Merrill Predicts Rocky Road For 2005 Radio Advertising Industry

The recent speculation around the proposed takeover bid by private equity group 3i of Scottish Media Group owned, Virgin radio and the imminent merger of Capital Radio and GWR has resulted in Merrill predicting a fragmenting of the radio market (see SMG Rejects 3i Offer For Virgin).

This coupled with negative RAJAR results for Chrysalis and Capital indicates a mixed picture for radio advertising in 2005.

Emap is reportedly the only radio player commenting particularly positively about January, with Capital stating in its trading statement that January was flat, citing a 4% drop in the Group’s overall revenue for the quarter from October to December 2004 (see Capital Radio Revenues Down After Slow End Of 2004).

GWR radio also revealed a downwards trend, saying that January was down by around 4% and that the Group’s like for like radio revenue fell by 3% year on year, in the quarter to December 31 2004 (see Capital Radio Revenues Down After Slow End Of 2004).

Chrysalis saw its flagship radio station Heart 106.2 FM affected by poor RAJAR figures, revealing a dramatic fall in listeners during the third quarter, with Heart’s share of the London radio audience declining to 5.4%, from 6.5% in Q2 (see Chrysalis Optimistic For 2005, Despite 3% Revenue Fall).

Merrill argue that there appears to be a difference between the local and national radio ad trends, with national tending to be more volatile, but on the whole more positive than local. This forecast confirms results released yesterday by Ofcom and the Radio Advertising Bureau (RAB), that total Commercial Radio revenue for 2004 reached £637.6 million, a 5.6% increase year on year (see Commercial Radio Continues Upward Trend).

The analysts attribute this effect to the possible increases in UK Government money being spent ahead of the General Election. The Central Office of Information (COI) is radio’s largest individual advertisers and therefore a significant influence on the market.