Analysis of Q3 2009 advertising revenue data of the UK commercial radio sector, written by Grant Goddard in December 2009 for Grant Goddard: Radio Blog.

1. UK COMMERCIAL RADIO
REVENUES: Q3 2009: THE
ANALYSIS
by
GRANT GODDARD
www.grantgoddard.co.uk
December 2009

2. Commercial radio revenue figures for 2009’s third quarter have been published.
Q3 2009 DATA
£120.2m total revenues
£35.7m local revenues
£59.8m national revenues – lowest quarter since Q1 1998
£24.8m branded content
YEAR-ON-YEAR
Total revenues – down 12.5%
Local revenues – down 3.8%
National revenues – down 16.5%
Branded content – down 13.3%
QUARTER-ON-QUARTER
Total revenues – up 0.4%
Local revenues – up 2.6%
National revenues – down 0.3%
Branded content – no change
QUARTERLY UK COMMERCIAL RADIO REVENUES (£m)
165.2
162.0
143.3
152.5
155.7
151.2
148.2
141.4
140.9
148.9
149.4
149.0
150.9
159.8
134.2
137.3
129.0
128.6
119.7
120.2
0
50
100
150
200
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
FOUR-QUARTER MOVING AVERAGE DATA
£497.5m total revenues – lowest since Q1 2000
Down 14.6% year-on-year (last quarter: down 13.4% year-on-year)
UK Commercial Radio Revenues: Q3 2009: The Analysis page 2
©2009 Grant Goddard

3. UK COMMERCIAL RADIO REVENUES- four-quarter moving
average (£m)
641.0
645.3
630.2
622.9
613.4
602.6
607.6
596.5
581.7
579.3
580.5
588.1
598.2
609.1
593.9
582.3
560.2
529.1
514.6
497.5
0
100
200
300
400
500
600
700
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
Have we hit the bottom yet? That is the thorny question. The answer is not easy. Yes, this
most recent quarter’s revenues have halted their recent terrifying decline, demonstrating a tiny
0.4% improvement over the previous quarter. But one ‘okay’ quarter does not necessarily
signal a turnaround. You would be risking your shirt to announce that the radio advertising
market is going to improve from now on.
LOCAL REVENUES: UK COMMERCIAL RADIO (% change
year-on-year)
1.1
-2.4
-9.1
-2.7
-8.3
-11.1
-5.5
-8.3
-9.7
0.5
1.3
-5.9
-9.8
-6.4
-6.0
-3.8
-8.4
3.3
-12
-10
-8
-6
-4
-2
0
2
4
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
The one bright spot was local advertising, which accounts for 30% of total radio revenues. It
improved quarter-on-quarter by 2.6%, although it was still down 3.8% year-on-year.
Nevertheless, it is local advertising which has held up better during this recession, exhibiting
only single digit percentage declines year-on-year. If you are looking for ‘grass shoots’, you
might find them here.
UK Commercial Radio Revenues: Q3 2009: The Analysis page 3
©2009 Grant Goddard

4. NATIONAL REVENUES: UK COMMERCIAL RADIO (% change
year-on-year)
-7.0
3.5
-10.0
-5.9 -6.1 -6.3
4.6
-11.6
-14.3
7.6
11.4
10.0
-15.9
-12.2
-21.2
-28.8
-16.1 -16.5
3.4
-30
-25
-20
-15
-10
-5
0
5
10
15
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
By contrast, national advertising (50% of total radio revenues) continues to be an unmitigated
disaster. This was the sixth quarter in succession to record double-digit percentage declines
year-on-year. National radio advertising in Q3 2009 was at its lowest point for eleven years
(longer, if you factor in inflation). Neither is this a purely cyclical phenomenon – out of the last
20 quarters, only six have exhibited year-on-year growth. In aggregate, during three and a half
out of the last five years, radio has suffered declining national revenues.
Where does that leave the UK commercial radio industry? Well, for the small local stations that
have continued to fulfil the remit of their original licences by serving local listeners and local
businesses, if they have survived this far, they might yet live to see another day. It is
impossible to predict that ‘the worst is over’, but it might be that ‘the worst of the worst is over’.
Local advertising is never going to migrate wholesale to digital TV or to the internet, and the
yields that a successful local radio station can extract remain high.
The outlook is not so good for group owners of local stations who started to spend less on the
shoe-leather necessary to secure local advertising contracts in the 1990s, dazzled by the
lucrative opportunities presented by big-name national brands. Unfortunately, the national
advertising market is fickle and media buyers now have a longer list of options than ever
before, at more competitive prices than ever before. It’s all very well for some current owners
to be busy ‘transforming’ local radio licences into national brands, but the market for national
radio advertising has shrunk by 40% over the last six years. Now, a much smaller cake has to
be divided by a greater number of national radio brands.
The revenue data also contradicts the message repeatedly broadcast by Ofcom in recent
years that national radio brands represented ‘the future of radio’. Betraying a lack of
understanding of the radio advertising market, Ofcom ignored double-digit declines in national
advertising revenues that were evident as early as 2005, instead insisting that national brands
on digital platforms were what listeners and advertisers wanted. To date, not one commercial
digital radio station broadcast on DAB has produced an operating profit, and consumers’
preferred source for national radio remains the BBC. Commercial radio used to be good at
genuinely local radio, so deliberately giving it up was never a sensible idea.
One characteristic that too much of UK commercial radio presently lacks is ‘excitement’, for
both listeners and advertisers. More so than ever in these days of media overload, you have to
create a distinct ‘buzz’ around your product to attract attention. Being in the marketplace is
simply not enough. I only realised how much I have missed that kind of radio excitement when
I stumbled across a local commercial station this week that entertained me enough to make
me stop what I was doing and listen intently. It even played three of my all-time favourite songs
in a single hour.
UK Commercial Radio Revenues: Q3 2009: The Analysis page 4
©2009 Grant Goddard

5. UK Commercial Radio Revenues: Q3 2009: The Analysis page 5
©2009 Grant Goddard
Unfortunately for the financial health of the UK radio industry, that station serves Lafayette,
Louisiana – metro population 257,000. Deservedly, it ranks #2 in the market.
[First published by Grant Goddard: Radio Blog as 'UK Commercial Radio Revenues Q3 2009', 9 December 2009.]
Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of
experience in the broadcasting industry, having held senior management and consultancy
roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at
http://www.grantgoddard.co.uk