Emmis Communications Corporation Uphill Battle for Profitability

It’s been a tough 15 years for traditional media companies like Emmis, but the radio and publishing outlet is hoping political ads and digital apps can boost growth.

Emmis Communications Corporation NASDAQ:EMMS Sun, Oct. 9 2016. (EEMS via Upstart City)

Shares of Emmis Communications Corporation fell 0.75 percent after it announced underwhelming results for its second fiscal quarter last Friday.

Jeff Smulyan, Emmis’s CEO, reiterated the media conglomerate’s profitability complications within its radio and publishing units, describing it as a difficult quarter “across the board.” In the second fiscal quarter, Emmis radio net revenues were down 3.3 percent, from $47.6 million to $46.0 million. The publishing net revenues were down 13.5 percent, from $14.6 million to $12.6 million. And the operating income declined to $4.9 million from $9.9 million since one year ago.

Emmis’s struggle with profitability has been a long slow decline spanning 15 years. The price of its shares has dropped from $249 in 1999 to $3.49 in 2016. This type of precipitous fall is common for traditional media companies such as Emmis, which have struggled to pivot their business models to compete in the contentious digital media market.

According to a report from the New York’s Times, “over the last 10 years, the average share of Americans listening to radio at any given time has shrunk about 14 percent, or 2.3 percentage points.” The decrease in popularity is correlated with the fall in profitability. The competition has also been just as stiff for the print market as well.

According to the Financial Times, “in the past six years, the print newspaper business in the U.S. has shrunk by more than half.” Facing a tougher market, traditional media firms like Emmis have begun utilizing seasonal advertising to help them weather the storm.

“We are hopeful that we will see political advertising tailwinds strengthen as we move through October,” said Emmis CEO Smulyan in a written statement. Smulyan’s plans to capitalize on election cycle spending are well founded. “In the last several elections, we’ve seen fundraising range between $5.3 billion to $6.5 billion,” Wells Fargo Securities media analyst Marci Ryvicker said in an interview, with the Los Angeles Times. It is estimated that 80 percent of the amount raised will be spent on advertising.

The boost from campaigns means good news for the coffers of media businesses. However counting on political ads is not a plan for long-term growth. To help stymie the bleeding and jumpstart profits Emmis is joining many other legacy media companies in the race to transition into mobile and digital with their smartphone app NextRadio.

“NextRadio continues to make progress on multiple fronts,” Smulyan said in the press release on the prospects of the company’s future growth. “NextRadio-compatible Samsung Galaxy S7, S7 Edge, and Note 7 smartphones are now available across all carriers, and an industry marketing campaign has begun to promote this to consumers. NextRadio continues to grow its geographic footprint and is now available in Mexico, Canada, and Peru.”

This month’s stock dip is only a small step on the downward decline that many media corporations are experiencing — Emmis and CEO Smulyan hope that the political funds and investment in digital will help turn things around.