Pandemic Effects Hitting Radio Advertising, Listenership Hard

Radio stocks fell Friday. “Radio is an advertising-based business, and it is feeling the brunt” of the reduction in ads caused by the pandemic, said BIA Advisory Services Chief Economist Mark Fratrik.

Q1 "started brightly, with both January and February radio division revenues ahead of prior year, and strong political revenues,” said Urban One CEO Alfred Liggins in a release. “The Covid-19 outbreak has reversed that growth, with cancellations from clients whose businesses revolve around events, travel, leisure and entertainment.”

“While we cannot determine the full extent of COVID-19’s impact on our business at this time, we are monitoring this rapidly evolving situation closely,” said iHeart CEO Bob Pittman in a release. Salem said that “due to continuing uncertainties regarding the ultimate scope and trajectory of COVID-19’s spread and evolution, the effects of the pandemic on Salem’s audiences, programmers and advertisers, and current and potential future governmental restrictions that may be adopted in the markets in which Salem operates, it is impossible to predict the total impact that the pandemic may have."

Ad-based businesses walking back their 2020 forecasts in the face of the pandemic isn't a “surprising move,” Noble analyst Michael Kupinski emailed investors about Salem. “While it is difficult to predict when the advertising picture will improve given the unprecedented event and impact on its businesses, we believe that the company will have the capacity to weather the storm.”

Broadcasters and analysts told us reductions and cancellations in commercials are harder hitting in larger, more urban markets. Cromwell Group CEO Bayard Walters said he had nearly a 50 percent drop in ad sales in Nashville compared with the same time last year, though in smaller markets the drop is closer to 15%.

Radio attorney Dawn Sciarrino said her smaller market clients have had few cancellations from advertisers but many requests to change ad copy because of lifestyle alterations due to the pandemic. “Instead of telling people to come to happy hour, they’re telling them to come get take-out,” she said.

Larger radio markets such as New York and Los Angeles are harder hit by the virus and facing more restrictions due to the pandemic, said Fratrik. Walters said larger market stations tend to be more sports focused, and also have more competing sources of local news. Smaller markets are less likely to have local TV news stations, elevating radio as an information provider, he said. “People need local information.”

The crisis doesn't affect TV stations as much because they have a secondary revenue stream from retransmission consent, and homebound viewers are likely to boost the ratings, said S&P Global analyst Justin Nielson. He expects ratings numbers to show TV viewing increasing while radio falls. Based on viewer feedback, more people are watching Cocola Broadcasting TV stations, said CEO Gary Cocola. Walters expects an increase in home use of smart speakers to listen to radio.

The ad market appears soft, and is expected to stay that way into the fall, said Nielson. Broadcasters had looked to 2020 as big political ad year, but Nielson said those dollars aren’t flowing in at the moment. Democratic presidential candidates Sen. Bernie Sanders and former Vice President Joe Biden have largely suspended their campaigns during the crisis, and Republicans have as well, he said: There could be a “snapback” around the national party conventions -- “if they still happen,” Nielson.

IHeart ended the day down 7.5% at $6.95. Salem fell 9% to 91 cents. Cumulus declined 16% to $4.62.