• by Erik Sass  @eriksass1, August 9, 2006

Over the last week, a slew of national radio networks released second-quarter earnings results that painted a mixed picture of the industry--with some companies like Clear Channel posting slight gains while others, like CBS, took big dives. Overall, senior media execs said, the business is stuck right where it has always been--the doldrums.

On a year-over-year basis, Clear Channel's overall corporate profits in the second quarter actually fell about 12 percent--from $220.7 million to $197.5 million--but at the same time the company achieved 7 percent growth in revenue, topping $1.85 billion. Within this, Clear Channel Radio earned revenues of $983.5 million--a 6 percent rise that compares favorably with the industry overall, which fell 1 percent.

The shrinking profit margin was due in part to increased expenses at Clear Channel Radio, the company said, reassuring investors that these were purely transitional costs associated with switching stations over to HD digital terrestrial format and revamping Clear Channel's online presence. According to company reps, third-quarter revenue is up 4.8 percent so far, and as expenses decline, profits should begin rising.

The company portrayed the rising revenue as a victory for its "Less Is More" campaign--which began last year, aiming to reduce ad "clutter" and thus lift the overall desirability of the medium as an ad environment. But Maribeth Papuga, senior vice president and director of local broadcast for MediaVest USA, said this may be somewhat overblown.

"Clear Channel is coming off of some lower comps last year, when they introduced 'Less Is More,' and it took them a while to get the inventory levels back up," Papuga said. "They made such a big change, by cutting back some of the 60s and converting them to 30s, and a lot of their competitors benefited from that in the short term. They're probably just recapturing the market share they lost." Papuga added: "Most of their stations are still fairly strong stations"--and with the anti-clutter adjustment behind it, the company is well-positioned going forward.

Meanwhile, other radio station operators are having a somewhat tougher time of it. Cumulus Media posted a substantial rise in income, going from a $5 million loss in second quarter 2005 to a $4.7 million gain in 2006--but also reported that overall revenue was essentially flat, dipping slightly from $87.4 million to $87.3 million. And CBS Radio brought up the rear with an 8 percent drop in revenue from 2005, ending at $519.1 million. The CBS announcement came on the heels of about 100 layoffs at the company.

Although it did not report quarterly earnings, Emmis Communications is also experiencing difficulty in the wake of a failed bid by CEO Jeff Smulyan to buy over $500 million of stock back from the company's shareholders. Smulyan withdrew his bid late Friday afternoon, sending Emmis stock tumbling about 20 percent to end at $11.55 that afternoon.

Looking at the overall radio market, Papuga said: "it's definitely not showing any signs of resurgence." For one thing, according to Papuga, "radio is still a challenge in terms of investment in the media, because there are so many alternatives" like the Internet and a booming outdoor market. "And there are so many issues on the measurement methods," she added, citing the perpetual complaint of advertisers about radio listening diaries, the current dominant method. "Even if Arbitron's PPM were chosen today, it would still take time to roll that into multiple markets. The sooner the industry can decide on some kind of electronic measurement, the sooner it will get out of this."

Papuga's grim estimate was echoed by Anne Elkins, executive vice president and director of local broadcast for MediaCom, who summed up the market in one word: "Soft!" Elkins too called for new measurement methods, but warned that even this will be no cure-all: "I think once new measurement is available, it might inspire some new experimentation--but what really needs to happen, is that the radio suppliers have to stand up and make bold new noise about the medium itself. They need to explain how it proliferates through people's lives." Here Elkins said she was referring to recent Arbitron studies demonstrating radio's usefulness as both a reach and frequency medium--facts that have gotten little media "airplay."