Source : National Post

Less than two weeks before radio operators begin hearings to demand less regulation to help a struggling industry, the CRTC released figures that show profits soared by 24% in 2005 for Canadian commercial radio stations.

Profit (before interest and taxes) rose to $277-million from $223.6-million in 2004, with a growth rate that exceeded the average rates over the past five years, the Canadian Radio-television and Telecommunications Commission said yesterday.

Results from three new radio stations were included in the 2005 figure.

In a submission made to the CRTC in advance of radio hearings that are to begin May 15, the Canadian Association of Broadcasters said Canadians -- particularly the young -- are abandoning radio in favour of newer technologies like subscription satellite radio, the Internet and iPods.

The industry lobby group said the future of commercial radio in Canada requires less regulation: more flexible rules on the amount of Canadian music that must be played, and stricter limits on licensing new radio stations that would compete with existing ones.

The alarm the industry is sounding appears to be at odds with the financial results tabulated by the CRTC, said a Toronto-based analyst who follows the radio industry closely.

"The presumption would be the broadcasters believe the current trend is not sustainable," he said, speaking on condition that his name not be used.

Indeed, some industry watchers believe commercial radio is at the top of the cycle -- an argument they say is backed up by the consideration companies such as Corus Entertainment Inc. and Standard Broadcasting Corp. are giving to spinning their radio operations into income trusts.

The radio industry's enviable margins and profitability arose after the CRTC relaxed rules in 1998 that limit how many stations an operator can own in a single market. The change sparked a major round of consolidation.

Revenue rose as advertisers "succumbed to paying higher rates for the medium," said analysts, and profits soared as duplicate costs were cut.

National advertising sales climbed 18.7% last year to $322-million from $271.4-million in 2004, according to the CRTC figures. Local advertising rose 5.3% to $987-million.

Sunni Boot, president of media buyer Zenith Optimedia Canada, said radio airtime -- particularly on top stations in large markets -- remains coveted by national retail advertisers. But they are watching closely to see what impact "the iPod phenomenon" has on radio listening.

The CRTC numbers show FM radio continues to do better than AM, at least on the measure of revenue growth. AM radio suffered a drop in revenue as local advertising sales fell.

But profits grew as a result of cost-cutting across the board. In fact, AM radio's profit (before interest and tax) of $13.6-million was the healthiest in the five years tabulated by the CRTC.

© National Post