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Digging out of a hole - Broadcasting & Cable

Digging out of a hole

In 2002, spending will increase, but radio hurt by aftermath of Sept. 11
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Radio might be waking up from the nightmare that haunted most media segments in 2001. The final numbers are expected to show that radio advertising was down as much as 7% in 2001. But the pace of sales picked up a bit in the waning weeks of last year, and that has radio execs optimistic that they'll see modest gains—estimates run between 1% and 4%—in 2002.

Retail, traditionally the industry's top advertiser, has increased spending and accounted for 5% of business in December. Automobile manufacturers were active in the fourth quarter, although their spending was largely based on their "0% financing" offers. Entertainment and package-goods advertising also rose slightly.

Some insiders expect ad revenues to be in positive territory (on a year-to-year basis) by the second quarter.

But the industry has to overcome 18 months of declining ad spending, including an 80% reduction in Internet advertising, which had grown to be the largest category. Sept. 11 dealt another vicious blow, with two more big sectors—airlines and travel—curtailing their spending: Airline business alone fell 40% in the fourth quarter.

The Radio Advertising Bureau estimates that, through October, ad revenues were down 8%, with local ads down 4% and national sales off 19%. President Gary Fries predicts that combined sales will rise 3% in 2002, with local-ad sales leading the charge. "Local ads react to the consumer," he said, "and get right at the consumer when they are showing signs of interest in purchasing."

Local ads are a station's financial lifeline, accounting for as much as 85% of ad revenue. Station groups are dreaming up new promotions and sponsorships to drive business. "Our people need to sit down with local merchants and devise ways to move their products off the shelves," said David Field, CEO of Entercom, a station group with clusters in 50 key markets.

After declining 20% in 2001, national advertising will likely return slowly. Some blue-chip advertisers are leading the way. Interep Chairman Ralph Guild says several large corporations—notably Proctor & Gamble, Johnson & Johnson and Kraft—are advertising some products on radio for the first time.

Veteran radio advertisers are finding new values in the medium, said Natalie Swed Stone, director of national radio for media buying firm OMD USA: "An advertiser that was airing at night can now afford morning drive or have a celebrity endorse them."

<p>Prognosticator</p><p>Prediction</p>

Radio Adv. Bureau

+3%

Interep

+1% to +2%

Universal McCann

+2%

Jack Myers Report

-4%

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