The fourth quarter is increasingly looking like the pivot point for the radio industry as executives have spelled out the lay of the land in a series of presentations to Wall Street. Based on pacing so far, the third quarter looks a lot like the second when virtually all publicly traded companies reported softer revenue. But as the economy improves and late-year sales goals stare down CMOs at the large national brands that have sat on the sidelines for much of the year, company heads think the tide for radio will turn.
Speaking on a conference call last week, iHeartMedia Chairman and CEO Bob Pittman framed the billion-dollar question: “Will the advertisers who have cut back or stood on the sidelines throughout the year start to spend as they enter the fourth quarter? Based on the improving trends we've mentioned here, and how the fourth quarter of last year performed, we think the answer to that is most likely yes,” he said.
Q4 has long been radio’s richest revenue and earnings quarter in large part because advertisers accelerate their spending during the lucrative holiday season. The biggest sales quarter for almost all large national advertisers is the fourth. “If you're going to hold out for the year, the one quarter you probably will not hold out for is Q4,” Pittman continued. “And as we've had conversations with advertisers, as well as looking at historical trends, we feel confident that Q4 certainly is going to be much stronger. I think the question is how much stronger.”
Large national advertisers holding back ad spending had a drag on radio revenues in the second quarter. How much varies by company and the size of the markets they operate in. While national business fell 21% year-over-year at Townsquare Media, it didn’t have the same wallop as it had at some companies that are more dependent on agency-driven transactional ad sales.
“No doubt that hurts, but that decline doesn’t hurt us as much as others because national broadcast advertising now only accounts for approximately 7% of our total company revenue,” CEO Bill Wilson said. “In contrast, our local broadcast advertising performed much better in Q2 and year to date.” Because of this, Townsquare’s second-quarter broadcast ad revenue declined 4% excluding political. “We expect local broadcast advertising to continue to meaningfully outperform national in the back half of the year,” Wilson said. More than 90% of the company’s business is local advertising.
There was no shortage of steep year-over-year drops in national ad sales in the second quarter. National spot ads fell 29.5% at Salem Media. Audacy reported a 16.6% national advertising decline, and Beasley Media Group’s national business was down 11%. Cumulus Media didn’t break out national ad revenue but it blamed weak national ads sales for an 11% total Q2 revenue decline and said network radio billings at Westwood One declined 18.5%. Local ad billings, in comparison, declined 5% in the quarter.
Cumulus also said its smaller markets weren’t feeling as much of the brunt from weak national sales as their larger counterparts. Because they rely less on national dollars, smaller markets are performing better than larger markets, the company said.
The Outlier: Saga Communications
For years, national wasn’t a priority at Saga Communications. “Previously in our company, national was largely looked at as transactions with not a lot of support for our [national sales managers],” Saga CEO Chris Forgy said last week. National was perceived by many of Saga’s managers “as a low cost per point business, and many of the market managers weren’t leaning into the effort, partially because they didn't understand the benefits to them. And frankly, we at the corporate level perpetuated the idea that national wasn't all that important,” Forgy continued.
In the second quarter, national ad sales jumped 12% at Saga, an increase of $450,000. “We continue to see nice growth in national,” CFO Sam Bush said. The catalyst: Saga is now taking national business seriously. “This is a direct result of us taking a local approach to selling and servicing our national business,” Forgy explained.
At iHeartMedia, management doesn’t distinguish all that much between local and national business since every seller is trained to sell everything the company offers to advertisers. It’s more about the distinction between small and large advertisers.
“We really look at it as larger advertisers and smaller advertisers,” Pittman said last week. “Although we may have a greater exposure to larger advertisers, we also tend to get a greater share of that advertising.”
Smaller advertisers that need to make the cash register ring have continued to invest in advertising through the downturn, Pittman said. But the larger advertisers have been a mixed bag. “Some have been in at the levels they were, and some categories actually are up in the large advertisers. And some are holding back… And it looks like probably Q4 is the quarter when that breaks loose.”
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