Financial Analysis Case Assignment 2: Urgent
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51511RadioBroadcastingintheUSIndustryReport.pdf
WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 1
IBISWorld Industry Report 51511 Radio Broadcasting in the US July 2017 Devin McGinley
Mixed signals: Competition will loom, but improved advertising will support modest growth
2 About this Industry 2 Industry Definition
2 Main Activities
2 Similar Industries
3 Additional Resources
4 Industry at a Glance
5 Industry Performance 5 Executive Summary
5 Key External Drivers
7 Current Performance
9 Industry Outlook
11 Industry Life Cycle
13 Products & Markets 13 Supply Chain
13 Products & Services
15 Demand Determinants
15 Major Markets
16 International Trade
17 Business Locations
19 Competitive Landscape 19 Market Share Concentration
19 Key Success Factors
19 Cost Structure Benchmarks
21 Basis of Competition
21 Barriers to Entry
22 Industry Globalization
23 Major Companies 23 Sirius XM Radio Inc.
24 iHeartMedia Inc.
25 Cumulus Media Inc.
28 Operating Conditions 28 Capital Intensity
29 Technology & Systems
30 Revenue Volatility
30 Regulation & Policy
31 Industry Assistance
32 Key Statistics 32 Industry Data
32 Annual Change
32 Key Ratios
33 Industry Financial Ratios
34 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
This report was provided to Texas A&M University - Corpus Christi (2127680724) by IBISWorld on 25 November 2017 in accordance with their license agreement with IBISWorld
WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 2
This industry consists of broadcasting stations, networks and syndicates that transmit audio programming through
AM, FM and satellite radio channels. The Radio Broadcasting industry excludes operators that function solely online.
The primary activities of this industry are
Operating radio stations
Operating radio networks
Transmitting programming to the public, subscribers or affiliates
Creating entertainment, news, talk, business, religious or other broadcast media content
51512 Television Broadcasting in the US This industry primarily engages in broadcasting across TV networks.
51521 Cable Networks in the US This industry comprises cable networks that broadcast specialty TV channels on a subscription or fee basis.
51913b Internet Publishing and Broadcasting in the US This industry broadcasts news and media content through online platforms.
51711b Satellite TV Providers in the US This industry provides TV content via subscription to a satellite TV service.
Industry Definition
Main Activities
Similar Industries
About this Industry
The major products and services in this industry are
Adult contemporary
Country
News, talk and sports
Urban formats
Rock and alternative
Top 40
Other
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 3
About this Industry
Additional Resources
IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
For additional information on this industry
www.nab.org National Association of Broadcasters
www.npr.org National Public Radio
www.nielsen.com Nielsen
www.rab.com Radio Advertising Bureau
www.rbr.com Radio and Television Business Report
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2210 12 14 16 18 20Year
Total advertising expenditure
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2309 11 13 15 17 19 21Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2017)
23.4% Adult contemporary10.2%
Other
17.8% News, talk and sports
8.6% Urban formats
15.1% Country
13.1% Rock and alternative
11.8% Top 40
SOURCE: WWW.IBISWORLD.COM
Key Statistics Snapshot
Industry at a Glance Radio Broadcasting in 2017
Industry Structure Life Cycle Stage Decline Revenue Volatility Low
Capital Intensity Medium
Industry Assistance Medium
Concentration Level Medium
Regulation Level Heavy
Technology Change Medium
Barriers to Entry Medium
Industry Globalization Low
Competition Level High
Revenue
$20.4bn Profit
$4.0bn Wages
$5.7bn Businesses
3,410
Annual Growth 17-22
0.9% Annual Growth 12-17
1.0%
Key External Drivers Total advertising expenditure Per capita disposable income Number of broadband connections Total vehicle miles
Market Share Sirius XM Radio Inc. 26.4%
iHeartMedia Inc. 16.9%
Cumulus Media Inc. 5.6%
p. 23
p. 5
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 5
Key External Drivers Total advertising expenditure Radio broadcasters depend on ad revenue to fund their services. As the overall economy continues to grow, major companies will likely increase their advertising budgets and use the power of radio to promote their goods and services. More revenue from advertisers enables broadcasters to provide higher quality service to a wider number of listeners. Total advertising expenditure is expected to increase in 2017, representing a potential opportunity for the industry.
Per capita disposable income High levels of disposable income provide a strong indicator that a company should
consider advertising its products via radio broadcast. In addition, direct consumer expenditures have grown more important to the industry amid the rise of subscription-based satellite radio. Per capita disposable income is expected to increase in 2017.
Number of broadband connections The increasing presence of low-power radio stations, online-only radio and podcast networks will create additional competition for satellite and terrestrial radio broadcasters. Increasing broadband usage has expanded consumers’ interests in on-demand music and news services, many of which can be downloaded and listened to at a later time. The number of
Executive Summary
Over the past five years, the Radio Broadcasting industry has battled to maintain its relevance and audience due to competition from digital media platforms. In particular, the industry has suffered because of its limited interaction with listeners and heavy reliance on advertising to fund its operations. Radio stations have historically benefited from being a standard part of most companies’
advertising budgets. Digital advertising platforms, however, have led companies in many sectors to refocus advertising budgets away from terrestrial radio platforms. However, radio has maintained its audience reach and slowly increased ad revenue. In addition, satellite radio has grown popular, dominated by major player Sirius XM Radio Inc., the success of which has buoyed the overall industry. Over the five
years to 2017, industry revenue is expected to grow at an annualized rate of 1.0% to $20.4 billion, despite a 0.5% projected decline in 2017.
The economy is projected to grow over the next five years, with aggregate advertising expenditures set to follow. Total advertising expenditure is anticipated to increase at an annualized rate of 2.0% over the five years to 2022. The industry is well established within the advertising portfolio, and radio’s role in advertising will not be eliminated overnight; however, it is expected to diminish slowly as companies dedicate a larger portion of their resources to reaching consumers online. However, technological advancements will also help the industry, as satellite and digital radio are already becoming more prevalent. These formats offer consumers high-quality audio and a wide music selection that is comparable with other digital music formats. Consequently, IBISWorld forecasts revenue to grow at an annualized rate of 0.9% over the next five years to total $21.4 billion in 2022.
Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Technological advancements will also help the industry, as satellite and digital radio are already becoming more prevalent
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Industry Performance
Key External Drivers continued
broadband connections is expected to increase in 2017, posing a potential threat to the industry.
Total vehicle miles The industry is affected by the amount of time people spend in their cars,
since driving frequently coincides with radio listenership. Preinstalled satellite radio kits have also enabled mainstream adoption of new forms of broadcasting. The total number of vehicle miles is expected to increase in 2017.
% c
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2210 12 14 16 18 20Year
Per capita disposable income
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2210 12 14 16 18 20Year
Total advertising expenditure
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Industry Performance
Advertising and competition
Most commercial radio broadcasters generate revenue primarily by selling airtime to advertisers. Over the five years to 2017, total US advertising expenditure is expected to increase at an annualized rate of 2.7%, benefiting businesses that sell to marketers. Radio has remained an attractive advertising medium for a variety of reasons. Despite a fragmentation of the media landscape across more and more digital channels and devices, radio’s market penetration is vast. According to Nielsen estimates, industry broadcasters reach about 271.0 million Americans each week, representing 93.0% of the adult population. This exceeds the penetration of both traditional media such as television (89.0%) and emergent platforms such as smartphones (83.0%). In an era of fragmented media consumption, advertising platforms that reliably reach a broad, general audience have remained valuable. In addition, much of radio’s audience listens from
their cars, providing advertisers access to consumers as they travel to retailers and other points of purchase.
