Without a major influx of cash and support from the radio industry, time and money has apparently run out for NextRadio, the bold initiative to place FM chips inside smartphones spearheaded by Emmis Communications.
Emmis Chairman and CEO Jeff Smulyan said on the company’s second quarter earnings call Thursday that Emmis is “unwilling and unable” to continue funding the NextRadio and TagStation businesses.
“Emmis and other companies in the radio industry have been working diligently to form a consortium that would own and operate the NextRadio and TagStation businesses,” Smulyan said. “The participating companies envisioned using their collective scale and resources to build an attribution platform for the radio industry that would have provided the common language and measurement that radio advertisers are demanding.
“Unfortunately, the effort to form a consortium for NextRadio and TagStation has not been successful. We have tried and have worked with a number of broadcasters, but because Emmis is unwilling and unable to continue to fund the NextRadio and TagStation businesses as they are currently structured, we plan to dramatically reduce the operations of these businesses and explore other means of eliminating the operating losses from these businesses in the coming months.”
NextRadio, developed by TagStation LLC and owned by Emmis, has been a celebrated cause for Smulyan, but financial support from the other major radio broadcast groups has been dwindling, according to periodic Emmis financial disclosures. TagStation is a cloud-based software platform that allows stations to manage album art, metadata and enhanced advertising on various devices.
“To make NextRadio successful it needed to do data attribution. To do that we need much deeper involvement [from the radio industry]. We tried. We couldn’t get the industry to come together,” Smulyan said.
Emmis disclosed during Thursday’s call that operating losses from its related NextRadio businesses totaled $7.6 million over the past 12 months ending Aug. 31, 2018.
At one time, in an effort to kick start NextRadio’s foothold in the marketplace, a consortium that included Emmis, iHeartMedia, Beasley, Radio One, Hubbard Radio, Townsquare Media, Bonneville, Entercom Communications and others, agreed to pay Sprint $15 million per year over a three-year period beginning in 2013 in return for the wireless provider activating the FM tuners in a minimum of 30 million FM-enabled wireless devices.
In all it appears Sprint was paid $39.2 million total for the app activations. Emmis ended the practice of paying cell carriers to activate the chip in smartphones in 2016, and instead adopted a revenue sharing formula with wireless providers.
Emmis never successfully convinced Apple Inc. to unlock FM chips in iPhones, despite pressure from FCC Chairman Ajit Pai and others to do so in the interest of public safety.
Emmis tried to drum up additional investment in NextRadio by giving other eligible broadcasters several “call options” to acquire all or part of NextRadio, according to paperwork filed by Emmis with the U.S. Securities Exchange Commission. The call option could have been exercised by eligible radio broadcasters in August 2017 and again in August 2019. It’s unknown whether any company pursued the option in 2017, but following yesterday’s developments it seems unlikely.