Private radio broadcasting revenue and profit rise

Statscan - In 2008, the operating revenue of private radio broadcasters rose 5.6% to $1.6 billion (current dollars) and their profits before interest and taxes increased 12.2% to $336.5 million.

The profit margin before interest and taxes of 21.1% realized in 2008 was almost identical to the industry's best performance in the last 30 years, the 21.2 % margin achieved in 2005.

For the past several years, the private radio industry has been doing relatively well with respect to profitability. Its profit margin before interest and taxes has exceeded 15.0% every year since the start of the decade. This is largely due to a major reorganization that has seen the radio industry transform itself in two ways.

First, the industry's large companies are operating an increasing number of stations, especially in the biggest markets. This change has enabled the industry to withstand competition from other media by improving the offer to advertisers, and to gain better control of its spending as a result of the economies of scale that come from operating several stations within the same market. It is moreover in the large markets that radio has, for a number of years, been the most profitable. In 2008, the industry had a profit margin of 25.4% before interest and taxes in those markets, compared with 19.1% in medium-sized markets and 15.6% in small markets.

Second, the industry has been rejuvenated by the gradual transfer of stations from the AM band to the more popular and profitable FM band. This transition began in the early 1990s and is still continuing. The number of AM stations stood at 159 in 2008, 15 fewer than in 2007.

Stations still broadcasting on the AM band are generally more profitable than they were previously. In 2008, they generated a profit margin of 8.1% before interest and taxes, their best performance in the past 20 years. However, this is only a fraction of the 24.5% generated by FM radio.

FM radio is one of the best performing traditional media with respect to profitability. Its profit margin before interest and taxes in 2008 (24.5%) was higher than that of specialty television (23.6%), pay television (22.3%) and especially, private conventional television (0.2%).

The financial successes of FM radio are not new; since 1997, FM has consistently generated a profit margin of more than 20% before interest and taxes.

Radio stations' performance varied considerably depending on the broadcasting language. In 2008, Anglophone stations recorded the highest profit margin before interest and taxes (23.0%), followed by Francophone stations (13.8%) and stations broadcasting in other languages (4.2%). This ranking has remained unchanged since 1998.

Note: The statistics presented here are for the fiscal year ending August 31. They do not reflect the impact on the radio industry of the economic downturn that began in the final months of 2008.