Saturday, March 24, 2007

Local Broadcasters Deliver Digital Ads, Drawing From New Revenue Pools

After taking knocks from upstart digital media, local broadcasters are starting to receive sizeable benefits from next wave of new media development, said speakers at the Kagan Radio/TV Values & Finance Summit in New York City on Thursday.


Kagan Research forecasts that radio and TV stations will generate $1.7 bil. in 2007 revenue from online media sources—which will deliver double-digit growth in the years ahead. That covers station-owned websites, multicast channels in digital broadcasting, podcasting and station content monetized on third party platforms, including budding wireless broadband media.



"It's a pretty positive outlook for radio from my perspective," said John Blackledge, senior analyst covering radio, TV and outdoor at JPMorgan. Summit speakers noted that selling digital platform ads and drilling deeper for local advertisers that never bought broadcasting before brings completely new ad money, as the accompanying table indicates.

"The pie expands," said Tom Castro, president and CEO of radio group Border Media Partners. "It's not a zero sum game" anymore.

Tapping new-to-broadcasting advertising money is crucial because ad revenue from traditional advertising is trending flat to slow-growth. Excluding online/digital, TV stations' $44.9 bil. in 2006 total ad billings and—to a lesser extent—radio stations' $20 bil. in ad billings ride a see-saw of ups-and-downs based on election and Olympic years.

Last year, Kagan estimates new media revenue contributed 2.7% of all ad revenue at radio and TV stations. Local advertisers can create their own ads using the self-serve tools available via websites, which relieves stations of time consuming account service and ad creation work for the smallest advertising accounts.

"Broadcast stations—both TV and radio—are ideally positioned to be leaders in their local online markets due to their strong ties to the community, leading local content, and seasoned sales teams with strong ties to area advertisers," said Kagan Senior Analyst Robin Flynn. "According to Kagan Summit speakers, TV station owners are at most in the very 'first innings' of developing the local online opportunity—if not still in Spring training."

Digital media is not a cake walk to riches because operating websites and enlarging local content creation raises broadcast station expenses. But speakers said broadcasters seemed to have turned a corner by holding their own amid the bombastic arrival of fast-growing new digital media rivals, such as subscription satellite radio and the Internet.

There are worries ahead. New digital media revenue streams can't be automatically counted on to lift profits, given spotty weaknesses in conventional radio advertising, particularly in the automotive category. However, political ads seem to have morphed into a non-stop business, not just an election year windfall in even numbered years, broadcast executives said.

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