Is Radio at the Right Place on the Media Dial? a Special Report from Media Group Online, Inc

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Is Radio at the Right Place on the Media Dial? A Special Report from Media Group Online, Inc.

Radio was the first broadcast medium. Despite the growing popularity of TV during the 1950s, radio was able to thrive. Thanks to the invention of the transistor and small portable radios, teenagers made the medium essential to their lifestyles.

Stereo FM technology during the early 70’s gave radio another boost. Digital technologies then challenged radio and TV. An explosion of video content sources and devices has fragmented the TV audience and music streaming services, podcasts and a variety of audio devices have done the same to radio.

Now, radio is on the verge of introducing a number of new concepts similar to NextGen TV. In this report, Media Group Online outlines the current state of radio and what could propel it into a new age for the medium and its advertisers. Still the Reach Leader

Radio remains the reach leader, with 88.9% of average persons 12+ using radio during Q1 2020 (March 2020), although the percentage has been eroding since the December 2018 high of 89.8%. By age group, those 25–54 had the largest reach percentage.

Radio Reach, by Quarter and Age Group, Q4 2018–Q1 2020 Age Group Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Persons 12+ 89.8% 89.6% 89.4% 89.3% 89.2% 88.9% Persons 12–17 86.1% 85.6% 85.0% 84.8% 84.5% 84.0% Persons 18+ 90.2% 90.0% 89.9% 89.7% 89.6% 89.4% Persons 18–24 86.1% 85.6% 85.1% 84.5% 84.2% 83.7% Persons 18–34 87.3% 88.2% 87.9% 87.6% 87.3% 86.9% Persons 18–49 90.3% 90.2% 90.0% 89.7% 89.5% 89.2% Persons 25–54 92.0% 92.0% 91.8% 91.7% 91.5% 91.2% Persons 55+ 89.1% 88.9% 88.8% 88.8% 88.8% 88.8% Persons 65+ 85.9% 85.9% 85.7% 85.7% 85.7% 85.7% Radio Advertising Bureau, March 2020

A trend, although slight, is clearly visible, as reach among younger age groups has consistently decreased since Q4 2018 and reach among older audiences has also declined or stagnated.

Another declining trend for radio is the average home has 1.5 radios, compared to 3.0 radios during 2008, according to the Edison Research/Triton Digital report, The Infinite Dial® 2020. Expressed differently, 32% of Americans say they have no radio in their homes, which was only 4% during 2008.

Radio is proving its value during the coronavirus outbreak. 2019 data from Edison Research indicates of the 75% of people who work at home listen to AM/FM radio compared to 68% of those at work in an office or other employment setting.

Since the spread of the coronavirus, Americans are spending more time with all media, both as an important entertainment source while staying at home and for the latest information about the pandemic.

Nuvoodo, a digital research, marketing and social media company, reported in its daily media consumption data that 83% of people responding to its 3/20/20 survey said they were “using at least one media source more since the coronavirus outbreak.”

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 2 Unsurprisingly, radio listening among African Americans A Diverse Appeal and Latinx Americans spikes at 7am Monday–Friday, declining at approximately 9am, increasing throughout Unlike the table on page 2 that shows a slight, but the day to another peak at 3pm and then decreasing consistent, erosion of radio listening among all Americans throughout the evening. 12+, radio increased its weekly reach from 2015 to 2019 among African Americans, 31.3% and 32.7%, respectively, Saturday and Sunday listening is a bit different, with and Latinx Americans, 40.3% and 43.2%, respectively. a steady increase from early morning to a peak at approximately noon, and then declining throughout the Interestingly, radio’s weekly reach among Latinx remainder of the two days. Americans was 4 percentage points more than African Americans, or 96% and 92%, respectively; Most of African Americans and Latinx Americans’ radio however, TV’s weekly reach of African Americans was 3 listening occurs outside the home and large majorities in percentage points more than Latinx Americans, or 88% their vehicles. and 85%, respectively.