Still, industry growth has lagged total advertising expenditure due to greater competition in the media sector. This includes digital news outlets and video services that do not compete directly with radio broadcasters for listeners, but which nonetheless have gained a share of advertising budgets at their expense. Other emerging media formats pose a more direct threat to the industry. Streaming music services, for example, have reshaped music listening habits. Over the five years to 2017, album sales are expected to decline an annualized 9.7%; although this has not directly impacted the industry, it reflects the rapid evolution of music consumption habits amid the twin rise of streaming services and internet-connected mobile devices. Services such as Spotify provide consumers much more control, and the threat of smartphones has increased
Current Performance
The Radio Broadcasting industry has been resilient over the past five years amid fierce competition from alternative media formats. The industry has grown modestly, benefiting from a general increase in US advertising expenditure. Although radio stations and networks have lost many regular listeners to relatively new forms of audio entertainment, such as podcasts and streaming music, radio remains the widest-reaching media format in the United States. Moreover, growth in satellite radio, which is included in the industry, has offset weaknesses in terrestrial radio advertising. Over the five years to 2017, industry revenue is expected to increase at an annualized rate of 1.0% to $20.4 billion. This includes an anticipated decline of 0.5% in 2017, in part due to a particularly
strong 2016 due to greater election-year advertising spending and news consumption that led weekly radio listenership to rise by about 2.0 million people, according to Nielsen estimates.
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Industry revenue
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Industry Performance
Advertising and competition continued
Satellite growth Over the past five years, satellite radio has been the industry’s fastest-growing segment, dominated by major player Sirius XM Radio Inc. Satellite radio has grown through deals with automakers to include satellite radios in their cars, as well as distribution to retail and food service businesses. Unlike terrestrial radio, satellite radio operators sell few advertisements and generate most of their revenue from paid subscriptions, insulating them from growing competition for ad dollars. In addition, satellite radio can be streamed through internet-connected devices and, much like other music streaming services,
can be programmed to offer music tailored to a consumer’s listening habits. Over the past five years, the industry market share of Sirius XM has grown from 18.9% in 2012 to a projected 26.4% in 2017. The growth of this company has buoyed the overall industry, with the company’s high margins likely boosting industry profitability, as well.
Limited consolidation Terrestrial radio stations and networks have struggled by comparison, forcing some to exit the industry by either moving to an online-only model or shuttering operations entirely. Though the largest operators in the industry have performed relatively well over the past five years by spreading costs across their dozens or hundreds of stations and leveraging national content syndication strategies, the extent to which the industry can consolidate is limited by regulations. Federal Communications Commission rules set limits for the media share a radio station can hold within a particular geographic market. Ownership caps depend on the number of radio stations operating in the local market. For example, in a market with 45 or more
stations, eight stations are permitted to be under common ownership. In a market with fewer than 14, only five stations are permitted per owner. Cross- ownership of newspapers and television networks is also tightly controlled, though satellite radio is not covered by these regulations. As a result, mergers in the industry are complex and typically require divestitures. This has likely prevented significant consolidation in the industry, given the cost benefits of operating as part of a larger media network. Over the five years to 2017, the number of companies participating in the industry is expected to decline at an annualized rate of 0.3% to 3,410. Likewise, employment has contracted an annualized 1.6% to an estimated 96,052 workers.
through easier integration into cars. Even in the talk and news categories, the industry has encountered greater competition from podcasts, which can be produced and distributed at comparatively little cost and which have
consequently flourished in recent years. Podcasts pose a particular threat to the industry because they have grown especially popular among more affluent consumers aged 18 to 44, a demographic prized by advertisers.
Satellite radio has been the industry’s fastest-growing segment
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Industry Performance
Potential consolidation
The Federal Communications Commission has given indications that it will explore a relaxation of broadcast media ownership caps, which could lead to a substantial increase in merger and acquisition activity. The most likely acquisition targets are local and independent radio stations, as they provide insights into local markets for advertisers. Companies looking to buy radio ads prefer major radio holding companies that can reach a wider geographic area than lone radio stations, enabling companies that acquire local stations to improve their advertising reach in smaller regions. Additionally, operators that have multiple stations can reduce transaction costs and benefit from economies of scale in management time, equipment negotiation and other purchasing costs. As a result, large companies are more likely than small ones to stay profitable and in business.
Restructuring is expected to limit employment opportunities within the industry. Regardless of the regulatory
landscape, larger stations are likely to grow their market share as smaller stations fold, implementing combined sales departments, syndicated content and other strategies to reduce overhead and labor requirements. Furthermore, industry operators are expected to increasingly use online platforms to reach consumers. Over the next five years, industry employment is projected to decline an annualized 0.9% to 91,804 workers. Nevertheless, given current ownership caps and potential opportunities in satellite radio, the number of companies participating in the industry is expected to rise an annualized 0.5% to 3,491 over the next five years.
Industry Outlook
Over the five years to 2022, radio broadcasters will endure increasing competition from music streaming and podcasts, both made available through a growing number of internet-connected mobile devices. Although competition for advertising dollars will continue to be strong, total ad expenditure is expected to grow at an annualized rate of 2.0% over the next five years. Radio will likely
continue to remain valuable for advertisers given the relative dearth of broad-based marketing platforms in a fragmented media landscape. In addition, the industry will be buoyed by anticipated growth in satellite radio. Over the five years to 2022, revenue for the Radio Broadcasting industry is projected to increase at an annualized rate of 0.9% to $21.4 billion.
Large companies are more likely than small ones to maintain profitability and stay in business
Slow growth Radio commercials have long been a staple in advertising budgets. As part of the status quo, the industry held its ground when alternate forms of media began to emerge in the early 2000s. While recent economic growth is projected to drive advertising spending
over the five years to 2022, radio can no longer expect its share of advertisers’ interest to remain stable. Major advertisers have shifted toward the internet to pursue major promotional activities, although local merchants and service providers still find value in
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 10
Industry Performance
Spotlight on satellite Partly underpinning the overall industry’s growth, satellite radio will likely emerge as a strong force. Satellite radio’s dual revenue streams of advertising and subscription fees give the segment an edge. The stability of this business model enables satellite radio broadcasters to combine resources and cut down on redundant programming and overhead costs, leading to higher profit margins.
Sirius XM Radio Inc. has weathered the media sector upheaval better than radio stations that rely solely on advertising by growing its subscriber base, while traditional radio audience numbers have stagnated over the past five years. The company’s flourishing subscriber base can be attributed to the
vast amount of content it delivers and the company’s aggressive marketing campaigns with major automobile manufacturers. Satellite radio delivers higher-quality audio and premium talk-radio content that can compete with podcasts and commercial-free music channels. As a result, it can successfully hold off the threat of music streaming and other emerging digital media. IBISWorld anticipates that satellite radio will continue to expand its market share over the next five years.
pursuing radio advertising. Unlike national operators, local companies are less likely to find comparable alternatives to reach a local audience. This is because it is more difficult to target the majority of residents within a specific town on the internet rather than on a popular local radio station. A focus on local events may give broadcasters an advantage with advertisement pricing, as local advertising often comprises the majority of a radio station’s revenue.
Advertising will remain the dominant revenue stream for radio stations but will also likely remain restricted as companies focus on a wider media blend. Expanded advertising budgets over the next five years will likely give radio stations a boost through higher prices for commercials. The industry is also expected to maintain fairly stable listenership, helping it minimize losses in share of ad spend.
Traditional radio audience numbers have stagnated over the past five years
Slow growth continued
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Industry Performance Industry participation is stagnant
IVA growth lags that of GDP
Music streaming has attracted listeners away from radio
Life Cycle Stage
SOURCE: WWW.IBISWORLD.COM
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% Growth in number of establishments
-10 -5 0 5 10 15 20
Decline Shrinking economic importance
Quality Growth High growth in economic importance; weaker companies close down; developed technology and markets
Maturity Company consolidation; level of economic importance stable
Quantity Growth Many new companies; minor growth in economic importance; substantial technology change
Key Features of a Decline Industry
Revenue grows slower than economy Falling company numbers; large fi rms dominate Little technology & process change Declining per capita consumption of goods Stable & clearly segmented products & brands
Television Broadcasting
Music Publishing
Cable Networks
Satellite TV Providers
Satellite Telecommunications Providers Radio Broadcasting
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Industry Performance
Industry Life Cycle Over the 10 years to 2022, the Radio Broadcasting industry’s value added, a measure of the industry’s contribution to the overall economy, is expected to increase at an annualized rate of 1.2%. By contrast, US GDP is expected to grow at an annualized rate of 2.1% during the same period. Thus, the Radio Broadcasting industry’s contribution to the economy is expected to trail GDP growth. IBISWorld expects that this industry is in the decline stage of its life cycle, as evidenced by its contracting share of the national economy.
