Radio Revenue Outlook Is Blah

Publicly held radio companies are expected to announce more flat to declining revenue in the coming days.
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Publicly held radio companies are expected to announce more flat to declining revenue in the coming days.

JP Morgan analysts John Blackledge and Aaron Chew noted continuing softness in radio revenue for U.S. commercial broadcasters. They made their forecast this week as publicly held companies prepared to issue quarterly financials.

“On the whole, we believe the radio sector is poised to post flat to slight declines in same-station revenues vs. the year ago quarter. While most of the companies within our coverage universe offered (quarterly) guidance for flat-to-slightly down same station revenues when they reported 2Q earnings in early August, we believe the advertising environment has softened a tad since then.

“In fact,” the analysts continue, “radio industry revenues for 3Q07 were tracking down about 1% through the first two months of the quarter, which we believe will make it challenging for many of the radio operators to post same-station revenue growth this period.”

They also noted company-specific issues:

“Fundamental operating weakness should lead to double-digit declines” at Westwood One, they said, though Westwood’s subsequent announcement beat JP Morgan’s estimates with revenue of $108 million. Still that was down 9% from a year earlier. Westwood One stock has declined 71% since early May.

Also the analysts predicted “continued problems” in Los Angeles would weigh on Radio One revenues. Recent divestitures should lead to above-average declines for CBS Radio revenue, while acquisitions should boost Entercom’s, they predicted.

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CBS Radio Revenue Falls

In the company’s fourth quarter, “same station” revenue fell 7%, and overall radio revenue decreased 10%, reflecting weakness in ad sales as well as the impact of radio divestitures in 10 markets.