Emmis 3Q revenue declines, but company still posts profit

Emmis Communications Corp. Chairman Jeff Smulyan continues to see a silver lining in the otherwise dark cloud hanging over
his company and the entire radio industry.

Indianapolis-based Emmis, which released its third-quarter earning report
Friday morning, saw significant revenue declines both in the three months ended Nov. 30 and in the year-to-date period. Quarterly
revenue was $64.6 million, down 18 percent from the same period a year earlier. Revenue for the first
nine months of the fiscal year was down 23 percent from a year ago, to  $188.6 million.

Even so, the media company saw a $1.7 million profit this quarter compared to a $125.7 million loss during the same quarter
of last year. The loss last year was due primarily to a $210.2 million impairment loss related to the
Federal Communications Commission licenses during the third quarter. Emmis owns 22 radio stations in
seven U.S. markets along with radio operations in Bulgaria and Slovakia and seven U.S. magazines.

Smulyan told employees in a Friday letter that there’s reason for optimism.

“If
there’s a general theme to our results, it’s that things continue to head in the right direction,”
Smulyan wrote. “We continue to see sequential improvements in Emmis’ domestic radio results
and our advances accelerated during the recent holiday season.”

In the letter, Smulyan
touted investments to stations in New York, Los Angeles and Austin, Texas, as well as “strategy initiatives
in [Emmis’] Publishing Division focused on accelerating revenue growth during the upcoming recovery.”

“These steps should help us in the future as our business rebounds,” Smulyan added.

Smulyan told
employees that ratings at Emmis stations in St. Louis, New York, Los Angeles and Chicago were surging.
Stations in Indianapolis and Austin also were strong “across the board,” he wrote. In Indianapolis, Emmis
owns WLHK-FM 97.1, WIBC-FM 93.1, WYXB-FM 105.7 and WFNI-AM 1070.

But even the ever-optimistic Smulyan notes Emmis
is still in danger as the tumult in the radio industry continues.

“No matter how much things head in the
right direction, it’s clear we aren’t out of the woods yet,” Smulyan said. “The economy is better, but it’s
certainly not on solid footing yet. Advertisers are starting to open up their checkbooks, but they’re not ready to return
to pre-recession spending levels.”

And there’s a bit more sobering news in Emmis’ earnings filing,
which details a “precipitous decline of advertising spending in [Emmis’] domestic and international radio markets.”
Emmis’ biggest advertisers, automotive companies, spent 36 percent less with its radio stations during the first nine
months of the current fiscal year than it did during the same period a year previous.

For the nine-month period
ended November 30, 2009, revenues of Emmis’ domestic radio stations were down 21.4 percent, compared to domestic radio
markets overall where Emmis has stations, which were down 18.3 percent, according to Miller Kaplan, a Los Angeles-based media
consultancy.

Emmis shares were trading at $1.19 around noon, down 10 cents from Thursday’s closing price.