UK commercial radio: Q2 2010 national revenues down 40% since 2003

It seems like only yesterday that the Radio Advertising Bureau [RAB] was telling us that:

“The [commercial radio] sector has turned a corner and not only halted [revenue] decline, but moved into renewed growth …”

In fact, it was 20 May 2010 and the reason for the RAB’s optimism was the sector’s 2009 revenue performance. Yes, revenues in 2009 were down 10% year-on-year and yes, back in 2008, they had already been down 6% year-on-year. But, as I noted at the time, mere numbers never seem to get in the way of the trumpeting of a “terrific achievement.”

Fourteen days prior to the RAB pronouncement, a general election had ousted the Labour government and introduced a new Conservative/Liberal coalition. The writing was clearly on the wall that tougher times were ahead for the commercial radio sector. At the beginning of May 2010, I had spelled out emphatically the dire implication for commercial radio revenues of an incoming Conservative government:

“The Conservative Party pledged in its manifesto to reduce advertising expenditure by government departments, if elected. The planned cuts would be significant, 40% of the COI 2008/9 budget of £540m, according to one press report. … A 50% budget cut to COI expenditure on radio would lose commercial radio £26m to £29m per annum, 6% of total sector revenues.”

And so it came to pass, even though the Radio Advertising Bureau was still insisting in June 2010:

“We are optimistic that radio’s strengths will be recognised as COI budgets come under ever greater scrutiny.”

But budget cuts of 50% cannot be executed that recognise the radio medium’s strengths. Since May 2010, public funding of commercial radio has fallen sharply from 18% of sector revenues and will not be bouncing back anytime, at least not while the Conservative Party holds the public purse strings. The largest commercial radio owners have been hit the hardest, whilst the smaller local stations (that rely much more on local advertisers) have been little impacted.

As a result, it was no surprise that commercial radio revenue data for Q2 2010 were released quietly without fanfare or further pronouncements about “renewed growth.” The notion that commercial radio revenues had “turned a corner” looks even more hollow now, a mere four months after the Radio Advertising Bureau had uttered those words.


Q2 2010 TOTAL REVENUES
· Up 1.9% year-on-year, but remember that Q2 2009 had been the sector’s most disastrous
· Q2 2010 total revenues are the third lowest this millennium (after Q2 and Q3 in 2009)


Q2 2010 NATIONAL REVENUES
· No change year-on-year, but remember that Q2 2009 revenues were already down 16.1% year-on-year and, before that, Q2 2008 had been down 15.9% year-on-year
· Q2 2010 national revenues are the second lowest this millennium (after Q3 2009)

Q2 2010 LOCAL REVENUES
· Up 1.7% year-on-year, but remember that Q2 2009 was already down 6.0% year-on-year and, before that, Q2 2008 had been down 8.4% year-on-year
· Q2 2010 local revenues are the lowest since Q2 2009 and, before that, Q1 2002

The most frightening facts about the Q2 2010 data are:
· National revenues have fallen 40% since Q4 2003
· National revenues have fallen to a level the sector had attained in 1998 (earlier, if inflation is considered) when there were about eighty fewer commercial radio stations

If Q2 2010 was bad for commercial radio, then the following quarters are likely to be worse, as the impact of government expenditure cuts will have wreaked havoc across complete quarters of commercial radio’s national revenues. The outlook for the commercial radio sector looks anything but “terrific”, though trade body RadioCentre was still peddling eternal optimism in its September 2010 newsletter:

“Whilst revenue for Q1 2010 was up 7.3% year on year, the best performance and highest growth for 2 years, Q2 proved more of a challenge with the election and subsequent cuts in government expenditure. However, the RAB is working with a wide range of advertisers to bridge the gap, and the current outlook for quarter three is that we'll see a modest growth, even despite COI cutbacks.”

And, after this week’s Radio Advertising Awards (where, ironically, “government departments and campaigns scooped the most awards,” wrote Marketing Week), the RAB was still proclaiming “… the outstanding work which has seen our [commercial radio] sector return to growth …”

Suffice to remind you that Q2 and Q3 in 2009 witnessed the commercial radio sector’s lowest recorded revenues this millennium, so that any year-on-year increase will have been achieved from a base of absolute ‘rock bottom’. To add to the gloom, Minister for the Cabinet (and the government’s Paymaster General) Francis Maude told The Times last week:

“We are looking at whether we should be expecting the BBC — when people are paying their Licence Fee — to carry some public information advertisements. It wouldn’t be a propaganda operation but this is public service broadcasting. The taxpayer might say, ‘Should I be paying out my taxpayer’s money for the Government to pay ITV to carry public information advertisements?’”

So the worse news for commercial radio is that it could be about to lose whatever remaining government advertising has survived, if pubic service announcements are to be switched to BBC Radio. After all, not only would such a policy save the government a further £30m per annum, but BBC Radio reaches 67% of the UK adult population per week, greater than commercial radio’s 64%.

In May 2010, I had predicted that the government could adopt just such a policy:

“If a government were to return to the post-War COI policy of using public broadcasters to air its Public Service Announcements, rather than paying commercial rates for airtime, up to 18% of commercial radio revenues would disappear at a stroke.”

I am sufficiently ancient to remember the intriguing, but rather bizarre, Public Information Films that used to grace BBC television. I also remember the Public Service Announcements that local commercial radio stations were required to broadcast for free when the Independent Broadcasting Authority was the sector regulator. So such a policy would be nothing new and should have been anticipated by the sector.

But what can commercial radio do? The key is the word ‘commercial’. The industry was foolish to have ever considered public expenditure on radio advertisements anything more than an ‘extra’ that was bound to disappear some time at the whim of politicians. That time is now. The same way that the government is mounting a war on ‘benefit scroungers’ who are said to have become too reliant on public handouts, the Conservatives are effectively waging a war against ‘COI scroungers’ – commercial broadcasters whose sales teams knew they could rely on government advertising handouts to meet their revenue targets and earn their bonuses.

How did the industry let itself get into this state? ‘Commercial radio’ was always meant to be ‘commercial’, not publicly funded. In exactly the same way, ‘local commercial radio’ was always meant to be ‘local’. It is the very point at which you begin to lose sight of who you really are that you set off down a rocky road that leads to inevitable oblivion.

Local Commercial Radio, know thyself.