Radio enjoys flashback to 1980s profits
GRANT ROBERTSON 00:00 EDT Tuesday, August 15, 2006 <http://www.globeinvestor.com/servlet/story/GAM.20060815.RRADIO15/GIStory/>http://www.globeinvestor.com/servlet/story/GAM.20060815.RRADIO15/GIStory/ Canada's radio industry is quietly thriving. In fact, the last time the sector had it this good, George Michael and Tiffany were topping the charts. Sales of commercial airtime on private radio rose 8.7 per cent last year, giving the industry its biggest one-year jump in advertising dollars since 1988, Statistics Canada said yesterday. That increase pushed commercial revenue to a combined $1.3-billion for AM and FM stations, led by the top three markets in the country: Calgary, Ottawa-Gatineau and Toronto. The surge in radio revenue is being driven by a shift among television networks toward more lucrative regional and national ads, leaving local businesses such as restaurants and shopping malls for radio stations. "The television industry has kind of walked away from the local market," said Doug Checkeris, president of Media Company in Toronto, which buys commercial space across the country. "More and more -- particularly in Ontario or in British Columbia -- the television market is going for regional money rather than taking local money." Across the industry, private radio made a profit of 20.6 cents on each dollar of revenue last year. That was up from the 17.7 cents the industry has averaged over the previous five years and substantially higher than the 6.6-cent average recorded in the nineties. However, most of the money is being made by stations in the largest markets. Profit margins in Canada's five biggest metropolitan areas averaged 27 per cent last year, while the rest of the industry averaged roughly 15 per cent. In Calgary, where federal regulators recently decided the local advertising market was robust enough to allow five new FM stations, private radio had profit margins of 31.2 per cent last year. Ottawa-Gatineau wasn't far behind at 31.1 per cent, followed by Toronto at 30.5 per cent. Analyst Carl Bayard of Desjardins Securities in Montreal said the radio sector has boosted revenue by changing how it sells advertising. In most cases, companies now band together to sell commercials in a particular market over a variety of stations, allowing them to charge higher rates. Some of the industry's largest players, such as Corus Entertainment Inc., Astral Media Inc., Standard Broadcasting Corp. Ltd. and Rogers Communications Inc., have adopted this strategy. The consolidated advertising approach has created a different industry in Canada, compared with the United States, where commercial radio is struggling with slimmer margins. "It really is remarkable when you look at what's going on south of the border and radio is having the most difficult time just generating a piddling 1- or 2-per-cent growth," Mr. Bayard said. "And, here in Canada, it's been growing by 8 or 9 per cent the last few years." But the strong numbers are creating problems for the industry. In the hottest markets, such as Calgary, stations risk running out of ad space during peak times. Though surging demand allows stations to hike their rates, they can't take advantage of the situation if the inventory sells out weeks in advance. "Sometimes you can do too good," said Gary Belgrave, president of the Radio Marketing Bureau, which represents the commercial sector. "The last thing we want is to be in a position where we have to tell our advertisers that we don't have any more inventory. In some cases, in those strong markets, we can get to that point." The healthy profits also threaten to distract from the most serious issues facing the industry. The radio sector is poised to argue in Ottawa over the next few months that new technology, such as the Internet and digital music players like iPods, are eroding their audiences. Companies want fewer restrictions by regulators on what their stations play, including the amount of commercials they're allowed to broadcast. However, the current profit margins could make those arguments difficult. "Right now they're going through an excellent period, but there are storm clouds on the horizon, there's no question," Mr. Checkeris said. "So the struggle they have is to figure out the changes they need to make to continue to be relevant . . . so they don't wake up one day and say, 'What happened?' That's where the anxiety in the radio market is." © The Globe and Mail --------------------------------------------------------------------- Duane Whittingham (N9SSN) - Producer Tom and Darryl Radio Shows Heard on C-Band Analog Satellite (W0KIE) - Telstar 6 (IA6) Ch 1 6.2/6.8 mHz Also on WTND-LP Macomb 106.3 FM, WQNA 88.3 FM, WBCQ 7415 kHz & the Internet. Heard Fridays 9pm ET, Sundays 12am ET and Tues 2am ET (Folk) An Independent Freeform Eclectic Radio Show. http://www.tomanddarryl.org http://www.wtnd.us _______________________________________________ Medianews mailing list [email protected] http://twiar.org/mailman/listinfo/medianews_twiar.org
