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Monday, May 24, 2010

Retracting a Mistake

Back in August of 2009, I wrote a blog called "Optimism: 2010's Secret Weapon". At the time, the point was that optimism will help turn around the business environment. And that would lead to clear thinking on the part of management.
I think it's time I retracted that blog because optimism is steering management down a rocky road.

As it turns out, optimism and an improving advertising climate have so far turned 2010 into a fairly positive environment for many businesses, and certainly for the media industry.

First quarter advertising improved 6% for traditional radio and was off the charts for Internet advertising expenditures, including Internet radio. A good sign, right?


The mood among corporate CEO's, terrestrial radio group heads and regional managers is positive but cautious. As they should be.

The revenue increases published for the first half of 2010 bring smiles to many broadcast operators, but comparisons to 2009 are deceiving.

The second half of 2010 will compare a bit less favorably with its 2009 counterpart and as 2010 closes in on another holiday season, the "comps" with 2009 will be less invigorating.

I think broadcast leaders understand this.

And that is why many are not reinvesting into their businesses this year; a year which is thus far the best revenue year in quite a few.

Not reinvesting some of 2010's profit is a natural strategy for business operators who found their companies down 20-25% in revenues in 2009 and 15-20% in profits. They now find themselves in positive territory for the first few months of 2010 - they are making up some of the ground lost last year and they want to hold on to it.

A fairly powerful argument can be made for that strategy - in a normal year.

But as 2010 goes skipping into the future, perhaps you have noticed the ferocious pace at which digital media is galloping along, breaking down the barriers to consumer adoption and putting the squeeze on traditional media.

My concern is that the optimism that began blooming at the end of January of this year, has morphed into a conservative spending mentality which will leave traditional radio marginalized - at best - as 2010 turns into the year of the Rabbit.

Digital media consumption has reached a tipping point; more average consumers are discovering all sorts of cool ways to get their media fix. And with radio's final bastion - the car - quickly being penetrated by Internet radio and devices that make it easy to consume, traditional radio could have an uphill battle in 2011.

Bridge Ratings will soon publish its revenue projections for 2011 and the forecast is not as rosie as 2010.

2009 revenue was down 18%.

2010 traditional radio revenue will be up 4%.

2011 revenue will be down 2%.

Comparisons to 2010 will not look as strong as they do this year.

The political advertising infusion which many are expecting during the second half of 2010 will be missing in 2010.

Investment in traditional radio operations (digital development and advancement) will be hard to find. This cycle could be sustained for at least another two years.

See what I mean? Marginalization of traditional media is a very real possibility with no aggressive business development in sight.

Optimism is certainly refreshing after 5 or more years of dismal business trends.
It's time to turn that optimism into purposeful re-investment and rapidly enhance traditional radio's ability to compete.