Michael Kupinski: Yeah, traditionally, your radio station seem to be pretty stable relative to your larger market radio peers. And it seems like, in general, they tend to perform better in past economic headwinds. I was just wondering, outside of the sports betting, are you still seeing the similar kind of performance relative to economic scenarios that we’ve had in the past?
Bill Wilson: Yes, very much so. And to you point, that’s why we are very disciplined. From day one of Townsquare in 2010, our strategy is to be the number one local media provider in markets outside the top 50. We’ve obviously had tremendous opportunities to move into the top 50. But we believe it is a completely different business outside the top 50 markets. Not only for radio where the companionship and €“ as I’ve described on prior calls, there has been such a lack and a deceleration of news and information. It’s quite sad in terms of the media landscape in these markets as it relates to newspapers cutting back. We’ve seen TV stations exit these markets. So we quite honestly feel like we’re serving a mission for these communities to provide news and information.
As we’ve shared in the past, that’s why, on average, in our size markets, we reach 50%, half of the adult population, through one of our AM and FMs. When you factor in our digital audience, which is significant, we reach 7 in 10 adults in the 74 markets that we operate in. So, it is such a different business. It is such a different landscape for consumer choice, as well as from competitive set in these smaller markets. And that’s why we have said, hey, let’s focus on digital as our growth engine. Right? So, today, we’re 50% digital revenue and profits. As we move forward, that will continue to grow because, as you’ve seen, our digital growth is going to be double-digits for quite some time. And the competitive set there and the ability to bring these very sophisticated digital marketing solutions with Townsquare Interactive and digital advertising solutions with Ignite is quite differentiated and, most importantly for the client, our mission is to help them grow.
And our products do that. And the fact that we can use radio, which is number one reach medium, but yet only 6% of all ad spend, but then factor in digital advertising and digital marketing solutions, which today is 65% €“ 65% of every dollar spent today goes to digital. And as I shared on my remarks, that’s moving to 75%. So that’s $0.75 on every dollar by 2027. Clearly, to be strong in digital is incredibly powerful and differentiated. And to your original point, in smaller markets, we’re bringing a level of sophistication and technology in platforms that we believe is second to none.
Michael Kupinski: If I may squeeze in just one more. On your Interactive business, are there any particular categories that are being affected at this point. And in the past, I believe that you’ve actually offered discounts, I know through the COVID situation that we had. Are you currently giving discounts? Or are you maintaining your pricing there in your Interactive business?
Bill Wilson: As it relates to categories, no. But what I would share is €“ what we’re seeing is smaller businesses. So businesses with a smaller revenue base, businesses with more challenging economics, maybe their wages are increasing based on the area. Or if they’re restaurants and their cost of eggs and food is increasing, things like that nature, we’re definitely seeing. And yes, we are working with our customers, as we did during COVID because, again, Townsquare’s mission is to help these businesses grow. So if they’re in business, and we can help them by giving them some discounts, we are definitely doing that. That worked quite well during 2020. And we went back to full pricing for those clients that we did offer discounts in 2021.
You saw that revenue growth come back quite nicely in 2021. So that was what I expect here, as well. We’re going to work with our clients and serve them and help them along this challenging time. When these conditions lift for them, I don’t know when that will be, if that’s in the back half of this year or 2024, we will then return them to full pricing. But we definitely think that’s the right thing to do. And we’re proud to do it. But it clearly will impact our short term results. But I hope and expect our investors and shareholders to look at what we did in 2020. And then look at 2021 where we posted our best record profits coming off of that, only to be beaten this past year in 2022. So, definitely, with the headwinds and these smaller businesses in TSI, you’ll see muted performance, add on the fact that we are working with them and providing discounts, that’ll add to that as well.
But we’re quite confident as we look forward in the future, and those clients get back to normal as inflation comes down, whenever that does, we’ll be in a great position again.
Operator: Our next question is from Jim Goss with Barrington Research.