Weekly Radio Reach of African American and Latinx American Audiences, 2015–2019 African Americans Latinx Americans Time Periods Outside Outside In-Car In-Car Home Home Entire week 68% 69% 73% 62% Working weekday 72% 66% 76% 59% Weekday drive times 70% 74% 75% 68% Weekends 65% 76% 68% 72% Nielsen, October 2019 The Media Audit’s September 2019 Aggregate Survey (57 US markets, more than 157 million adults) reported African Americans and Latinx Americans listened to radio more minutes daily. Although the percentages were only slightly more than Caucasian Americans, African Americans and Latinx Americans indexed higher.

Media Day Analysis of Caucasian American, African American and Latinx American Adults 18+, 2019 Caucasian Americans African Americans Latinx Americans Media Minutes Percent Index Minutes Percent Index Minutes Percent Index Television 253.88 49.0% 102 276.64 44.5% 111 231.69 40.0% 93 Radio 140.87 27.2% 94 176.79 28.5% 118 166.91 28.8% 112 Newspaper 68.89 13.3% 86 99.43 16.0% 124 105.69 18.3% 131 Billboards 7.75 1.5% 77 12.81 2.1% 128 15.26 2.6% 152 Internet (no email) 31.94 6.2% 90 37.77 6.1% 106 40.08 6.9% 113 Email 14.5 2.8% 87 17.52 2.8% 106 19.31 3.3% 116 Based on The Media Audit’s September 2019 Aggregate Survey

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 3 Radio and the Consumer

Americans’ largest consumer purchases are typically a vehicle and a home. Interestingly, data from The Media Audit’s September 2019 Aggregate Survey reveals the largest percentages of adults 18+ who planned to make these purchases had medium, not heavy, exposure to radio. Those with the heaviest exposure, however, indexed higher in both consumer categories.

Adults 18+ Who Plan to Buy or Lease Any Passenger Vehicle Type*, by Radio Exposure, 2019 Adults 18+ Adults 18–49 Adults 50+ Radio Exposure Percent Index Percent Index Percent Index Heavy: 180+ min. avg. day 28.0% 133 30.7% 125 22.2% 136 Medium: 60–179 min. avg. day 42.3% 115 41.8% 110 43.3% 122 Light: 1–59 min. avg. day 10.3% 83 8.8% 79 13.3% 95 None: 0 min. avg. day 19.4% 66 18.6% 71 21.2% 62 Based on The Media Audit’s September 2019 Aggregate Survey *during the past 12 months (2019 to 2020)

Adults 18+ Who Plan to Buy a Home*, by Radio Exposure, 2019 Adults 18+ Adults 18–49 Adults 50+ Radio Exposure Percent Index Percent Index Percent Index Heavy: 180+ min. avg. day 28.5% 136 31.2% 127 18.9% 116 Medium: 60–179 min. avg. day 40.6% 110 39.7% 104 43.8% 124 Light: 1–59 min. avg. day 10.1% 82 9.4% 84 12.7% 91 None: 0 min. avg. day 20.7% 70 19.6% 75 24.6% 72 Based on The Media Audit’s September 2019 Aggregate Survey *during the next two years (2019 to 2021)

Heavy radio exposure also drives consumer shopping at a variety of stores. “Shopped at drug stores during past 4 weeks” had the largest percentage, or 86.1%, followed by “shopped at hardware/building supply store during past 4 weeks” 74.4% and “shopped at discount stores during past 4 weeks” 59.7%.

“Shopped at jewelry stores during past 4 weeks” indexed the highest at 158 (10.2%), with “shopped at auto parts stores during past 4 weeks” second at 145 (19.9%) and “shopped at sporting goods stores during past 4 weeks” 140 (20.2%).

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 4 Formats and Ad Revenues

Like TV programs, radio formats are what attracts listeners, which, in turn, attract advertisers.

