Led Zeppelin's "Communication Breakdown" isn't about the problems traditional radio faces in attracting listeners. Nonetheless, I find the title fitting for Emmis Communications
Emmis knows as much as anyone about the hurdles traditional radio faces. The company owns 23 FM stations and two AM stations in the U.S.'s largest markets, including New York, Los Angeles, and Chicago, and has a presence in Hungary, Belgium, Slovakia, and Bulgaria. In a conference call, management acknowledged that the situation was "challenging," calling it a "tough run for radio." A look through the company's latest quarterly report points to this reality.
Third-quarter radio revenues increased 9.5% compared with the same period a year ago. But looking to Q4, Emmis is projecting only 1% to 2% revenue growth in this segment. In spite of lackluster growth and increased competition, CEO Jeff Smulyan believes the "hoopla over satellite radio is finally starting to die down." He added that pay radio has yet to prove that it can make money, and with new high-definition digital radio coming out, traditional radio still has opportunities to grow.
I, for one, do share his skepticism of satellite radio. The big news in radioland has been Howard Stern's switch from FM to Sirius Satellite Radio
While traveling back home for the holidays, I went on the first road trip in my life that FM radio wasn't turned on. What was I tuning into as I made the trek on the Pennsylvania Turnpike? Apple's iPod. With the iPod hooked up to my car stereo system, I no longer had to search for music. Every song I could ever want to listen to was readily available. And if I ever tired of music, Audible
My family isn't the most tech-savvy one out there; we'll never be confused with the Jetsons. To my surprise, I learned there were seven more iPods in my family than there were a year ago -- three of which were plugged into car stereos. And if iPods are plugged in, that means less tuning in to traditional radio. For the record, there are no satellite radio subscriptions in my family.
Although my evidence is anecdotal, it does represent my doubts about the sustainability of satellite radio. Despite Smulyan's optimism about HD digital radio, I cast an equally skeptical eye on the outlook for traditional radio operators like Cox Radio
Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.