OTTAWA – Canadian private radio’s bottom line, for the most part, still looks pretty good, despite the perpetual predictions of its impending death thanks to new media like mp3 players and satellite radio.
In the 2006 broadcast year, ended August 31, 2006, according to a Statscan report released today, private radio’s advertising revenue increased 5.3% to $1.4 billion.
That growth rate, however, is slightly lower than the average of 5.7% over the last five years and much lower than the rate of 8.7% observed in 2005. The radio industry had a particularly prosperous year in 2005, posting its largest gain in advertising revenue since 1988, says the report.
Despite the decline in performance, "the dean of the electronic media continued to produce substantial profits," it reads.
In 2006, Canadian private radio stations collectively generated profits of $284 million before interest and taxes, up 0.4% from 2005. The 20% profit margin is the third-highest in the last 40 years after those realized in 2005 (+21%) and 1971 (+20.5%).
But there are a number of variances within the whole, which show it’s better to be a big company operating FM stations in English in larger markets.
English-language stations enjoyed the largest profit margin (+22%), followed by French-language stations (+11.5%) and ethnic stations (+8.3%). This order has remained unchanged in the last five years, says Statscan. "English-language stations’ main competitive advantage is that they spend a smaller percentage of their revenues on programming and administration," reads the report.
The gap is just as wide between large markets and small and mid-sized markets, too. In 2006, the profit margin before interest and taxes was 26.9% for all stations in the five largest metropolitan areas (Toronto, Montreal, Vancouver, Calgary and Ottawa), about double the profit margins for stations in other metropolitan areas (+13.4%) and stations operating outside metropolitan areas (+13.9%). "In larger markets, corporations can more readily reap the benefits of owning more than one station," says the most obvious sentence in the release.
The protracted rationalization of AM radio seems to be paying off. In 2006, AM radio made a profit before interest and taxes for the fourth consecutive year after suffering losses between 1990 and 2002. Its total profit before interest and taxes was $17.6 million in 2006, up 29.7% from 2005. However, nearly half of all stations did not break even, and the 5.5% profit margin before interest and taxes is only a fraction of FM radio’s 24.2% profit margin, notes the report.
The FM band’s advertising revenues rose to $1.1 billion, up 5.6% from 2005. Its 2006 profit margin before interest and taxes is similar to the profit margins it has enjoyed over the last five years. In total, seven out of 10 FM stations made a profit in 2006, slightly less than in 2005.
And that change is due to the influx of a number of new stations across the country as it usually takes a few years for newcomers to turn a profit. Stations that started broadcasting in 2006 lost a total of $4.9 million before interest and taxes, or 28.5 cents for every dollar of revenue.
Those returns and the new stations also saw staffing levels in Canadian private radio rise 5.7% to 9,970 when compared to 2005 levels and by 11.5% when compared to 2002.
For a table breaking down some of the numbers a bit more, click here.
