Radio strengthens its revenue but can digital radio follow suit?

Commercial Radio Australia (CRA) confirmed yesterday the growth of advertising revenue for commercial radio stations in Metro Markets, with an overall increase in advertising revenue of 17% to a total of $59.16 million for the month of August (see press release here).

According to CRA, Brisbane was the best performing market with an overall growth in revenue of 25.41% to a total of $9.7 million, compared to the same time last year. Perth grew 24.36% to a total of $7.92 million; Sydney saw an increase of 14.85% to a total of $18.30 million; Melbourne grew by 14.45% to a total of $17.74 million and Adelaide was up 12.42% to a total of $5.49 million.

The growth in figures is positive news for the radio industry which took a hit during the GFC but since then has continued to grow with the launch of a new talk station in Melbourne, Melbourne Talk Radio, and digital-only offerings such as Austereo’s Barry. The growth in last month’s advertising revenue has been largely attributed to the Federal election campaign.

This reasoning is reflected in the most played radio ads for the seven days ending 23 August 2010 (as monitored by AirCheck and published in MediaWeek Issue #976), where each metro market either had Australian Labor Party ads or Liberal Party ads in the top ten most played ads for that period.

According to CRA Chief Executive Joan Warner, the radio industry remains optimistic for the next 12 months in attracting further advertising revenue. What will be interesting to monitor over the next year is the growth of digital-radio stations and their revenues.

Last month, the radio industry celebrated one year of digital radio throughout all metro-markets with the latest data showing that there are 523,000 people listening to digital radio and 150,000 digital radios in the market.

According to Digital Radio+ Australia, broadcasters have invested more than $50 million dollars on the DAB+ infrastructure and in excess of $24m in on air promotion. The question remains when will this spend transform into strong advertising revenue for the new stations and a large listener base? Will the new stations follow the same course as Free-to-Air’s digital-only multichannels, which according to the networks generate solid revenue for their businesses?

There are now 60 DAB+ digital radio models available for sale in Australia from 20 different manufacturers and more than 650 retail stores who carry digital radio. Harvey Norman boss Gerry Harvey said, “Digital radio is proving to be a growing category for us.  The range of digital radios on the market continues to increase with the larger electronic manufacturers entering the market and creating a stand alone category in our stores offering listeners a wide choice in price and functionality.”

There are a plethora of new digital-only stations available such as NovaNation, Koffee, U20 radio, Radar radio, Classic Hits Plus, Classic Hits Live, The EDGE, Gorilla Super Digi, mY Perth Digital, Hot Country Perth Digital, The Crack, Barry, Zoo Super Digi, Aussie, MyMP, SkySports Radio Digital and 4TAB digital. These stations are providing unique listening experiences. For example on election-night Melbourne’s 3AW digital-only station broadcast election coverage whilst their AM signal broadcast an AFL match.

However the penetration rate of these new stations is likely to remain limited and therefore continue to only reach a small audience until there is a date set for an AM/FM switch-off (in much the same way as the TV analogue switch-off date in 2013 which has now seen 74% of households adopt digital-TV) and new cars are factory fitted with DAB+ radios rather than the consumers having to fit their own after market digital solution.

Commercial Radio Australia have stated they are continuing to work with the car industry to have DAB+ radios factory fitted in new cars. However, until this occurs these new and interesting stations will continue to play a minor role in the Australian radio industry.

Digital-radio to be a viable broadcast model in Australia needs the car manufacturers to work with the industry and install digital sets as factory standard in new cars. However the car industry is unlikely to do such until the Federal Government expands digital radio to have a national footprint and set a AM/FM switch-off date.

Digital-radio is a chance for broadcasters to attract new listeners and advertisers in Australia to one of the oldest forms of broadcast media, radio. However, until the Government acts in the same way as it has with digital-TV, it is likely that the AM/FM stations will continue to remain favoured among consumers and advertisers, whilst digital radio retains niche audiences and limited advertisers.

Digital Radio is the future of commercial radio in Australia but government action is required to ensure the commercial radio industry remains strong by allowing broadcasters to generate new advertising revenue streams from their digital stations to a national audience both at home, at work and in the car.

Do you listen to digital radio? Give us your thoughts.


Digital Radio Plus

Commercial Radio Australia

MediaWeek Magazine

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