Radio Web

Radio Web

UPDATE by Jean Gruss | Editor/Lee-Collier

The onslaught of the Internet, satellite radio and podcasts has altered the radio business. But Beasley Broadcast Group is investing in new technology to counter those threats.

Advertising on the Internet has become such a potent force that it will overtake radio advertising for the first time this year.

But Beasley Broadcast Group of Naples and other companies that operate terrestrial radio stations are embracing the new medium. "We have to find better ways to marry the Internet with radio," says Caroline Beasley, the chief financial officer of the radio company founded by her father, George Beasley.

Now, every one of Beasley's 44 stations has a Web site and most of them are broadcasting their programming over the Internet, a process known as "streaming". Although still small, Beasley's percentage of revenue from the Internet has doubled in the past year.

Broadcasting over the Internet is one way Beasley is keeping competitors from eating away at its advertising lifeblood. So far, the company has staved off the threat with a distinct advantage: terrestrial radio is still free for listeners.

It's also investing in new technology called high-definition radio, or HD radio. The promise of HD radio for listeners is CD-quality sound on the FM band and FM-quality sound on the AM band because the digital signal doesn't take as much room as the older analog one.

In addition, HD radio lets broadcasters fit as many as eight stations on a single band allowing it to sell more advertising. But the challenge is that listeners need a special receiver to be able to hear those extra channels. These receivers are only just now becoming widely available in stores such as Circuit City, Best Buy, Costco and Wal-Mart. And automakers such as BMW, Volvo, Ford, Hyundai and Jaguar are installing the receivers in their new models.

Converting stations to digital radio is a costly process. Beasley is spending $125,000 per station to upgrade its signal to HD radio and it has done that at a little more than half its stations.

Beasley is making these upgrades even as the local economies in some of its markets are declining, including those in its own back yard. "I think for the first time in years and years, the Fort Myers market experienced a decline in advertising," Beasley says.

Surprisingly, the Miami market is holding up well considering the depressed real estate market and the fact that it is broadcasting games for the worst team in the National Football League right now, the Miami Dolphins. Miami has a more diverse economy and it's a big international destination, two factors that work in its favor.

Beasley acknowledges that investors have sent the company's stock down in light of all the new competition. It stock recently was down about 30% for the year (symbol BBGI, recent stock price $7). But Beasley is not alone, as the radio broadcasting industry has fallen out of favor on Wall Street. Still, Beasley says, the company is doing the right things: investing in new technology, buying back stock, paying a regular dividend and lowering debt.

"We're using our free cash flow wisely," Beasley says.

REVIEW SUMMARY

Company: Beasley

Broadcast Group

Industry: Terrestrial radio

Key: Invest in new technology to remain competitive.