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Second Half Outlook: Cautious Optimism As Key Categories Improve.

Coming out of a challenging first half of 2023, radio broadcasters see reasons to be optimistic as the second half gets underway. While forward pacings are somewhat choppy and there is some advertiser hesitancy, key ad categories, including auto, are improving and radio’s digital efforts continue to blossom into a larger portion of industry revenues.

“We are forecasting the second half to be up over 2022,” says Tina Murley, Chief Revenue Officer at Beasley Media Group. She singles out the arrival of sports betting revenue in Massachusetts and other key markets where the company operates, along with “a rebound of automotive advertising, the resurgence of the legal category, and continued growth in the concert/event/leisure categories” as key factors.

Townsquare Media Chief Operating Officer Erik Hellum anticipates “a mild ad rebound for broadcast in the back half of 2023” for the small and medium market specialist. That will be most evident locally, “where we have more control and have been pacing positive year to date,” he says. Digital, which is Townsquare’s primary growth engine, is “not a rebound but a continued expansion and strong growth.”

Galaxy Communications, which operates in the central New York State markets of Syracuse and Utica-Rome, is expecting “a much stronger second half,” says CEO Ed Levine. While both markets were “down significantly” in the first six months of 2023, Levine likes what he sees in forward pacings: July up low-single digits, August and September up high-single digits, October up low-double digits, and November and December up mid-double digits. “We're quite confident on the radio and digital side for the second half,” Levine says.

‘A Fight For Every Dollar’

Despite these upbeat assessments, no one is expecting the next six months to be a cake walk. “I think it’s going to be a slog and we’ll need to fight for every dollar,” suggests Salem Communications CEO Dave Santrella. “Digital remains the growth engine, albeit even that seems somewhat sluggish in this very strange economy.” And while Alpha Media CEO Bob Proffitt says the second half “looks fine,” he notes that “forward pacing has been choppy and different than previous years.” Moreover, the macro economy has caused some reluctance among advertisers to pull the trigger on longer-term campaigns. “There's more pausing and waiting than normal,” Proffitt says.

Radio execs are most upbeat about local direct business and digital. Retail, healthcare, entertainment, auto, legal services, casinos & gambling, and home improvement are among the categories best positioned for growth. “Anything pertaining to home improvement and home services” looks strong, Hellum says, “particularly plumbing, heating and air conditioning.” NRG Media CEO Mary Quass says retail is pacing up 30%, auto +15%, professional services +13%, and food +10%.

Alpha’s Proffitt is optimistic about automotive. “We expect to see the auto industry continue to come back stronger as they're able to replenish their lots with inventory. I've seen some interest rate promotions to counter the rate increases and inflation concerns,” he says. Dealers are showing the most promise, followed by dealer associations.

With more cars on their lots, Galaxy’s Levine says dealers need to advertise to move vehicles. Local auto ad dollars aren’t back to pre-COVID levels “but they’re certainly a lot stronger than they were a year ago,” Levine says. Beasley’s Murley agrees the category has a long way to go to get back to pre-pandemic levels but says it shows signs of stabilizing. “We are very encouraged to see double-digit ad growth that is being driven by Tier One and Tier Two sectors,” Murley adds. In the markets where Townsquare operates, Hellum says auto ad sales are slightly down from 2022 and significantly down from 2019. “As inventory starts to pick up in our markets, we may see a return to growth in the back half of this year, but are not counting on it yet,” he adds.

‘Tremendous Upside’ For Digital

Digital is poised to deliver an increasing proportion of radio revenue in the second half. It’s up to 50% of revenue and 60% of profits at Townsquare. “We see tremendous upside in the back half of 2023 and in 2024 and beyond,” says Hellum. NRG’s Quass anticipates “record setting [digital] growth” in the next six months. For Alpha, Beasley and others, digital is their growth strategy. “Each year digital revenue becomes a higher percentage of our portfolio and we fully project that trajectory to continue,” says Murley. The revenue split at Galaxy is about 75% radio, 25% digital. And when digital and revenue from its separate events business are combined, Levine expects they will surpass radio-only revenue.

Despite continued uncertainty and recessionary fears, Alpha’s Proffitt suggests determination and perseverance will be key to winning in the second half. “Those sellers that get up and put their big boy and girl pants on every morning and go prospect, believe in their products, and continue to hone their skills as marketing professionals will always prosper,” he says. “Those sitting around waiting for the other shoe to drop won't.”

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