CHANTILLY, VA. April 14, 2009
– Cornered by weak radio station sales in the first quarter of 2009 and all
of 2008, the radio industry’s sole opportunity for valuation growth relies
on the ability to transform itself into a blended operation of broadcasting,
online and other activities, according to analysts at
BIA Advisory Services, a leading financial and strategic advisory firm
serving the media and communications industries. Reviewing recent station
transactions in the first edition of BIA’s quarterly,
Investing In Radio® Market Report, demonstrates that
stations with more than just over-the-air offerings provide the foundations
for appraisals that raises its value above their competitors not involved in
these other activities.
Through
March 2009, 164 stations were sold for a total of $46 million. With 769
stations sold for an estimated $700 million last year, it was the sixth time
since 2001 that one thousand stations or less were sold, but the first in
that period for total transaction values to sink below $1 billion. In 2002
the identical number of stations went for $5.4 billion. Also of note, 2008
was the first year since the late 1980s where the number of stations sold in
metro markets (383) was virtually equal to that of unrated markets (386). BIA recently reported
2008 radio revenues of $16.7 billion.
“Transforming the business model may not come easy for owners, particularly
because there is no magic formula, but they will increase the value of their
operations simply through off-air diversification, which can take a number
of forms,” said
Mark
R. Fratrik, Ph.D., Vice President, BIA Advisory Services.
The chart below shows the amount of radio station transaction volume and the
number of stations sold from 1999-2008 (without the stations involved in the
Clear Channel privatization).
At the
same time, radio broadcasters may also immediately take advantage of other
media troubles to increase their revenues and their values. Mike Andres,
Managing Director of BIA Capital Strategies, an investment banking affiliate
of BIA specializing in the communications industries, sees vulnerabilities
in the newspaper industry as real revenue opportunities for radio stations.
“Radio's
upside potential lies in its ability to accelerate the pace they take local
advertising dollars away from newspapers, once advertisers that have been
dormant begin returning," said Andres. "Many local newspapers have been
ceasing operations, or moving to online versions, creating opportunity for
other local media to fill this need.”
The
struggles of the radio industry began a few years ago, but have been
exacerbated by changing technologies and the recent problems in the
financial markets. Station owners have been left to grapple with both
strategic and tactical decisions for the long and short term in order to
remain solvent.
“While
expense cutting may be necessary in this economy, radio broadcasters must
accelerate their transformative process and recognize where they exist in
the media ecosystem,” said Rick Ducey, chief strategy officer of BIA. “To do
this they must recondition their sales teams, think more locally, look at
their advertisers through a different lens, consider migrating to other
platforms, and start partnering with other organizations to provide more for
their consumers and advertisers.”
BIA has
created a new conference, “Winning Media Strategies,” to discuss critical
topical issues for broadcasters and provide them with a tangible means to
improve their operations. In a three-day program, May 20-22, 2009 in
Washington, D.C.,
speakers will discuss new technologies, shifting consumer demographics,
media usage trends, new competition, and how different business models are
driving new revenue to traditional media. Additional details and
registration information is available at
www.bia.com/WMS.
A
comprehensive profile of all 302 radio markets is available in the first
edition of the quarterly Investing In Radio® Market Report
and the new 2009 Investing In Radio® Ownership Report
published by BIA. Both publications are part of the Investing In
financial guide series that includes market trend analysis,
demographic and economic overviews, competitive overviews, technical data,
ownership data, pending and completed transactions, and Arbitron ratings.
Information on these publications is available on the BIA website at
http://www.bia.com/publications_reference_radio.asp.
BIA also publishes investment reference guides and provides data services for the television and newspaper industries. For more information, call 800.331.5086 or email
info@bia.com.