IBISWorld expects this industry to continuously endure tough external competition in the form of online broadcasters, streaming music services and podcasts. As radio broadcasters have
shifted operations toward online platforms, participation in the industry has stagnated. Over the 10 years to 2022, the number of companies in the industry is projected to rise at an annualized rate of only 0.1%.
During the period, the industry has undergone a multitude of ownership changes as falling advertising revenue has squeezed profit margins. Although technological advances are improving the quality of radio, alternatives to traditional radio are increasing the competition that the industry experiences. Online-only radio stations are becoming more prevalent. Other developments are also competing against radio, such as cars with built-in iPhone adapters or phones with streaming radio applications.
This industry is Declining
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Products & Services
The Federal Communications Commission (FCC) licenses radio stations as either commercial or noncommercial educational, and they can broadcast in AM, FM or satellite formats. Commercial stations generally fund operations through advertising revenue, while public
radio stations often have a combination of government funding and contributions from listeners and nonprofit entities.
Shifts in radio programming vary with consumer tastes, and it is not uncommon for major stations to flip formats in response to waning consumer interest in
Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
9901 Consumers in the US Individual consumers are the target audience for radio broadcasting stations, which can be broadcast in households or businesses.
KEY SELLING INDUSTRIES
51223 Music Publishing in the US This industry licenses music recordings to air on radio stations.
51322 Cable, Internet & Telephone Providers in the US This industry uses home broadband connections to help radio broadcasters stream their music over the internet.
51741 Satellite Telecommunications Providers in the US This industry provides satellite services to radio station operators for broadcasting across a geographic area or broadcast region.
51911 News Syndicates in the US This industry provides news services for broadcasting across a number of networked stations.
54181 Advertising Agencies in the US This industry connects disparate companies seeking new advertising outlets with radio broadcasters.
Supply Chain
Products and services segmentation (2017)
Total $20.4bn
23.4% Adult contemporary10.2%
Other
17.8% News, talk and sports
8.6% Urban formats
15.1% Country
13.1% Rock and alternative
11.8% Top 40
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Products & Services continued
certain styles of music. For example, New York’s WRXP, K-Rock, Boston’s WBCN, Philadelphia’s WYSP and Washington’s WVRX have all either rebranded their programming, flipped their once-popular alternative rock format to talk radio or no longer exist at all. Over the next five years, music programming is projected to continue declining in favor of sports, news and political talk programming.
Music programming The Radio Broadcasting industry has historically focused heavily on music. When the industry first emerged in the early 20th century, radio stations offered a diverse array of entertainment formats, including serial dramas, romances, thrillers, horrors, comedies and live big band concerts. As the proliferation of TV throughout the 1940s and 1950s heralded the demise of much of the industry’s scripted content, the music format has come to dominate the industry’s programming. Due to the high audio quality of FM broadcasts in comparison with AM radio, music is the main offering of most FM radio stations. Conversely, talk radio, news, sports and other spoken word broadcasts that do not require high-fidelity transmission have remained on AM radio, although some AM stations simulcast their programming on sister FM stations to offer audiences a higher quality transmission.
Over the past five years, adult contemporary, country and rock/ alternative have been the industry’s most popular music formats. Other popular programming includes top 40 and urban radio. Over the next five years, music programming is projected to continue declining in favor of sports, news and political talk programming.
News, talk and sports Talk radio, which typically features regular hosts, discussions of topical
issues, guest interviews and listener participation, has been growing in popularity in recent years. Radio broadcasters have shifted away from music formatting, which is waning in popularity among younger audiences, toward talk-radio programs that remain popular among older listeners. There is increasing competition for talk radio through online platforms such as podcasts, but the industry has continued to invest in its news, talk and sports segments over the past five years. Conservative talk radio such as The Rush Limbaugh Show, The Sean Hannity Show, The Glenn Beck Program, The Mark Levin Show and The Savage Nation frequently rank as the most- listened-to radio programs in the country, while hot talk and sports programs such as the Bubba the Love Sponge Show, The Howard Stern Show, The Dan Patrick Show and Francesa also hold large audiences. The advent of uncensored satellite radio has increased the number of talk programs over the past five years, but hefty FCC fines for indecent material has largely eliminated the shock jock format from public AM and FM airwaves.
Other The industry also holds a range of miscellaneous programming that exists in small quantities throughout the country. Much of the programming is music-based, including formats such as oldies, jazz, easy listening, classical, kids and family and gospel. All of these programs appear in far lower amounts compared with the industry’s dominant genres, although they combine to represent a significant piece of industry revenue. Additional programming such as religious broadcasts, world music, college radio, weather and emergency alert stations are also included in this segment.
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Products & Markets
Major Markets According to the Pew Research Center, the vast majority of US consumers continue to listen to radio, although an increasing number are listening through digital means. Consumers’ use of terrestrial radio has remained essentially constant over the last decade, with radio reaching more than 90.0% of the adult population at least once per week.
Radio listenership is very evenly spread among age groups, with younger
consumers naturally preferring to experience newer forms of digital media instead of radio. Consumers between the ages of 12 and 24 represent 10.1% of the industry’s audience, the smallest segment of radio’s age demographic. Consumers between the ages of 25 and 34 represent 15.8% of radio’s audience, while consumers between the ages of 35 and 44 represent 16.1%. Working adults regularly listen to the radio in the car
Demand Determinants
Demand for radio broadcasting largely depends on consumers’ individual preferences, which can have a major effect on advertisers’ willingness to spend money through radio. Consumer preference for radio as a means of consuming music has waned over the past five years, as a result of increasing competition from online streaming content, on-demand music services and mobile applications, podcasting, campus radio stations and the increasing popularity of live performance. The widespread availability of integrated MP3 docks, chargers and applications preinstalled in automobiles has drastically reduced the likelihood of consumers listening to traditional radio broadcasts for the purposes of music discovery. Since radio listenership in the car represents an enormous component of industry demand, these alternative services have posed a substantial threat to the industry’s continued relevance in the digital era.
Consumers are increasingly using alternative platforms to listen to music, and the industry has responded by directing its focus away from standard programming formats such as Top 40, adult contemporary and classic rock toward non-music news, sports, politics and hot talk formats. Satellite radio, however, has provided a vast ecosystem of channels to maintain the industry’s
relevance as a destination for music consumption. Unlike AM and FM channels that may be limited by strictly regimented playlists and hourly formats, satellite stations are typically more flexible with their lineups of niche music offerings such as album-oriented rock, progressive rock, oldies, world music and limited-time channels dedicated to specific artists, live recordings, bootlegs, one-hit wonders, B-side tracks or holiday music. As a result, the flexibility and niche-focused programming of satellite radio has provided a glimmer of hope for music to survive as a major function of the Radio Broadcasting industry.
The vast majority of terrestrial radio revenue is generated through advertisements, and courting sponsorships is therefore an essential component of industry success. Advertisement sales revenue is generated through housing, auto, consumer products, retail, travel, political, telecom/ utility, beverages, fast food, entertainment and professional services advertising. Since corporate advertising expenditure is closely tied to the performance of GDP, insofar as strong economic growth implies higher advertising budgets and greater consumer disposable income, radio broadcasting is a cyclical business that generally follows GDP performance.
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Products & Markets
International Trade The Radio Broadcasting industry provides content over the airwaves mainly to domestic audiences. Although some satellite and terrestrial signals may
be licensed and distributed to international markets on a limited basis, the industry does not account for any international trade of goods.
