• by Erik Sass  @eriksass1, December 2, 2008

This year has been bad for radio, but 2009 will be even worse, according to the latest edition of the "Investing in Radio Market Report" from BIA Advisory Services, which has total radio station revenues dropping 7% this year and 10% next year. BIA pegs station revenues at $16.7 billion in 2008, compared to just under $18 billion in 2007, and warns that they could fall as low as $15 billion in 2009.

BIA was mutely optimistic about radio's prospects beyond 2009, saying only that there's a "chance" of positive growth in 2010. Here, the company takes the conservative line adopted by other radio observers.

Several weeks ago, Jim Boyle, a veteran radio analyst with CL King and Associates, issued this grim forecast: "If the recession lasts for all of 2009 and the weakness persists in many of the major radio ad categories, such as auto, to a point where spending severely plunges, then it may be 2010 or beyond before radio revives."

However, Mark Fratrik, the vice president of BIA Advisory Services, remained hopeful in the long term, noting that radio is still a profitable business. Radio will weather the storm, he said, "providing it strategically invests in its online presence, which will prove to be its rescue, as ad budgets continue to shift to more measurable online media."

The 2008 numbers are in broad agreement with industry revenue figures from the Radio Advertising Bureau. (The RAB includes non-station revenues in its industry revenue counts, but stations still make up the bulk of radio revenue.) In the first three quarters of 2008, RAB says total revenues fell 7% to $14.83 billion; at this rate, total industry revenues would come in at $19.3 billion.

The BIA forecast is the latest wave of bad news for a medium awash in dire reports and predictions. Recently, Cumulus Media President and CEO Lew Dickey Jr. told the Atlanta Business Chronicle that "half the companies in business today will be gone within 36 months," blaming the sharp economic downturn and insupportable levels of debt at many radio groups. (Cumulus, he averred, will be fine.)

Judging by the history of the two most recent recessions, radio is in for a pummeling. First, the bottom point for radio revenue declines has become steadily lower during recessions--with a 3% dip in 1991, a 7.8% drop in 2001, and a predicted drop of 10% (or more) in 2009. Second, the post-recession rebounds have also dropped lower, sliding from an average 7.6% growth rate in the four years following 1991 to 2.4% in the four years following 2001.

Perhaps most ominous since 2001, radio's annual growth rate has failed to keep pace with the percentage increase in U.S. GDP. That's a big change from previous periods, when radio revenue growth rates almost always exceeded U.S. GDP. The departure probably reflects increasing competition from the Internet and new devices like iPods.