaries. While conceding "it's going to be a slow roll-out in the top markets," Fratrik asserted "that's going to be a net positive for radio broadcasters."

Some industry insiders have predicted widespread electronic measurement by the end of 2007, but Arbitron's PPM service still faces significant obstacles. Foremost, it's still negotiating with radio giant Clear Channel over the price of the PPM service. Although Clear Channel recently signed up for PPM results in Philadelphia, it's also funding a field test of a competing "smart phone" measurement system from MediaAudit--a sign the company is digging in its heels for a long-term tug-of-war with Arbitron.

On a slightly acerbic note, Fratrik added that while better than previous years, "2.2% isn't any great thing" compared to other media. For comparison, Internet ad revenue rose 34% in 2006, to $16.8 billion, according to a joint study from the Interactive Advertising Bureau and PriceWaterhouseCoopers. And in fact, a new analysis from ZenithOptimedia forecasts Internet revenue passing radio globally in 2008--a year earlier than previously predicted.

"To really grow beyond the low single digits, it's going to take other things related to the radio stations, said Fratrik, "whether it's the Internet, podcasting, or events." The last category is especially lucrative, according to Fratrik, who said stations are realizing "tremendous revenues" from radio-related events. "These stations do have brand names, and they can maximize revenue in a variety of ways that are just now being explored."