Post by bossradio93 on Sept 24, 2003 13:21:46 GMT -5
L.A. radio thrives as N.Y. struggles[/b]
LOS ANGELES/NEW YORK (Hollywood Reporter) - The two largest U.S. radio markets -- New York and Los Angeles -- couldn't be farther apart in terms of growth this year, with the Big Apple slumping along while the City of Angels is racking up some of the highest growth in the country.
A number of factors are likely the key drivers of this, including the generally tepid economic recovery and its effect on New York's financial services sector as well as the heavier concentration in Los Angeles of an increasingly important target group for marketers -- Hispanics.
"Los Angeles is a much more diversified small- and middle-market business community than New York is," Sanders Morris Harris analyst David Miller said. "People think of L.A. as a media market, as a studio town, but the Hollywood community only occupies a small sliver of the population. L.A. has many more smaller- to mid-market businesses because of (its) entrepreneurial nature."
That is critical because radio is largely a local medium, observers said.
Spending growth for local advertising, which represents about 80% of the industry's overall revenue, grew just 2% in New York during the first seven months of this year, while it was up 10% in Los Angeles, according to a new report from Goldman Sachs analyst Richard Rosenstein, who tapped into figures from ad research firm CMR and Miller Kaplan Arase & Co., an accounting firm specializing in the radio industry.
What makes New York -- the No. 1 U.S. market in terms of overall advertising spending -- such an anomaly is that the greatest growth in local advertising this year has come in the country's largest markets, led by Austin, Texas, (up 16%), Las Vegas (12%) and Los Angeles (10%). On average, spending in the largest markets has grown 4% year-to-date, exceeding the overall industry growth rate of 3%.
"9/11 was a massive impact on New York that L.A. didn't have to undergo," said Gordon Hodge, an analyst at Thomas Weisel Partners. "New York is (showing) softer (growth) than L.A., but both of them have softened up recently."
Another factor affecting growth has been the shallow economic recovery, which may be a reason that national ad spending has been so much stronger than local.
"National advertisers are willing to look out a little further, and they're going to be focused on the fact that if we're in a recovery, they want to gain those two to three (market) share points now so their brands are well-positioned in a recovery," Hodge said. "Local advertisers are more attuned to week-to-week foot traffic into their stores, so they might see unemployment ticking up and say, 'Why should I advertise?"'
Also, national radio has been posting far greater gains than local in part because there is greater demand for the limited inventory of national spots.
National radio revenue should be up about 12% in October, while local radio could be up or down 2% depending on the market, Miller predicted.
However, radio results as a whole are expected to pick up through the end of the year and into 2004, Rosenstein said.
Other analysts agree. "I think the turnaround is beginning, and ultimately it's going to be very tied to the economic rebound, which has developed very slowly," Barrington Research Associates analyst James Goss said.
"It's reasonable to expect it to accelerate into 2004, because, aside from political and Olympic broadcasting, which tends to focus on television and have a spillover into radio, there will be a drive to improve the economy by the (Bush) administration."
In the meantime, the recent weakening of overall local advertising momentum has led some industry observers to lower their financial expectations for the current year on various radio station groups. And companies that have a strong New York presence seem particularly hit.
Merrill Lynch analyst Marc Nabi said Tuesday that he has lowered his revenue and cash flow projections for Emmis Communications' current fiscal year, which ends March 31, and beyond "to reflect our reduced radio industry forecast given ongoing weakness in local advertising."[/i]
Reuters/Hollywood Reporter
Source: Los Angeles Radio People L.A.Radio.com