Major Markets continued
during their morning and afternoon commutes, at their desks during the workday and in the evening at home. This also applies to consumers between the ages of 45 and 54, who represent a slightly higher 20.8% of the industry’s audience. Slightly older working audiences may be more prone to listen to traditional and satellite radio than younger working audiences who may have shifted somewhat
toward podcasts and streaming music services. Consumers between the ages of 55 and 64 represent 17.5% of the industry’s market, while consumers 65 and older represent 18.7%. Radio listenership increases slightly among the country’s oldest consumers, since many of these consumers have lived during the era in which TV and radio represented the overwhelming majority of the country’s media.
Major market segmentation (2017)
Total $20.4bn
20.8% Consumers
aged 45 to 54
6.9% Consumers aged 18 to 24
19.7% Consumers
aged 65 and over
3.2% Consumers aged
12 to 17
17.5% Consumers aged 55 to 64
16.1% Consumers
aged 35 to 44
15.8% Consumers
aged 25 to 34
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 17
Products & Markets
Business Locations 2017
MO 2.2
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT 0.4
MA 1.5
RI 0.4
NJ 0.8
DE 0.3
NH 0.5
CT 0.9
MD 1.4
DC 0.4
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ 1.8
CA 9.6
NV 0.7
OR 1.4
WA 1.8
MT 0.8
NE 1.1
MN 2.3
IA 1.8
OH 3.7
VA 2.7
FL 5.3
KS 1.5
CO 2.0
UT 0.7
ID 0.6
TX 7.2
OK 1.5
NC 2.8
AK 0.7
WY 0.5
TN 3.0
KY 2.6
GA 3.3
IL 3.6
ME 0.6
ND 0.8
WI 2.2 MI
2.5 PA 3.6
WV 1.0
SD 0.7
NM 1.0
AR 1.5
MS 1.3
AL 2.2
SC 1.2
LA 1.3
HI 0.5
IN 2.1
NY 5.5 5
6 7
8
3 21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
Great Lakes
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Products & Markets
Business Locations Industry establishments are generally concentrated in states that hold a higher percentage of the US population. Due to the ubiquitous nature of the Radio Broadcasting industry, broadcasters are more likely to locate their facilities near densely populated areas that have a large pool of potential listeners. However, small markets in suburbs and rural areas still serve as vital areas for radio broadcasters. The highest concentration of establishments is in the Southeast, which also has the highest percentage of the US population. In 2017, the Southeast is expected to contain 28.3% of industry establishments while holding 25.6% of the US population. After the Southeast, the West and the Great Lakes regions hold 14.7% and 14.1% of industry establishments, respectively. The Mid- Atlantic and the Southwest regions follow with a respective 12.0% and 11.5% of industry establishments.
The states with the most industry establishments are California (9.6%), Texas (7.2%), New York (5.5%) and Florida (5.3%). These states contain major metropolitan areas with massive listening audiences, so industry operators benefit by doing business in these states.
Los Angeles and New York City are, according to Nielsen estimates, the largest radio markets in the United States, followed by Chicago, San Francisco and Dallas. With the number of industry establishments declining over the past five years, major radio markets have increasingly shored up the bulk of the industry’s listening audience and business locations.
%
30
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5
10
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20
25
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Pl ai
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Establishments Population
Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 19
Cost Structure Benchmarks
Profit Average industry profit, defined as earnings before interest and taxes, is expected to account for 19.8% of revenue in 2017, an increase from 18.2% of industry revenue in 2012. Advertising
expenditure for radio broadcasting has declined in recent years, causing industry revenue growth to slow and radio broadcasting companies to focus additional resources toward expanding its relevance online. However, industry
Key Success Factors Ability to quickly adopt new technology Radio broadcasters benefit from technology breakthroughs that improve the range of their broadcast and the sound quality of the audio transmission. These technologies include satellite signals, digital transmission and in-band on-channel transmissions.
Must have license Radio stations must acquire and maintain broadcasting licenses or draw penalties from the FCC.
Ability to attract local support/patronage Radio station advertising revenue depends on the size of a station’s audience and the geographic outreach of the broadcaster. Advertising is hugely important even in
small markets to connect local businesses with the radio audience.
Access to highly skilled workforce Radio stations with popular shows and personalities are better suited to attract and retain listeners. This ultimately raises the value of a station’s advertisements and their revenue.
Ability to vary services to suit different needs Radio programming must frequently change and evolve with consumer tastes. Talk radio, for example, has been a historically successful component of radio, while music programming must continually change and adjust format.
Market Share Concentration
Although independent broadcasters and major broadcasting networks vary in size, the four largest companies in this industry are estimated to generate 52.7% of revenue. The industry is dominated by a few large companies that own many stations across many major radio markets, enabling them to charge premium advertising rates to companies seeking to promote their goods and services to major radio markets. As a result, profit margins among the industry’s largest companies tend to be significantly higher than those of independent stations.
The industry’s largest broadcasters have also expanded operations to better facilitate advertising. It is far easier for
larger companies to negotiate major advertising agreements with sponsors if the broadcaster also has financial ownership of outdoor, billboard, newsprint, TV and internet advertising departments. Conversely, local independent stations often struggle to get sponsorship revenue unless a parent broadcasting company owns them. Many local stations are owned by national broadcasting companies and receive some of their content from providers such as National Public Radio, American Public Media, Public Radio International and Public Radio Exchange. Almost all radio stations produce some local content to supplement syndicated shows and national programming.
Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Level Concentration in this industry is Medium
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
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Competitive Landscape
Cost Structure Benchmarks continued
profit is expected to increase relative to revenue over the coming years as limited consolidation in the industry lowers content and administrative costs.
Wages The Radio Broadcasting industry’s wages will account for an estimated 27.8% of revenue in 2017. Employees are integral in raising funding for radio, and they represent stations on the air. In 2012, wages accounted for an estimated 28.8% of industry revenue. Since then, radio stations have cut back on labor expenses, part of which included increased reliance on syndicated content. Wages are anticipated to continue declining gradually as a proportion of revenue over the five years to 2022.
Purchases Purchases are anticipated to make up 18.0% of industry revenue in 2017. Radio
stations spend money on hosting events such as concerts or music festivals. A substantial portion of industry revenue is also spent on licensing and royalty payments, which are paid to record labels that license the music for distribution prior to release. Radio broadcasters are expected to spend a shrinking percentage of revenue on purchases over the five years to 2017, as sponsors will be more inclined to give stations promotional items to give away as consumer spending increases.
Advertising and other costs Radio broadcasting companies primarily generate revenue from companies that pay for advertising over the airwaves. The industry also purchases some advertising and promotions of its own services, the costs of which are anticipated to represent 3.3% of revenue in 2017. Rent and utilities are estimated to account for a combined 3.7% of industry revenue in
Sector vs. Industry Costs
n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other
Average Costs of all Industries in sector (2017)
Industry Costs (2017)
0
20
40
60
Pe rc
en ta
ge o
f re
ve nu
e
80
100
SOURCE: WWW.IBISWORLD.COM
16.1 19.8
22.6
3.7 3.3
4.8
18.0
27.8
24.9
3.23.1 7.5
21.0
23.1
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Competitive Landscape
Barriers to Entry While costs to start a station are relatively low, they can vary depending on the type of radio station. Listeners typically are loyal to pre-existing stations and most US markets already benefit from a wide variety of radio content. Many stations, however, broadcast
programming that they purchase from a national provider. This syndicated content often helps local stations enter the market and instantly establish a programming schedule that features personalities and shows that local audiences may wish to hear.
Basis of Competition Internal competition Internal competition for an industry broadcaster depends on the size of the station’s surrounding market, the number of competing broadcasters within their target market and the demography of the broadcaster’s audience. For instance, radio stations that target the teenage demographic are better suited to market major radio personalities, celebrity interviews and guest appearances by popular musicians. To maintain market share, these broadcasters must pay careful attention to emerging genres and artists, as well as those that may be on the decline. This is particularly important when courting advertisers, since negotiating major sponsorships will be far easier for broadcasters that consistently boast the highest ratings.
