Radio Sees A Bright Revenue Future Through Digital.

For radio, digital is making all the difference. While terrestrial radio’s advertising revenue is expected to be flat over the next several years, the industry’s digital prospects are on the upswing. According to a new forecast by PwC, radio’s digital revenues are expected to rise at an 8.6% compound annual growth rate over the next five years.

That number compares to just 0.4% CAGR growth for AM/FM radio.

Combined, PwC says the total radio industry ad revenue, which also includes a small amount of satellite radio ad billings, is expected to tick up 1.2% through 2021 to a total $18.9 billion.

Radio should focus on developing its mobile and streaming integrations, according to Greg Boyer, partner, Entertainment, Media & Communications practice. “Consumers have made a positive choice in the streaming model. The biggest opportunity for radio is how to take traditional terrestrial operating aspects and convert it to what is more and more of a streaming-based world,” Boyer said.

That could involve increasing podcasting or tailoring radio content, such as news, sports and talk content, for digital consumption. Boyer says radio stations should also find ways to extend their popular on-air hosts to digital platforms, which could include social and video.

And radio broadcasters can take advantage of advances in digital platforms to make gains in the home, offices and in autos, Boyer noted. Voice-activated technology such as Amazon’s Echo, Google’s Google Home and Apple’s soon-to-be-released HomePod have created new ways to deliver audio, and radio broadcasters are working to deliver their content to these devices, both through customized integrations and on aggregators. “Radio broadcasters are rethinking how they reach customers and how they reach them through a device like that in the home,” said Boyer. “How can they make it easy and efficient and use their broad display of content, like the local factor and their talent, and how they make it work for them.”

Adapting to changes in automobiles is particularly important for radio broadcasts that have long been the primary entertainment option in automobiles. In recent years, interactive dashboards have become more widespread and software that makes smartphones compatible with car entertainment is becoming prevalent and easier to use, giving drivers more choices and threatening radio’s position. Toward the end of 2016, PwC notes that CarPlay was available on some 180 new car models while Android Auto had shipped on more than 200 models worldwide. “But both SiriusXM and analog radio broadcasters are beginning to see serious competition for the listening attention of the in-car audience from the advent of the interactive dashboard,” the report noted.

At the same time, digital streaming services and radio broadcasters with strong digital assets are making advances. PwC notes that National Public Radio has had particular success with its podcasting efforts, including attracting 72 million unique streams and downloads globally in October 2016. Four NPR podcasts ran in the top ten of all podcasts, including the top-rated podcast, “All Things Considered.”

Now, NPR’s podcasts are beginning to have a positive impact on the bottom line. “Such has been the success of NPR’s podcasts that the broadcaster more than doubled its revenue from that source in 2015 and expects equally robust growth for 2016, with revenue coming in at around $10 million,” the report noted.

Another broadcaster, iHeartMedia, expanded its digital music offerings this year by launching two subscription tiers, iHeartRadio Plus and All Access, which give users on-demand features such as unlimited song-skipping, the ability to build playlists, replay songs and listen offline. Users also have access to iHeart’s 850 live radio station streams and custom channels. “iHeartRadio’s move into the music-streaming market represents the first real kickback by a radio broadcaster against the on-demand music services,” PwC said.

Digital music has become the leading source of revenue in the music industry. Digital music streaming revenue increased 99.1% in 2016 to total $3 billion, compared to the year before and streaming revenue is expected to rise to $7.4 billion by 2021. The streaming sector accounted for 62.3% of digital recorded music revenue last year, a figure that is forecast to rise to 92.4% by 2021.

Within the radio sector, traditional revenue is projected to hit $16.4 billion this year and increase fractionally to $16.6 billion in 2021. Total radio revenue including digital billings and satellite ad revenue will tally $18.1 billion this year and reach $18.87 billion by 2021, PwC forecasts. The U.S. remains the world’s largest radio market, accounting for 49.6% of total 2016 global radio revenue.

To generate significant growth in the future, Boyer says radio broadcasters will need to balance maintaining their legacy business with their digital pursuits. On the terrestrial side, he says it is important to develop genres that appeal to young adults and Millennials, such as EDM, and tend to wildly popular genres such as country.

“Terrestrial radio has a reach for local advertisers that is very hard to copy,” Boyer said. “But given the level of technological innovation and where the consumer is moving, broadcasters have to reinvent themselves in innovation and services to play in that market.”


Enjoyed this post? Share it!

 

Leave a comment