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VSS Predicts 3%+ Radio Growth in 2010

Would be the first ad growth in three years

A private equity firm projects that in 2010, total spending on broadcast and satellite radio will grow for the first time since 2007, rising 3.3% to $17.68 billion.

That’s according to Veronis Suhler Stevenson, which released a communications industry forecast through 2014.

VSS predicts broadcast and satellite radio will continue to grow during the forecast period, although it will trail nominal GDP gains during the period. Broadcast and satellite radio will rise at a 5% compound annual growth rate through 2014, reaching $21.85 billion — still less than 2007 levels — as consumers begin listening to radio using new digital formats, satellite radio subscription prices rise and online and mobile platforms post double-digit gains, according to VSS.

To put radio in context, VSS predicts total communications industry spending is on pace to increase 3.5% in 2010 and post a compound annual growth rate of 6.1 percent in the 2009–2014 period to $1.416 trillion.

VSS Co-Founder, President and General Partner John Suhler believes there will be a longer and slower economic recovery during the expansion period covered by the forecast, compared with previous expansions, because of the breadth and depth of the recession. Advertising and marketing investments, historically drivers of communications growth during recoveries, are expected to be more muted as they shift away from traditional media outlets to more targeted media, he said.

Looking at the recent past, total spending on radio, including broadcast, satellite, online and mobile advertising and content, dropped 16.2% to $17.12 billion in 2009, as the recession affected key ad categories including automotive, retail and financial.

VSS reports that advertising on broadcast radio “plummeted” 19.4% in 2009 to $14.25 billion due to the economic downturn, combined with fewer stations broadcasting, falling listenership and the absence of political spending.

Satellite radio in 2009, meanwhile, saw its subscription and advertising spending rise 2.5% in 2009 to $2.39 billion, primarily due to subscription rate increases; its ad sales and new subscriptions were down, VSS noted.

Spending on online and mobile advertising rose 13.5% in 2009 to $480 million, as advertisers targeting younger listeners explored emerging outlets such as streaming audio websites and mobile phones.