FORM 10-K

(Mark One)

þ	Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Fiscal Year Ended February 28, 2005

o	Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Transition Period from _________ to _________.

EMMIS COMMUNICATIONS CORPORATION

INDIANA
(State of incorporation or organization)

0-23264
(Commission file number)

35-1542018
(I.R.S. Employer
Identification No.)

ONE EMMIS PLAZA
40 MONUMENT CIRCLE
SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices)

(317) 266-0100
(Registrant’s Telephone Number,
Including Area Code)

     SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

     SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class A common stock, $.01 par value of Emmis Communications Corporation; 6.25% Series A Cumulative Convertible Preferred Stock, $.01 par value of Emmis Communications Corporation.

     Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Act). Yes þ No o.

     The aggregate market value of the voting stock held by non-affiliates of the registrant, as of August 31, 2004, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $970,450,000.

     The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of April 30, 2005, was:

DOCUMENTS INCORPORATED BY REFERENCE

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s Knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

FORM 10-K

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS.

GENERAL

     We are a diversified media company with radio broadcasting, television broadcasting and magazine publishing operations. We operate the eighth largest publicly traded radio portfolio in the United States based on total listeners. We own and operate seven FM radio stations serving the nation’s top three markets – New York, Los Angeles and Chicago. Additionally, we own and operate sixteen FM and two AM radio stations with strong positions in Phoenix, St. Louis, Austin (we have a 50.1% controlling interest in our radio stations located there), Indianapolis and Terre Haute, IN. We also own and operate a leading portfolio of television stations covering geographically diverse mid-sized markets in the U.S., as well as the large markets of Portland and Orlando. The sixteen television stations we own and operate have a variety of network affiliations: five with CBS, five with FOX, three with NBC, one with ABC and two with WB.

     Our operational focus is on maintaining our leadership position in broadcasting by continuing to enhance the operating performance of our broadcast properties. We also are regularly looking to acquire underdeveloped properties that offer the potential for significant improvements through the application of our operational expertise. We have created top performing radio stations that rank, in terms of primary demographic target audience share, among the top ten stations in the New York, Los Angeles and Chicago radio markets according to the Fall 2004 Arbitron Survey. We believe that this strong large-market radio presence and our diversity of station formats make us attractive to a broad base of radio advertisers and reduces our dependence on any one economic sector or specific advertiser. We seek to be the largest local television presence in our television markets by combining network-affiliated programming with leading local news. We have created television stations with a strong local “brand” within the station’s market, allowing viewers and advertisers to identify with the station as we build the station’s franchise value. We have generally improved the profitability of our television stations since our acquisition of them by applying the focused research and marketing techniques we utilize successfully in our radio operations and by concentrating our sales efforts locally.

     In addition to our domestic radio and TV broadcasting properties, we operate a news information radio network in Indiana, publish Texas Monthly, Los Angeles, Atlanta, Indianapolis Monthly, Cincinnati, Tu Ciudad, and Country Sampler and related magazines, and operate an international radio business and a regional book publisher. Internationally, we operate nine FM radio stations in the Flanders region of Belgium and have a 59.5% interest in a national top-ranked radio station in Hungary. Subsequent to year end, we purchased a radio network in Slovakia. We also engage in various businesses ancillary to our broadcasting business, such as consulting and broadcast tower leasing.

BUSINESS STRATEGY

     We are committed to maintaining our leadership position in broadcasting, enhancing the performance of our broadcast and publishing properties, and distinguishing ourselves through the quality of our operations. Our strategy is focused on the following operating principles:

Develop Innovative Local Programming. We believe that knowledge of local markets and innovative programming developed to target specific demographic groups are the most important determinants of individual radio and television station success. We conduct extensive market research to identify underserved segments of our markets and to ensure that we are meeting the needs of our target audience. Utilizing the research results, we concentrate on providing a focused programming format carefully tailored to the demographics of our markets and our audiences’ preferences. Our local sales force has capitalized on our local presence to increase the percentage of our net revenues from local advertising. Historically, local advertising revenues have been a more stable revenue source for the broadcast industry, and we believe local sales will continue to be less susceptible to economic swings than national sales.

Focus Our Sales And Marketing Efforts. We design our local and national sales efforts based on advertiser demand and our programming compared to the competitive formats within each market. We provide our sales force with extensive training and the technology for sophisticated inventory management techniques, which provide frequent price adjustments based on regional and market conditions. Our sales philosophy is to maintain the price integrity of our available inventory. We will accept a lower sell-out percentage in periods of weak advertiser demand instead of cutting prices to fill all available inventory. Additional Company resources have been allocated to locate, hire, train and retain top sales people. Under the Emmis Sales Assault Plan, a

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Company-wide initiative geared toward attracting and developing sales leaders in the radio, television and magazine industries, we added and trained scores of sales people to our workforce in recent years, which was incremental to hirings in the normal course of business. As a result, we have significantly increased our share of local television revenues and maintained our share of local radio revenues, despite direct format attacks from competitors in our New York and Chicago markets.

Develop Strong Local Identities For Our Television Stations. We strive to create television stations with a strong local “brand” within the station’s market, allowing viewers and advertisers to identify with the station as we build the station’s franchise value. We believe that aggressive promotion and strong local station management, strategies which we have found successful in our radio operations, are critical to the creation of strong local television stations as well. Additionally, we believe that the production and broadcasting of local news and events programming can be an important link to the community and an aid to the station’s efforts to expand its viewership. Local news and events programming can provide access to advertising sources targeted specifically to the local or regional community. We believe that strong local news generates high viewership and results in higher ratings both for programs preceding and following the news.

Pursue Strategic Acquisitions. We have built our portfolio by selectively acquiring underdeveloped media properties in desirable markets at reasonable purchase prices where our experienced management team has been able to enhance value. We have been successful in acquiring these types of media properties and improving their ratings, revenues and cash flow with our marketing focus and innovative programming expertise. We intend to continue to selectively acquire media properties in desirable markets to create value by developing those properties to increase their cash flow. We find underdeveloped properties particularly attractive because they offer greater potential for revenue and cash flow growth than mature properties through the application of our operational experience.

Encourage A Performance-Based, Entrepreneurial Management Approach. We believe that broadcasting is primarily a local business and that much of its success is the result of the efforts of regional and local management and staff. We have attracted and retained an experienced team of broadcast professionals who understand the viewing and listening preferences, demographics and competitive opportunities of their particular market. Our decentralized approach to station management gives local management oversight of station spending, long-range planning and resource allocation at their individual stations, and our approach also rewards all employees based on those stations’ performance. In addition, we encourage our managers and employees to own a stake in the Company, and most of our full-time employees have an equity ownership position in Emmis. We believe that our performance-based, entrepreneurial management approach has created a distinctive corporate culture, making Emmis a highly desirable employer in the broadcasting industry and significantly enhancing our ability to attract and retain experienced and highly motivated employees and management. In 2005, Fortune magazine recognized Emmis as one of the “100 Best Companies to Work For.”

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RADIO STATIONS

     In the following table, “Market Rank by Revenue” is the ranking of the market revenue size of the principal radio market served by the station among all radio markets in the United States. Market revenue and ranking figures are from BIA’s Investing in Radio 2005 (1^st Edition). “Ranking in Primary Demographic Target” is the ranking of the station among all radio stations in its market based on the Fall 2004 Arbitron Survey. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” represents a percentage generally computed by dividing the average number of persons over age 12 listening to a particular station during specified time periods by the average number of such persons for all stations in the market area as determined by Arbitron.

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In addition to our other domestic radio broadcasting operations, we own and operate Network Indiana, a radio network that provides news and other programming to nearly 70 affiliated radio stations in Indiana. Internationally, we operate nine FM radio stations in the Flanders region of Belgium and have a 59.5% interest in a national top-ranked radio station in Hungary. Subsequent to year end, we purchased a radio network in Slovakia. We also engage in various businesses ancillary to our broadcasting business, such as consulting and broadcast tower leasing.