In addition to content, radio broadcasters use technology to separate themselves from competing stations. Online streaming, high-definition audio and mobile phone apps are common technologies that broadcasters use to draw audiences away from other stations that may otherwise play very similar music. Satellite radio has more readily adapted to these changes and has also
developed extensive lineups of many celebrity hosts and diversified content across its music platform.
External competition This industry competes against many forms of audio and visual media, including television, film and the internet, for the attention of target audiences and advertisers. Portable music devices and streaming internet radio have been steadily growing threats to the industry, and preinstalled hardware that supports these devices is increasingly marginalizing the use of traditional radio in cars. Millions of potential radio listeners have access to their own music libraries, which can be accessed with no commercial interruption. Although these technologies remain less popular among older drivers, younger drivers that once dominated the audience for radio are increasingly using these external technologies. To combat the competition that has emerged from streaming and on-demand music services, broadcasters have begun to stream their programs online and offer free mobile apps to make their broadcasts more accessible to younger audiences.
Cost Structure Benchmarks continued
2017, reflecting the space needed to for offices and the costs associated with powering transmission equipment. These locations have relatively high rent associated with them because of the competition for
elevated spaces and rooftop access in urban areas that will transmit signals to the most consumers. Depreciation of major transmission equipment is expected to account for 4.8% of revenue in 2017.
Level & Trend Competition in this industry is High and the trend is Increasing
Level & Trend Barriers to Entry in this industry are Medium and Steady
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Competitive Landscape
Industry Globalization
The majority of operators in this industry are domestically owned and earn revenue from activities directed toward US consumers. However, some major operators that are based in the United States have syndication rights to radio stations in Canada and Mexico, where foreign investment and ownership regulations are permitted.
For instance, iHeartMedia operates across the United States and has holdings in about 240 radio stations in
Australia, New Zealand, the United Kingdom, Mexico, Norway and the Czech Republic. Internet, satellite and digital pay-radio may provide further opportunities for global operators in the future. Nonetheless, IBISWorld expects that the Radio Broadcasting industry will be subject to low globalization, because the nuances and preferences of local markets can serve as significant barriers to entry for foreign competitors.
Barriers to Entry continued
Another barrier to entry is the Federal Communications Commission (FCC) licenses required to broadcast radio transmissions. The FCC reviews each station periodically and approves new stations, on the basis of whether or not they serve the public interest and abide by federal broadcasting standards, such as those described in the Telecommunications Act. Under this law, broadcasters must follow strict regulations concerning where their broadcast facilities and towers may be located and which frequencies these radio stations can operate. Total radio licenses are restricted, because of the limited amount of frequencies available for stations to transmit their signals. The
FCC does not grant permission for new radio stations to broadcast on frequencies that may interfere with existing stations or other frequency-emitting technologies. Expansion of the radio frequency bands is not anticipated over the next five years.
Barriers to Entry checklist
Competition High Concentration Medium Life Cycle Stage Decline Capital Intensity Medium Technology Change Medium Regulation & Policy Heavy Industry Assistance Medium
SOURCE: WWW.IBISWORLD.COM
Level & Trend Globalization in this industry is Low and the trend is Increasing
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Player Performance Headquartered in New York City, Sirius XM Radio Inc. broadcasts its various programming through a proprietary satellite radio system to consumers for an annual subscription fee. The company’s SIRIUS system consists of recording studios, five in-orbit satellites, one stored replacement satellite and 120 earth-based facilities that receive and retransmit satellite signals. The company’s dominance in the industry is the result of a $13.0-billion merger of Sirius Satellite Radio Inc. with its former competitor, XM Satellite Radio Inc., in 2008.
Unlike AM and FM radio programming, the company’s programming can be accessed only through its own satellite radios by paid subscribers. These are primarily distributed through automakers that preinstall satellite radio devices in their automobiles or through the company’s website. The company also generates a
portion of its revenue from activation fees, advertising on nonmusical channels (nearly all music channels are commercial-free) and selling its radios and accessories.
In January 2014, Liberty Media, a company that holds a controlling stake in Sirius XM, offered to acquire all outstanding shares of Sirius XM, which would have effectively made Sirius XM a wholly owned subsidiary of the company. However, Liberty Media withdrew its acquisition offer in March 2014 due to shareholder opposition and concerns that Liberty Media’s offer did not provide a large enough premium to acquire the company. Liberty Media continues to hold the majority of the company’s outstanding shares of common stock.
Financial performance IBISWorld estimates that company revenue will grow in 2017, as the
Major Companies Sirius XM Radio Inc. | iHeartMedia Inc. Cumulus Media Inc. | Other Companies
51.1% Other
Sirius XM Radio Inc. 26.4%
iHeartMedia Inc. 16.9%
Cumulus Media Inc. 5.6% SOURCE: WWW.IBISWORLD.COM
Major players (Market share)
Sirius XM Radio Inc. - fi nancial performance*
Year Revenue
($ million) (% change) Operating Income
($ million) (% change)
2012 3,402.0 12.9 872.0 29.0
2013 3,799.1 11.7 1,044.6 19.8
2014 4,181.1 10.1 1,119.7 7.2
2015 4,570.1 9.3 1,178.7 5.3
2016 5,017.2 9.8 1,432.1 21.5
2017 5,406.1 7.8 1,619.6 13.1
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Sirius XM Radio Inc. Market share: 26.4% Industry Brand Names SIRIUS XM
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Major Companies
Player Performance iHeartMedia Inc. was formed in 1972 as Clear Channel Communications following the purchase of its first FM radio station in San Antonio. In the years since, the company has undergone a substantial number of mergers, acquisitions, corporate restructuring efforts and rebrandings to become one of the most powerful radio station operators and holding companies in the country. Their most recent rebranding occurred during a 2014 corporate relaunch from CC Media Holdings to iHeartMedia after consecutive years of declining revenue. Following a leveraged buyout from Bain Capital and Thomas H. Lee Partners for $17.9 billion, plus the assumption of $8.0 billion in debt, the company has since experienced mostly stable revenue and profit growth.
The company is also one of the largest outdoor advertising companies and
undertakes media and sports representation activities. Its operations within the Radio Broadcasting industry remain its largest operating segment. Since undergoing its leveraged buyout, the company has aggressively sought to scale down operations to focus only on its most profitable stations. The company currently owns 858 domestic radio stations that are positioned in 44 of the top 50 markets. Additionally, the company operates digital radio programming via the iHeartRadio platform. This segment has increasingly driven the company’s overall performance and is expected to play an important role over the next five years.
Financial performance Over the five years to 2017, the company’s industry-relevant revenue is expected to grow at an annualized rate of
Player Performance continued
proportion of premium services sold is expected to continue growing in line with disposable income. The company is developing a hybrid service that would broadcast via satellite but use the internet to tailor individual programming to user preferences. This will help neutralize competition from
streaming services that offer similar services, but with less mobility. The company has gained market share over the past five years as terrestrial radio stations have struggled. During the period, IBISWorld expects Sirius XM’s revenue to rise at an annualized rate of 9.7% to $5.4 billion.
iHeartMedia Inc. (industry-relevant operations) - fi nancial performance*
Year Revenue
($ million) (% change) Operating Income
($ million) (% change)
2012 3,084.8 N/C 941.6 N/C
2013 3,131.6 1.5 906.7 -3.7
2014 3,161.5 1.0 974.0 7.4
2015 3,284.3 3.9 1,006.1 3.3
2016 3,403.0 3.6 1,043.1 7.4
2017 3,460.6 1.7 886.8 -17.9
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
iHeartMedia Inc. Market share: 16.9%
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Major Companies
Player Performance Cumulus Media Inc. is an Atlanta-based broadcasting company holding the second-largest number of AM and FM radio stations in the United States, trailing only iHeartMedia in total stations. The company is publicly traded and operates 505 stations across 120 media markets. The company, which was acquired by a group of investors led by Lew Dickey and the Merrill Lynch Global Private Equity group for $1.3 billion, acquired Citadel Broadcasting Corporation in 2011 for $2.3 billion. The move nearly doubled Cumulus in total market capitulation and propelled the company toward the top of the industry.
