L.A. Stations Improve Reception of Ad Dollars

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L.A. radio is outperforming the airwaves in other cities.

Through the first half of the year, the 32 L.A. radio stations that report their financial results said their advertising revenue increased 2.6 percent from the first half of last year, according to industry group Southern California Broadcasters Association.

The market also grew ad revenue 3.8 percent in July compared with the same month last year.

Nationally, revenue was flat through the first half of the year.

Although it’s unclear exactly why Los Angeles has outperformed the rest of the country, SCBA President Thom Callahan said the comparison shows radio locally is finally back on firm footing.

“We’re having a great comeback year,” Callahan said. “The economy is picking up and there is a mood swing among advertisers.”

The local growth comes after a tough slog. Digital competition and the recession cut one-third of ad dollars out of the market from its prerecession peak.

After bottoming out at revenue of $609 million in 2009, the L.A. radio market grew 4 percent in 2010, was flat in 2011 and then grew 1 percent to $639 million last year.

This year’s turnaround has been supported by ad buys from companies in many industries, but much of the increased revenue can be traced to the housing recovery. Mortgage lending firms, real estate companies as well as lawn and garden advertisers are among those buying more spots.

The good news comes despite several fronts of pressure on the radio industry, including streaming music services and podcasts. (See related story, page 5.)

Perhaps the largest beneficiary locally is Clear Channel Communications Inc., which operates eight stations in Los Angeles, including talk station KFI-AM (640), pop stations KIIS-FM (102.7) and KBIG-FM (104.3), and adult contemporary station KOST-FM (103.5). Those stations typically place in the top five most popular stations with listeners in any given month.

The group of stations generated about $220 million in revenue last year – about one-third of the market’s total.

Greg Ashlock, president and market manager at Clear Channel’s Media + Entertainment division in Burbank, said his L.A. station group saw increased ad revenue of 6.5 percent in the first half of this year over last.

The growth, he said, is rooted in the basic radio business model: selling air time based on highly rated programs.

“The digital side continues to grow, but broadcast has driven the overall growth,” he said.

The core of Clear Channel’s pitch is the ability to reach a huge number of people over the traditional airwaves.

Ashlock said this year has marked an increase in dollars from national advertisers, such as Target Corp., which are looking for broad reach. Clear Channel will often sell across many of its 850 national radio stations, offering advertisers the ability to reach a certain demographic.

Clear Channel has 63 radio sales people in Los Angeles. While the company has cut programming staff, DJs and other personnel in the past year, the sales side has remained relatively intact.

Clear Channel’s streaming service, I Heart Radio, is not yet a major financial contributor but has been the fastest-growing business segment lately, Ashlock said.

But some are unconvinced that any rebound in local radio advertising can last without a major uptick in digital revenue.

Jerry Del Calliano, publisher of radio industry newsletter Inside Music Media in Scottsdale, Ariz., said broadcast radio has ignored the preferences of many young consumers for on-demand offerings and will continue to struggle until it builds more attractive products for younger people.

“Radio is not a growth industry,” he said. “If you want to look at L.A. and say they’ve had a real good quarter – they had a good quarter compared to anybody else. Most cities are not getting those kinds of results. Radio should have made its transition by now to 20 percent of revenue from digital.”

Instead, just 5 percent of about $8.4 billion of revenue generated by the national radio market in the first half of the year came from digital revenue streams.

But Ashlock sees improvement. “Our feeling is optimistic,” Ashlock said. “Advertisers do seem to be spending a little bit more this year.”

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