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The statistics presented in this Bulletin are for the fiscal year ending August 31 and cover the period from 2003 to 2007. The text below includes references to earlier periods when it is useful to put the industry’s recent performance in a historical context.

The following analysis concerns commercial radio. A commercial station is one where advertising revenue ¹  represents more than half of total revenue. Stations that do not meet this criterion are classified as “public and non-commercial”. This segment’s operating results are presented in a separate table.

Another good year financially for commercial radio

At a time when new technologies such as satellite radio, on-line radio and portable digital players are becoming increasingly popular and cutting into the potential audience, traditional radio continues to prosper.

In 2007, private radio’s advertising sales advanced 6.0% to reach $1.5 billion, outpacing the advertising market as a whole (+5.5%) for the third time in the last five years. ² 

Moreover, the 19.8 cents of profits before interest and taxes per dollar of revenue realized in 2007 represent the industry’s third-best showing in the past 30 years after those of 2005 and 2006.

The 2007 results are part of a long-term trend that began in the late 1990s following many lean years. The industry’s financial success during this period is due to strong economic growth and industry restructuring. In addition, regulatory changes in 1998 allowed greater concentration of ownership, which helped radio withstand the competition from other media. The industry also rationalized its operations by transferring AM stations to the generally more popular and more profitable FM band.

FM radio still the driving force behind the industry

In 2007, FM radio had advertising revenues of $1.2 billion, 7.1% more than in the previous year. FM radio generated nearly 78% of the industry’s advertising revenues in 2007, compared to 63% ten years earlier.

FM stations also accounted for 95% of the industry’s profits before interest and taxes in 2007. The healthy 24% profit margin achieved in 2007 is comparable to the margins reported over the last five years.

During that time, the rationalization of AM radio that started in the early 1990s continued, although the situation now appears to be stabilizing. The number of stations and networks declined to 175 in 2007, three fewer than in 2006. Five years earlier, there were 211 on the air.

Despite the loss of three stations, this segment’s advertising revenues increased slightly to $320.3 million.

AM radio’s profit before interest and taxes was down 7.4% from 2006 after three years of rapid growth. This segment nevertheless made a profit for a fifth consecutive year after suffering losses from 1990 to 2002. Just over half of all AM stations were profitable in 2007. By comparison, roughly seven out of ten FM stations made a profit.

Ethnic radio is growing faster but remains less profitable

Ethnic radio stations enjoyed a higher rate of growth in advertising sales (+7.3%) in 2007 than their English-language and French-language counterparts (+6.6% and +2.7% respectively).

However, English-language stations reported the best profit margin (+21.4%), followed by French-language stations (+13.8%) and ethnic stations (+7.9%). This ranking has remained unchanged since 1998. English-language stations’ main competitive advantage is that they spend a smaller percentage of their revenues on programming and administration, two areas where greater ownership concentration offers economies of scale.

Market size affects profitability

In 2007, radio stations in large markets ³  generated almost twice as much profit before interest and taxes per dollar of revenue as stations in smaller markets. This trend has been evident for a number of years and is largely due to the fact that companies in large markets can take full advantage of more flexible ownership rules.

On the other hand, advertising revenues showed stronger growth in small and medium-sized markets (+7.4% and +8.3% respectively) than in large markets (+4.0%). This situation last occurred in 2002.

Calgary remains the most profitable large market

Altogether, Calgary radio stations earned a profit of 28.4 cents before interest and taxes for each dollar of revenue generated in 2007. Calgary replaced Vancouver at the top of the list of most profitable radio markets in 1998 and has remained there ever since. Calgary was also the large market with the fastest revenue growth in 2007, as air time sales increased by 12.1%.

Financial performance differs from region to region

The performance of radio broadcasters varied substantially from one region to another in 2007. Air time sales grew at a faster rate than the national average (6.0%) in the Atlantic provinces, Alberta and British Columbia and at a slower rate than the national average in the other provinces.

Alberta enjoyed the highest growth rate for the third consecutive year. Radio advertising sales totalled $238.5 million, 13.6% more than in the previous year.

Alberta was also the province where radio was the most profitable, generating 26.4 cents of profits before interest and taxes per dollar of revenue. This confirms the adage that when the economy is good, the radio industry benefits.

Employment and productivity are up

The industry had a weekly average of 10,239 employees in 2007, up 3.2% from the previous year. This is the first time since 1991 that employment in the industry has topped 10,000.

Private radio broadcasters spent 40.5% of their revenues, or $612.5 million, on salaries and benefits.

Air time sales per employee totalled $143,866, 2.7% more than in 2006.