Local ad revenues to hit $174B by 2021, BIA/Kelsey says

Local TV holds the second biggest share of local advertising revenue in BIA/Kelsey’s forecasts for 2017. jansucko/iStock/Getty Images Plus

Local ad revenues will continue to grow over the next four years and reach $174 billion by 2021, according to new projections from BIA/Kelsey.

That figure equals out to a compound annual growth rate of 3.8%, which will be driven by double-digit increases in mobile and social advertising as well as local online and mobile video, all due to grow 17% by 2021.

But before that growth trajectory fully takes shape, BIA/Kelsey has slightly reduced its advertising estimate for 2017 to $147.9 billion. The firm is blaming the decrease on an overall weaker than expected economy in the beginning of 2017 that has led to softness in advertising revenues. But the firm is raising its future growth in online/digital advertising revenues estimates to a CAGR of 11.9% from 2016-2021. Over the same period, traditional advertising revenues will see a slight decrease in the 2016-2021 period with a CAGR of -0.6%, according to a news release.

"We are on the precipice of different advertising channels taking lead positions in the local advertising marketplace," said Mark Fratrik, chief economist at BIA/Kelsey, in a statement. "Although national and local businesses still utilize a mix of digital and traditional advertising platforms, the opportunities afforded by mobile, social and video advertising are incredibly valuable due to their measurability, adoption by consumers and enhancements by technologies such as beacons and data attribution that blend extraordinarily well with today's mobile consumer."

RELATED: Local TV stations' revenue totaled $28.4 billion in 2016, BIA/Kelsey says

Local TV holds the second biggest share of local advertising revenue in BIA/Kelsey’s forecasts for 2017, but local radio has been knocked out of the top five by mobile.

While advertising is still a big piece of the pie for local TV, BIA/Kelsey has acknowledged that retransmission is becoming more integral. Local TV broadcasters’ revenue totaled $28.4 billion in 2016, and a significant portion of that came from retransmission consent agreements.

According to a recent BIA/Kelsey study, stations brought in about $6.8 billion from retransmission agreements made individually or through ownership groups with cable and satellite providers. In addition, local television saw increased election advertising and double-digit growth through its digital media offerings.

"The dependence on retransmission fees has become incredibly important to local stations and many publicly traded ownership groups because it amounts to nearly one-third of their revenue," said Fratrik. "The fees provide a sound financial basis for the stations and have also become the foundation for many of the larger stations. Our analysis also uncovered that even mid-size and smaller market stations are increasingly relying on the income provided by these fees."