Total U.S. radio station revenue grew 4.5% to $15.47 billion in 2022 for another bounce-back year, according to fresh figures from Kagan. While billings are headed in the right direction, the industry’s bottom-line is still $2.30 billion lower than the pre-pandemic year 2019. For 2023, the forecast is for radio revenue to grow 2.8% to $15.91 billion before flattening and declining slightly through 2026 with ad share continuing to be siphoned off to streaming.
Presenting the forecast at the 2023 NAB Show, Kagan Principal Analyst Justin Nielson said the industry experienced “a deep decline during 2020 in the pandemic,” followed by “some bounce back in 2021 and 2022. We see this year going forward with pretty much flattish growth,” he added, with national ad business “a little bit more challenged” than local business.
Across the period from 2022-2027, Kagan calls for radio to post a compound annual growth rate of 1.06%. However, your mileage may vary. The Central Gulf, Mid-Atlantic, Mountain and Pacific regions will grow at a slightly faster clip. On the other end of the spectrum, the Central South, Great Lakes, Upper Midwest and New England regions will exhibit slower growth. These total industry numbers from Kagan reflect network, national spot, local, digital and off-air revenues.
Drilling down to the market level, Dallas-Ft. Worth is radio’s top growth market, expected to increase radio station revenues from $306.8 million in 2022 to $328.8 million in 2027 for an annual growth rate of 1.4%. Seattle-Tacoma is No. 2, projected to increase from $159.6 million to $171.1 million during the same time period at an annual growth rate of 1.39%. Rounding out the top five radio growth markets for 2022-2027 are Boise, ID (+1.38% CAGR), Salt Lake City-Ogden-Provo (+1.37%), and Atlanta (+1.36%).
The local figures include Kagan estimates of Nielsen Audio-rated radio station market national, local, and digital ad revenues as of second quarter 2022 and exclude network and off-air revenues.
Digital Audio Up 12% In 2022
Kagan’s report also looks at the ad-supported tiers of the streaming audio business. It estimates ad revenues from streaming music, online radio and podcasting grew to $4.35 billion in 2022, up 12.0% from $3.89 billion in 2021. According to its model, streaming audio ad revenue (which encompasses pureplays like Spotify and Apple Music, the digital audio businesses of iHeartMedia, Cumulus Media and other radio broadcasters, and podcasting) should grow 11.0% in 2023 to $4.83 billion, maintaining a 3.1% share of total U.S. online ad revenue. The forecast is for streaming audio ad revenue to increase to 3.9% of total U.S. online ad revenue in 2032, reaching $8.89 billion.
Nielson said the podcasting ad business has “been growing two-fold over the past few years, although that's kind of matured.”
Lower Deal Multiples
After what Nielson called “huge steep consolidation years” in the early 2000s, the radio deal market has seen a significant slowdown in the past decade or so marked mainly by smaller or “tuck-in” deals in certain markets. “There is still activity. There are stations being traded in the marketplace, it's just at lower values that we've seen in the past,” he explained.
For radio, Latino Media Network’s $60 million purchase of 18 radio stations in ten cities from Univision was the largest radio deal of the past three years, per Kagan.
As radio deal volume has slowed, so have the cash flow multiples paid for stations. Kagan estimates the multiple to be 6.8-times cash flow for radio deals in 2022, largely consistent with where they have been since 2014.
Kagan is a media research group within S&P Global Market Intelligence.