Thanks to the ongoing rebound from the pandemic and an infusion of mid-term political ad spending, the U.S. radio ad business is forecast to grow 4.8% in 2022 to $12.32 billion, excluding network and off-air revenue. That’s according to a newly released forecast from Kagan, the media research unit of S&P Global Market Intelligence.
Kagan’s forecast calls for radio's core local spot ad market to increase 5.0% to $8.83 billion in 2022 and by 3.0% to $9.10 billion in 2023, with growth rates “leveling off and then slightly declining over the remaining forecast period to $9.03 billion by 2027.” Thanks to a boost in political from midterm election spending, national radio ad revenues are forecast to grow 3.0% to $2.07 billion in 2022 and by 1.5% to $2.11 billion in 2023, before leveling off in 2024 and then starting to decline by 1% to 2% over the remaining years in the forecast period to $2.00 billion by 2027.
Digital Gains 6%, Off-Air Grows 4%
Radio’s digital assets are the brightest spot in the new Kagan outlook. It projects digital gains of 6.0% in 2022 and 4.8% in 2023, followed by a range of 4.3% to 3.8% growth through the rest of the 2024-2027 projection period. “Radio station owners are continuing to invest in streaming, podcast and digital marketing initiatives, with digital revenues expected to rise to $1.73 billion by the end of 2027,” the report says. Propelled by the return of live events, off-air revenue is forecast to grow 4.0% in 2022 and 3.0% in 2023 and “should remain a solid segment for the radio industry long-term reaching $2.42 billion by the end of 2027.”
Kagan’s latest Radio & TV Annual Outlook says radio’s recovery is expected to be “short-lived and partial” as national advertising continues to shift away from radio to streaming audio and podcasting alternatives. The report notes that radio advertising is predominantly local and focused on the auto, retail, travel and entertainment categories – all of which were heavily impacted by the ad pullbacks in 2020-21.
Your Mileage May Vary
But it’s anything but a one-size fits all forecast. “Some markets were less impacted than others from masking and social distancing orders during the pandemic, and station owners in those areas are expected to fare better based on our market-level forecast,” says Justin Nielson, principal analyst and author of the report. “In addition, radio owners must compete with multiple streaming audio and on-demand options for music and talk,” he says, adding that the new hybrid or permanent work-from-home economy has reduced commuting hours during prime in-car radio time.
“Radio's lower ad cost, local audience and relatively high return on investment compared to other media will keep it relevant, although digital investments point to future growth opportunities with the spot ad market for radio expected to decline over the forecast period,” the report says.
When local and national spot ad revenues, including digital, are rolled up together, Kagan says radio station revenues are on track to increase at a compound annual growth rate of 1.06% in rated markets between 2022 and 2027, with non-rated markets declining 0.36%.
Total radio revenue, including national and local spot, digital, off-air and network revenue, is expected to be mostly flat at a five-year compound annual growth rate of 0.78% from an estimated $15.47 billion in 2022 to $16.09 billion by the end of 2027.
Based on Kagan’s radio market-level ad projections, the top five fastest-growing U.S. markets by 2022-2027 compound annual growth rates are Dallas-Fort Worth (+1.40%); Seattle-Tacoma (+1.39%), Boise, ID (+1.38%); Salt Lake City-Ogden-Provo (+1.37%); and Atlanta (+1.36%).
The new forecast calls for the total U.S. broadcast station industry to hit $36.47 billion in ad revenue in 2022, up 12.9% from $32.31 billion in 2021, with local stronger than the national side of the spot ad business for many station owners. Kagan’s 2022 projection breaks down to $24.15 billion from TV stations — including core national and local spot, political and digital/online — and $12.32 billion from radio stations, which includes national and local spot and digital, excluding network and off-air.
Kagan says its individual market projections for radio are based on estimated population growth in each core-based statistical area, as provided by Nielsen. Estimates in the model also reflect market-level economic factors, traditional advertising spending shifting to digital and mobile, as well as recent radio listenership trends.
Read the full report HERE.