Before its acquisition by Cumulus, Citadel Broadcasting Corporation included major station brands such as WJZ, NBC Blue, ABC Radio and ESPN Radio Network. It operated headquarters in Dallas and New York and controlled
more than 230 radio stations. The company also had more than 4,400 affiliate radio stations that purchased and aired Citadel’s programming, as well as more than 180 online streaming websites and podcasts.
Other than the Citadel acquisition, Cumulus has slowly expanded over the past decade through smaller acquisitions and station swaps with other radio broadcasters, including iHeartMedia. Cumulus currently has a presence in eight of the top 10 radio markets and also invests heavily in local radio locations. The company has historically focused on mid-sized radio markets, due to the high populations in these areas who could potentially listen to radio programming. This strategy has evolved, however, to place additional emphasis on local radio stations. Digital streams have made it easier for audiences throughout the
Player Performance continued
2.3% to $3.5 billion. The company has experienced slow but consistent growth over the past five years due to its ability to accumulate audiences through many radio stations and digital platforms. IBISWorld anticipates that the company’s iHeartRadio platform will gradually
increase both terrestrial and digital broadcasting services moving forward. The company has benefited from additional advertising revenue from this segment, with platform listenership increasing steadily over the past five years. IBISWorld expects revenue to increase 1.7% in 2017.
Cumulus Media - fi nancial performance*
Year Revenue
($ million) (% change) Operating Income
($ million) (% change)
2012 1,002.3 115.1 56.9 13.6
2013 1,026.1 2.4 187.4 229.3
2014 1,263.4 23.1 161.8 -13.7
2015 1,168.7 -7.5 -478.5 N/C
2016 1,141.4 -2.3 -408.8 N/C
2017 1,148.9 0.7 89.2 N/C
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Cumulus Media Inc. Market share: 5.6% Industry Brand Names Citadel Broadcasting
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Major Companies
Other Companies Entercom Communications Corporation Estimated market share: 3.7% Headquartered in Bala Cynwyd, PA, Entercom Communications Corporation is a parent company that oversees more than 125 radio stations in 28 markets nationwide. The company focuses on local programming, talent and audience participation. Entercom is particularly known for its ties to several sports teams, holding team broadcast partnerships with the Boston Red Sox, Buffalo Bills, Buffalo Sabres, Kansas City Royals, Memphis Grizzlies, New Orleans Saints, New Orleans Pelicans, Oakland Athletics, Oakland Raiders and San Jose Sharks. The company’s finance performance is therefore contingent on many of these teams extending their seasons into the playoffs, the broadcasts of which greatly improve the company’s listenership ratings. In 2017, the company agreed to purchase CBS Corporation’s radio unit, which encompasses 116 radio stations. The acquisition is likely to be completed in the second half of the year, significantly boosting the company’s revenue. However, FCC regulations will likely require the divestiture of some stations. In 2017, IBISWorld projects that the combined company would generate $750.0 million in revenue.
Cox Enterprises Inc. Estimated market share: 1.8% Cox Enterprises Inc. is a privately owned media conglomerate operating through
Cox Communications, Cox Automotive and Cox Media Group, the last of which runs the company’s radio broadcasting interests. Cox Communications holds interests in cable TV distribution, high- speed internet access, commercial telecommunications and advertising solutions. Cox Automotive holds various automotive auctions, offers software solutions and performs financial services. Cox Media Group operates TV stations, digital media, newspapers, advertising sales operators and industry-relevant radio stations. Cox Radio oversees 60 stations across the United States. The company’s holdings are concentrated in the Southeast region of the United States, but it also owns several radio stations in New England, Texas, Kentucky, Ohio and Virginia. The company is private and discloses very limited financial information. In 2017, IBISWorld expects that it will generate $164.4 million in industry-relevant revenue.
National Public Radio Inc. Estimated market share: 1.1% National Public Radio Inc. is a nonprofit, membership-based organization consisting of public radio stations across the United States that are independently licensed and operated. The company is supported primarily by station programming fees and sponsorships, which historically represent over half of the company’s annual revenue. Other significant sources of revenue include
Player Performance continued
United States to listen to radio, and the company has leveraged digital technology to encourage advertisers to purchase airtime in local areas.
Financial performance Over the five years to 2017, IBISWorld expects that Cumulus will grow at an annualized rate of 2.8%. In 2017, the
company’s revenue is projected to increase 0.7% to $1.1 billion. The company, however, has declined overall since 2014, after growing significantly as a result of the Citadel merger. Much like the rest of the terrestrial radio market, the company will likely experience tepid revenue growth over the coming years as radio loses ad spending to other media formats.
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Major Companies
Other Companies continued
private donations, distribution services and various grants and endowments; membership dues comprise less than 2.0% of company revenue. As a result of growing advertising sales, revenue is
estimated to increase to $216.1 million in 2017. Sponsorships have been stimulated by the extensive online news-sharing capabilities of the company and its growing audience of listeners.
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Capital Intensity There are relatively modest capital requirements to set up a broadcasting studio, and initial costs for setting up a new station vary depending on the size and scope of the broadcaster. In addition to licenses, radio stations must purchase transmission equipment and basic studio equipment including soundboards, microphones, headphones, digital radio suites and, in some cases, analog media such as Fidelipac carts and vinyl records for audio playback.
Depreciation and recurring capital expenses make up a moderate proportion of operating costs in comparison to labor. IBISWorld estimates that for every dollar spent on wages in 2017, $0.17 will be spent on equipment and maintenance. Basic AM or FM stations in small
markets can be set up for about $100,000. However, for larger markets and for stations requiring large studios,
Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Tools of the Trade: Growth Strategies for Success
SOURCE: WWW.IBISWORLD.COM
La bo
r In
te ns
iv e
Capital Intensive
Change in Share of the Economy
New Age Economy
Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.
Traditional Service Economy
Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.
Old Economy
Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
Investment Economy
Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Television Broadcasting
Music Publishing
Cable Networks
Satellite TV Providers
Satellite Telecommunications Providers
Radio Broadcasting
Capital intensity
0.5
0.0
0.1
0.2
0.3
0.4
SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity
Capital units per labor unit
Radio Broadcasting
InformationEconomy
Level The level of capital intensity is Medium
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Operating Conditions
Technology & Systems High-definition Most of the industry either partially supports or has fully converted to digital broadcasting. AM and FM stations often also transmit digital signals, which enable multicasting over several programming streams. Many stations broadcast in a hybrid mode, called In-Band On-Channel, where simultaneous and identical digital and analog programming is aired. Unlike TV, there is no requirement for radio stations to stop transmitting analog signals in the near future. Digital signals, however, have greatly increased the quality of radio programming available to consumers. Digital has also enabled FM stations in particular to broadcast more reliably and for longer hours, since traditional FM often performs poorly at night.
Online streaming Online streaming has become an enormously popular segment of the industry’s services over the past five years. With many radio stations broadcasting over the internet, local radio stations must now compete directly with radio stations that are capable of reaching listeners across the world. This is particularly important for radio stations in countries that have music or talk formats that are generally unavailable in the United States. Increasing the distribution of obscure radio formats and music genres has led to additional fragmentation of radio listening audiences, as consumers seek niche formats from other cultures.
Portable radio Although portable radio devices have existed for decades, radio has gained popularity through digital devices that can receive high-quality sound through digital radio. Mobile players, such as phones and MP3 players, have radio tuners built-in or are internet-enabled. Most mobile phones have applications that enable streaming radio. These advances are increasing radio’s overall reach, while still providing a method through which advertising can be aired and revenue can be collected. However, mobile devices also directly compete against radio by facilitating access to other music distribution models, such as music recommendation services, streaming music services and digital downloads.
