Radio One Loss Grew With Drop In Ad Sales

Spending Shifts to Web, Firm Says

Urban media company Radio One yesterday reported a second-quarter loss of $11.7 million as it contends with an industry-wide decline in radio advertising revenue and expands its Internet efforts.

The company said average ad prices were down 5 percent as budget-conscious companies have tightened up and shifted spending to the Web.

"Listening to radio is stronger than it has ever been," said Perry Steiner of Arlington Capital Partners, which bought five stations from Lanham-based Radio One last year. "But we're in a difficult economy, and one of the first things companies will cut is their advertising budget. . . . More and more dollars are going to the Internet."

Radio One officials said they expect the market to continue to soften and have been concentrating on the company's Web presence.

"Online is the fastest-growing ad category right now," said chief executive Alfred C. Liggins III. "I believe it will be a growth driver into the future. It's also part of our diversification strategy because ultimately I believe our future is in being a black media and content company, and not just a radio company."

The company lost 12 cents a share, compared with a loss of 5 cents, or $5.1 million, in the corresponding period in 2007. Revenue rose to $83.4 million from $82.6 million in the three months ended June 30.

Operating expenses increased 16.7 percent, to $71.6 million, including $10.4 million in bonuses for Liggins; $3.5 million for the operations of its new social networking site, Community Connect; and $2.1 toward its Web efforts.

This spring, the company's board gave Liggins and his mother, Radio One founder Cathy Hughes, millions of dollars in bonuses, raises and retroactive compensation.

Radio One's stock gained 4 cents yesterday, to close at $1.03. A year ago, shares were trading above $4.

While analysts say radio traditionally gets bumps in election years and Radio One expects some gains, Liggins said he is not counting on an "Obama" effect.

Company officials noted that the sale of Radio One stations in Los Angeles, Miami and other underperforming markets helped it reduce debt, which now amounts to $744.1 million, down from $815.5 million as of Dec. 31. Radio One's debt level is higher than its peers, but the company said it is within industry standards if $12 million in spending on Internet operations is not counted.

Liggins's online strategy involves bringing together Web sites with original content targeted at black consumers under the name Interactive One. The company this spring spent $38 million to buy Community Connect, which provides a platform for social networking among blacks, Asians and Hispanics. One company analyst on a conference call yesterday asked Liggins whether he would consider selling off the content that is not focused on African Americans.

"We're exploring what options there are . . . to match up the Latino sites with a network of other Latino sites," said Liggins, who described the company's Web sites as "behind the curve" in revenue.

"We're a black media company at the end of the day," he said. "Everything we have that's not black-targeted is up for discussion."

Liggins said his plans will position Radio One and its subsidiaries as the vehicle for reaching 82 percent of black American consumers.

"We're going into the mouth of the trough of the economic decline," he said. "We'll flourish as much as one can in terms of grabbing market share during the downturn."