800.275.2840 MORE NEWS» insideradio.com THE MOST TRUSTED NEWS IN RADIO THURSDAY, JANUARY 15, 2015 Radio’s best weapon for 2015 may be going after promotional dollars. Where’s the growth in marketing? It’s not advertising, at least in the traditional sense. The big gains are in promotions according to Borrell Associates president Gordon Borrell, who told an Inside Radio webinar yesterday that it’s a trend line that has him feeling good about radio’s future. Borrell estimates $104.1 billion was spent on advertising last year, a 22% decline compared to a decade ago. At the same time Borrell says businesses spent 73% more last year on promotions compared to 2005. The firm says promotional spending topped $212 billion last year. “When you look at what people are spending in advertising versus marketing, it is huge — this is where the money is,” Borrell said. It is spread across contests, coupons, events, sponsorships and a variety of digital marketing. Borrell said many companies believe they don’t need to spend as much on traditional spot buys since they have their own media within easy reach in the form of their own website. But consumers need to know it’s out there. “This is why we’re so enthusiastic about radio because it knows promotions better than any other medium,” he said, adding, “There’s great opportunity here.” Borrell: Radio will be among the few local media to grow in 2015. Promotions spending may be growing more rapidly, but Borrell Associates estimates traditional local advertising will also pick up steam in 2015. The firm forecasts total U.S. local ad spending will increase 11.3% to $115.9 billion this year. How does radio fit in? Borrell projects the industry’s local revenue will increase 2.6% to $10.96 million. Most other media, including local TV, newspapers, and local out-of-home media will each see their revenue slide. “There is secular erosion for all print media — there’s big erosion and you ought to be going after those advertisers,” Gordon Borrell said yesterday. His team says local online spending will grow the most, projecting a 42% spurt this year. Cinema advertising is estimated to increase 24% with Borrell predicting a 5% gain for local cable TV. If you missed yesterday’s Radio Forecast 2015 webinar stay tuned for details on how to catch the replay! Kagan: 2014 produced radio’s most active deal market since in three years. Crunching data from all of the radio deals announced in 2014, SNL Kagan pegs the total value of sales at $1.51 billion, a 48% increase from a year earlier. It was the best performing year since 2011 when the industry watched the combination of Cumulus Media and Citadel Broadcasting. “There were some larger $100 million deals last year, but there were a lot of smaller deals too,” SNL Kagan senior analyst Justin Nielson points out. Seventy percent of all radio stations sold last year were in market No. 75 or smaller. “This area has become the most active part of a still vibrant broadcast deal market,” Nielson says. The average FM sold for $2.5 million last year, up $500,000 from 2013. And SNL Kagan says the typical AM sale totaled $860,000. That was a $100,000 gain over a year earlier. “There’s a dearth of private equity funding and there isn’t a lot of capital coming into the radio sector, so those are still good levels for strategic synergies for a lot of the larger players,” Nielson says. Average sale multiple holds steady: report. SNL Kagan says the typical broadcast cash flow multiple for radio stations was essentially unchanged last year, with the average at 6.9-times compared to an average 7.0-times multiple in 2013. “That’s where typically you see deals being valued,” SNL Kagan senior analyst Justin Nielson says. “For buyers, it seems [email protected] | 800.275.2840 PG 1 NEWS insideradio.com THURSDAY, JANUARY 15, 2015 like a good time to buy radio stations, especially at those levels.” He expects the current multiple level to hold into the year unless there’s a bigger than expected spike in revenue growth. Kagan currently projects radio revenue will increase 1.5% in 2015. “Radio is on better footing than it was five years ago and I think that the digital initiatives, especially among the larger group owners, are pointing to future growth potential for the business,” he says. Unlike radio, where volume and prices increased last year, SNL Kagan says the pace of sales slowed in television with a drop in the number of stations that traded last year. But while the TV deal market did not repeat 2013’s record-breaking $12.4 billion tally, Nielson points out that last year’s total TV station sale value is still larger than all the radio sales from 2009 to 2012 combined. Read this week’s Inside Radio’s Deal Digest on Page 