This failure was brought into focus with the Radio Advertising Bureau's announcement that total radio revenues fell 8% in September, with all the main ad categories taking hits: local (down 10%) national (7%) and off-air (1%). While grim, the first two figures are not surprising, considering that September is the 17th straight month of overall revenue declines. The real bad news is the last figure, which includes Internet revenues--until recently the sole bright spot for big radio groups.
Off-air enjoyed several years of double-digit expansion, with a cumulative annual growth rate of 10% from June 2005 to June 2007--and seemed poised to continue growing at this rate for some time. Indeed, radio broadcasters have aggressively pursued online strategies. Awareness and use of online radio is growing rapidly, especially among young adults, according to Arbitron and Edison Research.
However, this has failed to translate into substantial online revenues. Despite two years of double-digit growth, off-air still contributed just $501 million to radio's bottom line in the second quarter of 2008--less than 10% of the total $5.36 billion.
The path followed by radio was blazed by newspapers, whose decline started several years earlier, but looks remarkably similar in its trend lines. Total newspaper revenues have declined steadily since the third quarter of 2006. While third-quarter figures for 2008 are not yet available, a conservative guess places them at $9.8 billion--down 17% from $11.8 billion two years ago.
Meanwhile, like radio executives, newspaper publishers recognized the importance of online revenue early and moved to monetize Web sites, building new features to make them more engaging. Yet like radio, they have failed to earn enough money online to replace their print losses. When they reached their record level of $847 million in the last quarter of 2007, online still contributed less than 7% of total newspaper revenues, according to the Newspaper Association of America.
Even more troubling, newspapers' online revenues fell in the second quarter, seeming to cancel (at least temporarily) what little hope there was for a turnaround in the near future.
The secular downturn and wider economic meltdown have hit magazines hard in 2008. According to the Publishers Information Bureau, total consumer magazine ad pages during the first nine months of 2008 are down 9.5%, compared to the same period last year.
Looking to the future, there are ominous rumblings from Congress and Democratic presidential candidate Barack Obama about regulating direct-to-consumer pharmaceutical advertising some time this year-- threatening further reductions in the drugs and remedies category, which has already tumbled 15.2% this year. The implosions of the housing and auto markets have also slammed magazines, with the auto category down 23.6% and home furnishings down 15.6%, according to PIB.
Online revenue figures are hard to come by for magazines, but if the occasional hints from publicly traded companies are accurate proxies, it seems likely that here--as with radio and newspapers--online still represents just a fraction of the overall business.
In 2007, online advertising accounted for just 3.7% of Meredith Corp.'s total revenues, while in the second quarter of 2008, Martha Stewart Living Omnimedia's Internet revenues of $3.2 million represented about 4% of the total $77 million. At industry leader Time Inc., online provided 9% of total ad revenues in the first half of 2008.