Digital will remain radio’s growth engine over the next five years with revenues forecast to climb 6.5% in 2023, 6.0% in 2024 and within a range of 5.7% to 5.1% during the 2025-2028 period. Radio’s off-air billings are also on an upswing, expected to grow 3.0% in 2023 and 2.3% in 2024 with live events reaching $2.45 billion by the end of 2028. This is according to a new forecast from Kagan, the media research group of S&P Global Market Intelligence.
Despite the upward trajectory of digital and off-air, total radio revenue – including national and local spot, digital, off-air and network revenue – is expected to decline slightly at a five-year negative compound annual growth rate of -1.2% from an estimated $15.15 billion in 2023 to $14.26 billion by the end of 2028.
Excluding network and off-air revenue, Kagan projects radio station ad revenue to decline 2.1% in 2023 to $11.97 billion and decrease 0.9% in 2024 to $11.86 billion.
Between 2023 and 2028, radio’s local and national spot ad revenues, including digital, are expected to decline at a CAGR of -0.98% in rated markets, -2.68% in non-rated markets.
Consumer Spending Under Pressure
Radio derives the bulk of revenue from local businesses with auto, retail, travel, and entertainment among its top ad categories. These categories were “heavily impacted by the pandemic-influenced advertising pullback and now are suffering from higher interest rates and price inflation primarily from higher labor costs,” Kagan says in its Annual Outlook released Tuesday. “Consumer spending that rebounded post-pandemic with shelter-in-place and masking orders being lifted has now come under pressure although has not dipped into recessionary levels yet.”
That helps explain why the media research group is calling for radio's core local spot ad market to decline by 3.0% to $8.49 billion in 2023, down 1.0% in 2024, down 3.0% in 2025 and then slightly declining by 1% to 2% over the remaining forecast period to $7.85 billion by 2028. The downturn in national radio ad revenues is expected to continue with a 4.5% decline to $1.97 billion in 2023, then a 6.0% drop to $1.85 billion in 2024, before starting to decline by 7.0% to 8.5% to $1.33 billion by 2028.
“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.
Fastest Growing Markets
Based on Kagan’s radio market-level ad projections, the top five fastest-growing U.S. markets by 2023-2028 compound annual growth rates are Boise, ID at 0.32%; Myrtle Beach, SC, at 0.16%, Seattle-Tacoma, WA, at 0.05%; Denver-Boulder, CO, at -0.07%; and Austin, TX at -0.12%.
"The U.S. broadcast station industry has mostly rebounded from the pandemic-level advertising declines in 2020-21, however, new headwinds have emerged in 2023 resulting in softness in the ad market as a result of high interest rates and inflationary pressures,” says Justin Nielson, principal research analyst at S&P Global Market Intelligence. “The local ad market continues to be stronger than the national side of the spot ad business as national ad agency and brand budgets have shifted dollars to streaming, mobile and social media platforms."
Ebb And Flow For TV Revenues
Due to the loss of nearly $2.5 billion in political, TV station ad revenue is forecast to decrease at a faster clip than radio in 2023, falling 9.5% to $21.86 billion in 2023. Kagan’s TV forecast has local spot up 2.0% in 2023, and digital up 3.0% while national spot declined by 3.0%. However, thanks to the influx of nearly $4 billion in political ads from a presidential election year, TV station ad revenue is expected to grow 13.5% to $24.82 billion in 2024. TV station ad revenue during the five-year period 2023-2028 is projected to grow at a 2.31% compound annual growth rate, hitting a high of $24.75 billion in 2028.