5. Survey: Spotify users are more likely to be radio listeners. A new study offers more evidence that the growth of digital music services is additive to radio listening, rather than cannibalizing it. Streamers are 9% more likely to listen to the radio than non-streamers, according to a new global survey conducted by comScore and commissioned by Spotify. The correlation between streaming and radio usage is more pronounced among Spotify users, who are 19% more likely to listen to the radio. Streamers are more likely than non-streamers to listen to music in virtually every location surveyed, from at home, in the car and at work to surfing the web, exercising and reading. The survey of 500 respondents in nine countries, including the U.S., turned up some key lifestyle differences between those who stream and those who don’t. Streamers are slightly less likely than non-steamers to drive a car, truck or SUV weekly and more than 1.5 times as likely to use public transportation weekly, which is likely connected to streaming services’ early traction in urban cities and among younger demos. Streamers have wider music tastes and are nearly twice as likely to enjoy hip-hop and techno/electronic. Non-streamers, on the other hand, over-index on easy listening and country. The study also reinforced the notion that streamers are a desirable group for brand marketers. They’re nearly twice as likely as non-streamers to advocate for and feel emotionally connected to brands. Star power remains a lobbying card that the music industry likes to play. The music business won’t just count on songwriters and musicians to deliver hits in 2015. It will also increasingly turn to them to help make the case for stronger royalty legislation on Capitol Hill. A mid-December meeting with aides to House Speaker John Boehner and other Republican congressional staffers included Aloe Blacc, the songwriter behind Avicii’s massive hit “Wake Me Up.” This week the country act The Band Perry took to the halls of Congress for the Recording Academy’s annual Grammys on the Hill event. It was billed as a way to “reinforce the value of music as Congress considers revisions to laws that affect music creators.” While not a new lobbying tactic, leveraging well-known performers and songwriters is likely to go far beyond Grammys on the Hill. The National Music Publishers Association, the Recording Industry Association of America, SoundExchange and the Future of Music Coalition are all expected to bring musicians to Washington. “The attention Ohio Rep. Aaron that a star brings to the issue, sometimes you just can’t get from Washington lobbyists,” Recording Schock takes selfie Academy VP Daryl Friedman tells Politico. “They do relate to each other.” The debate over music with The Band Perry royalties has grown to cover a wide ground, from the Copyright Royalty Board’s digital rate setting, to rights for songs recorded before 1972 to broadcast radio’s performance royalty exemption. Music copyrights remain in congressional bulls-eye. Returning House Judiciary Committee chair Bob Goodlatte (R- VA) plans to keep pushing forward on a rewrite of copyright law, a move that will include a focus on music and royalties. In a speech yesterday in Washington, Goodlatte said he plans to continue the “important work” started during the 113th Congress. The goal of the review, according to Goodlatte, has been “to determine whether the copyright laws are still working in the digital age to reward creativity and innovation.” Many in the music community argue that the lack of a radio performance royalty isn’t working for them any longer, and hope a multiyear effort to change that law will finally produce results. Goodlatte’s committee has so far held 18 hearings on copyright law and he says they’re planning more. He’s also promising to meet with the industries impacted, including radio and the record labels. “We intend to work together with all the stakeholders — from the technology community to the content community — to find consensus on the areas of the [email protected] | 800.275.2840 PG 2 NEWS insideradio.com THURSDAY, JANUARY 15, 2015 Copyright Act that need improvement,” Goodlatte said. Steven Marks, the top lawyer at the Recording Industry Association of America (RIAA), says declining music downloads is working to undercut broadcast radio’s argument that airplay promotes record sales. “What we need to focus on is fair market value for all of these different uses — that includes terrestrial radio,” he told the Consumer Electronics Show last week in Las Vegas. Marks also dismissed reports about a growing rift between songwriters, artists, record labels, and performance rights organizations over how music royalties should be divvied up.