Yes, AM/FM radio is still a 13.8 billion dollar industry here in the U.S., but that figure was 16 billion a few years ago and as high as 20 billion before the pandemic. Each year total radio revenue in the U.S. is shrinking roughly a billion a year. So, the pessimistic view is we’re screwed. The optimist looks at that and says we’ve got at least 14 years left. But, that may not be true because there are fixed costs that go up each year. We probably need anywhere from 5 to 7 billion or so to keep everything on the air. But, I have a different take for two reasons.
Number one, radio isn’t just AM/FM. Whether we like it or not, radio now includes satellite and internet radio as well, which isn’t declining. It also includes in-store radio. If you’ve been to a Walmart in the past couple years you’ve probably noticed they’re playing more than music through their in-store speakers. They have on-air talent, take calls and do their own contesting. Walmart Radio relaunched in 2016, after a six-year hiatus, and now broadcasts live in all their stores across the country bringing customers the top hits, latest retail news, and engaging conversations with associates, customers and members. I expect many more large companies to do the same soon. How will that help broadcasters? Other than giving laid off employees a potential place to work, it doesn’t unless we get in on the trend by providing custom radio stations for companies ourselves.
Number two, I know that how long traditional AM/FM radio lasts is still within our control provided we’re willing to adapt and evolve. But as the numbers clearly show, the window to do that is rapidly closing. Radio ad spot revenue is declining faster than projected each year, roughly 5% locally and 6% nationally, numbers that are being masked a bit by increasing digital and off-air revenue but that’s not enough to keep total radio revenue from shrinking each year. Magna predicts a 3.2% year over year decline in total radio ad spending.
Depending on your job title and role within your radio group, you may be reading this saying ‘I don’t know what you’re talking about Andy, our revenues are up year over year, we’re fine.’ While it may be true that individual groups are having success, especially at the local level. Working in an industry that gets smaller every year ultimately affects everyone in the industry. There are less companies focused on selling products and services to our industry, less job opportunities that pay a living wage for people to jump to if they’re unhappy at their current company and less growth opportunities drawing new people into the industry. That’s why there are more employees leaving radio than starting in radio. For on-air talent the annual average growth rate is roughly -25%.
However, there are hopeful signs. For instance in 2024 the U.S. commercial radio industries digital revenue surpassed $2 billion for the first time. Digital now accounts for 25%, one out of every four dollars, of the average radio stations total revenue. Good news for stations leaning into digital, bad news for stations that are not. Because digital is the only part of radio revenue that’s going in the right direction and that’s unlikely to change. Hence why I’m constantly encouraging radio stations to fully embrace digital, focus on multi-platform content creation and every AI tool they can get their hands on. Doing so, while also focusing on local revenue, could literally save our industry.
What do you think? Comment below or email me at Andy@RadioStationConsultant.com.
Pic AI generated by Freepik.com.