Why Emmis Pulled The Plug On NextRadio And TagStation.

Story by Inside Radio

During a meeting last week in its home market of Indianapolis, Emmis CEO Jeff Smulyan delivered an ultimatum of sorts to broadcasters from various companies who had assembled to discuss the future of Next Radio and TagStation. “We finally said, ‘Guys, we can’t do this anymore,’” Smulyan recounted to investors Thursday. After bankrolling efforts to put FM on smartphones, and racking up millions of dollars in operating losses during the past five years, Emmis will radically reduce operations at its two subsidiaries.

“We have tried. We have worked with a number of broadcasters. We’ve had so many people who supported our efforts,” Smulyan continued, explaining how efforts to build a consortium of broadcasters to continue funding the two businesses had failed. “We tried but we couldn’t get the industry to come together. Everybody unanimously said, ‘We have to have this.’ But when it came time for pitching in and helping fund it, we couldn’t get enough support.”

Back in 2013, when NextRadio was a relatively new concept, the industry did come together to invest in making FM radio broadcasts accessible on smartphones. Emmis acted as a conduit for the industry agreeing to pay Sprint up to $45 million over a three-year period to install the app on its mobile devices.

While it wasn’t able to collect all the money it expected from fellow broadcasters, foreshadowing what was to come, as a catalyst, it seemed to be money well spent on behalf of the radio industry. By July 2015, AT&T agreed to include FM chip activation on its Android specs to wireless device manufacturers, followed by T-Mobile in September 2016. In all cases, the wireless carriers would receive a share of some revenue generated by the NextRadio app. From there NextRadio went directly to device makers, cutting deals with BLU Products, Alcatel, LG and Samsung for their Android devices.

But Apple remained a persistent and significant holdout. It even rebuffed efforts by Federal Communications Commission chair Ajit Pai to get FM on iPhones as an important tool during disasters. By not opening its walled garden to FM radio, Apple effectively shut out nearly half of the smartphone-using population in the U.S.

Low Adoption Rates

NextRadio was also stymied by low adoption rates – as of April 2017 the app that wakes up dormant FM chips embedded in smartphones had been downloaded just 13 million times, while active listeners to FM-enabled phones amounted to only one million per month. That’s when NextRadio added streaming capabilities while remaining committed to unlocking the FM chip in all phones. More recently it focused more intently on using the technology to develop attribution capabilities to show advertisers the impact of their ad campaigns.

Emmis had given the radio industry a “call option” to buy NextRadio and TagStation, which provides interactive visual elements like album art and advertiser calls-to-action synched with FM broadcasts. But the August 2017 date to exercise the call option came and went without any takers. A second option would have opened up in August 2019. But with losses mounting, Emmis has decided it can’t wait that long.

Looking back, Smulyan said industry support “was really remarkable” for the years-long initiative. “The challenge was it was 10 miles wide and about a tenth of an inch deep,” he said during Emmis’ financial results call Thursday. Where the support came up short was in radio companies providing access to data and financial funding. “We really needed to use this remarkable network of all the stations that were involved to come together to provide aggregated data,” Smulyan said, in reference to the Dial Report which collects first-party radio station ad data and smartphone user data, including listener location, brick and mortar store traffic, exposure, engagement and audience behavior to provide attribution data for ad campaigns. “Some people understood it, a lot of people didn't,” Smulyan said. In addition to a deeper level of involvement on the data piece of the puzzle, Emmis, under pressure from its board, concluded it could no longer tolerate financial losses incurred from being the primary funding source for NextRadio and TagStation. “At the end of the day there just weren’t enough of those companies to say we’ll help support it,” Smulyan said. And when the Emmis board asked Smulyan why “one small company” was funding a sizable R&D project for the U.S. radio industry, “It was a question I just couldn’t answer,” he told investors.

NextRadio and TagStation cost Emmis $7.7 million in operating losses during the twelve months ended August 31. Smulyan thanked employees of the two companies for their “brilliant work,” and said he didn’t know what the future holds for them.

Future Of FM Chip

While the future of NextRadio looks bleak, FM radio functionality is likely to continue to be a part of the communications chip in smartphones, which also enables services such as Bluetooth and WiFi. With Smartphone manufacturers building phones for a global market and FM radio capability being a popular service around the world, manufacturers aren’t likely to discontinue FM radio capability from their devices.

The National Association of Broadcasters, which has invested in and lobbied for FM on smartphones, will continue to make software enabling FM radio functionality in mobile devices available to app developers for free. Since August 2016, the trade group’s PILOT technology and innovation division has funded development of an FM API for accessing and controlling the FM chip in many Android smartphones and made the API available to app developers through its PILOT FM Radio SDK portal.