Specialization Advances in technology have prompted some radio stations to specialize in key public areas. POP Radio, for example, is broadcast in stores only and sells advertising space for items available in those stores. It is distributed to department stores and supermarkets through online channels and has replaced regular radio stations that used to be listened to in those stores. Traffic broadcasts and other services have also become more consumer oriented with technological advancements. About 70.0% of radio stations have adapted the radio data system to transmit song identification along with music radio broadcasts. Program-associated data (PAD) is widespread throughout satellite music services and compatible car
Capital Intensity continued
these costs quickly rise to millions of dollars. Costs also increase for companies that purchase the newest technology, such as digital and high- definition broadcasting equipment. Relative to traditional stations, satellite-
radio broadcasters pay more for insurance and invest more heavily in new equipment. The satellites used by Sirius XM represent some of the most expensive capital expenditures in the entire industry.
Level The level of Technology Change is Medium
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Operating Conditions
Regulation & Policy Terrestrial and satellite broadcast stations are regulated slightly differently by the Federal Communications Commission (FCC). Title 47 of the US Code of Laws is generally regarded as the official compilation and codification of all federal statutes pertaining to the Federal Communications Commission, the National Telecommunications and Information Administration and all other broadcasting throughout the United States. Title 47 is very broad in scope; it
regulates broadcasting of AM and FM stations and lays out the necessary licensing all broadcasters must complete to operate in the industry. There are limits on signal strength, avoiding interference with other signals, airing offensive content and having cross-ownership of other forms of media. Fines are applied for those who do not comply with these regulations, and broadcasters also risk not having their license renewed if they receive continual infraction notices.
Revenue Volatility Due to the industry’s dependence on its advertisers, the Radio Broadcasting industry’s revenue is vulnerable to sudden changes in the market conditions of its major sponsors. Consumer sentiment and disposable income levels drive advertising revenue. Revenue volatility has nonetheless been low over the past five years. The industry’s largest year of decline
occurred in 2014 with a 0.7% revenue decrease and is achieved its strongest year of growth in 2016 with a 5.0% increase in revenue. Additionally, industry revenue is subject to some seasonal volatility due to local and national advertisers typically spending more money on holiday shopping promotions in the final months of the calendar year.
Technology & Systems continued
dashboard displays. This system informs listeners of what they are listening to and aids in music discovery.
SOURCE: WWW.IBISWORLD.COM
Volatility vs Growth
Re ve
nu e
vo la
ti lit
y* (%
)
1000
100
10
1
0.1
Five-year annualized revenue growth (%) –30 –10 10 30 50 70
Hazardous
Stagnant
Rollercoaster
Blue Chip
* Axis is in logarithmic scale
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.
When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
Radio Broadcasting
Level The level of Volatility is Low
Level & Trend The level of Regulation is Heavy and the trend is Decreasing
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Operating Conditions
Industry Assistance National Association of Broadcasters The National Association of Broadcasters (NAB) lobbies on behalf of radio and TV broadcasters. It has formed opinions on many issues related to radio, including the performance tax, localism and a reporter shield. The association also organizes several seminars annually to educate radio operators and encourage collaboration. NAB organized an advocacy program to develop new broadcast technologies, such as FM tuners embedded in cell phones. It works in unison with the Consumer Electronics Association to ensure that radio electronics and industry standards evolve together.
HD radio Major operators have formed the HD Digital Radio Alliance to facilitate the switch to digital radio transmission. Members of the Alliance provide two digital audio broadcasts on each radio station, one that will be a digital rebroadcast of the station’s analog signal and the other a broad range of commercial-free programming. The Alliance also markets digital radio technology to receiver manufacturers, retailers and automobile manufacturers and to the general public.
Radio Heard Here Radio Heard Here is a campaign designed to promote the benefits of radio
to national audiences through public advocacy efforts. The slogan “radio heard here” is used by media, radio personalities and consumers to encourage active participation in maintaining the significance of radio as a tool to broadcast music and discussion. The campaign runs several promotional and educational activities each month. By informing people of how radio affects their daily lives, this organization strives to increase the perceived value of radio and encourage the public’s continued support of the industry.
Corporation for Public Broadcasting A private non-profit corporation created by Congress and largely funded by the government, CPB typically provides 12.0% to 17.0% of annual revenue for public broadcasting stations. The CPB also provides funding for National Public Radio (NPR). NPR produces and distributes news and other programming to its member radio stations. Its members are required to be noncommercial or educational. It is estimated to draw over 27 million listeners a week and its original programming such as Morning Edition, All Things Considered and Wait Wait ... Don’t Tell Me! are among the most popular programs on public radio.
Regulation & Policy continued
In January 2010, the FCC approved FM requests to increase their digital transmission power, as long as they do not interfere with other signals. This enables stations to transmit a clearer signal and operate longer hours, since FM signals are often weaker at night. Broadcasting in digital is optional for FM stations. For AM stations, the most
significant change occurred last decade. The FCC began permitting AM broadcasters to use FM translator stations to retransmit AM programming within the AM station’s authorized service area. This permitted AM stations to strengthen their signals and, therefore, provide simulcasts to audiences over FM with far superior sound quality.
Level & Trend The level of Industry Assistance is Medium and the trend is Steady
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Key Statistics Revenue
($m)
Industry Value Added
($m) Establish-
ments Enterprises Employment Exports Imports Wages ($m)
Domestic Demand
Total advertising expenditure
($b) 2008 20,890.5 10,889.1 7,112 3,697 121,474 -- -- 6,733.7 N/A 310.0 2009 18,081.4 9,179.8 6,843 3,551 109,555 -- -- 5,825.7 N/A 262.5 2010 19,011.9 10,000.2 6,903 3,444 105,475 -- -- 5,733.1 N/A 283.2 2011 18,992.6 9,667.4 6,766 3,482 104,997 -- -- 5,615.4 N/A 293.9 2012 19,434.5 9,960.3 6,735 3,465 104,030 -- -- 5,594.6 N/A 296.7 2013 19,365.6 9,562.4 6,696 3,427 100,394 -- -- 5,413.6 N/A 300.6 2014 19,235.1 10,139.4 6,684 3,394 99,690 -- -- 5,449.3 N/A 304.8 2015 19,571.9 9,710.9 6,690 3,380 97,578 -- -- 5,547.1 N/A 310.3 2016 20,556.4 10,727.0 6,853 3,444 98,363 -- -- 5,752.1 N/A 316.6 2017 20,444.1 10,704.5 6,819 3,410 96,052 -- -- 5,679.9 N/A 314.1 2018 20,629.0 10,920.2 6,885 3,425 95,163 -- -- 5,690.4 N/A 320.5 2019 20,983.5 11,115.8 7,007 3,468 95,043 -- -- 5,747.0 N/A 330.5 2020 21,101.6 11,126.7 7,050 3,471 93,845 -- -- 5,738.2 N/A 335.4 2021 21,247.7 11,152.5 7,103 3,480 92,781 -- -- 5,736.8 N/A 340.2 2022 21,412.3 11,187.4 7,162 3,491 91,804 -- -- 5,740.0 N/A 346.4 Sector Rank 28/85 28/85 18/85 18/85 21/85 N/A N/A 28/85 N/A N/A Economy Rank 527/1757 366/1571 608/1757 690/1757 464/1757 N/A N/A 396/1757 N/A N/A
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000) Wages/Revenue
(%) Employees
per Est. Average Wage
($)
Share of the Economy
(%) 2008 52.12 N/A N/A 171.98 32.23 17.08 55,433.26 0.07 2009 50.77 N/A N/A 165.04 32.22 16.01 53,176.03 0.06 2010 52.60 N/A N/A 180.25 30.16 15.28 54,355.06 0.07 2011 50.90 N/A N/A 180.89 29.57 15.52 53,481.53 0.06 2012 51.25 N/A N/A 186.82 28.79 15.45 53,778.72 0.06 2013 49.38 N/A N/A 192.90 27.95 14.99 53,923.54 0.06 2014 52.71 N/A N/A 192.95 28.33 14.91 54,662.45 0.06 2015 49.62 N/A N/A 200.58 28.34 14.59 56,847.86 0.06 2016 52.18 N/A N/A 208.99 27.98 14.35 58,478.29 0.06 2017 52.36 N/A N/A 212.84 27.78 14.09 59,133.59 0.06 2018 52.94 N/A N/A 216.78 27.58 13.82 59,796.35 0.06 2019 52.97 N/A N/A 220.78 27.39 13.56 60,467.37 0.06 2020 52.73 N/A N/A 224.86 27.19 13.31 61,145.51 0.06 2021 52.49 N/A N/A 229.01 27.00 13.06 61,831.63 0.06 2022 52.25 N/A N/A 233.24 26.81 12.82 62,524.51 0.06 Sector Rank 42/85 N/A N/A 69/85 38/85 45/85 69/85 28/85 Economy Rank 470/1571 N/A N/A 1044/1757 534/1757 817/1757 784/1757 366/1571
Figures are in inflation-adjusted 2017 dollars. Rank refers to 2017 data.
