Tuesday, January 18, 2005
Q&A with Emmis Communications CEO Jeff Smulyan
Q:
A: The FORTUNE recognition demonstrates that our employees are engaged and committed, and such committed employees create value for shareholders. Not only are we one of only 100, we are one of the very few media companies ever to receive this honor. In an industry where manpower is the most important power, we have a decided advantage. This honor shows investors that Emmis is a company with a future.
Q:
A: First of all, we’ve built good franchises. Emmis has always been a company that produces great content, and we’ve improved programming across the board. I think that shows in the continued strength of KPWR [Power 106, Los Angeles] and WQHT [Hot 97, New York] as well as the remarkable performance of our TV division. And the second vital ingredient to our success is great sales training and great local sales managers.
Q:
A: In the past few years we’ve focused on getting the balance sheet where we want it. We paid off $52.5 million in the third quarter, and every day we pay down more debt. Our station swap with Bonneville closed last week, giving Emmis another $70 million for debt reduction. The more debt we pay down, the more flexibility we have to do other things.
Q:
A: In Radio, we have a multi-pronged effort; senior managers from major companies - including myself and Radio President Rick Cummings - have come together with the National Association of Broadcasters to focus on an industry marketing campaign, which launched this month. The Radio Advertising Bureau has conducted research that has been favorably received by the advertising community, and the RAB has also beefed up efforts in calling the major national accounts, especially those that have not previously used radio. Broadcasters are coopering in new ways to tell our story, and I think radio as a whole will benefit from these campaigns. And because Emmis is in the largest markets, and because we already lead in ratings, ad rates and market performance, any industry boost should particularly benefit us.
Q:
A: We’ve talked about high definition radio for years; this is absolutely not a response to the satellite newcomers. It’s taken a long time to get HD radio through the pipeline and to get government approval, but this is something broadcasters have been working on for quite a while. The conversion costs only about $100,000 per station - it’s much, much less than the expense of building television’s digital infrastructure. WIBC-AM in Indy is already broadcasting daytime content in HD, and our other stations will roll out in the next 2 1/2 years.
Q:
A: Despite the buzz surrounding satellite radio, I believe iPods are a bigger threat, because you have a larger number of people with an alternative source of music. That said, I can remember when people were predicting the death of radio after 8-tracks came out. Despite continually evolving technologies, nothing has replaced the local information and local personalities we give our audiences. We know our communities, and we respond to their needs. Over the holiday season alone, Emmis radio stations raised $500,000 for charitable causes in their local communities - I don’t see how satellite radio can match that reach. Sirius and XM may or may not be viable businesses, but the reality is that two of Emmis’ stations reach more people then the entire satellite industry, and those satellite subscribers still spend much of their listening time with terrestrial radio.
Q:
A: What it says is that TV President Randy Bongarten and his team have a strategic focus for our TV group, and they’ve taken a station that has historically languished in Albuquerque and made it a powerhouse. It’s a combination of dramatic improvement in news and other programming and an excellent local sales effort. We have to give CBS credit - the network is stronger - but this station was previously known as one of the weaker CBS affiliates. We’ve reversed that. Over and over again, this company excels at creating product that is responsive to its markets.
Q:
A: We have to do something. The cable companies have done a great job of confusing the issue, but for decades they’ve profited from our signals and given us nothing in return. Now they want to take our HD signal and charge people even more for it. Studies prove that cable subscribers spend the vast majority of their viewing time watching local broadcasting. We have the most value, and I think Nexstar is on the right track. Everyone else in the cable universe gets paid; we absolutely have to get paid for our signal.
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Certain statements included above which are not statements of historical fact, including those identified with the words "could," "will," or "would" are intended to be, and are, identified as "forward-looking statements," as defined in the Securities and Exchange Act of 1934, as amended, and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of EMMIS to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. See EMMIS' filings with the Securities and Exchange Commission for a more detailed discussion of these risk factors. EMMIS does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
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