Media Curmudgeon

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February 16, 2007

Bill Grimes On the State of Radio

Radio station owners may not be as "desperate" as Bruce Braun contends in his February 15 Media Curmudgeon blog entry; although, if they were they would hardly reveal it publicly. But Clear Channel might be desperate, having watched its stock decline for three years. It is reportedly selling as many as two hundred of its stations.

Radio's problem is that it is a forgotten "utility" in that high-speed Internet access provides both information and entertainment that users want when they want it. This increasing Internet access is now available in more that 50 percent of US households, and usage has dealt a significant blow to advertiser-supported radio listenership in home. Out-of-home audiences, long a bastion of radio's appeal to advertisers, is in decline because of wireless Internet devices, iPods, satellite radio, and because the increase in the number of commercials that stations air today has alienated many listeners. I stopped listening to Newsradio two years ago when the increase in commercials became too overbearing and I realized that any news being broadcast was available on some website, including its own.

The fact is that radio station values have declined in both public and private markets because of the reasons stated above, and their ad revenue growth is less than inflation. So Google's ambitions to gobble up radio station inventory may be unrealistic and arrogant but its market capitalization and balance sheet cash enables it to engage in an abundant number of business ventures such as this one in radio without the company suffering much consequence. If it wanted to, Google, which has a market cap of $141 billion today (versus Clear Channel's $18 billion), has the financial capacity to buy nearly the entire US radio industry. Of course the FCC would prevent such a purchase, and why would Google want ownership in a declining industry. Google's desire to reap advertising revenues by making deals like Bruce describes with stations may fail and stations may continue to sell all of their inventory themselves, but that does not enhance the prospects of the ailing radio business.

Posted by Charles Warner at February 16, 2007 04:32 PM

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