Among Nielsen’s format ratings for the January–November 2019 period, only Adult Contemporary, Classic Hits and Classic Rock increased their average ratings for persons 6+, compared to same 2018 period. Adults 18–34 and 25–54 were primarily responsible for the increases of Classic Hits and Classic Rock formats.

Of the other top 5 formats for persons 6+, News/Talk decreased 0.5% (10.0% to 9.5%), Country decreased 0.6% (7.3% to 6.7%) and Pop CHR (Contemporary Hit Radio) decreased 0.4% (6.9% to 6.5%).

Top 5 Radio Formats’ Average Ratings, by Age Groups, January–November 2019 Persons 6+ Adults 18–34 Adults 25–54 Format Rating Format Rating Format Rating News/Talk 9.5% Pop CHR 10.1% Adult Contemporary 7.7% Adult Contemporary 8.1% Country 7.7% Pop CHR 7.6% Country 6.7% Adult Contemporary 7.6% Country 6.8% Pop CHR 6.5% Urban Contemporary 6.1% News/Talk 6.7% Classic Hits 5.8% Hot Adult Contemporary 5.9% Hot Adult Contemporary 5.5% Nielsen, December 2019

As of March 2020, more radio stations broadcasted a Country format, or 2,189, followed by Religion (teaching, variety) 2,034, News/Talk 1,997, Contemporary Christian 1,273 and Variety 1,260.

Given the major disruptions from the spread of the coronavirus, it’s almost impossible to forecast near-term and future ad spending in any medium. Almost all non-essential retail stores and other consumer-based businesses closed in some states during March 2020. Other state governments are likely to order similar closings, so consumers won’t be spending much, if any, discretionary dollars, which reduces the need for ad spending.

What can be somewhat accurately predicted is consumers will come rushing back into stores and businesses once some semblance of normalcy has returned, which is likely to boost ad spending. Plus, media will benefit from the 2020 election cycle during the coronavirus outbreak as most Americans are at home and are a very captive audience.

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 5 The Impact of Digital Home Radio Station Listening Platforms*, 2019 Advertising Platform Percent AM/FM radio in vehicle 43% A challenge for radio stations, as it has been for local TV, is convincing prospective and current advertising AM/FM radio at home, work or school 22% clients that despite some erosion of OTA audiences, Computer stream 18% stations are also reaching audiences via digital Mobile apps 7% channels and devices. Smart speakers 4% Jacobs Media’s 2019 Tech Survey of radio listeners Podcasts 2% discovered almost one-third of those listeners accesses Other 3% radio station content via those other channels and devices while the other two-thirds are doing so via Jacobs Media, August 2019 traditional methods. * percentage of time spent with home station on each platform during a typical week

Discussions with a number of Media Group Online members reveal sales teams are still too focused on selling traditional ad buys. Many don’t want to add the complexity of digital advertising to their knowledge base and expand their pitches to include the digital component. No doubt, a similar trend is occurring at local radio stations.

The digital audiences exist, and in substantial numbers, but stations have had difficulty accessing those numbers and then converting them into ad buys and profits.

That might be changing according to 2020 research from the RAB. It reported during February 2020 that local radio stations’ digital ad revenues increased 25% during 2019 to a total of more than $1 billion, the largest increase since 2012.

The total also represents the first time digital advertising was 10% of radio stations’ ad revenues. If approximately one-third of Americans are listening to radio via digital channels and devices, then there would seem to be much more digital advertising stations could sell.

Advertisers would seem to be a step ahead of radio stations, as the RAB also reported 26% are more likely than other radio ad buyers to decrease their use of radio if a digital package isn’t part of the sales rep’s pitch.

The RAB research also indicated station managers’ attitude about their digital strategy has been increasing, from 72% during 2018 to 78% during 2019.

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 6 Audio Content Challengers

Smart speakers are one of the major digital devices more consumers use to listen to radio as well as podcasts and other content. An unsurprising trend is the number of smart speakers in American homes has increased 135%, from 67 million during December 2017 to 157 million during December 2019, according to NPR/Edison Research’s The Smart Audio Report Winter 2019.