TELEVISION STATIONS

     In the following table, “DMA Rank” is estimated by the A.C. Nielsen Company (“Nielsen”) as of January 2005. Rankings are based on the relative size of a station’s market among the 210 generally recognized Designated Market Areas (“DMAs”), as defined by Nielsen. “Number of Stations in Market” represents the number of television stations (“Reportable Stations”) designated by Nielsen as “local” to the DMA, excluding public television stations and stations which do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative audience of less than 2.5%) for reporting in the Sunday through Saturday, 7:00 a.m. to 1:00 a.m. time period. “Station Rank” reflects the station’s rank relative to other Reportable Stations based upon the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday through Saturday during February 2005. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” reflects an estimate of the share of DMA households viewing television received by a local commercial station in comparison to other local commercial stations in the market as measured from 9:00 a.m. to midnight, Sunday through Saturday.

     Emmis also owns and operates nine satellite stations that primarily re-broadcast the signal of certain of our local stations. A local station and its satellite station are considered one station for FCC and multiple ownership purposes, provided that the stations are in the same market.

     Each of our television stations is affiliated with CBS, NBC, ABC, Fox or WB (each a “Network”) pursuant to a written network affiliation agreement, except WFTX in Ft. Myers, FL, which is affiliated with Fox pursuant to an oral affiliation agreement. Each affiliation agreement provides the affiliated television station with the right to rebroadcast all programs transmitted by the Network with which the television station is affiliated. In return, the Network has the right to sell a substantial portion of the advertising time during such broadcasts.

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     In the years ended February 2003, 2004 and 2005, we received approximately $3.3 million, $2.0 million and $2.0 million, respectively, in Network compensation payments, which represented less than 1% of our total net revenues in each year. The long established Networks (ABC, CBS and NBC) have historically paid the affiliated station to broadcast the Network’s programming. This Network compensation payment used to vary depending on the time of day that a station broadcast the Network programming. Typically, prime-time programming generated the highest hourly Network compensation payments. In the recent years, however, ABC, CBS and NBC have been eliminating or sharply reducing compensation payments to stations for clearance of Network programming. In some cases, Networks have undertaken to cut compensation when a station is to be sold and the affiliation agreement is to be assigned or transferred, or when an old affiliation agreement has expired. The more recently established Networks (Fox and WB) generally pay little or no cash compensation for the clearance of Network programming. They tend, however, to offer the affiliated station more advertising availability for local sale within Network programming than do the long established Networks.

PUBLISHING OPERATIONS

     We publish the following magazines through our publishing division:

     In addition to our monthly and bimonthly magazines, Emmis also owns and operates a regional book publisher, Emmis Books.

INTERNET AND NEW TECHNOLOGIES

     We believe that the development and explosive growth of the Internet present not only a challenge, but an opportunity for broadcasters and publishers. The primary challenge is increased competition for the time and attention of our listeners, viewers and readers. The opportunity is to further enhance the relationships we already have with our listeners, viewers and readers by expanding products and services offered by our stations and magazines. For that reason, we have individuals at many of our properties dedicated to website maintenance and generating revenues from the properties’ websites.

     We believe that there are opportunities to improve and expand our television operations utilizing new technologies such as those that capitalize on the digital spectrum. Each television broadcaster has spent considerable capital complying with the digital conversion mandated by the FCC. Emmis has spent approximately $26.5 million converting its stations to digital. We believe we have developed a compelling business model to monetize this digital spectrum. Our model contemplates local television operators pooling their digital spectrum in individual markets and offering an over-the-air, low cost alternative to cable and satellite. Although we believe this subscription-based model is viable, its ultimate success will depend upon industry involvement, customer penetration and certain other contingencies. Emmis incurred approximately $4.0 million of costs in fiscal 2005 related to the development of a formal business plan

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and industry-related organizational costs. These costs are part of corporate expenses. Emmis continues to pursue industry participation for this business venture. Emmis expects to incur less than $1 million of costs in fiscal 2006 related to the organizational aspects of this venture.

COMMUNITY INVOLVEMENT

     We believe that to be successful, we must be integrally involved in the communities we serve. To that end, each of our stations participates in many community programs, fundraisers and activities that benefit a wide variety of organizations. Charitable organizations that have been the beneficiaries of our contributions, marathons, walkathons, dance-a-thons, concerts, fairs and festivals include, among others, Give2Asia, United Way’s September 11^th Fund, The March of Dimes, American Cancer Society, Riley Children’s Hospital, The Salvation Army and research foundations seeking cures for ALS, cystic fibrosis, leukemia and AIDS and helping to fight drug abuse. In addition to our planned activities, our stations and magazines take leadership roles in community responses to natural disasters, such as commercial-free news broadcasts covering the events of September 11^th and the war in Iraq and special fundraisers for victims of the tsunami disaster. The National Association of Broadcasters Education Foundation honored us with the Hubbard Award, honoring a broadcaster “for extraordinary involvement in serving the community.” Emmis was only the second broadcaster to receive this prestigious honor.

INDUSTRY INVOLVEMENT

     We have an active leadership role in a wide range of industry organizations. Our senior managers have served in various capacities with industry associations, including as directors of the National Association of Broadcasters, the Television Operators Caucus, the Radio Advertising Bureau, the Radio Futures Committee, the Arbitron Advisory Council, and as founding members of the Radio Operators Caucus. Our chief executive has been honored with the National Association of Broadcasters’ “National Radio Award” and as Radio Ink’s “Radio Executive of the Year.” At various times we have been voted Most Respected Broadcaster in polls of radio industry chief executive officers and managers, and our management and on-air personalities have won numerous prestigious industry awards.

COMPETITION

     Radio and television broadcasting stations compete with the other broadcasting stations in their respective market areas, as well as with other advertising media such as newspapers, cable, magazines, outdoor advertising, transit advertising, the Internet and direct mail marketing. Competition within the broadcasting industry occurs primarily in individual market areas, so that a station in one market (e.g., New York) does not generally compete with stations in other markets (e.g., Chicago). In each of our markets, our stations face competition from other stations with substantial financial resources, including stations targeting the same demographic groups. In addition to management experience, factors that are material to competitive position include the station’s rank in its market in terms of the number of listeners or viewers, authorized power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other stations in the market area. We attempt to improve our competitive position with programming and promotional campaigns aimed at the demographic groups targeted by our stations. We also seek to improve our position through sales efforts designed to attract advertisers that have done little or no broadcast advertising by emphasizing the effectiveness of radio and television advertising in increasing the advertisers’ revenues. Changes in the policies and rules of the FCC permit increased joint ownership and joint operation of local stations. Those stations taking advantage of these joint arrangements (including our New York, Los Angeles, Chicago, St. Louis, Indianapolis, Austin and Terre Haute clusters) may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although we believe that each of our stations can compete effectively in its market, there can be no assurance that any of our stations will be able to maintain or increase its current audience ratings or advertising revenue market share.

     Although the broadcasting industry is highly competitive, barriers to entry exist. The operation of a broadcasting station in the United States requires a license from the FCC. Also, the number of stations that can operate in a given market is limited by the availability of the frequencies that the FCC will license in that market, as well as by the FCC’s multiple ownership rules regulating the number of stations that may be owned and controlled by a single entity and cross ownership rules which limit the types of media properties in any given market that can be owned by the same person or company.

     The broadcasting industry historically has grown in terms of total revenues despite the introduction of new technology for the delivery of entertainment and information, such as cable television, the Internet, MP3 players, satellite radio, satellite television, audio tapes and compact discs. We believe that radio’s portability in particular makes it less vulnerable than other media to competition from new methods of distribution or other technological advances. There can be no assurance, however, that the development or introduction

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in the future of any new media technology will not have an adverse effect on the radio or television broadcasting industry.

ADVERTISING SALES

     Our stations and magazines derive their advertising revenue from local and regional advertising in the marketplaces in which they operate, as well as from the sale of national advertising. Local and most regional sales are made by a station’s or magazine’s sales staff. National sales are made by firms specializing in such sales which are compensated on a commission-only basis. We believe that the volume of national advertising revenue tends to adjust to shifts in a station’s audience share position more rapidly than does the volume of local and regional advertising revenue. During the year ended February 28, 2005, approximately 24% of our total advertising revenues were derived from national sales and 76% were derived from local and regional sales. For the year ended February 28, 2005, our radio stations derived a higher percentage of their advertising revenues from local and regional sales (83%) than our television (73%) and publishing entities (61%).

EMPLOYEES

     As of February 28, 2005 Emmis had approximately 2,514 full-time employees and approximately 488 part-time employees. We have approximately 278 employees at various radio and television stations represented by unions. We consider relations with our employees to be good. In January 2005, Fortune magazine named Emmis one of the “100 Best Companies to Work For.”

