Short Term Radio Decline Expected to Reverse
According to projections in "Radio Station Deals & Finance," a new study from SNL Kagan. radio's annual revenue growth will average 3.2%, reaching $28.7 billion by 2016. Although revenue growth is slow, radio station values have held relatively firm - largely due to higher margins and ample free cash flow, SNL Kagan said.
Three major factors are contributing to a decline in the short term, according to Kagan:
According to SNL Kagan estimates:
According to the report, "at the end of Q3 2007 Wall Street pushed the average radio public trading multiple to 9.5x vs. an average public trading multiple in the region of 23x at year-end 1999, with many TV stations now trading higher than radio shares, in an historic switch."
Relative Historic Performance of Broadcast Media
%chg '00-'07 (9/28)
TV Stations (avg)
Spanish Lang. Bcst.
Radio Stations (avg)
Source: SNL Kagan, September 28,2007
Robin Flynn, senior analyst for SNL Kagan, said "The operators and financial community will continue to invest and support radio going forward... (while) many ad dollars are migrating to the internet... radio, it still enjoys media-leading cash flow margins... (though) not media's highest growth industry."
The recent bright spots in the revenue picture have been nontraditional revenues and initiatives, including HD channels and incremental growth in internet dollars. The internet generally makes up 3% to 5% of overall revenues for operators, who are hoping for growth of 7% next year and growth of up to 15% in 2016, according to the report. In addition, many stations are converting to HD, and significant revenue associated with the new technology is expected to emerge next year.
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