James Goss: Given all that you’ve laid out now and recent past about your digital priorities, I was wondering if you might discuss the action you are apparently joining involving ownership caps within your radio station group. What are the objectives? Is a greater penetration in existing markets that you would like to adjust? And does the sort of instability at the head of the FCC with another nominee dropping out have any impact on your ability to get something like that through?
Bill Wilson: For those that don’t know, just disclose it in case anybody’s not aware, I’m also the Executive Chair of the National Association of Broadcasters on the radio side. So I’m quite involved in the NAB and some of the policies that they lobby on, including lifting the ownership caps. Personally, for Townsquare, speaking not on the NAB’s behalf, but on our company’s behalf, is the ownership rules are antiquated. They are decades old. And you can have Spotify, Pandora, YouTube, so forth and so on, have billions of offerings, yet we’re restricted to a certain number of signals. I just feel it’s rules based on another time in the past and not relevant now. So, particularly when you factor in what as I described to with Michael’s question, I don’t know how many people are in these smaller markets.
On average, our population is 300,000 people. It is really concerning to see print newspapers 10 years ago go from printing seven days a week to, many of our markets, there’s no longer a printed paper. There’s an online version with a paywall, and the majority of that content is national, not local, and the local content is crime, weather and maybe a little sports. So, we really feel that the ownership caps will allow us to super serve the communities even better. A sub point in there is, yes, we would look for more ownership and penetration in our existing markets first and then, secondarily, we would also look at other markets outside the top 50. If the caps were lifted, it would be highly advantageous. We’ve demonstrated and we’re seeing this now with Cherry Creek that we can go in and we can really create a diversified media business by transforming a local radio company into a digital first company.
So if ownership caps are lifted in the future, we would be pursuing that quite aggressively. And we think it would be the right thing to do. To your last point is, with Gigi withdrawing her nomination for the FCC, I do think it’s going to be a challenging time to get much done there. But I hope in time, and I think we’ve proven we’re quite patient in general, that the ownership caps will be lifted, because I think it’s the right thing to do for consumers and these communities.
James Goss: With regard to TSI, you mentioned that there might be some issues with the return to work aspect in Charlotte. Is that also contributing to the slowdown in the revenue gain in addition to €“ in that area? And is there some destabilization that happens when you have a changeover in personnel if you’re pushing that rather than let them work at home?
Bill Wilson: Correct. Yes. Again, in the spirit of transparency, we always like to share that maybe €“ overshare to some. But, yes, through 2022, we had a return to work policy in Charlotte. It’s our largest office with over 600 employees. And it’s also a population based on an average, let’s say, mid-20s workforce. There’s obviously exceptions to that. But the large majority, the mean is in their mid-20s. And they were obviously working remote through COVID for quite some period of time, which is similar to other businesses across the US. And we made a decision that we’d be returning back to work. And there were some exceptions to that, for people who had tenured and high performers. But if you weren’t tenured and a high performer, we, in essence, required you to come back to work.
Could have been hybrid, meaning it may have been five days in the office, could be three, two, four, one and so forth. But there was a subset of those people who opted out and looked for an opportunity with another company to be able to work remote. And so, that did have some €“ you asked about destabilization, I would just say, it wasn’t destabilizing, but it created some challenges for us. And handing over €“ we’ve been, again, transparent in that our Townsquare Interactive model has been that a client has a customer service, our customer success representative, and that’s a one to one relationship, meaning if you call into Townsquare Interactive, particularly you’ve got the same person every time. So when that person left, and more did during this time of disruption of return to work, it created more challenges for us.
I feel quite confident as we sit here on March 9, we’ve addressed those challenges. But as with a subscription business, pretty much what happened more in the last six months dictates our current results versus what’s happening today or over the next six months. So yes, return to work was definitely a challenge for us. We’ve addressed those challenges, and we’re in a great place. Just to be clear, too, in case my comment made people think we lost a lot of people, we’re net positive in terms of employees at Townsquare Interactive. And our Phoenix location, again, just opening this month in March, we’re coming up, I think, on roughly 30 people. And I think I said earlier, we have eight new hires joining us by the end of the month. So, again, robust, aggressive investment in our digital operation based on the market opportunity and our performance to date.