INTERNET ADDRESS AND INTERNET ACCESS TO SEC REPORTS

     Our Internet address is www.emmis.com. You may obtain through our Internet website, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports will be available the same day we electronically file such material with, or furnish such material to, the SEC. We have been making such reports available on the same day they are filed during the period covered by this report.

FEDERAL REGULATION OF BROADCASTING

     Television and radio broadcasting are subject to the jurisdiction of the Federal Communications Commission (the “FCC”) under the Communications Act of 1934, as amended [in part by the Telecommunications Act of 1996 (the “1996 Act”)] (the “Communications Act”). Television or radio broadcasting is prohibited except in accordance with a license issued by the FCC upon a finding that the public interest, convenience and necessity would be served by the grant of such license. The FCC has the power to revoke licenses for, among other things, false statements made in applications or willful or repeated violations of the Communications Act or of FCC rules. In general, the Communications Act provides that the FCC shall allocate broadcast licenses for television and radio stations in such a manner as will provide a fair, efficient and equitable distribution of service throughout the United States. The FCC determines the operating frequency, location and power of stations; regulates the equipment used by stations; and regulates numerous other areas of television and radio broadcasting pursuant to rules, regulations and policies adopted under authority of the Communications Act. The Communications Act, among other things, prohibits the assignment of a broadcast license or the transfer of control of an entity holding such a license without the prior approval of the FCC. Under the Communications Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with broadcast stations.

     The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Reference should be made to the Communications Act as well as FCC rules, public notices and rulings for further information concerning the nature and extent of federal regulation of radio and television stations. Other legislation has been introduced from time to time which would amend the Communications Act in various respects, and the FCC from time to time considers new regulations or amendments to its existing regulations. We cannot predict whether any such legislation will be enacted or whether new or amended FCC regulations will be adopted or what their effect would be on Emmis.

     LICENSE RENEWAL. Radio and television stations operate pursuant to broadcast licenses that are ordinarily granted by the FCC for maximum terms of eight years and are subject to renewal upon approval by the FCC. Our licenses currently have the following expiration dates, until renewed¹:

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     Under the Communications Act, at the time an application is filed for renewal of a station license, parties in interest, as well as members of the public, may apprise the FCC of the service the station has provided during the preceding license term and urge the denial of the application. If such a petition to deny presents information from which the FCC concludes (or if the FCC concludes on its own motion) that there is a “substantial and material” question as to whether grant of the renewal application would be in the public interest under applicable rules and policy, the FCC may conduct a hearing on specified issues to determine whether the renewal application should be granted. The Communications Act provides for the grant of a renewal application upon a finding by the FCC that the licensee:

•	has served the public interest, convenience and necessity;
•	has committed no serious violations of the Communications Act or the FCC rules; and
•	has committed no other violations of the Communications Act or the FCC rules which would constitute a pattern of abuse.

     If the FCC cannot make such a finding, it may deny the renewal application, and only then may the FCC consider competing applications for the same frequency. In a vast majority of cases, the FCC renews a broadcast license even when petitions to deny have been filed against the renewal application.

     Petitions to deny have been filed against the renewal applications for WKQX and KPNT, and an informal objection has been filed against the renewal applications of the Company’s Indiana radio stations. See “PROGRAMMING AND OPERATION.”

     REVIEW OF OWNERSHIP RESTRICTIONS. The 1996 Act required the FCC to review all of its broadcast ownership rules every two years and to repeal or modify any of its rules that are no longer “necessary in the public interest.” Pursuant to recent congressional appropriations legislation, these reviews now must be conducted once every four years.

     On June 2, 2003, the FCC adopted its most recent broadcast ownership review decision, in which it modified several of its regulations governing the ownership of radio and television stations in local markets. On June 24, 2004, however, the United States Court of Appeals for the Third Circuit released a decision rejecting much of the Commission’s 2003 decision. While affirming the FCC in certain respects, the Third Circuit found fault with the proposed new limits on media combinations, remanded them to the agency for further proceedings and extended a stay on the implementation of the new rules that it had imposed in September 2003. As a result, the restrictions that were in place prior to the FCC’s 2003 decision generally continue to govern media transactions, pending completion of the agency proceedings on remand, possible legislative intervention and/or further judicial review. In January 2005, several parties filed petitions for review by the U.S. Supreme Court of the Third Circuit’s decision. These petitions remain pending. The discussion below reviews the changes contemplated in the FCC’s 2003 decision and the Third Circuit’s response to the revised ownership regulations that the Commission adopted.

     Local Radio Ownership:

     The local radio ownership rule limits the number of commercial radio stations that may be owned by one entity in a given radio market based on the number of radio stations in that market:

•	if the market has 45 or more radio stations, one entity may own up to eight stations, not more than five of which may be in the same service (AM or FM);
•	if the market has between 30 and 44 radio stations, one entity may own up to seven stations, not more than four of which may be in the same service;
•	if the market has between 15 and 29 radio stations, a single entity may own up to six stations, not more than four of which may be in the same service; and
•	if the market has 14 or fewer radio stations, one entity may own up to five stations, not more than three of which may be in the same service, however one entity may not own more than 50% of the stations in the market.

     Each of the markets in which our radio stations are located has at least 15 commercial radio stations.

     Although the FCC’s June 2, 2003 decision did not change the numerical caps under the local radio rule, the Commission adjusted the rule by deciding that both commercial and noncommercial stations could be counted in determining the number of stations in a radio market. The decision also altered the definition of the relevant local market for purposes of the rule. In addition, the agency determined that radio station Joint Sales Agreements (“JSAs”) will be attributable under the local ownership rule where the brokering party sells

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more than 15% of the brokered station’s advertising time per week and owns or has an attributable interest in another station in the local market. Existing JSAs that result in attribution and cause the brokering station to exceed the ownership limits will be grandfathered from the effective date of the Commission’s decision (which, as of this writing, has not occurred pursuant to the judicial stay discussed above). The Third Circuit upheld each of these changes to the local radio rule. In response to a rehearing request from the Commission, the court lifted its stay with respect to these modifications, allowing them to go into effect. However, the court questioned the FCC’s decision to maintain the pre-existing numerical caps listed above, and remanded them to the agency for further consideration.

     In addition, over the past several years, the FCC has been aggressive in examining issues of market concentration when considering radio station acquisitions, even where the numerical limits described above are not violated. In some instances, the FCC has delayed its approval of proposed radio station purchases because of market concentration concerns, and in several recent cases, the FCC has ordered evidentiary hearings to determine whether a proposed transaction would result in excessive concentration.

     Local Television Ownership:

     The local television ownership rule (or so-called “duopoly” rule) permits an entity to own two or more television stations in separate Designated Market Areas (“DMAs”). The rule also permits an entity to own two or more television stations in the same DMA if:

•	the coverage areas of the stations do not overlap, or
•	at least eight, independently-owned and -operated full-power non-commercial and commercial operating TV stations will remain in the market post-merger (the “eight voices test”), and one of the two commonly-owned stations is not among the top four television stations in the market based on audience share ratings (the “top four rule”).
	Permanent waivers of the television duopoly rule are considered if one of the stations is:
•	a “failed station,” i.e., off-air for more than four months or involved in an involuntary bankruptcy proceeding;
•	a “failing station,” i.e., having a low audience share and financially struggling; or
•	an unbuilt facility, where the permittee has made substantial progress towards constructing the facility.

     The FCC’s June 2003 decision significantly relaxed the restriction on television duopolies by permitting a company to own two TV stations in any DMA with at least five television stations (regardless of whether the stations are separately owned), but retaining the top four rule. In DMAs with 18 or more TV stations, the new rule would allow a company to own three TV stations so long as no more than one is among the market’s top four. In addition to retaining the failed, failing and unbuilt station waiver standards, the new rule also allows parties to seek waivers of the top four restriction in DMAs with 11 or fewer stations. The Third Circuit upheld the top four rule, but remanded for further consideration the other numerical limits applicable to same-market TV station combinations. The eight voices test of the pre-2003 rules therefore remains in effect.

