PWC: RADIO LOSES SHARE TO LOCAL CABLE Katy Bachman – Mediaweek Despite inventory reductions and the promise of digital radio, the radio business will still lose share to local cable and outdoor over the next five years, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook, released Wednesday.
“2005 is a hold-steady year for radio,” said Stefanie Kane, a partner for PwC’s entertainment and media practice, who is projecting radio will post a 3.5 percent increase in 2005, with increases of around 4 percent annually from 2006-2009. “We are hopeful that the industry can hold back on clutter, which will increase demand. If even one group deviates, that could have serious repercussions. Right now, there is widespread buy-in,” Kane added.
While less clutter in the near term and digital broadcasting down the road will lead to solid growth compared to the past two years, it won’t be enough to overcome increased competition from a booming outdoor business that is benefiting from new technologies and an aggressive local cable business that is ramping up its ad insertion capabilities.
According to PwC’s report, radio’s share of radio/local cable/out-of-home advertising fell to 63.3 percent last year from 68.4 percent in 2000. The medium has also drawn significantly less political advertising over the years. As a result, by 2009, radio’s share of advertising will drop to 58.4 percent.
The good news for radio is that national is projected to recover from its slump to be the fastest growing segment of the business, increasing to $5.9 billion in 2009 from $4.4 billion in 2004, a 5.5 percent compound annual increase. Local will grow at a 3.9 percent compound rate to $18.3 billion in 2009, from $15.2 billion in 2004.
With only minimal advertising on Sirius Satellite Radio and XM Satellite Radio, PwC does not expect satellite radio to represent a huge threat to terrestrial, but it could hold down terrestrial radio’s growth. If advertising does take off on satellite radio, it will likely attract national advertisers, which represent only 20 percent of terrestrial radio’s business. By 2009, PwC is forecasting the number of satellite radio subscribers to reach 20.5 million.
Following 6.3 percent growth in outdoor last year, in part due to a new influx of political advertising and an increase in new platforms such as street furniture, transit advertising and alternative media, advertising is projected to increase 6 percent in 2005. By 2009, the outdoor market will grow by 6.3 percent compounded annually to $8 billion in 2009, from $5.9 billion in 2004.
“It’s a technology and ease of use [for advertisers] story,” said Kane.
New billboard formats that incorporate digital technology aided by the promise of a potential ratings system to provide advertisers with demographic data, will continue to lead the outdoor segment. PwC is projecting 6.6 percent compound annual growth from 2005 to 2009, with ad spending increasing to $5.1 billion from $3.7 billion in 2004.
Street furniture, transit and other alternative media will rise to $2.9 billion in 2009 from $2.2 billion in 2004, for 5.9 percent annual compound growth. |