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From IndyStar.com
Radio big in Emmis' rotation
Local communications company is counting on the oldest form of broadcasting to boost its success, revenue in the 21st century
ABOUT Emmis Communications
• Ticker: EMMS
• History: Founder Jeff Smulyan incorporated then-Emmis Broadcasting in 1979 when he bought Shelbyville radio station WSVL, which later became WENS-FM.
• Headquarters: 40 Monument Circle, Indianapolis
• Employees: 3,127
• Executives: Jeffrey Smulyan, chairman, president and CEO; Walter Berger, executive vice president and CFO.
• 2004 revenue: $592 million
• 2004 profit: $2.3 million
• Properties: 25 domestic radio stations, seven television stations (Emmis had 16 but recently sold nine), six magazines and a book-publishing unit. Emmis also owns radio stations or networks in Belgium, Hungary and Slovakia.
• In Indianapolis: Emmis owns WIBC-AM (1070), WNOU-FM (93.1), WLHK-FM (97.1), WYXB-FM (105.7), Network Indiana and Indianapolis Monthly Magazine.
By Erika D. Smith
[email protected]
Jeff Smulyan believes in radio, even if others have their doubts.
The chairman and chief executive of Emmis Communications Corp. is betting radio -- a medium invented in the 1800s and sucker-punched in the 21st century -- will carry the company into the future.
He wants radio to account for 70 percent of the company's revenue, up from the current 45 percent. The other 30 percent will come from an expanded magazine and book publishing division, as well as some international assets.
Television isn't in the picture.
Last week, the Indianapolis company sold nine of its 16 television stations for $681 million. The rest will go in a few weeks.
That's how Smulyan sees the company's future.
"We just concluded that we needed to go in a different direction," he said. "We have a bigger base in radio, and we're going to concentrate on that."
Emmis owns 23 FM and two AM stations, including ones in Indianapolis, Chicago, New York and Los Angeles. The company ranks No. 10 in the industry by revenue.
Smulyan said he doesn't have an "overwhelming drive" to be No. 1, but he does want to increase Emmis' presence in the top 10 radio markets.
That could happen if Emmis manages to buy some or all of The Walt Disney Co.'s 77 radio stations. The possibility of that deal has been widely reported.
Like Emmis, Disney is narrowing its focus to specific media. Clear Channel, another conglomerate, is spinning off its live entertainment division. Viacom is splitting up, too.
"This is the year of breaking up the media conglomerates," said Jack Messmer, executive editor of Radio & Television Business Report.
But a conglomerate holding up radio, of all things, as the core of a long-term business strategy may make some people uneasy.
Even Smulyan admits it.
After all, this is a time when everybody seems to be carrying an iPod, techies are pushing citywide Wi-Fi networks that stream music, and satellite radio stations are touting their rising subscriber numbers.
"Radio was sort of the darling of the media world until about three or four years ago. Then it took a turn," Smulyan said. "Now, you can't go into a 7-Eleven without somebody asking: What about satellite radio?' "
Add to that a lackluster economy that has eaten into advertising sales, and the radio industry is a lot tougher to navigate than it was 10 years ago, experts say.
And it's starting to show.
"It's still quite profitable, but the growth has been very slow in the last few years," Messmer said.
Revenue growth for the industry, once averaging 7 percent or 8 percent annually, is now around 1 percent or 2 percent. Emmis tends to outperform the industry, but as Smulyan said: "There's a big difference when you're making 10 (percent) and the industry's at 8 (percent), and when you're making 5 (percent) and the industry's at 2 (percent)."
There are signs, too, that people are spending less time listening to the radio, even though the number of listeners has remained consistent.
About 94 percent of Americans listen to radio each week, according to the market research firm Arbitron Inc. But in fall 2004, people spent 191/2 hours a week listening to radio, down more than an hour from five years ago and 21/2 hours from 10 years ago.
How much of an effect Internet radio, satellite radio and MP3 players are having on those numbers is debatable. But a recent study indicated it's minimal.
When it comes to listening to radio, there's only a difference of 15 minutes per day between people who use alternative radio and iPods and those who don't, Arbitron and Edison Media Research reported in March.
"The radio industry is very healthy, in spite of the new competition," said Dave Van Dyke, president and chief executive of the radio research firm Bridge Ratings.
Its biggest strength lies in being local -- something that satellite radio and its new-age brethren can't do, he said.
Many industry watchers, including Van Dyke, say the effects of those technologies on traditional radio are overblown.
Still, that perception of stiff competition has pushed radio station operators to get creative.
Emmis and others are toying with new music formats, most of which are designed not to sound like a format.
Whether it's "Jack," "Bob" or "Red," the experimental formats boast large, varied playlists and less chatter from disc jockeys. They sound more like somebody's iPod than the predictable rotation of a radio station.
"It's just different. It's kind of anti-radio," Van Dyke said.
So far, many of Emmis' new-format stations, including Indianapolis' country music Hank FM, have been very successful.
But whether Emmis will rely on such formats to keep listeners in a shaky industry remains to be seen. "Hank" and his friends are new and could turn out to be a fad, Smulyan said. A bigger part of Emmis' long-term business strategy is wading deeper into high-definition radio.
High-definition, or HD, radio is free of static, hisses and pops, and the signal is stronger. Consumers need a high-end receiver to get the compact disc-quality digital signal, which is a competitor to satellite radio.
Emmis already runs several radio stations across the country that are high-definition, but it's planning to convert more. Smulyan expects a big rollout within two years.
"It'll be all the rage," Smulyan said. "I'm sure of it."
In the meantime, Emmis plans to beef up its publishing business, too. Sales of magazines and books represent about 12 percent of the company's revenue.
"We'd like to grow it," he said. "It's been a nice steady business for us."
For the most part, Emmis will stick with city and regional magazines, such as Indianapolis Monthly, Smulyan said. Earlier this year, the company launched Ciudad Magazine, an English-language publication for the Hispanic population of Los Angeles.
While that magazine has been successful, Smulyan said radio is where it's at for Emmis.
"We never know what Wall Street will love and what Wall Street won't love," Smulyan said. "We have to do the things that make the most sense."
