Local ad spend on broadcast radio will decline 2.3% in 2024, according to a revised ad forecast released Thursday by Borrell Associates. That’s a slight improvement over its initial forecast, which called for broadcast radio sales to decline by 2.8%. Digital will continue to be where the growth is for radio, with its digital ad sales expected to finish 2023 up a healthy 11%.
The digital growth number is a downward revision from the 17% increase Borrell forecast for radio’s digital sales back in February. “That was based on impressive budgeting numbers we saw in our survey of radio managers back in December-January,” CEO Gordon Borrell told Inside Radio on Thursday. Now it has revised that projection downward to 11% growth. He notes the revised number still amounts to more than $2 billion in digital revenue, “but not quite at the $2.1 billion we initially thought.”
“Fumbled” is the word Borrell uses to describe how some local media companies performed in digital sales this year. “It should have been a great growth year, and so far, it's not,” he said. His firm’s latest outlook shows a wide variance in digital sales performance among the radio companies it tracks. Audacy’s digital revenue is down 3% in 2023 so far, Cumulus Media is flat and iHeartMedia up 3.7%. Other digital growth stories in radio include Salem Communications (+5.7%), Saga Communications (+10.1%), and Townsquare Media (+13.0%). Beasley Media Group tops radio’s digital revenue gainers in 2023, up 20.2%. The Borrell numbers are based on SEC filings.
Despite lower than expected gains, digital sales remained healthy in 2023, the Borrell number crunchers say. At +11%, radio was out-performed only by cable TV (+14%). Radio grew digital revenue faster than TV (+8%), newspapers (+5%) and yellow pages (-6%).
Local media companies are expected to focus more intently on digital in 2024 for a variety of reasons, says Borrell. For some, the pandemic created a “final awakening” to digital. Legacy sales revenue, meanwhile, hasn’t returned to 2019 levels – rarely do you hear a radio company compare their current performance to pre-pandemic numbers. Moreover, digital revenue has grown to the point where it can now mitigate losses or re-establish total company growth. And in a very few cases, digital revenue now exceeds legacy dollars. Plus digital profit margins have grown to impressive levels. For example, iHeartMedia had a 28% digital profit margin in the first half of 2023 and Townsquare Media clocked in at 31%, not including its Townsquare Interactive business. “We think this has gotten a lot of executives attention, and that they're strategizing right now to invest more in digital next year,” Borrell said during an online presentation of the new forecast on Thursday.
The latest forecast from the local ad spend tracking firm calls for total local advertising to increase 4.4% next year. “It’s still coming back from the pandemic,” Corey Elliott, Borrell’s chief researcher, said during the presentation. “I know it's 2023 and the pandemic seems like it was so long ago. But it takes a while to get back to the ‘new normal.’”
Despite radio’s projected 2.3% decline, the forecast shows radio out-performing cable TV (-3.2%), newspaper (-4.0%), telemarketing (-4.9%), run of site banners (-11.0%) and directories (-19.2%). Digital audio will be one of next year’s fastest growing media channels, on track to increase 7.7%, trailing only listing sites (+8.1%), local TV (+9.0%, due in large part to political) and video/OTT (+9.3%).
Overall, digital ad formats are expected to see a 6% increase in local ad expenditures in 2024 with non-digital formats up 0.4%. That’s the first time non-digital ad formats were forecast to rise since the huge advertising bounce back in spring 2021.
However, non-digital advertising lost significant market share post-pandemic, falling from 42% of the local ad pie in 2019 to a projected 28% in 2024. Digital advertising has surged from 58% to 72% during the same time frame. “The pandemic really helped digital gobble up more market share, because in 2020, when people and businesses retracted, they kept their messages going digitally,” Elliott explained.
The top spending formats, according to the 2024 forecast, are search, video, and targeted banner ads.
While digital accounts for an increasing chunk of the local ad pie, not all of it remains in the local market. According to Borrell, about 14% of digital ad spend is obtainable by local media companies. “This is the piece of the pie that most of the people on this call are trying to tap into,” Borrell explained. “And in lot of markets, we're seeing growth.”