Airline passengers between flights patronize the iHeartRadio facility at Denver International Airport in Denver on Jan. 19, 2014.
Robert Alexander | Archive Photos | Getty Images
It’s a well-recognized refrain: “Legacy media is dead” — unless you are talking about radio.
Despite being one among the oldest media formats, dating back to the Nineties, radio has maintained relatively stable listenership over the past decade. Pay TV, while newer, has faced more significant declines.
In 2009, 92% of Americans age 12 or older listened to traditional, or terrestrial, radio in a given week, in keeping with data from Pew Research published last yr. By 2022, that number fell 10 percentage points. Pay TV penetration, then again, fell 20 percentage points between 2014 and 2023, in keeping with data firm Statista. Within the third quarter of last yr, the pay TV industry shrank at a record pace, analysts at MoffettNathanson said of their latest cord-cutting report.
“Terrestrial radio has stayed regular at the same time as other mediums like satellite radio, podcasts and Apple CarPlay have come on board,” said Guggenheim media analyst Curry Baker.
“Historically, radio personalities and stations have engaged with local audiences,” which tend be “sticky,” Baker said. “Cable networks never really did that.”
Radio has maintained the upper hand on many media formats partly due to its accessibility and relative lack of cost barriers. Most cars come already equipped with access to AM and FM radio at no additional cost, and in keeping with Statista data from 2022, nearly all of U.S. drivers decide to take heed to terrestrial AM/FM radio over every other type of entertainment on the road.
But radio listenership has also been bolstered by the unique ability of stations to capture local audience loyalty. Listeners tune in to listen to familiar voices, akin to Elvis Duran on Latest York’s Z100 or Ryan Seacrest on Los Angeles’ KIIS-FM. Conservative commentators have also traditionally commanded large followings on their radio shows, akin to Fox News’ Sean Hannity.
Contests and sweepstakes represent one other unique draw to terrestrial radio. Major stations are known to permit listeners to call in and win prizes akin to tickets to live shows or money.
“Radio is an interactive medium, and a part of that’s contesting,” Tom Poleman, chief programming officer at iHeartMedia, told CNBC. “For over half of our listeners, contesting is one among the explanations that they arrive to radio. Over time, contests has develop into more accessible with digital options like text-to-win and social media contests. Radio can also be inherently social: 80% of our listeners say that they arrive because they trust our host to be the voices of the community.”
iHeartMedia, which controls 860 stations across the U.S., captures a mean of 250 million monthly listeners, the corporate said in November, the biggest reach of any radio broadcaster within the U.S.
Over-the-air evolution
Like other legacy media, radio has faced increasing encroachment from digital audio formats, akin to podcasting and streaming platforms. Radio giants akin to iHeartMedia and SiriusXM have adopted podcasts and digital output as a part of their business models.
Podcasts, in lots of respects, function because the streaming iteration of radio, in the identical way that Netflix was the streaming iteration of cable.
Top radio corporations have positioned themselves to learn from the podcasting boom, in stark contrast to some media corporations’ contentious relationship with streaming, as many have struggled to migrate their declining cable revenue to streaming.
“There’s something about with the ability to concentrate on a human voice that’s compelling,” Poleman said. “Our radio hosts have naturally develop into great podcasters and we weren’t surprised to see the explosion in podcasting. We feel it is very complimentary toward broadcast radio.”
Still, similar to TV, radio faces promoting headwinds because the industry looks to recuperate from the Covid-19 pandemic slump, said Guggenheim’s Baker.
In November, iHeartMedia CEO Bob Pittman noted ongoing “uncertainty” within the promoting industry. Multiplatform revenue was down 5.1% for the corporate yr over yr within the third quarter of 2023, primarily brought on by a “decrease in broadcast promoting attributable to a difficult macroeconomic environment and a decline in political promoting,” the corporate said in a press release.
Guggenheim forecasts iHeartMedia’s broadcast promoting revenue to say no about 23% for the total yr 2023 compared with 2019 levels.
Likewise, other media corporations have reported declining ad revenues inside their TV units in recent months. CNN owner Warner Bros. Discovery reported a 12% drop in ad revenue for its TV segment for the third quarter of last yr. Global TV ad revenue for 2023 is expected to be down 18% yr over yr, in keeping with media investment firm GroupM.
Baker also forecasts a “flat to down” broadcast revenue outlook for iHeartMedia and the terrestrial radio industry as an entire. But within the face of pay TV’s rapid decline, radio is faring well amid the broad contractions within the media industry.
A spokesperson for iHeartMedia noted that listening habits have modified since 2019 as more customers make the switch to listening on a digital platform, contributing to the decline in promoting revenue from broadcast.
The representative also pointed towards the corporate’s growth in total revenue compared to 2019, which aspects in promoting revenue from each digital and broadcast platforms. For the third quarter of 2023, iHeartMedia brought in $953 million in revenue, they said, while in 2019’s third quarter, the corporate captured $948.3 million in revenue.
“For [radio broadcasters], the hope is you’ll be able to stabilize the terrestrial business enough and proceed to grow the digital business to where digital growth offsets terrestrial secular pressures,” Baker said. “Should you model this out, the digital business simply overtakes the legacy terrestrial business in the following five to 6 years.”
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