Lack of pricing power and demand are reasons for a decline in U.S. radio ad sales in May, Marci Ryvicker thinks.
The Wachovia Capital Markets analyst reacted to a report of a 1% decline in monthly revenue compared to a year ago. Non-spot revenue was up 10%; excluding that, local and national spot business was down 1%.
“While May is weak for the fifth straight year in a row, this year’s 1% decline is the worst of the trend thus far,” she wrote. “Historically, May has been the highest revenue-generating month of the year (at roughly 10% of total annual industry revenue) and provides a pretty clear picture as to how the rest of the year will play out.
“We have seen an interesting trend over the past five years: May has started off pacing quite well until we enter the month, at which point business falls off,” Ryvicker continued. “We can’t pinpoint one particular reason for this trend, but we can offer a few opinions.”
May weakness is not due to prior-year comps, which have been easy in recent years, she wrote.
“We think the biggest issue is lack of pricing power and demand, primarily as a result of the increase in shorter length spots, which actually add units while (sometimes) reducing overall minutes. Sources also tell us that overall ad budgets have come down, and that more dollars from a smaller ad pie are being allocated to ‘sexy’ media such as online, outdoor and Hispanic.”
She now anticipates a flat year for U.S. radio overall.