Radio Broadcasting

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The statistics presented in this Bulletin are for the fiscal year ending August 31 and cover the period from 2004 to 2008. 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.

Radio broadcasters’ profitability: an excellent year

In 2008, private radio broadcasters earned 21.1 cents of profits before interest and taxes per dollar of revenue. This is the second-strongest performance in the past thirty years, following that of 2005 (21.2 cents per dollar of revenue).

The relatively high profitability of the commercial radio industry in recent years may be largely explained by the strong growth of its advertising revenues. In 2008 it rose 5.9% to $1.6 billion. This growth rate is comparable to the average of 5.8% for the past five years. Furthermore, expenditure growth was lower (+3.9%) than revenue growth (+5.6%) in 2008, contributing to an improvement in the profit margin.

Beneficial effects of reorganization

The economic success of the radio industry in recent years is largely explained by its reorganization. Among other things, the changes made to regulations in 1998 enabled companies in the industry to operate more stations in each market. This change allowed the industry to compete more successfully with other types of media.

Reorganization also resulted in greater concentration of ownership. While the number of stations on air is increasing from year to year, the number of companies operating them remains relatively stable and large companies in the industry are capturing a growing share of industry revenue.

The economies of scale made possible by this reorganization have also enabled the industry to gain better control of its spending; this was especially evident in 2008.

Another factor enabling the industry to improve its results was the transfer of numerous stations from the AM band to the FM band, which is more popular and generally more profitable.

Radio in better shape than television

In a period when new media are occupying an ever-larger place and the competition for advertisers’ dollars is increasingly fierce, radio is managing better than television, especially conventional television. This is true for both revenue growth and profitability.

Thus, the profit margin before interest and taxes was 13.6% for all private television broadcasters and 0.2% for private conventional television broadcasters in 2008, compared to 21.1% for private radio broadcasters. The results for the two best-performing traditional media were comparable: FM radio (24.5%) and pay and specialized television (23.4%) once again generated a profit margin before interest and taxes of more than 20%. For FM radio, this has been the case every year since 1997.

The growth of advertising revenue for private radio broadcasters (5.9%) was twice that of the television industry (+2.8%) in 2008. Even so, television advertising revenue ($3.4 billion) remains twice as large as that of commercial radio ($1.6 billion). Ten years earlier, in 1998, it was two and a half times as large.

Less and less AM radio

The number of AM stations fell to 159 in 2008, 15 less than in 2007. This was the largest drop since 2001, proving that the rationalization of AM radio that began in the early 1990s is continuing.

Rationalization is hitting the least profitable stations, and those that remain are generally more profitable. Thus, 58% of AM radio stations were profitable in 2008 compared to 52% in 2007. The 8.1% profit margin before interest and taxes for all stations was the best in a number of years, even if it is only a fraction of the 24.5% profit margin achieved by FM radio stations. In 2008, AM radio stations made profits before interest and taxes of $26.7 million, up 63.7% compared to 2007.

For the FM radio, advertising revenues reached $1.2 billion, up 7.6% from the previous year. FM radio generated more than 79% of the industry’s advertising revenues in 2008, compared to 65% ten years earlier.

FM stations earned profits before interest and taxes of $309.9 million in 2008, up 9.3% compared to 2007. This increase is the largest since 2005 (+24.4%).

A difficult year with respect to profits for ethnic radio

Radio broadcasters’ performance in 2008 differed considerably according to the broadcasting language. Ethnic radio had a more difficult year, with its profits before interest and taxes falling 45.0% in one year. This performance contrasts with those of English and French-language radio broadcasters, who saw their profits before interest and taxes increase by 13.9% and 3.8% respectively for the same period.

Anglophone stations experienced stronger growth in their air time sales (+6.4%) than Allophone and Francophone stations (+5.1% and +3.3% respectively).

Anglophone stations registered the highest profit margin (+23.0%), followed by Francophone stations (+13.8%) and ethnic stations (+4.2%). This ranking has remained unchanged since 1998.

Advertising revenues show stronger growth in small markets

Just as in 2007, advertising revenues showed stronger growth in small and medium-sized markets (+8.7% and +7.0% respectively) than in large markets ²  (+3.8%).

Radio broadcasters generated profits before interest and taxes in markets of all sizes, but radio stations in large markets again ranked first in profitability with a 25.4% profit margin before interest and taxes. Those in medium-sized markets (19.1%) follow, ahead of those in small markets (15.6%).

Toronto is the most profitable of the large markets

Altogether, Toronto radio stations made a profit of 30.0 cents before interest and taxes per dollar of revenues generated in 2008. Toronto replaced Calgary (25.8) at the top of the list of most profitable radio markets, a position it had held since 1998. Calgary was also outranked by Ottawa-Gatineau (27.7) and Vancouver (26.6).

While the market for air time sales was strongest in Calgary in 2008 (+9.1%), the good performance of the other markets may be explained by better control over spending. As well, Calgary’s radio broadcasters saw their operating expenses increase 13.3% in one year, compared to a 0.7% drop for their Toronto counterparts.

Better growth in advertising revenues for Western Canada

Radio broadcasters’ performance varied substantially from one region to another in 2008. Air time sales grew at a faster rate than the national average of 5.9% in Saskatchewan, 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 fourth consecutive year. Radio advertising sales there totalled $267.1 million, 12.0% more than in the previous year.

Alberta was also the province where radio was the most profitable, generating 25.5 cents of profits before interest and taxes per dollar of revenue.

Radio broadcasters elsewhere in Canada succeeded in improving their profitability. Those in Ontario, Manitoba and British Columbia registered their best profit margin before interest and taxes in the last ten years. The profit margin before interest and taxes for Quebec and the Atlantic provinces remained stable, while it declined slightly in Saskatchewan.

Employment and efficiency are up

The industry had a weekly average of 10,500 employees in 2008, up 2.6% from the previous year, and it spent 40.0% of its revenues, or $638.6 million, on salaries and benefits. The proportion of revenues needed to pay the industry’s workers has been declining since 2004.

Air time sales per employee totalled $148,603, 3.2% more than in 2007.