What's going on at Entercom Buffalo?

[Rusty Bridges]

Truthfully all kinds of radio is struggling for a wide number of reasons. Pandora has been struggling for a while because it can't turn a profit. Every time they get a great revenue month, their earning slip because of higher costs. Meanwhile Spotify is stealing their listeners. Sirius keeps announcing subscription increases, but then other news knocks them down. They got sued last year for $100 million That'll set you back a bit. General Electric used to make radios, radio equipment, and they even owned stations for a while. Now they're in a lot of trouble. If you want to make money in stocks, I'd look elsewhere.

Valid points, Mr. Big. Some investors are also known to play short on broadcast and media stocks. That may have been the case with Pandora, especiallly earlier. It's also been reported that some broadcast supply companies are facing difficult challenges.

Have these businesses reached the point where in order to be successful, they resort to a Walmart-type philosophy in which employees Are paid on an hourly basis as part time employees earning between 15 and 20 dollars an hour working less than 29 hours a week; becoming contract employees, working strictly on percentage such as sales reps, or partaking in the gig-economy working from a table at the local coffee shop.

This seems to be the case with some operators these days who claim to be making out well.

 

[SirRoxalot]

There seems to be a lot of blather in parts of this thread. A couple of observations:

First, Cumulus has a billion dollars in debt. That's true - and also sustainable debt for group its size. The recent bankruptcy reduced the debt by about half, giving them relief from overwhelming debt service and allowing them to reinvest in facilities, personnel, and enter into the digital realm. It's way too early to determine where the stock will settle on the market. Trading has been thin.

iHeart is trying to shed half of its debt - a stunning $20-Billion. Revenues have been going to little more than debt service (and perks for a few high-level corporate honchos) for a long time now. The real question is whether even that will be enough. They've stripped the company of valuable assets (including towers and real estate) that could have helped post-bankruptcy. Stay tuned. It's a work in progress.

Entercom took on a lot of debt to purchase CBS radio. They believe that they can reduce expenditures reasonably, and increase revenue. The real challenge is in the big markets that they got from CBS. Entercom appears to be the type of company that will do this a bit more carefully over a longer period of time, avoiding the typical slash and burn philosophy of previous consolidators. Of course, maximizing profits means that they will eventually get to medium and small markets, and make decisions on who or what stays, and who or what goes.

Townsquare took a bashing in the purchase and sale of North American Midway Entertainment. They bought it for $75.5-million in 2015, and recently sold it back to the original principle for $23.5-million. Meanwhile, they lost a bunch of money with it - $33-million last year alone. They took the money from NAME and put it into radio stations - including WOUR-FM in Utica and a handful of others from Connoisseur Communications. They also retained their "Taste of Country" events in several markets.

All three major owners in Buffalo are facing challenges. Rochester has the added burden of iHeart. All of radio is challenged by shareholders enamored of growth with little attention paid to steady profit margins in excess of 30%. It seems to me that radio is going through the difficult resolution of the over-expansion and overpriced consolidation that ran rampant between the enactment of the 1996 Telecom Act and the recession of 2008. And, there are the challenges from new technologies.

There are a lot of radio people who are simply trying to ride it out until retirement - which is in sight for a lot of the people still in the business. They are generally trying to maximize profit to pad their own exit, with little regard to what comes next. The industry is slowly reacting to new realities. Ratings methods are changing to incorporate listening via new technologies. Hopefully, stronger balance sheets thanks to debt reduction will bring new people with new ideas to innovate better answers going forward in the radio industry.

 

[TheBigA]

It seems to me that radio is going through the difficult resolution of the over-expansion and overpriced consolidation that ran rampant between the enactment of the 1996 Telecom Act and the recession of 2008. And, there are the challenges from new technologies.

And I think that's what the last year has been about, as far as clearing out debt and bad investments. It's been ten years since the recession, and its clear that the ad market hasn't recovered, but instead has diversified. Radio has two choices: Either recognize that you have to be a multi-platform player like iHeart or Townsquare to attract the big national contracts, or get out of that business completely and focus on the local transactional business. I think Buddy is doing the latter. He made a lot of great contacts at Entercom, saw they were going in a different direction, and he applied what he knew to single station ownership. That's a great approach, and I know a lot of people who are doing the same thing.

The big companies have a lot of work to do, because as they become bigger, other media companies are getting even bigger. It's one thing to talk about the size of iHeart, but they're a pimple compared to Disney or Comcast, and that's who they're competing with in the ad market. Entercom is a solid company, but the CBS stations they bought were used to being part of a bigger, more diversified media company. Those stations, especially in the Top 10 markets, were budgeted for being combined with TV staff and resources. Now those things are gone. When CBS sold its Buffalo stations to Regent, it took a while for those stations and their costs to be absorbed in the system. I expect the same things will happen to Entercom. But looking forward, for big radio companies to grow, they either need to start new businesses that bring new revenue streams, or they need to combine with other companies, because radio revenues alone won't bring them the kind of growth they need to appeal to Wall Street. Not when you compare them to companies like Apple or Amazon.

 

[Buddy Shula]

And I think that's what the last year has been about, as far as clearing out debt and bad investments. It's been ten years since the recession, and its clear that the ad market hasn't recovered, but instead has diversified. Radio has two choices: Either recognize that you have to be a multi-platform player like iHeart or Townsquare to attract the big national contracts, or get out of that business completely and focus on the local transactional business. I think Buddy is doing the latter. He made a lot of great contacts at Entercom, saw they were going in a different direction, and he applied what he knew to single station ownership. That's a great approach, and I know a lot of people who are doing the same thing.

The big companies have a lot of work to do, because as they become bigger, other media companies are getting even bigger. It's one thing to talk about the size of iHeart, but they're a pimple compared to Disney or Comcast, and that's who they're competing with in the ad market. Entercom is a solid company, but the CBS stations they bought were used to being part of a bigger, more diversified media company. Those stations, especially in the Top 10 markets, were budgeted for being combined with TV staff and resources. Now those things are gone. When CBS sold its Buffalo stations to Regent, it took a while for those stations and their costs to be absorbed in the system. I expect the same things will happen to Entercom. But looking forward, for big radio companies to grow, they either need to start new businesses that bring new revenue streams, or they need to combine with other companies, because radio revenues alone won't bring them the kind of growth they need to appeal to Wall Street. Not when you compare them to companies like Apple or Amazon.

Perfectly said. Major companies are going to start shedding stations. Banks are not fond of the radio business, unless the radio owner has had great financial success. Radio companies, like TV companies, like the Phone Book, like Newspaper and trying to find different buckets for revenue. They NEED these different buckets to tell Wall Street that there is hope. Digital is the biggest bucket they are shooting for. Unfortunately or fortunately (whatever side you are looking from), advertisers get the fact that broadcast and print companies, are NOT digital companies. At WECK, we do not even TRY to sell digital or pretend we are digital experts. We do not NEED those extra buckets of money for Wall Street. We focus on RADIO. We are experts at THAT. WECK can make large amounts of profit by just selling commercials. Major companies no longer can. Major companies will be selling off their various parts very soon. This is the exact reason I left corporate radio. It is also the reason that when I was a kid, and a DJ, I realized that DJ alone would not cut it, so I found a way to get into radio sales, and do both. That has worked. The bottom line is all broadcast industries are in trouble because of technology. and more choices for advertisers. To survive, a company better have a value proposition product, ideas for the advertiser, and relationships, and they must be able to generate quantifiable results and ROI for the client. That is why I do not only own the radio stations, but I own an ad agency inside the radio stations.