     Emmis’ acquisition of the Lee Enterprises stations required a waiver of the pre-existing television duopoly rule because the signals of KHON-TV and KGMB-TV (one of the Lee Enterprises stations) overlap, the stations serve the same market, and both stations are rated among the top four in that market. In approving the acquisition, the FCC granted a temporary waiver of the rule, ordering that an application for divestiture of either KHON-TV or KGMB-TV (plus associated “satellite” stations) be filed on or before April 1, 2001; that deadline was subsequently extended at our request to April 1, 2002. In February 2002, we filed a request for a further extension to April 1, 2003, which was opposed by a Honolulu broadcaster. In response to our further extension request, the FCC required us to file additional information concerning our divestiture efforts. Pending its review of the information we submitted, the FCC granted us an interim extension of our waiver until July 1, 2002. In addition, in May 2002, we filed a request for interim relief with the Commission, asking that the divestiture requirement be stayed pending the outcome of the 2002 broadcast ownership review. That request was opposed by the same Honolulu broadcaster who opposed the February extension request, as well as by two local public interest groups. In September 2002, we supplemented the request for interim relief with additional information.

     As part of its June 2003 ownership decision, the Commission required all entities (including Emmis) with pending waiver requests of the local television ownership rule to come into compliance with the revised rule within 60 days of the effective date of the Order. As noted above, the effectiveness of the Commission’s decision has been stayed pending the outcome of judicial review. Since both KHON-TV and KGMB-TV are among the top four stations in the Honolulu market, Emmis’ Hawaii television holdings are not in compliance with the modified version of the ownership rule. Further, because the Honolulu market contains more than 11 television stations, Emmis is not eligible for a waiver of the rule under the additional waiver standard adopted in the June 2003 decision.

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Accordingly, when and if the stay is lifted, Emmis likely will be required either to divest one of its Honolulu stations or to seek a permanent waiver of the television duopoly rule. If such a waiver is requested and ultimately denied, divestiture of one station will be required.

     National Television Ownership:

     The 1996 Act required the FCC to relax its restriction on the number of television stations that a single entity may own nationwide. Specifically, the rule was adjusted to restrict ownership to stations reaching, in the aggregate, no more than 35 percent of the total national audience. An owner of a UHF station is attributed with only 50% of the TV households in the station’s market (“UHF discount”). In its June 2003 decision, the Commission adjusted the national cap to 45% and retained the UHF discount. Congress subsequently prevented implementation of the revised national cap through appropriations legislation. Specifically, the Consolidated Appropriations Act of 2004 included a compromise provision directing the FCC to set the cap at 39%. As a result of this congressional intervention, the national ownership cap is not under consideration in the pending judicial review of the June 2003 decision.

     Cross-Media Ownership:

     Pre-Existing Radio/Television Cross-Ownership Rule: The FCC’s radio/television cross-ownership rule generally permits the common ownership of the following combinations in the same market, to the extent permitted under the FCC’s television duopoly rule:

•	up to two commercial television stations and six commercial radio stations or one commercial television station and seven commercial radio stations in a market where at least 20 independent media voices will remain post-merger;
•	up to two commercial television stations and four commercial radio stations in a market where at least 10 independent media voices will remain post-merger; and
•	two commercial television stations and one commercial radio station in a market with less than 10 independent media voices that will remain post-merger.

For purposes of this rule, the FCC counts as “voices” commercial and non-commercial broadcast television and radio stations as well as some daily newspapers and cable operators. The Commission will consider permanent waivers of its revised radio/television cross-ownership rule only if one of the stations is a “failed station.”

     Pre-Existing Newspaper/Broadcast Cross-Ownership Rule: The FCC rules also prohibit common ownership of a daily newspaper and a radio or television station in the same local market.

     New Cross-Media Limits: The cross-media limits adopted in the June 2003 decision would replace both the newspaper/broadcast cross-ownership restriction and the radio/television cross-ownership limits as follows:

•	In DMAs with three or fewer commercial and noncommercial television stations, the FCC will not permit cross-ownership between TV stations, radio stations, and daily newspapers.
•	In DMAs with 4 to 8 television stations, the FCC will permit parties to have one of the three following combinations: (a) one or more daily newspaper(s), one TV station, and up to 50% of the radio stations that would be permissible under the local radio ownership limits; (b) one or more daily newspaper(s) and as many radio stations as can be owned pursuant to the local radio ownership limits (but no television stations); or (c) two television stations (so long as ownership would be permissible under the local television ownership rule) and as many radio stations as the local radio ownership limits permit (but no daily newspapers).
•	In DMAs with nine or more television stations, the FCC will permit any newspaper and broadcast cross-media combinations so long as they comply with the local television ownership rule and local radio ownership limits.

     The Third Circuit remanded the new cross-media limits to the Commission for further consideration, and the pre-existing radio/television and newspaper/broadcast cross-ownership rules were left in place in the meantime.

     We cannot predict the ultimate outcome of the proceedings described above, future biennial reviews or other agency or legislative initiatives or the impact, if any, that they will have on our business.

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     ALIEN OWNERSHIP. Under the Communications Act, no FCC license may be held by a corporation if more than one-fifth of its capital stock is owned or voted by aliens or their representatives, a foreign government or representative thereof, or an entity organized under the laws of a foreign country (collectively, “Non-U.S. Persons”). Furthermore, the Communications Act provides that no FCC license may be granted to an entity directly or indirectly controlled by another entity of which more than one-fourth of its capital stock is owned or voted by Non-U.S. Persons if the FCC finds that the public interest will be served by the denial of such license. The FCC staff has interpreted this provision to require an affirmative public interest finding to permit the grant or holding of a license, and such a finding has been made only in limited circumstances. The foregoing restrictions on alien ownership apply in modified form to other types of business organizations, including partnerships and limited liability companies. Our Second Amended and Restated Articles of Incorporation and Amended and Restated Code of By-Laws authorize the Board of Directors to prohibit such restricted alien ownership, voting or transfer of capital stock as would cause Emmis to violate the Communications Act or FCC regulations.

     ATTRIBUTION OF OWNERSHIP INTERESTS. In applying its ownership rules, the FCC has developed specific criteria in order to determine whether a certain ownership interest or other relationship with a Commission licensee is significant enough to be “attributable” or “cognizable” under its rules. Specifically, among other relationships, certain stockholders, officers and directors of a broadcasting company are deemed to have an attributable interest in the licenses held by that company, such that there would be a violation of the Commission’s rules where the broadcasting company and such a stockholder, officer or director together hold attributable interests in more than the permitted number of stations or a prohibited combination of outlets in the same market. The FCC’s regulations generally deem the following relationships and interests to be attributable for purposes of its ownership restrictions:

•	all officer and director positions in a licensee or its direct/indirect parent(s);
•	voting stock interests of at least 5% (or 20%, if the holder is a passive institutional investor, i.e., a mutual fund, insurance company or bank);
•	any equity interest in a limited partnership or limited liability company where the limited partner or member is “materially involved” in the media-related activities of the LP or LLC and has not been “insulated” from such activities pursuant to specific FCC criteria;
•	equity and/or debt interests which, in the aggregate, exceed 33% of the total asset value of a station or other media entity (the “equity/debt plus policy”), if the interest holder supplies more than 15% of the station’s total weekly programming (usually pursuant to a time brokerage, local marketing or network affiliation agreement) or is a same-market media entity (i.e., broadcast company or newspaper).

     To assess whether a voting stock interest in a direct or indirect parent corporation of a broadcast licensee is attributable, the FCC uses a “multiplier” analysis in which non-controlling voting stock interests are deemed proportionally reduced at each non-controlling link in a multi-corporation ownership chain.

     Because Jeffrey H. Smulyan’s voting interest in the Company has fallen below 50% for FCC control purposes, the Company is no longer eligible for an exemption from the broadcast attribution rules under which minority shareholders are not deemed to hold attributable interests in the Company. Accordingly, the other media interests of any shareholders whose voting interests in the Company meet or exceed the attribution thresholds described above will now be combined with the Company’s interests for purposes of determining compliance with FCC ownership rules.

     Ownership rule conflicts arising as a result of aggregating the media interests of the Company and its attributable shareholders could require divestitures by either the Company or the affected shareholders. Any such conflicts could result in Emmis being unable to obtain FCC consents necessary for future acquisitions. Conversely, Emmis’ media interests could operate to restrict other media investments by shareholders having or acquiring an interest in Emmis.

     ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors, including compliance with the various rules limiting common ownership of media properties, the “character” of the licensee and those persons holding attributable interests therein and compliance with the Communications Act’s limitations on alien ownership as well as other statutory and regulatory requirements. When evaluating an assignment or transfer of control application, the FCC is prohibited from considering whether the public interest might be served by an assignment of the broadcast license or transfer of control of the licensee to a party other than the assignee or transferee specified in the application.

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     PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to serve the “public interest.” Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness.

     Federal law prohibits the broadcast of obscene material at any time and the broadcast of indecent material during specified time periods; these prohibitions are subject to enforcement action by the FCC. The agency recently has engaged in more aggressive enforcement of its indecency regulations than has generally been the case in the past. In addition to imposing more stringent fines, the Commission has indicated that it may begin license revocation procedures for “serious” violations of the indecency law. Furthermore, Congress is considering legislation that would substantially increase the current per-violation maximum fine for indecency violations and would mandate license revocation proceedings for licensees with multiple violations.

     In August of 2004, Emmis entered into a Consent Decree with the FCC, pursuant to which (i) the Company adopted a compliance plan intended to avoid future indecency violations, (ii) the Company admitted, solely for purposes of the Decree, that certain prior broadcasts were “indecent,” (iii) the Company agreed to make a voluntary payment of $300,000 to the U.S. Treasury, (iv) the FCC rescinded its prior enforcement actions against the Company based on allegedly indecent broadcasts, and agreed not to use against the Company any indecency violations based on complaints within the FCC’s possession as of the date of the Decree or “similar” complaints based on pre-Decree broadcasts, and (v) the FCC found that neither the alleged indecency violations nor the circumstances surrounding a civil suit filed by a WKQX announcer raised any substantial and material questions concerning the Company’s qualifications to hold FCC licenses. A petition requesting that the FCC reconsider its approval of the Decree has been filed and remains pending. If the petition were to be granted by the FCC, or if a court appeal were taken and the court were to invalidate the Decree, then any indecent broadcasts that may have occurred on the Company’s stations could be considered by the FCC, which could have an adverse impact on the Company’s FCC licenses. In addition, petitions have been filed against the license renewal applications of stations WKQX and KPNT, and an informal objection has been filed against the license renewals of the Company’s Indiana radio stations, in each case based primarily on the matters covered by the Decree. Consequently, any invalidation of the Decree could result in the petitions and objections being considered in connection with those and possibly other license renewals, which could have an adverse affect on the Company’s FCC licenses.

     Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, contest and lottery advertisements and technical operations, including limits on radio frequency radiation.

     In 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the “1992 Cable Act”). Certain provisions of this law, such as signal carriage and retransmission consent, have a direct effect on television broadcasting.

     In April 1997, the FCC adopted rules that require television broadcasters to provide digital television (“DTV”) to consumers. The FCC also adopted a table of allotments for DTV, which assigns eligible broadcasters a second channel on which to provide DTV service. The FCC’s DTV allotment plan is based on the use of a “core” DTV spectrum between channels 2-51. Although the Communications Act mandates that each television station return one of its two channels to the FCC by the end of 2006, the Balanced Budget Act of 1997 may effectively extend the transition deadline in some markets by allowing broadcasters to keep both their analog and digital licenses until at least 85% of television households in their respective markets can receive a digital signal. Local zoning laws and the lack of qualified tall-tower builders to construct the facilities necessary for DTV operations, among other factors, including the pace of DTV production and sales, may cause delays in the DTV transition. The FCC has announced that it will review the progress of DTV every two years and make adjustments to the 2006 target date, if necessary.

     Television broadcasters are allowed to use their DTV channels according to their best business judgment, provided that they continue to offer at least one free programming service that is at least comparable to today’s analog service. Digital services and programming can include multiple standard definition program channels, data transfer, subscription video, interactive materials and audio signals (so-called “ancillary” services). The FCC has imposed a fee of 5% of the annual gross revenues for television broadcasters’ use of the DTV spectrum to offer ancillary services. The form and amount of these fees may have a significant effect on the profitability of such services. Broadcasters will not be required to air “high definition” programming. Beginning April 1, 2003, broadcasters operating in digital mode were required to simulcast at least 50% of their analog programming on the digital channel. Affiliates of ABC, CBS, NBC and Fox in the top 10 television markets were required to be on the air with a digital signal by May 1, 1999, and affiliates of those networks in markets 11-30, including KOIN-TV, were required to be on the air with a digital signal by

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November 1, 1999; KOIN-TV complied with this deadline. The remaining commercial stations, including all other television stations owned by Emmis, were required to file DTV construction permit applications by November 1, 1999, and were required to be on the air with a digital signal by May 1, 2002, absent an extension on a station-by-station basis. All Emmis’ stations met the November 1, 1999 application deadline. Stations WALA, WKCF and WFTX met the May 1, 2002 on-air deadline, and all other stations subsequently initiated DTV service prior to their extended deadlines, except stations KAII-TV, KHAW-TV, KGMD-TV and KGMV-TV, which, as “satellite” stations, have been granted an extension pending a decision by the FCC on when to require buildout of such stations. Additionally, all of the Emmis stations filed timely applications to “maximize” (expand the coverage of) the DTV facilities to ensure the DTV coverage is equal to or better than the coverage of our analog channels.

     WBPG is not subject to the usual DTV deadlines because it was not issued a second channel for DTV operation; rather, WBPG will be required to convert to DTV operation by the conclusion of the DTV transition period. Further, since Channel 55, on which WBPG operates, is to be reallocated by the FCC for other use at the end of the DTV transition period, the FCC will assign the station to a different channel at that time unless it has already changed its channel.

     When the FCC adopted service rules for the digital television transition, it stated that it would periodically review the transition’s progress. In its first review, completed in 2001, the Commission decided to permit broadcasters to construct initial minimal DTV facilities (i.e., facilities that cover only their cities of license) while retaining interference protection for their allotted and maximized facilities. In September 2004, the FCC issued a decision in its second periodic review of the DTV transition. Among other things, the decision set deadlines by which broadcasters operating with minimal (e.g., reduced power) DTV facilities must either provide DTV service to their full authorized coverage areas or else lose interference protection to the unserved areas. The Commission set July 1, 2005 as the date for affiliates of ABC, NBC, CBS and Fox in the top 100 markets to build out their full facilities or lose protection for the “unused” areas. This deadline applies to all the Emmis television stations except WTHI, KSNT and WKCF. All other stations, including WTHI, KSNT and WKCF, would be required to build out their full facilities by July 1, 2006. In addition, the decision established a multi-step process by which broadcasters may select their post-transition DTV channel within the core DTV spectrum (Channels 2-51). This process began in November 2004, with a goal of having all channel assignments finalized by the end of 2006.

     In January 2001, the FCC issued a preliminary decision regarding the carriage (“must-carry”) rights of digital broadcasters on local cable and certain DBS systems in which the FCC determined that (1) digital-only stations may immediately assert carriage rights on local cable systems; (2) stations that return their analog spectrum and convert to digital operations are entitled to must-carry rights; and (3) a digital-only station asserting must-carry rights is entitled to carriage only of a single programming stream and other “program-related” content, regardless of the number of programs broadcast simultaneously (or “multicast”) on its digital spectrum. In February 2005, the Commission released a decision on reconsideration in which it (1) affirmed its prior tentative conclusion not to impose a dual carriage requirement on cable operators (which would have required them to carry broadcasters’ analog and digital signals simultaneously); and (2) affirmed its prior determination that cable operators are not required to carry more than a single digital programming stream from any particular broadcaster. Further FCC action or legislation on these issues is possible.

     The FCC decided in August 2003 to require, by 2007, all new television sets with screens 13 inches and larger and all TV interface devices (VCRs, etc.) to include the capability of tuning and decoding over-the-air digital signals. In addition, on September 10, 2003, the FCC adopted “plug-and-play” rules for cable adaptability. Under these rules, consumers will be able to plug their cable directly into their digital televisions, without the need for a set-top box. These rules cover one-way programming only; the cable and electronics industries are negotiating an agreement on two-way “plug-and-play” standards that would eliminate the need for set-top boxes for advanced services such as video on demand, impulse pay-per-view and cable operator-enhanced electronic programming guides.

