In a Thursday morning conference call hosted by Emmis Chairman/CEO Jeff Smulyan to discuss his company’s third quarter 2017 results, it was noted that — to little surprise — political dollars didn’t come in where Emmis hoped they would.
But the “real” challenge for the company involves Los Angeles, where its KPWR-FM “Power 106” is “due for a bounce-back” as it deals with a tough competitive challenge from iHeart’s crosstown KRRL-FM “Real 92.3.”
RBR + TVBR OBSERVATION: We know the Los Angeles radio market very well, and we believe that hip-hop is poised for a big year. This will help Emmis, as Power 106 is a heritage radio station that enjoys coalition listening from Asians, Blacks, Hispanics and Anglo audiences. We look forward to seeing a strong fiscal 2018 from the station as it battles strongly against “Real 92.3” while riding a resurgence in hip-hop’s popularity.
Of the key challenges facing Emmis, it is the company’s “underperformance in L.A.,” Smulyan says.
That’s directly the result of KRRL, which in March 2015 adopted an Urban Contemporary format and became a direct competitor to Emmis’ hip-hop focused CHR/Rhythmic Power 106.
With the shift to “Real 92.3,” iHeart snagged longtime Power 106 morning host Big Boy for similar duties at KRRL.
This resulted in a significant revenue and ratings impact for Emmis, which has no other radio stations in the nation’s biggest radio market when it comes to dollars.
In fact, when Emmis excludes Los Angeles, its stations are up four-tenths of a point with respect to its share of market revenue.
Los Angeles magazine was not discussed; it is among a cluster of glossy magazines up for sale by Emmis and has been operated separately from Power 106.
Meanwhile, December looks to be a very tough month for all radio operators, and not just for Emmis, Smulyan warns. At the same time, he says January and February 2017 look better, and he is holding to his prediction that FY2017 will see 1% to 2% growth.
Asked via e-mail if Smulyan retains his belief that radio has a perception problem, and not a consumption problem, he said yes, reminding those who dialed in to the conference call that radio still has the largest reach of any medium.
With the significant fragmentation of television and the stunning decline of the newspaper, he questions why radio hasn’t capitalized on this with advertisers.
Smulyan closed out the call by noting that Emmis’ target leverage is below 4%; Emmis is approaching 5% leverage following this quarter, a result of its divestment of Texas Monthly and its Terre Haute, Ind., cluster. He also is “cautiously optimistic” about Emmis’ New York cluster, where Urban WBLS-FM 107.5 is the third-ranked station, 6+, in Nielsen Audio’s most recent ratings for the market.