Jacobs Media’s research (page 6) indicated 4% of audiences were using smart speakers for radio listening during mid-2019; however, the NPR/Edison Research report found 24% of the consumers (persons 13+) they surveyed said they were listening to AM/FM radio on a smart speaker.

Share of Time Spent Podcasts are the other competitive channel for radio, although many Listening to Audio radio stations are not yet taking advantage of the opportunity. The NPR/ Edison Research survey found daily listening of spoken-word content Sources on a Smart on smart speakers increased 20% since 2015 while music listening Speaker, December decreased 5% during the same five-year period. 2019–January 2020 Nielsen’s Audio Today 2019 report of African American and Latinx Audio Source Percent American consumers 18+ found both groups are very active users of their smart speakers. Streaming audio 46% Amazon 15% Smart Speaker Weekly Pandora 12% Audio Activities, Q2 2019 Spotify 9% African Latinx Activity Other 10% Americans Americans AM/FM radio 24% Listen to streaming music 89% 86% Owned music 10% Listen to news 70% 54% SiriusXM 8% Listen to AM/FM radio stations or shows 65% 64% Podcasts 5% Listen to sports updates 47% 45% Other 7% Listen to podcasts/audiobooks 51% 40% NPR/Edison Research, January 2020 Nielsen, October 2019

BIA Advisory Services predicts local online (terrestrial, streaming and podcasts) radio ad sales will increase at an annual rate of 8.1% from 2019 through 2023, or from $1.6 billion to $2.1 billion. Many radio stations have not adapted to the popularity of podcasts, although that is changing, which may allow them to gain larger shares of podcast advertising.

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 7 Technology Will Drive the Next Era of Radio Advertising

Although not yet in wide use, NextGen TV and the concepts of addressability and localization, or geo-targeting, are being touted as the tech tools local TV stations will be able to use to combat the increasing diversion of ad dollars to digital.

The radio industry is poised to offer similar tech tools to local stations. In fact, BIA Advisory Services and Advertiser Perceptions’ independently funded surveys found more than 90% of local advertisers and 67% of national advertisers are enthusiastic about geo-targeting FM radio ads.

The BIA also forecasts local radio stations could add National and Local Advertisers’ another $750 million in annual revenues with over-the- Interest in Geo-Targeted FM air geo-targeted broadcast zones. Given the highly mobile nature of radio usage, this would be a major Radio Advertising, October and advancement for local radio advertising. December 2019 Similar to what is being contemplated for local TV, National Local Interest addressability would allow a radio listener to be much Advertisers Advertisers less passive and use interactive voice ads to request Yes 63% 81% more information about a product or service, actually order and buy either or silence the ad entirely. No 31% 11% Not sure 6% 7% Now that many consumers and households have BIA Advisory Services and Advertiser Perceptions, February 2020 smart speakers and have used voice commands, the appeal of radio ads with interactive voice technology should come quite easily – and, of course, be a boon to local advertisers, especially those who can’t typically afford extensive radio advertising.

Like the NextGen TV technology, interactive voice ads on radio will also generate considerable data about use, information requested and purchase habits.

Radio’s adoption of these technologies should be an incentive for local TV stations to be first with geo-targeting and addressability, although there may also be opportunities to partner with radio stations to package advertising via these technologies for local advertisers.

Sources: Radio Advertising Bureau Website, 3/20; Edison Research Website, 3/20; Nuvoodoo Website, 3/20; Inside Radio Website, 3/20; Radio+Television Business Report Website, 3/20; The Media Audit Website, 3/20; Nielsen Website, 3/20; Magna Global Website, 3/20; Jacobs Media Website, 3/20; Marketing Charts Website, 3/20; Media Village Website, 3/20; National Public Radio Website, 3/20; BIA Advisory Services Website, 3/20; All Access Website, 3/20; Radio Ink Website, 3/20.

Prepared: March 2020

Is Radio at the Right Place on the Media Dial? www.mediagrouponlineinc.com pg. 8