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CBS radio for sale

A

ajc_trw

http://www.latimes.com/hc-cbs-radio-selling-stations-20160316-story.html

Just heard on Kevin & Bean and I'm wondering what the radio landscape will look like once this sale is final. KROQ, KRTH, KCBS and the rest (KAMP & KTWV) may be gone if a new owner doesn't like them or think they can do better.

OTOH when ClearChannel came in they pretty much kept their stations the same. I'm definitely hoping history repeats. I'll tell myself before I go to sleep.
 
ajc_trw said:
http://www.latimes.com/hc-cbs-radio-selling-stations-20160316-story.html

Just heard on Kevin & Bean and I'm wondering what the radio landscape will look like once this sale is final. KROQ, KRTH, KCBS and the rest (KAMP & KTWV) may be gone if a new owner doesn't like them or think they can do better.

OTOH when ClearChannel came in they pretty much kept their stations the same. I'm definitely hoping history repeats. I'll tell myself before I go to sleep.
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Don't jump to conclusions. All that was said to investors is that CBS would look at selling the radio division or spinning it off to shareholders as a separate company. The most likely conclusion is that nothing will happen; investors just want to know that a company is looking at the best use of its capita.
 
K.M. Richards said:
You may be better served by reading the existing national thread on this, as the local/regional ones are going to be duplicating content but not have all of it.

http://www.radiodiscussions.com/showthread.php?693266-CBS-to-sell-entire-radio-group
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What you'll find is a lot of radio fans (and radio people as well?) making wild and uninformed speculation and statements about the proposed deal and wall street in general, and two or three people who actually know something about business in general and the radio business in particular trying to school them. It's already a rather tedious thread.
 
ChannelFlipper said:
What you'll find is a lot of radio fans (and radio people as well?) making wild and uninformed speculation and statements about the proposed deal and wall street in general, and two or three people who actually know something about business in general and the radio business in particular trying to school them. It's already a rather tedious thread.
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You're right about all that -- including the "tedious" description -- but I think your narrative provides precisely the reason why people should be reading that thread.

There is going to be speculation for a while about this (how could there not be, given CBS' size?) which will end only when deals are announced or Moonves makes an announcement that they are once again deferring a decision on selling the radio group. If someone only reads the thread for their local market, they may well jump to conclusions -- wild, uninformed, speculative, insane -- that are disproved already in the national thread.

Everyone is done a greater service by accessing those answers and explanations, wouldn't you agree?
 
ajc_trw said:
http://www.latimes.com/hc-cbs-radio-selling-stations-20160316-story.html

Just heard on Kevin & Bean and I'm wondering what the radio landscape will look like once this sale is final. KROQ, KRTH, KCBS and the rest (KAMP & KTWV) may be gone if a new owner doesn't like them or think they can do better.

OTOH when ClearChannel came in they pretty much kept their stations the same. I'm definitely hoping history repeats. I'll tell myself before I go to sleep.
Click to expand...

I think your speculation is premature. It seems to me that the operative philosophy in broadcasting these days is "if it ain't broke, don't 'fix' it." For example, News Corp (Fox) recently purchased their popular Bay Area TV affiliate - KTVU. When it was announced, viewers engaged in a lot of hand-wringing and wild speculation that Fox would 'ruin' KTVU, turn it into a right-wing propaganda machine, etc. etc. Well, other than changing the branding from "KTVU Channel 2" to "KTVU Fox 2," absolutely NOTHING has been changed. Nothing!

So why a potential new owner of the CBS stations would want to tank his huge investment by changing formats at high rated stations is beyond me. As you point out, Clear Channel didn't change much when they Hoovered up all those LA stations in the 90s. In the Bay Area, Clear Channel kept practically all of the existing formats of the stations they purchased. The only format flip I can recall is 98.1 FM, which they flipped from the old low-rated 70s hits format "K-Big" to R&B Oldies Kiss-FM. And that format has now remained mostly the same (with a few tweaks) since 1997.

Whether you're a critic of the current era of huge corporate overlords (IHeart, CBS, etc.) or not, you have to admit that it has brought stability to radio. Boss Radio KHJ lasted...what? - 17 years?. By contrast, KIIS-FM (again, with some tweaks) has lasted easily twice that long, with no future changes in sight.
 
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In a nutshell: radio is not fantasy baseball. Its players are not necessarily interchangeable, and nothing changes on a whim. It never has.

In radio and television, you're creating programming that gives people reason to tune in. These habits do not change overnight, and the general public doesn't like change for the sake of change. And when you make a drastic change, you're taking a revenue hit while the public catches up. So if a new owner comes in, there's more upside to just running the place and making money. These aren't distressed properties.

