The Cost of Uncertainty to Radio

In January, I characterized the future of radio in a word, and that word was “uncertain.” Since then, the future of the business world is now being described using that same word.

Radio Advertising

The radio industry has one means of support for all that it does in our local communities;

ADVERTISING.

Local businesses that advertise their products and services are the economic engine that pays for everything a radio station provides to its listeners. Depending on the size of a radio market, additional monies may come from regional and national advertising too. But it is through advertising that commercial broadcast radio exists.

It’s a business model that today is challenged by digital media services, which offer a subscription with an advertising plan allowing two revenue streams for their support.

Uncertainty is Bad For Business

Every business student has heard repeatedly that “uncertainty is bad for business.”

Under President Trump, uncertainty is gripping the business world, with the Associated Press writing:

“Trump is taking a blowtorch to the rules that have governed world trade for decades,” and the “reciprocal” tariffs “are likely to create chaos for global businesses and conflict with America’s allies and adversaries alike.”

The reality is business has no idea how to plan in a long-term, sustainable way, and that includes the radio business.

Seventy percent of America’s economy is based on consumer spending, and the National Retail Federation (NRF) is warning that the myriad of tariffs being proposed “will be extremely disruptive to [America’s] supply chains.” It will also mean higher prices for America’s families which will erode household spending power.

Recessions & Advertising

I started in radio sales during the recession of the early 80s. Orders for radio advertising didn’t just come in over the transom, as had been the case up until that time. If you wanted to build your account list with advertisers, you had to burn some shoe leather and go out to see them, work with them to developing an advertising program that would bring customers into their establishment. I remember Warren Buffett describing these days as…

“Only when the tide goes out

do you discover who’s been swimming naked.”

Which meant to those of us selling radio, tough times revealed who was actually working at the art of radio sales and who was just waiting for the phone to ring.

History clearly taught that businesses that advertised during difficult economic times like during a recession were taking advantage of a strategic opportunity to increase their share of the market and increase their business’s awareness in the mind of the consumer.

The University of Michigan, which monitors consumer sentiment, says that its index continues to decline, suggesting that consumers are very aware of what’s happening in Washington, DC with the talk of tariffs and the possibility of a global trade war.

“Tariffs are taxes,” said the European Commission. “By imposing tariffs, the U.S. is taxing its own citizens, raising costs for business, stifling growth and fueling inflation. Tariffs heighten economic uncertainty and disrupt the efficiency and integration of global markets.”

Uncertainty & Business

Economists have tried to study what uncertain conditions mean for business in countries all over the world. What they’ve consistently learned was that uncertainty makes businesses:

• More reluctant to hire
• More reluctant to invest
• Leads to lower sales

Businesses can adapt when they have some idea of what the future looks like, but when it isn’t clear what the rules will be, both businesses – and their customers – end up in limbo.

Past spikes of uncertainty were caused by recessions, financial crises, negative word events – and most recently, the Covid-19 pandemic. However, this time the uncertainty is almost like a deliberate move to cause it, making it hard for anyone to predict how both businesses and consumers will respond.

Already both businesses and consumers are pulling back on expenditures of big ticket items, spending only on those things necessary for their daily existence. It’s that pull-back that could result in a much larger impact to the American economy.

People in times of uncertainty hunker down.

When anyone of us is uncertain about our future, we tend to hold on to our money, preserving capital to be ready for whatever the future may hold.

These days, whether you are the radio station owner, the radio seller of advertising or the radio listener, we are all trying to figure out what’s going on, what it means to the world and our family – for at this point in time…

No one knows what’s going to happen next, and that’s the problem.