     On November 4, 2003, the Commission adopted anti-piracy protection for digital television in the form of a “broadcast flag.” A broadcast flag is a digital code that can be embedded into a digital broadcasting stream. This will allow a broadcaster, at its discretion, to prevent mass distribution of its digital signal over the Internet, without affecting consumers’ ability to make limited digital copies. Digital television equipment must comply with the FCC’s broadcast flag requirements by July 1, 2005.

     The FCC has authorized the provision of video programming directly to home subscribers through high-powered direct broadcast satellites (“DBS”). DBS systems currently are capable of broadcasting over 500 channels of digital television service directly to subscribers equipped with 18-inch receiving dishes and decoders. At this time, several entities provide DBS service to consumers throughout the country. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”), which established a copyright licensing system for limited distribution of television programming to DBS viewers and directed the FCC to initiate rule-making proceedings to implement the new system. The statute extended the pre-existing system of permitting satellite distribution of distant network signals only to unserved households in so-called “white areas” (i.e., those that do not receive a Grade B

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signal from a local network affiliate). This system was designed to protect network-affiliated broadcast stations from the effects of satellite importation of non-local network signals into their markets. SHVIA also “grandfathered” delivery of the signals of television stations via DBS to certain subscribers who may have been receiving such signals in violation of prior law.

     In addition, SHVIA authorized DBS companies to provide local television signals to their subscribers pursuant to a retransmission consent agreement with the station. Moreover, effective January 1, 2002, local television stations became entitled to “must-carry” rights on a DBS system if the system is providing any local television station(s) to its subscribers. In such markets, stations now can choose whether to demand carriage on a DBS system by electing must-carry status or to negotiate with the DBS operator for specific carriage terms by electing retransmission consent status. SHVIA further required broadcasters to negotiate non-exclusive retransmission consent agreements in good faith until January 1, 2006, but provided that broadcasters may enter into agreements with competing DBS carriers on different terms.

     Congress recently passed the Satellite Home Viewer Extension and Reauthorization Act of 2004 (“SHVERA”), which extends the compulsory copyright license for carriage of distant signals through December 31, 2009 and addresses a variety of other issues related to the carriage of broadcast television signals on DBS systems. Among other things, SHVERA requires satellite carriers to phase out the carriage of distant signals in markets where they offer local broadcast service. The new statute also permits satellite carriers to deliver the distant signal of a network station to consumers in unserved digital households (also referred to as “digital white areas”), but only if the local station affiliated with that network misses the FCC’s deadlines for increasing the station’s digital signal power.

     There are FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as the use of auctions to resolve mutually exclusive application requests, network-affiliate relations, the ability of stations to obtain exclusive rights to air syndicated programming, cable systems’ carriage of syndicated and network programming on distant stations, political advertising practices, application procedures and other areas affecting the business or operations of broadcast stations.

     Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary fines, the grant of “short” (less than the maximum term) license renewals or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license.

     ADDITIONAL DEVELOPMENTS AND PROPOSED CHANGES. The Commission has adopted rules implementing a new low power FM (“LPFM”) service. The FCC has begun accepting applications for LPFM stations and has granted some of those applications. We cannot predict whether any LPFM stations will interfere with the coverage of our radio stations.

     The FCC also has authorized two companies to launch and operate satellite digital audio radio service (“SDARS”) systems. Both companies—Sirius Satellite Radio, Inc. and XM Radio—are now providing nationwide service. In addition, Sirius and XM recently have launched channels providing local traffic and weather information in major cities. Broadcasters have objected to these local services, contending that the provision of local news programming conflicts with the FCC’s intent to license satellite radio solely as a national service. XM and Sirius contend, in response, that the services are not in contravention of their FCC authorizations because the channels offering local information are being offered nationwide, not on a local basis. We cannot predict the impact of SDARS on our radio stations’ listenership.

     In October 2002, the FCC issued an order selecting a technical standard for terrestrial digital audio broadcasting (“DAB”). The in-band, on-channel (“IBOC”) technology chosen by the agency allows AM and FM radio broadcasters to introduce digital operations and permits existing stations to operate on their current frequencies in either full analog mode, full digital mode, or a combination of both (at reduced power). In March of 2005, the FCC announced that pending adoption of final rules, it would allow stations on an interim basis to broadcast multiple digital channels.

     In January 2001, the D.C. Circuit concluded that the FCC’s Equal Employment Opportunity (“EEO”) regulations were unconstitutional. The FCC adopted new EEO rules in November 2002, which went into effect in March 2003.

     Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our broadcast stations, result in the loss of audience share and advertising revenues for our broadcast stations and/or affect our ability to acquire additional broadcast stations or finance such acquisitions. Such matters include, but are not limited to:

•	proposals to impose spectrum use or other fees on FCC licensees;

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•	proposals to repeal or modify some or all of the FCC’s multiple ownership rules and/or policies;
•	proposals to change rules relating to political broadcasting;
•	technical and frequency allocation matters;
•	AM stereo broadcasting;
•	proposals to permit expanded use of FM translator stations;
•	proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;
•	proposals to tighten safety guidelines relating to radio frequency radiation exposure;
•	proposals permitting FM stations to accept formerly impermissible interference;
•	proposals to reinstate holding periods for licenses;
•	changes to broadcast technical requirements, including those relative to the implementation of SDARS and DAB;
•	proposals to limit the tax deductibility of advertising expenses by advertisers.

     We cannot predict whether any proposed changes will be adopted, what other matters might be considered in the future, or what impact, if any, the implementation of any of these proposals or changes might have on our business.

     The foregoing is only a brief summary of certain provisions of the Communications Act and of specific FCC regulations. Reference should be made to the Communications Act as well as FCC regulations, public notices and rulings for further information concerning the nature and extent of federal regulation of broadcast stations.

GEOGRAPHIC FINANCIAL INFORMATION

     The Company’s segments operate primarily in the United States with one national radio station located in Hungary and nine radio stations located in Belgium. The following tables summarize relevant financial information by geographic area. Net revenues related to our two stations in Argentina and three stations exchanged in Phoenix are excluded for all periods presented.

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     ITEM 2. PROPERTIES.

     The following table sets forth information as of February 28, 2005 with respect to offices, studios and broadcast towers of stations and publishing operations currently owned by Emmis. Management believes that the properties are in good condition and are suitable for Emmis’ operations.

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ITEM 3. LEGAL PROCEEDINGS.

     The Company is a party to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company likely to have a material adverse effect on the Company.

     In January 2005, we received a subpoena from the Office of Attorney General of the State of New York, as have some of the other radio broadcasting companies operating in the State of New York. The subpoenas were issued in connection with the New York

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Attorney General’s investigation of record company promotional practices. We are cooperating with this investigation. We do not expect that the outcome of this matter would have a material impact on our financial position, results of operations or cash flows.

     In March, 2005, we received a subpoena from the Office of Attorney General of the State of New York in connection with the New York Attorney General’s investigation of a contest at one of our radio stations in New York City. We are cooperating with this investigation and do not expect that the outcome of this matter would have a material impact on our financial position, results of operations or cash flows.

     During the Company’s fiscal quarter ended August 31, 2004, Emmis entered into a consent decree with the Federal Communications Commission to settle all outstanding indecency-related matters. Terms of the agreement call for Emmis to make a voluntary contribution of $0.3 million to the U.S. Treasury, with the FCC terminating all then-current indecency-related inquiries and fines against Emmis. Certain individuals and groups have requested that the FCC reconsider the adoption of the consent decree and have challenged applications for renewal of the licenses of certain of the Company’s stations based primarily on the matters covered by the decree. These challenges are currently pending before the Commission, but Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals. See “Federal Regulation of Broadcasting” for further discussion.

     In January 2005, a third party threatened claims against our radio station in Hungary seeking damages of approximately $4.6 million. Emmis is currently investigating this matter, but based on information gathered to date, Emmis believes the claims are without merit. Litigation has not been initiated and Emmis intends to defend itself vigorously in the matter.

