How Radio is Adapting to the New World
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Radio isn't what it used to be. In perspective, my dad's family didn't have a TV until he was in middle school. But these days, radio still has its uses. Most of these uses involve listening in the car on the way to work and back.
Breaking the Duopoly Standard
Sirius XM (NASDAQ: SIRI) is a great example of when two companies that used to face off for membership dollars decide that they can work better in concert with one another. Back when they were two different companies they battled for market share between the different automakers, but now they have agreements with every major auto company. While I love competition, I admit that sometimes consolidation works well when you want to lock down a market niche.
If you love the radio and are willing to pay for a huge amount of premium content without any commercials, Sirius XM has you covered. What's really interesting about Sirius XM is that even though it's an audio format, it's still in the same category as other subscription-based services like AOL and bases its revenue off of memberships instead of advertising. However, I still worry that a dark horse is going to appear out of nowhere and crack the market like Pepsi did to Coke.
More of the Same Can Be a Good Thing
Beasley Broadcast Group (NASDAQ: BBGI) has kept its business model since it started in 1961, and so far it's doing reasonably well. Taking on new programming directors and expanding its earnings in the third quarter of this year, Beasley's AM and FM holdings across the country keep doing well. I love that Beasley has stations in 11 different markets and reaches 6.2 million people, and I can appreciate that not everything has changed in this segment of the broadcasting world. I'm not a huge fan of Beasley's rather paltry 11% profit margins, though.
Finding New Outlets
Emmis Communications (NASDAQ: EMMS) has been a hungry company since it began. Emmis has spent its time acquiring stations in Texas, LA, New York, St. Louis and even the eastern European countries Hungary, Slovakia and Bulgaria. I appreciate any company that pushes the envelope to make a great profit, and Emmis carries a strong 30.3% profit margin. I also like how Emmis is diversified enough to own a few magazines that are ostensibly able to support themselves (given Emmis's tendency to sell off less-productive assets), despite the decline in print media. Of course, I'm not too jazzed about how Emmis almost had to close its doors in 2011 due to a lack of capital. But having survived that, Emmis is showing that it's got the heart to keep going.
While having a huge number of different individual stations is usually a great idea, Grupo Radio Centro (NYSE: RC) shows that sometimes you just need a few stations that play the right content. While Radio Centro only has 11 distinct individual stations under its banner, it rocks a 19.7% profit margin and reaches every corner of Mexico through its satellite broadcasts and affiliate stations. While I'm not sure about what would happen to the company if Mexico City's tastes changed dramatically, since that is the only location where Radio Centro operates, and any kind of natural disaster there could torpedo the company's operations, I do like how powerfully Radio Centro serves the local markets. I also have a lot of respect for a company that can operate continuously from 1946 to the present, considering how musical and talk-related tastes have changed over the years.
The Two Choices
The two choices that every company has to make moving forward are to either adapt and overcome or die an unceremonious death. The companies above are making good decisions so far, and I'm fairly confident that they could all be decent buys. Just remember to do your research because the marketing angle of radio is a fickle beast.
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