But the whole thing reminds me of the Outfront deal. CBS turned the billboards into a REIT and reaped the tax benefits. Radio has its own real estate holdings (tower sites). It's a lot smarter to put that into a REIT than it is to sell the real estate and lease it back as some cash-starved competitors are doing.

At the end of the day, I don't expect CBS to exit radio.
 
johndavis said:
At the end of the day, I don't expect CBS to exit radio.
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I agree with that. Consider the current businesses in CBS: Broadcast TV, cable TV, interactive radio, radio, and publishing. Broadcast radio makes up about 15% of their revenues. If they chop it off, they need to replace that revenue in order to maintain their income level. While interactive is growing, it's not growing at a rate that would make up for the loss of radio. Publishing is in worse shape than radio. At the same time, sister company Viacom is looking to sell Paramount Pictures, and I imagine Moonves (who once ran Warner Brothers) would love to own a motion picture company. But it's also ancient technology, and very risky. Not a dependable revenue stream for CBS shareholders.

So at the end of the day, CBS shareholders want to collect some radio money without incurring the expense. If Moonves can make that deal, then he's accomplished what he set out to do.
 
The only thing CBS can do is spin off the radio division. There is nobody with the capital to buy these stations. Also CBS would have a horrific tax burden with the sale of these stations. CBS has owned most of the stations for over thirty years so the capital gains taxes would be prohibitive.
 
chrocket87 said:
Only somewhat related to the topic, but how much did KROQ drop in billing? Had to be a pretty steep drop to fall behind KFI.
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KFI was up $2 million while KROQ was off by $7 million.
 
FYI, here are two links - one to he comparison cited by David, the other to a chart of top billers nationwide.

http://radioink.com/2016/03/30/kfi-re-enters-top-10-knocks-out-kroq/

http://radioink.com/2016/03/30/iheart-owns-majority-of-top-ten-billers/

Interestingly four of the top ten billing stations in the country are AM (although nationwide two of Iheart's Los Angeles FM stations exceed KFI). KFI has dropped $10 million since its peak in 2011 - which may explain subsequent changes to "live and local" that are now beginning to bear fruit.
 
Art Landing said:
KFI has dropped $10 million since its peak in 2011 - which may explain subsequent changes to "live and local" that are now beginning to bear fruit.
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Good call, Art. Nothing motivates a station to make adjustments, changes and tweaks like a drop in revenue, especially when compared to other stations in the same market cluster.
 
K.M. Richards said:
And given Les Moonves' ability to backtrack just about every time he threatens to sell the radio division ... I'm betting on A being right.
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There is one crucial difference you are discounting, which is Sumner Redstone's retirement. I haven't followed this situation too closely over the years, but it seems that Sumner had much more of an affinity to the radio division than Les. You could say the old guy loved the old medium.

Les has made comments before, to be sure, but until now he couldn't do anything without Sumner's blessing. And why wouldn't the new leader of the company want to spin-off it's least profitable (by ROI) division? Makes perfect sense to me, especially when one looks forward to the future where radio has an even more reduced role in content delivery, the value of the average station is bound to fall relative to overall inflation. If I were a CBS stockholder, I would be cheering the decision.
 
ChannelFlipper said:
And why wouldn't the new leader of the company want to spin-off it's least profitable (by ROI) division?
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Simon & Shuster isn't exactly a profit powerhouse either. Radio brings in a half billion or so a year. That's a lot of money to replace.

The goal isn't necessarily to make existing shareholders happy, but to attract NEW money. That's how you get the stock price to rise.

Full disclosure: I sold all my shares when the stock hit an all-time high two years ago. I'm not even thinking about getting back in.
 
ChannelFlipper said:
Les has made comments before, to be sure, but until now he couldn't do anything without Sumner's blessing. And why wouldn't the new leader of the company want to spin-off it's least profitable (by ROI) division? Makes perfect sense to me, especially when one looks forward to the future where radio has an even more reduced role in content delivery, the value of the average station is bound to fall relative to overall inflation. If I were a CBS stockholder, I would be cheering the decision.
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It is impossible to do a ROI calculation as many of the stations were bought or acquired long ago and the ROI is almost infinite. Better to do a return on capital analysis based on what the money the station sale could bring when reinvested, compared to what it is bringing now. It will be hard to find the 40% to 50% profit margins they are getting now in any other field.
 
Unfortunately for radio, the laws of unintended consequences come into play with announcements like what Les provided. As we've seen with sideline pundits on this discussion board, Wall Street analyst's look at the comments from CBS as proof that radio is dying and digital is the new King. But to David's point, the margins on solid performing radio properties is right in that good-operating sweet spot of 40-50%. Many stations are operating at 50%+. When you consider cable operators are running margins in the 15% range, other than the subscriber model, radio looks like a much better business. Problem is, radio isn't as sexy as "digital".
 
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