Digital continues to account for a growing percentage of radio industry revenue. But how profitable is it? A new survey of financial executives provides some important benchmarks.
Conducted by Borrell Associates and the Media Financial Management Association, the survey found that the average EBITDA margin was 32.8% and the average gross margin 41.5%. It also found that, while executives expressed high confidence in the calculations, some expenses associated with digital operations were excluded.
“This helps pull back the curtain on digital profitability," said Joe Annotti, CEO of the Media Financial Management Association. "It shows that financial managers have their eyes on it and are, in fact, tracking margins for overall digital sales revenue, as well as a great number of individual digital products."
The survey was conducted in late October to early November and included executives at 58 local media companies. It asked questions about margins, the perceived accuracy of the calculations, and how valuable the information is to media operations.
Among the findings:
71% said their companies have a formal framework for calculating digital profitability
On average, companies report revenue 11 digital products
Profit margins are calculated for an average of seven digital products
Highest profitability reported was for email newsletters, mobile advertising, banners, and geofenced ads
When calculating expenses for digital operations, most do not include shared resources with the core-product, including production staff, equipment, and office space.
“There’s been a lot of skepticism about the profitability of digital operations at traditional media companies,” said Gordon Borrell, CEO of Borrell Associates. “It’s great to see CFOs are providing insights on the digital profit factor so the industry can gauge a true bottom-line value.”
Findings were published in a 10-page report, “How Profitable Is Digital Revenue,” and made available to MFM members and Borrell clients. A free, open-to-the-public webinar will be held at 11am ET on Tuesday, Nov. 28. Guests include Joe Annotti, Borrell and David Bestler, CFO, Hubbard Radio. Register HERE.