As many Canadian broadcasters begin another new financial year, there is some positive news from down under.
Citi Research analysts Justin Diddams and Sudith Devan say “We like Radio as a medium, and more importantly an advertising platform. It’s not the most glamorous of mediums but it continues to deliver results for advertisers, and in the current advertising environment, which is obsessed with measurement and efficiencies, Radio continues to deliver ahead of peers.”
The radio market is “enjoying renewed interest, as it returns to revenue growth in 2013 and continues to outperform traditional media peers.” Radio has outperformed traditional peers over the last five years and is a consistent performer.
The reports about the ‘death of radio’ are greatly exaggerated, says the report. “We’re actually witnessing a period of renaissance for the radio industry, as the platform delivers positive marketing outcomes for advertisers and entertainment for consumers. Radio advertising has actually delivered growth each year since the financial crisis of 2009, outperforming the broader advertising market, and in particular the traditional media players.”
Radio is considered a defensive medium, outperforming in tough economic conditions. “It continues to deliver results for advertisers,” says the report, “with little (or no) structural impacts to audience and advertiser demand, unlike many other mediums.”
The radio market continues to deliver superior earnings, relative to traditional media peers. It is the only traditional media platform which has returned EBITDA margins to historic levels. Citi Research analysed the cost base of radio companies, showing the cost structure of the industry is sustainable. In Australia staff costs are 56%, license fees 10%, Commissions 10%, Rent 6%, marketing 9% and other costs 9%.
The report concludes “While we could never rule out structural changes impacting the radio market, we must stress the demise of the radio industry has been written about for decades. First it was the Eight Track which appeared in the late 1960’s, followed by the Sony Walkman in the 1980’s and then Apple iPods in the 2000’s…. Now, it’s the streaming music platforms Pandora and Spotify which represent the latest threat to commercial radio.”
The report, Entertain Me Issue 11, was published by Citi Research.