     On May 16, 2005, the Company commenced its “Dutch Auction” tender offer and Emmis filed Articles of Correction with the Indiana Secretary of State to correct the anti-dilution adjustment provisions of its outstanding convertible preferred stock. The Articles of Correction will implement the original agreement of the parties by correcting a mistake in the anti-dilution provisions relating to a tender offer by Emmis involving the purchase of shares of common stock for consideration representing more than 15% of the Company’s market capitalization. Upon the completion of the “Dutch Auction” tender offer, the anti-dilution provisions, as originally filed, would have resulted in the holders of the convertible preferred stock receiving a substantially greater reduction in the conversion price than was the original expectation of the parties. The revised anti-dilution provisions in the Articles of Correction reflect the original intent of the parties by including a customary anti-dilution formula for tender offers. Following the filing of the Articles of Correction, Emmis filed a lawsuit in Indiana State Court seeking, in part, a declaratory judgment authorizing the correction or reformation of the anti-dilution provisions in its second amended and restated Articles of Incorporation so that they are consistent with those in the Articles of Correction. The “Dutch Auction” tender offer is contingent on Emmis either prevailing in the lawsuit for declaratory judgment or resolving the subject matter of the lawsuit in a manner satisfactory to it. Emmis intends to actively seek to settle the lawsuit in a manner that is consistent with the revised anti-dilution provisions in the Articles of Correction. If Emmis does not prevail in the lawsuit or resolve it in a timely manner, Emmis intends to examine other alternatives to deliver value to its shareholders, which may include reducing the size of the tender offer so that no anti-dilution adjustment is triggered.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

     Listed below is certain information about the executive officers of Emmis or its affiliates who are not directors or nominees to be directors.

     Set forth below is the principal occupation for the last five years of each executive officer of the Company or its affiliates who is not also a director.

     Randall D. Bongarten has been employed as President of Emmis Television since October 2000. He served as President of Emmis International from June 1998 to September 2002. Prior to June 1998, Mr. Bongarten had served as President of GAF Broadcasting and as Executive Vice President of Operations for Emmis Radio Division.

     Richard F. Cummings was the Program Director of WLHK (formerly WENS) from 1981 to March 1984, when he became the National Program Director and a Vice President of Emmis. He became Executive Vice President of Programming in 1988 and became Radio Division President in December 2001.

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     Michael Levitan was the Senior Vice President of Human Resources from September 2000 to March 2004 when he became the Executive Vice President of Human Resources. Prior to joining Emmis, Mr. Levitan served as Director of Human Resources for Apple Computer and as Executive Director of Organizational Effectiveness and Assistant to the President of Cummins Engine.

     Gary Thoe has been employed as President of Emmis Publishing since February 1998. Prior to February 1998, Mr. Thoe served as President and part owner of Mayhill Publications, Inc.

     Paul Fiddick has been employed as President of Emmis International since September 2002. Prior to joining Emmis, Mr. Fiddick served as Assistant Secretary for Administration of the U.S. Department of Agriculture from November 1999 until May 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

     Emmis’ Class A common stock is traded in the over-the-counter market and is quoted on the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System under the symbol EMMS. There is no established public trading market for Emmis’ Class B common stock or Class C common stock.

     The following table sets forth the high and low bid prices of the Class A common stock for the periods indicated. No dividends were paid during any such periods.

     At May 6, 2005 there were 5,461 record holders of the Class A common stock, and there was one record holder of the Class B common stock.

     Emmis intends to retain future earnings for use in its business and does not anticipate paying any dividends on shares of its common stock in the foreseeable future.

     Emmis made no purchases of its equity securities during the fourth quarter or any previous quarter of its fiscal year ended February 28, 2005.

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ITEM 6. SELECTED FINANCIAL DATA

Emmis Communications Corporation
FINANCIAL HIGHLIGHTS

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

GENERAL

     The following discussion pertains to Emmis Communications Corporation and its subsidiaries (collectively, “Emmis” or the “Company”).

     We own and operate radio, television and publishing properties located primarily in the United States. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent more than 85% of our consolidated revenues. These rates are in large part based on our entities’ ability to attract audiences/subscribers in demographic groups targeted by their advertisers. Broadcast entities’ ratings are measured principally four times a year by Arbitron Radio Market Reports for radio stations and by A.C. Nielsen Company for television stations. Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.

     Our revenues vary throughout the year. As is typical in the broadcasting industry, our revenues and operating income are usually lowest in our fourth fiscal quarter. Our television division’s revenues typically fluctuate from year to year due to political spending, which is the highest in our odd-numbered fiscal years.

     In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to pre-empt advertising spots paid for in cash with advertising spots paid for in trade.

     The following table summarizes the sources of our revenues for each of the past three years. The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations and magazines conduct in their local markets. The category “Other” includes, among other items, revenues generated by the websites of our entities and barter.

     A significant portion of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions, and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, syndicated programming fees, utilities and office salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.

CRITICAL ACCOUNTING POLICIES

     Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially derive materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.

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  Impairment of Goodwill and Indefinite-lived Intangibles

     The annual impairment tests for goodwill and indefinite-lived intangibles under SFAS No. 142 require us to make certain assumptions in determining fair value, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by macro-economic factors, including market multiples at the time the impairment tests are performed. Accordingly, we may incur additional impairment charges in future periods under SFAS No. 142 to the extent we do not achieve our expected cash flow growth rates, or to the extent that market values decrease.

  Allocations for Purchased Assets

     We typically engage an independent appraisal firm to value assets acquired in a material acquisition. We use the appraisal report to allocate the purchase price of the acquisition among different categories of assets. To the extent that purchased assets are not allocated appropriately, depreciation and amortization expense could be materially different.

  Deferred Taxes and Effective Tax Rates

     We estimate the effective tax rates and associated liabilities or assets for each legal entity in accordance with FAS 109. These estimates are based upon our interpretation of United States and local tax laws as they apply to our legal entities and our overall tax structure. Audits by local tax jurisdictions, including the United States Government, could yield different interpretations from our own and cause the Company to owe more taxes than originally recorded. We utilize experts in the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax expense and related liabilities.

     The Company evaluates on a quarterly basis its ability to realize its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to support realization of certain deferred tax assets. Failure to achieve forecasted taxable income might affect the ultimate realization of certain deferred tax assets.

  Insurance Claims and Loss Reserves

     The Company is self-insured for most healthcare claims, subject to stop-loss limits. Claims incurred but not reported are recorded based on historical experience and industry trends, and accruals are adjusted when warranted by changes in facts and circumstances. The Company also maintains large deductible programs (ranging from $250 thousand to $500 thousand per occurrence) for workers compensation claims, automotive liability losses and media liability.

  Valuation of Stock Options

     The Company determines the fair value of its employee stock options at the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the value of exchange-traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different than these traded options. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility and expected term of the options granted. The Company has used historical data for its stock price and option life when determining expected volatility and expected term, but each year the Company reassesses whether or not historical data is representative of expected results.

ACQUISITIONS, DISPOSITIONS AND INVESTMENTS

     During the three year period ended February 28, 2005, we acquired one television station, nine international radio stations in Belgium, and a controlling interest in six domestic radio stations for an aggregate cash purchase price of $121.1 million. We also disposed of two domestic radio stations two international radio stations and one television production company and we exchanged three domestic radio stations for one domestic radio station, collectively receiving cash proceeds of $216.7 million. A recap of the transactions completed during the three years ended February 28, 2005 is summarized hereafter. These transactions impact the comparability of operating results year over year.

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     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago and $74.8 million in cash including payments for working capital items. Emmis used the cash to repay amounts outstanding under its senior credit facility. Emmis has long sought a second radio station in Chicago to complement its existing station in the market, WKQX-FM. This transaction achieves that goal by marrying the heritage alternative rock format (WKQX) with the heritage classic rock format (WLUP). Emmis began programming WLUP-FM and Bonneville began programming KTAR-AM, KMVP-AM and KKLT-FM under time brokerage agreements on December 1, 2004. The assets and liabilities of the three radio stations in Phoenix and their results of operations have been classified as discontinued operations in the accompanying consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The Company recorded $13.0 million of goodwill associated with the asset swap, but none of this goodwill is deductible for tax purposes.

     On May 12, 2004, Emmis sold to its minority partners for $7.3 million in cash its entire 75% interest in Votionis, S.A. (“Votionis”), which owns and operates two radio stations in Buenos Aires, Argentina. In connection with the sale, Emmis recorded a loss from discontinued operations of $10.0 million in fiscal 2004. In fiscal 2005, Emmis recorded income from discontinued operations of $4.2 million, consisting of operational losses of $0.5 million, offset by tax benefits of $4.7 million. The Argentine peso substantially devalued relative to the U.S. dollar early in 2002. The $10.0 million loss in fiscal 2004 was primarily attributable to the devaluation of the peso and resulting non-cash write-off of cumulative currency translation adjustments. Votionis had historically been included in the radio reporting segment.

