Following what he called “a very tough quarter because of COVID,” Alfred Liggins said business at Urban One is bouncing back, thanks to states and cities reopening. But the CEO of the Black-owned media company cautioned analysts Thursday that, even with one month of the third quarter under its belt, it’s still too early to forecast where radio revenues will end up.
Local radio is “the wildcard” in the company’s third quarter trajectory, Liggins said during the company’s quarterly earnings call. July will finish down in “the low 40s” after tumbling in the “high 50s” in Q2. In today’s unpredictable and daunting environment, he called that “good progress.”
On a positive note, the nation’s social justice movement is helping attract “a lot of new interest in our audience and platform,” Liggins said. That includes a recommitment to Black-owned media by Procter & Gamble, which placed some initial new business on Urban One outlets in June. During a speech at last month’s Cannes Lions Live event, Marc Pritchard, the Chief Brand Officer at the consumer packaged goods giant, said he views investment in Black enterprises as good for the Black community and for the larger economy. “We’re having great conversations with them about growing that relationship,” Liggins said.
As major brand advertisers aim to increase their multicultural marketing, Urban One is “further along than we ever have been” with major brand advertisers Google, Capital, One, Bank of America and Target. And with COVID having a disproportionate effect on African American communities, Liggins said he’s seeing “broader interest” from pharmaceutical companies.
National Biz Outpacing Local
In contrast to the local market, where some small businesses have been annihilated by lockdown orders and re-openings placed on pause, Urban One’s national business looks better. “We feel pretty good about Reach Media, which is national radio and not local-dependent,” Liggins said, forecasting flat earnings for the radio syndication unit in 2020. Cable TV division TV One, meanwhile, “has been a great bright spot” and is expected to post positive earnings for the year.
And with MGM National Harbor reopening its doors to 50% capacity as of late June, Liggins said the Maryland casino, which Urban One owns a minority stake in, is “opening to very strong activity.” As part of its deal, MGM agreed to invest $5 million in marketing with Urban One over a five-year period that expires at year-end 2021. With half that amount still unspent, it “should be some wind in our sails,” Liggins added.
Looking ahead to fourth quarter, political ad spend is expected to boost billings. After starting to have “deep conversations” with former Vice President Joe Biden’s campaign, Liggins said he is “very encouraged and hopeful about their need to reach our audiences.”
Looking across the industry landscape, Liggins said radio was “hit hard” by the pandemic and its aftershocks yet still maintained “a significant amount of revenue running through the business.” The company formerly known as Radio One has expanded into cable TV, digital, events and other sectors and that diversification helped it withstand the downturn. Asked how it stacked up compared to the rest of the industry, Liggins said his own channel checks found Urban One outperforming the pacings of peer companies he’s spoken with. On a total spot basis in Q2, Urban One beat the market by about four percentage points, Executive VP/CFO Peter Thompson said, citing Miller Kaplan data.
While hopeful, Liggins said rollbacks in the reopenings of states and cities have hurt revenue in COVID hotspots like Houston, where the company owns three FMs. Texas was one of the first states to reopen, only to see coronavirus infection rates surge. “We saw money get cancelled from that,” he explained. “We’re definitely seeing an increase of local advertiser activity but we’ve got to get out of this choppiness.”
Urban One’s radio division was the hardest hit segment in its business in Q2, as the virus ravaged the economy. Radio division advertising fell 58.4% year-over-year with national sales down 49.1% and local tumbling 61.2%. On a same-station basis, excluding the August 2019 sale of WDMK Detroit to Beasley Media Group, radio revenues were down 56.6% or 57.1 % excluding political. Total company revenue tumbled to $76.0 million, marking a 37.5% year-over-year decline.
“We see Q2 as the bottom, fortunately, and we’re starting to see sequential improvement into Q3,” Liggins said.
With live events shuttered due to the pandemic, the entertainment category took the biggest wallop, down 90%, followed by food and beverage (-83%), travel and transportation (-72%), auto (-71%) and telecom (-68%).
Revenue at Reach Media, the syndication arm home to Rickey Smiley, D.L. Hughley and Russ Parr, dropped 66.6%. But almost half of that decline came from the postponement of Tom Joyner’s Fantastic Voyage cruise that raked in $1.7 million in second quarter 2019.
Cable TV unit TV One is helping soften the blow. It delivered $43.8 million in revenue in Q2, a decrease of 5.7%, and is expected to post positive earnings for the year.
To minimize the impact to company earnings, Urban One cut what Liggins termed “an extraordinary amount” of costs. Employee furloughs, layoffs and temporary pay cuts saved $7.1 million while cutting back or delaying marketing conserved $4.4 million. Other savings came from lowering programming content costs ($2.3 million in savings), contract labor and costs savings ($1.8 million) and reduced travel and office expenses ($1.4 million). Lower variables expenses for sales commissions and rep fees, music license fees and others added up to another $3.2 million in cost savings.