Revenue (%)
Industry Value Added
(%)
Establish- ments
(%) Enterprises
(%) Employment
(%) Exports
(%) Imports
(%) Wages
(%)
Domestic Demand
(%)
Total advertising expenditure
(%) 2009 -13.4 -15.7 -3.8 -3.9 -9.8 N/A N/A -13.5 N/A -15.3 2010 5.1 8.9 0.9 -3.0 -3.7 N/A N/A -1.6 N/A 7.9 2011 -0.1 -3.3 -2.0 1.1 -0.5 N/A N/A -2.1 N/A 3.8 2012 2.3 3.0 -0.5 -0.5 -0.9 N/A N/A -0.4 N/A 1.0 2013 -0.4 -4.0 -0.6 -1.1 -3.5 N/A N/A -3.2 N/A 1.3 2014 -0.7 6.0 -0.2 -1.0 -0.7 N/A N/A 0.7 N/A 1.4 2015 1.8 -4.2 0.1 -0.4 -2.1 N/A N/A 1.8 N/A 1.8 2016 5.0 10.5 2.4 1.9 0.8 N/A N/A 3.7 N/A 2.0 2017 -0.5 -0.2 -0.5 -1.0 -2.3 N/A N/A -1.3 N/A -0.8 2018 0.9 2.0 1.0 0.4 -0.9 N/A N/A 0.2 N/A 2.0 2019 1.7 1.8 1.8 1.3 -0.1 N/A N/A 1.0 N/A 3.1 2020 0.6 0.1 0.6 0.1 -1.3 N/A N/A -0.2 N/A 1.5 2021 0.7 0.2 0.8 0.3 -1.1 N/A N/A 0.0 N/A 1.4 2022 0.8 0.3 0.8 0.3 -1.1 N/A N/A 0.1 N/A 1.8 Sector Rank 69/85 65/85 69/85 67/85 72/85 N/A N/A 70/85 N/A N/A Economy Rank 1375/1757 1256/1571 1443/1757 1430/1757 1515/1757 N/A N/A 1496/1757 N/A N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Radio Broadcasting in the US July 2017 33
Apr 2015 - Mar 2016 by company revenue Apr 2012 - Apr 2013 - Apr 2014 - Apr 2015 - Small Medium Large Mar 2013 Mar 2014 Mar 2015 Mar 2016 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.7 2.0 1.7 2.1 2.1 1.8 n/a Quick Ratio 1.4 1.5 1.6 1.9 2.0 1.7 n/a Sales / Receivables (Trade Receivables Turnover) 7.7 7.3 7.7 6.6 7.6 6.4 n/a
Days’ Receivables 47.4 50.0 47.4 55.3 48.0 57.0 n/a Cost of Sales / Inventory (Inventory Turnover) n/c n/c n/c n/c n/c n/c n/a
Days’ Inventory n/a n/a n/a n/a n/a n/a n/a Cost of Sales / Payables (Payables Turnover) 12.6 10.7 22.4 18.3 25.1 12.7 n/a
Days’ Payables 29.0 34.1 16.3 19.9 14.5 28.7 n/a Sales / Working Capital 11.6 11.2 9.5 7.9 10.0 7.2 n/a
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) / Interest 2.8 3.0 3.5 3.9 2.3 n/a n/a
Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt n/a n/a n/a n/a n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 5.0 1.7 4.0 8.6 -1.0 1.9 n/a Debt / Net Worth 73.3 4.0 -4.8 44.1 -2.5 1.6 n/a Tangible Net Worth -25.0 -7.5 -18.5 -12.8 -30.4 -0.3 n/a
Operating Ratios
Profit before Taxes / Net Worth, % 35.4 14.7 42.5 24.3 n/a n/a n/a Profit before Taxes / Total Assets, % 4.6 5.2 6.0 3.9 4.1 2.2 n/a Sales / Net Fixed Assets 5.6 5.0 6.2 3.4 6.3 3.1 n/a Sales / Total Assets (Asset Turnover) 0.8 0.8 0.9 0.7 1.1 0.6 n/a
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading 75.6 82.4 78.8 79.9 86.8 69.3 n/a Cash after Operations 11.7 10.4 14.9 11.1 10.0 11.8 n/a Net Cash after Operations 13.4 12.4 16.1 11.5 10.0 12.1 n/a Cash after Debt Amortization 1.3 3.2 3.8 1.4 0.4 1.5 n/a Debt Service P&I Coverage 2.1 2.1 1.9 1.3 1.0 n/a n/a Interest Coverage (Operating Cash) 4.7 3.4 3.9 4.8 3.7 n/a n/a
Assets, %
Cash & Equivalents 10.2 16.4 10.1 9.6 8.5 11.9 n/a Trade Receivables (net) 14.9 13.6 15.9 14.8 22.1 9.4 n/a Inventory 0.1 0.3 1.3 1.9 4.2 0.2 n/a All Other Current Assets 1.4 1.7 4.5 1.9 3.2 0.7 n/a Total Current Assets 26.6 32.1 31.8 28.2 38.0 22.3 n/a Fixed Assets (net) 19.2 21.2 24.8 21.7 21.9 20.8 n/a Intangibles (net) 41.8 36.7 32.2 39.6 34.5 43.5 n/a All Other Non-Current Assets 12.4 10.0 11.2 10.4 5.7 13.4 n/a Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 n/a Total Assets ($m) 990.1 893.1 945.0 1,197.1 31.4 498.7 667.1
Liabilities, %
Notes Payable-Short Term 5.0 2.7 10.3 4.4 6.6 3.5 n/a Current Maturities L/T/D 9.3 5.2 2.1 4.3 7.1 2.6 n/a Trade Payables 5.7 5.5 5.4 3.9 2.5 6.2 n/a Income Taxes Payable 0.2 0.4 2.1 n/a n/a n/a n/a All Other Current Liabilities 12.9 9.4 7.6 7.3 1.7 13.6 n/a Total Current Liabilities 33.1 23.1 27.4 19.9 17.9 26.0 n/a Long Term Debt 34.6 28.2 27.7 30.6 36.6 23.6 n/a Deferred Taxes 0.9 1.4 1.0 1.2 n/a n/a n/a All Other Non-Current Liabilities 14.7 18.1 30.2 21.5 41.4 7.2 n/a Net Worth 16.8 29.2 13.7 26.8 4.1 43.2 n/a Total Liabilities & Net Worth ($m) 990.1 893.1 945.0 1,197.1 31.4 498.7 667.1
Maximum Number of Statements Used 33 42 33 23 10 10 3
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
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Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
Industry Jargon
IBISWorld Glossary
DIGITAL RADIO Digital radio broadcasts that require a digital receiver.
PAY-RADIO Radio broadcasts that may only be accessed after payment of a subscription fee.
SATELLITE RADIO A service that enables radio station operators to broadcast the same program via satellite to stations located over vast geographic areas.
WRITE-DOWN The act of deliberately reducing the value of an asset in order to reflect its current market value.
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Jargon & Glossary
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
IBISWorld Glossary continued
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