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Broadcasters Are Diversifying Their Revenue Streams.

Radio has expanded its sales offerings with a range of digital products to help offset soft over-the-air spot sales. But a growing number of operators are diversifying their revenue streams beyond audio by pursuing complementary business lines that leverage radio’s core strengths and assets.

Audacy is betting on sports gambling, including a $32 million all-cash purchase of QL Gaming Group last November. Urban One is doubling down in the gaming arena with plans to develop a $600 million casino resort in Richmond. Beasley Media Group is playing in the fast-growing eSports space with a majority stake in the Houston Outlaws, part of the Overwatch League. Entravision Communications acquired Media Donuts and a majority stake in Cisneros Interactive as it aims to become a marketing technology service provider on a global scale. And keeping its focus squarely on audio, iHeartMedia has made a series of major investments that helped propel it to become the world’s largest podcast company.

These and other investments aren’t a case of CEOs dabbling in hobbyist pursuits. Rather they’re seen as essential paths to long-term growth. “Revenue diversity is a necessary part of survival,” says Borrell Associates CEO Gordon Borrell. “Anyone who believes a station can survive by just selling radio spots with digital sprinkles needs to retire and make way for the future.”

Entering Adjacent Markets

As a mature industry, radio needs to look at what adjacent markets it can enter and compete in, says Rick Ducey, Managing Director of BIA Advisory Services. “Local radio groups have valuable assets including strong brand equity, locally deployed sales forces at scale, great relationships with advertisers and agencies, trust and high usage by audiences, and substantial operational experience,” he says. These strengths are enabling groups to expand their businesses to where radio is only one of several products they can bring to market. “Increasingly, they are acting on the insight that they are platforms that bridge buyers, audience experiences, and consumers,” Ducey says. “Radio does that well.”

The diversification trend runs in parallel with the growing number of companies removing "radio" from their company names and replacing it with “audio” or "media." “Next, I think you'll see them distance themselves from ‘media’ and select a secular word for their companies, relying on a tagline to describe their broadening offerings,” says Borrell. “It's subtle, but quite telling of the industry's path.”

How a company describes itself to investors and the media says a lot about where it sees its future. While it started as a radio and TV broadcaster, Entravision now refers to itself as “a diversified global marketing, technology and digital media company” with clients throughout the U.S. and across the globe.

Nationalization of the Economy

Brian Wieser, Global President of Business Intelligence at GroupM, says diversifying beyond AM/FM is necessary in light of the “massive headwinds that geographically constrained media companies face due to the nationalization of the U.S. economy.” That began decades ago with the creation of the interstate highway system and continued with the invention of the internet. Together, these two forces helped transition the American economy from one primarily built around local economies into one organized around the national economy. “This nationalization of the economy has not favored locally or geographically constrained media,” says Wieser. “There is growth from the more nationally oriented types of audio,” he says, including podcasting “because it’s a product that is organized more like the marketers who support it.”

Leveraging Core Strengths

Ducey suggests diversification strategies for radio are most successful when they leverage the company’s core strengths of bridging buyers and consumers with fan-based audience experiences that consumers crave. “Sports betting, casinos, sports, and cross-platform audio content create new opportunities for radio groups to enter adjacent markets and leverage their core assets to be competitive entrants,” he adds.

As radio expands its scope into flanking businesses, it is also confronting the classic dilemma of which business it really is in – the radio business or the audience experience business. “The way radio groups answer that question,” says Ducey, “will determine their futures.”

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