• by Erik Sass  @eriksass1, January 23, 2008

Previously stuck in the doldrums, radio's boat is now springing leaks and taking on water. The maritime metaphor seems apt, as December brought the eighth straight month of revenue drops--with a 5% decline compared to the same month in 2006, according to figures from the Radio Advertising Bureau.

Radio's poor performance is now outpacing even Wall Street's negative predictions, notes radio analyst Jim Boyle of CL King and Associates, who said investors predicted a mere 2% drop.

The drop was due to continued losses in local ad revenue, traditionally radio's "bread and butter," which fell 4% in December after a 5% drop in November. On the basis of this data, Boyle now predicts an overall 4% drop in the fourth quarter of 2006--almost three times the previous industry estimate of 1.5%.

Bear Stearns analyst Victor Miller pointed out that December should have been easier than November in terms of year-to-year comparisons, since there was no political ad spending in December 2006. In the fourth quarter, Miller projects revenue drops at all the major broadcasters: CBS Radio down 7%, Citadel 5.5%, Beasley 6%, Radio One 5%, Cumulus 3.5% and Clear Channel 3%.

Looking ahead, Miller also predicts a flat 2008, with 3% shrinkage in core revenues offset by growth in online operations. Jonathan Jacoby of Bank of America agreed, writing that the business "will continue to be weak" through at least the first quarter of 2008, and forecasting a 3% drop.

Boyle also emphasized that revenue streams are crucial, but believes some can be found in the core broadcast audiences. Specifically, he advises radio broadcasters to focus on monetizing "hard-core" or P1 listeners who always listen to specific stations. If they can be measured, the P1 listeners constitute a highly engaged audience that should be very attractive to advertisers.