• by July 2, 2004

OUCH! RADIO'S OUTLOOK CUT YET AGAIN -- Likening the situation to "death by a thousand cuts," the media and entertainment industry equities research group at securities firm Merrill Lynch Friday reduced its radio revenue forecast once again. The downgrade comes as forecasters, including Merrill Lynch, PricewaterhouseCoopers, Universal McCann, TNS Media Intelligence/CMR and Nielsen Monitor-Plus, have upgraded the overall outlook for the media industry. Not so for radio, wrote the research team, revising radio's 2004 growth outlook to just 3.8 percent, down from an earlier projection of 5.6 percent, to reflect the "continued decelerating trends and our skepticism that radio operators will be able to easily reverse the slide."

Radio's signal doesn't strengthen all that much more in 2005, predicts the securities firm, which also revised that year's growth predictions to 5.0 percent from an earlier estimate of 5.6 percent.

"Our latest downward revision (and hopefully the last) is sparked by declining national ad radio spending coupled with slightly higher local radio revenue sales. In our opinion, the lingering weakness in radio reflects structural problems - most important is high inventory levels along with weak demand is transferring pricing power into advertisers hands. We believe this must be addressed in order to return to above GDP growth," explained the team.

While that seems evident from recent radio pacings, what is not clear is why radio is not performing better in light of some key incremental stimuli, including some heated political advertising spending, as well as the overall economic recovery that has been propping up demand for other major media.

The situation also appears to have weakened considerably from as recently as late May, when Radio Advertising Bureau president Gary Fries boasted that radio sales "over the next few months" would remain stable "with increased acceleration in the second half of the year."