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ANALYST: SEPT. RADIO ‘MUCH UGLIER THAN EXPECTED’ Jeffrey Yorke – Radio and Records Wachovia Capital Markets’ media analyst Marci Ryvicker spared Radioland no pain Monday (Nov. 5) after the RAB reported that radio’s local and national revenues showed a 7% revenue decline for the month of September. “September Radio Much Uglier Than Expected” screamed Ryvicker’s headline over a six-page report issued to her clients Monday afternoon.
C.L. King & Associates’ senior media analyst Jim Boyle used the words “shocking” and “stunning” to describe the numbers and told his clients, “September is another negative revenue month for the radio industry, its fifth consecutive one, but it’s the most discouraging month so far in 2007. This month also had a very easy negative comparison.”
Boyle, who can be brutal in his honesty about an industry he has great affection for, added, “The long-time weakness in the top 25 markets has continued into the mid-markets. Indeed, for the second straight month the mid-markets were down more than an average of 6% in September, which was worse than the big markets’ 4% average revenue drop.”
The numbers, which reflect both local and national revenues based on a pool of more than 150 markets as produced by Los Angeles accounting firm Miller Kaplan Arase & Co., were both ugly and startling and no one seems to know what caused the unexpected, across-the-board drop in revenue. Even Renee Cassis, the RAB VP for corporate marketing, acknowledges that there doesn’t seem to be any one event, or even a series of events, behind the industry’s dramatic revenues slip.
In September 2006, revenues were off only 3%, but this year national revenue was off 9% (versus 1% last year), while non-spot revenue was up only 9%, compared to 11% last year.
The year-to-year fall “does not bode well for earnings this week,” says Ryvicker, “especially for large market radio. We heard that September was not a good month for radio, but we were unprepared for such a large decline in both local and national spot.”
The analyst notes that “small market radio groups are still performing much better than their large market peers, as evidenced by Saga’s third quarter radio revenue growth of +1.2% versus CBS and Entravision’s Q3 radio revenue declines of 7% and 6%, respectively.” She adds, “We believe that large market radio groups, such as Radio One, Entercom and even Citadel (with exposure to major markets via its ABC acquisition), are at the greatest risk of missing guidance and investor expectations when they announce Q3 results this week.”
She’s changed her full year industry estimate after September's considerable decline, noting a “belief that significant industry weakness continued into October (according to our contacts).” She’s therefore reduced her “Q4 and full year industry estimates by 200 basis points and 130 basis points, respectively. Our new estimates are -3% and -1.7% for Q4 and the full year, respectively.”
Ryvicker’s bet is that October will be down 4%, November down 4% and December down 2%. Back at the RAB, analysts are dissecting the third quarter and expect to produce a report on the matter -- with dollar signs -- that’s set to land on your desk with a thud on or about Dec. 3. |