     On December 19, 2003, the Flemish Government awarded licenses to operate nine FM radio stations in the Flanders region of Belgium to several not-for-profit entities that have granted Emmis the exclusive right to provide the programming and sell the advertising on the stations for the duration that the not-for-profit entities retain the licenses. Five of these licenses are for the stations that Emmis began programming in August 2003 and the remaining four related to new stations that Emmis began operating in May 2004. The licenses and Emmis’ exclusive right are for an initial term of nine years and do not require the payment of any license fees to the Flemish Government.

     On July 1, 2003, Emmis effectively acquired a controlling interest of 50.1% in a partnership that owns six radio stations in the Austin, Texas metropolitan area for a cash purchase price of approximately $106.5 million, including transaction costs of $1.0 million. These six stations are KLBJ-AM, KLBJ-FM, KDHT-FM, (formerly KXMG-FM), KROX-FM, KGSR-FM and KEYI-FM. This acquisition allowed Emmis to diversify its radio portfolio and participate in another large, high-growth radio market. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $35.3 million of goodwill, all of which is deductible for income tax purposes. In addition, Emmis has the option, but not the obligation, to purchase its partner’s entire 49.9% interest in the partnership after a period of approximately five years from the acquisition date based on an 18-multiple of trailing 12-month cash flow.

     Effective March 1, 2003, Emmis completed its acquisition of substantially all of the assets of television station WBPG-TV in Mobile, AL-Pensacola, FL from Pegasus Communications Corporation for approximately $11.7 million, including transaction costs of $0.2 million. We financed the acquisition through borrowings under the credit facility, and the acquisition was accounted for as a purchase. This acquisition allowed us to achieve duopoly efficiencies in the market, such as lower programming acquisition costs and consolidation of general and administrative functions, since we already owned a television station in the market, WALA.

     Effective May 1, 2002 Emmis completed the sale of substantially all of the assets of KALC-FM in Denver, Colorado to Entercom Communications Corporation for $88.0 million. Emmis had purchased KALC-FM on January 17, 2001, from Salem Communications Corporation for $98.8 million in cash plus a commitment fee of $1.2 million and transaction related costs of $0.9 million. On February 12, 2002, Emmis entered into a definitive agreement to sell KALC-FM to Entercom and Entercom began operating KALC-FM under a time brokerage agreement on March 16, 2002. Proceeds were used to repay amounts outstanding under our credit facility. Since the agreed-upon sales price for this station was less than its carrying amount as of February 28, 2002, we recognized an impairment loss of $9.1 million in fiscal 2002. Additionally, in fiscal 2003 we recorded an incremental $1.3 million loss in connection with the sale, which is reflected in the accompanying consolidated statements of operations.

     Effective May 1, 2002 Emmis completed the sale of substantially all of the assets of KXPK-FM in Denver, Colorado to Entravision Communications Corporation for $47.5 million. Emmis had purchased KXPK-FM on August 24, 2000, from AMFM, Inc. for an allocated purchase price of $35.0 million in cash plus liabilities recorded of $1.2 million and transaction related costs of $0.4 million. Emmis entered into a definitive agreement to sell KXPK-FM to Entravision on February 12, 2002. Proceeds were used to repay amounts outstanding under our credit facility. In fiscal 2003 we recorded a gain on sale of assets of $10.2 million.

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RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 29, 2004 COMPARED TO YEAR ENDED FEBRUARY 28, 2005

Net revenue pro forma reconciliation:

     Since March 1, 2003, we have acquired a 50.1% controlling interest in six radio stations in Austin, Texas, sold two radio stations in Argentina, sold a television production company and exchanged three radio stations in Phoenix for cash and one radio station in Chicago (see Note 6 in the accompanying Notes to Consolidated Financial Statements). The results of our two radio stations in Argentina and our three radio stations in Phoenix have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions through February 28, 2005, irrespective of materiality. These pro forma results include the impact of the sale of our television production company and thus differ from the pro forma financial results reflected in Note 7 to the accompanying consolidated financial statements, which were prepared in accordance with U.S. generally accepted accounting principles.

Net revenues discussion:

     Radio net revenues increased partially as a result of our acquisition of six radio stations in Austin in July 2003. On a pro forma basis (assuming the Austin radio stations had been purchased on March 1, 2003 and the Phoenix-Chicago radio station swap had occurred on March 1, 2003), radio net revenues for the year ended February 28, 2005 would have increased $8.5 million, or 3.1%. We

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typically monitor the performance of our stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by the independent accounting firm Miller, Kaplan, Arase & Co., LLP (“Miller, Kaplan”). For the year ended February 28, 2005, on a pro forma basis, net revenues of our domestic radio stations were up 1.0%, whereas Miller, Kaplan reported that net revenues of our domestic radio markets were up 0.5%. The pro forma effect of including WLUP in our results reduced our domestic radio growth by 1.6%. Still, we believe we were able to outperform the markets in which we operate due to our commitment to training and developing local sales forces, as well as higher ratings driven by our continued investment in quality on-air personalities and format revisions. The higher ratings allowed us to charge higher rates for the advertisements we sold. Our advertising inventory sellout percentage decreased slightly year over year.

     The increase in television net revenues for the year ended February 28, 2005 is principally due to a substantial increase in net political revenues, as there were more political election campaigns in our fiscal 2005 than there were in our fiscal 2004. Net political advertising revenues for fiscal 2004 and 2005 were approximately $4.0 million and $30.1 million, respectively. Excluding political net revenues, we exceeded the average local revenue growth of our markets in fiscal 2005. We believe our commitment to training and developing local sales forces has contributed to our local revenue share growth. In fiscal 2005, our television stations sold a higher percentage of their inventory and charged higher rates for the inventory sold due to ratings improvements at our stations and strong demand in several of our markets, primarily the result of political advertisements.

     Our publishing division has experienced slow, steady growth, as our magazines are generally mature properties with limited direct competition.

     On a consolidated basis, pro forma net revenues for the year ended February 28, 2005 increased $40.1 million, or 6.8%, due to the effect of the items described above.

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Station operating expenses, excluding noncash compensation pro forma reconciliation:

     Since March 1, 2003, we have acquired a 50.1% controlling interest in six radio stations in Austin, Texas, sold two radio stations in Argentina, sold a television production company and exchanged three radio stations in Phoenix for cash and one radio station in Chicago (see Note 6 in the accompanying Notes to Consolidated Financial Statements). The results of our two radio stations in Argentina and our three radio stations in Phoenix have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

For further disclosure of segment results, see Note 12 to the accompanying consolidated financial statements. For additional pro forma results, see Note 7 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all consummated acquisitions and dispositions through February 28, 2005, irrespective of materiality. These pro forma results include the impact of the sale of our television production company and thus differ from the pro forma financial results reflected in Note 7 to the accompanying consolidated financial statements, which were prepared in accordance with U.S. generally accepted accounting principles.

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Station operating expenses, excluding noncash compensation discussion:

     Radio station operating expenses, excluding noncash compensation increased as a result of our acquisition of six radio stations in Austin in July 2003 and WLUP-FM in Chicago in the fourth quarter of fiscal 2005. The increase also relates to higher music license fees, higher sales-related costs, higher insurance and health-related costs, higher programming costs in our New York and Los Angeles markets and an incremental $2.1 million of cash compensation in the year ended February 28, 2005 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below).

     Television station operating expenses, excluding noncash compensation increased principally due to higher sales-related costs, higher programming costs and higher insurance and health-related costs. The increase also relates to an incremental $2.5 million of cash compensation in the year ended February 28, 2005 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below).

     Publishing station operating expenses, excluding noncash compensation increased due to an incremental $0.8 million of cash compensation in the year ended February 28, 2005 due to the corresponding reduction in our noncash compensation expense (see noncash compensation discussion below) as well as higher insurance and health-related costs.

     On a consolidated basis, pro forma station operating expenses, excluding noncash compensation, for the year ended February 28, 2005 increased $22.0 million, or 6.0%, due to the effect of the items described above.

Noncash compensation expenses: