WABC Sold?

[davideduardo]

I strongly doubt WABC's cash flow is that high. $6 million probably is a realistic guess if we're talking revenue.

I suspect their Broadcast Cash Flow is in the neighborhood of $2 million per year.

You are right in believing that there is no way that cash flow could have been $6 million. I've seen estimates of 2018 gross revenue of about $8 million. There is no way that they had an operating margin of 75%. 20% to 25% would be exceptionally good in this case, pre-sale.

So the cash flow on WABC in 2018 could have been in the $1.5 to $2 million range. And, going forward, much of the cash flow will be eliminated once the station is paying for its own management, back office, sales staff, rent and the likes now that WPLJ and Nash are gone. No cluster mates to share the overhead with.

I'd guess that the station is going to be losing money in its first period under new owners. No Cumulus / Westwood induced national sales, new studios to be constructed, and the full impact of a stand-alone management, sales, technical and back office staff.

 

[TheBigA]

No Cumulus / Westwood induced national sales, new studios to be constructed, and the full impact of a stand-alone management, sales, technical and back office staff.

We haven't seen the details yet, but there could be an office lease with Cumulus. There could be a joint sales agreement for national sales. Lots still unknown.

 

[Tibbs4]

You are right in believing that there is no way that cash flow could have been $6 million. I've seen estimates of 2018 gross revenue of about $8 million. There is no way that they had an operating margin of 75%. 20% to 25% would be exceptionally good in this case, pre-sale.

So the cash flow on WABC in 2018 could have been in the $1.5 to $2 million range. And, going forward, much of the cash flow will be eliminated once the station is paying for its own management, back office, sales staff, rent and the likes now that WPLJ and Nash are gone. No cluster mates to share the overhead with.

I'd guess that the station is going to be losing money in its first period under new owners. No Cumulus / Westwood induced national sales, new studios to be constructed, and the full impact of a stand-alone management, sales, technical and back office staff.

My "guess" will be an attempt to re-focus as a bit of a local city-based station that highlights the hustle and bustle of NYC with a tip of the hat toward business and specifically local business that would fall under the potential umbrella of advertisers and "friends." That may well cover some of the potential weekend changes and lessen the losses. How well this will all work is anybody's guess. Then again, if you look at the price paid, and they rigorously promote all of the businesses including the grocery stores, etc., and those businesses increase in revenue, you may well cover the $1M a year in additional revenue elsewhere. I think this is sort of a return to locally owned business owners using these stations to toot their own horn (ego and $.)

 

[TheBigA]

My "guess" will be an attempt to re-focus as a bit of a local city-based station that highlights the hustle and bustle of NYC

How about move the studio into one of the grocery stores? Get it closer to the people.

 

[davideduardo]

My "guess" will be an attempt to re-focus as a bit of a local city-based station that highlights the hustle and bustle of NYC with a tip of the hat toward business and specifically local business that would fall under the potential umbrella of advertisers and "friends." That may well cover some of the potential weekend changes and lessen the losses. How well this will all work is anybody's guess. Then again, if you look at the price paid, and they rigorously promote all of the businesses including the grocery stores, etc., and those businesses increase in revenue, you may well cover the $1M a year in additional revenue elsewhere. I think this is sort of a return to locally owned business owners using these stations to toot their own horn (ego and $.)

Let's not forget that even good programming on weekends is harder to sell than on a music station. And even with a high rated music format, weekends are considerably less marketable than weekdays.

Going back two decades, I programmed KTNQ in LA. It had the rather rare situation of having weekends that outperformed weekdays, and M-F often beat KFI in 25-54. The weekend was entirely live and local, with "experts" such as family law, immigration law, medicine, an outspoken priest, a psychologist and others on Saturday and a mix of the same early Sunday and then sports all afternoon. It was nearly impossible to sell profitably, so we ended up doing infomercials Saturday evening and Sunday morning to cover some of the costs.

Radio, if anything, has become harder to sell today than it was in the pre-Internet and pre-smartphone era. The demand for weekend time is lower, and most efforts in the sales department go towards selling the easier days and dayparts.

 

[Tibbs4]

How about move the studio into one of the grocery stores? Get it closer to the people.

Funny you would mention that. A local station in my area, WHIN, is in the process of moving into a space in a mall with great visibility. The ONLY negative comments were from old local radio folks that wanted to no change a thing and keep the station in the sticks, hidden from the masses. I think it could be a great concept, although the comments on here about the stores cleanliness could sure affect the signal on people's radios! I need to see how many stores there are and exactly where they are located. Ever shopped in any of them?(I admit all of this interests me about the local aspect, so anyone willing to give a fair assessment of things is really appreciated. I mean that.)

 

[Tibbs4]

Let's not forget that even good programming on weekends is harder to sell than on a music station. And even with a high rated music format, weekends are considerably less marketable than weekdays.

Going back two decades, I programmed KTNQ in LA. It had the rather rare situation of having weekends that outperformed weekdays, and M-F often beat KFI in 25-54. The weekend was entirely live and local, with "experts" such as family law, immigration law, medicine, an outspoken priest, a psychologist and others on Saturday and a mix of the same early Sunday and then sports all afternoon. It was nearly impossible to sell profitably, so we ended up doing infomercials Saturday evening and Sunday morning to cover some of the costs.

Radio, if anything, has become harder to sell today than it was in the pre-Internet and pre-smartphone era. The demand for weekend time is lower, and most efforts in the sales department go towards selling the easier days and dayparts.

Interesting David. It seems like the more things change, the more radio seems to be working when it goes to it's local roots to survive and succeed. This sell really has the potential for the unpredictable shocker. There is a 1-5% "chance" in my predictions that maybe they do take WABC "back" to music. That, I know is a huge long shot, but if they use this station to promote the old style grocery stores and perhaps products....welll.....Am I crazy? (Don't answer that!)

 

[davideduardo]

I need to see how many stores there are and exactly where they are located. Ever shopped in any of them?(I admit all of this interests me about the local aspect, so anyone willing to give a fair assessment of things is really appreciated. I mean that.)

There are, I believe, 33 Gristedes locations, mostly in Manhattan.

The stores are not "old style" but rather conventional supermarkets. Because they are in NYC, the locations are smaller than supermarkets in most other places so they have a "cramped" look and tend to be less clean and neat than bigger markets due to the high traffic per square foot. I'v shopped them on trips to NYC when I got tired of $50 breakfasts and found them uncomfortable compared to the 50,000 square foot and above markets in my area of CA.

At most locations, it would be hard to find enough space for a tiny studio, let alone one that would accommodate guests and a screener and the like.

Per WABC's new owner, "The ideal size for a city supermarket like Gristedes, he said, is 9,000 to 12,000 square feet, big enough to have wide selection but not so big as to have a crippling rent bill. (Gristedes stores range from about 4,000 to about 20,000 square feet)". In the last two decades, the chain has shrunk from over 70 locations to the current 33. There is an expressed policy of closing stores if the rent demands make profitability impossible.

In a Times article from about 12 years ago, the owner says that the markets would not be a good stand-alone business, but that his oil and refining business makes it possible to sustain.

 

[Tibbs4]

There are, I believe, 33 Gristedes locations, mostly in Manhattan.

The stores are not "old style" but rather conventional supermarkets. Because they are in NYC, the locations are smaller than supermarkets in most other places so they have a "cramped" look and tend to be less clean and neat than bigger markets due to the high traffic per square foot. I'v shopped them on trips to NYC when I got tired of $50 breakfasts and found them uncomfortable compared to the 50,000 square foot and above markets in my area of CA.

At most locations, it would be hard to find enough space for a tiny studio, let alone one that would accommodate guests and a screener and the like.

Per WABC's new owner, "The ideal size for a city supermarket like Gristedes, he said, is 9,000 to 12,000 square feet, big enough to have wide selection but not so big as to have a crippling rent bill. (Gristedes stores range from about 4,000 to about 20,000 square feet)". In the last decade or so, the chain has shrunk from over 70 locations to the current 33. There is an expressed policy of closing stores if the rent demands make profitability impossible.

Thanks, David. From what I have read, he managed to be the dominate grower in NYC. Not bad at all. I find this really interesting. He seems to be pretty much a straight-forward, tell it like it is businessman. His policy on rent is smart. I can appreciate that. That is happening in Nashville and I cannot tell you how many local businesses are giving up due to the greed. I think he will play the politics and business approach given his vast array of political friends. He doesn't play the exclusive one-sided political game. I think he may well surprise some people, but would not expect a simple, gentle flowing approach.

 

[davideduardo]

Thanks, David. From what I have read, he managed to be the dominate grower in NYC. Not bad at all. I find this really interesting. He seems to be pretty much a straight-forward, tell it like it is businessman. His policy on rent is smart. I can appreciate that. That is happening in Nashville and I cannot tell you how many local businesses are giving up due to the greed. I think he will play the politics and business approach given his vast array of political friends. He doesn't play the exclusive one-sided political game. I think he may well surprise some people, but would not expect a simple, gentle flowing approach.

What is most interesting is the idea watching the drama of a local owner with a different agenda trying to turn a radio station that we might say "nobody else wanted" into a viable property.

The fact that WABC did not sell immediately at the time WPLJ was sold might indicate that there were not any suitors or that the offered prices were exceedingly low.

 

[Kelly A]

Going back two decades, I programmed KTNQ in LA.

"Don't say thank you, say _____ __!"

 

[davideduardo]

"Don't say thank you, say _____ __!"

And in the 90's when I was there, the station had been in Spanish for about 20 years. Yet a fair number of diary entries said "Thank You" instead of Ten Q.

Oddly, the group that bought KTNQ from Storer chose to keep the English name, Ten Q, instead of changing it to a name in Spanish. Even more oddly, when they had purchased KLVE a few years before, they kept the K-love name. So the two major Spanish language stations in LA had English names.

I always thought that they did not change the names or call letters because the owners were so cheap. Very cheap.

 

[MarkW]

So the cash flow on WABC in 2018 could have been in the $1.5 to $2 million range. And, going forward, much of the cash flow will be eliminated once the station is paying for its own management, back office, sales staff, rent and the likes now that WPLJ and Nash are gone. No cluster mates to share the overhead with.

Terrific points.

When one considers added operating overhead due to the pro forma absence of synergies that previously existed, on a pro forma basis, that $12 million sale price might very well represent a 10x (or more) multiple of pro forma BCF.

On a cash flow multiple basis, Cumulus has been successful with its major market divestitures so far. Cannot help but wonder if Standard General (with Jeff Smulyan serving as CEO of its newly formed "Mediaco" subsidiary - what a terribly sterile and lame sounding name) will ultimately scoop up what's left of Cumulus' major market properties?

Not sure Smulyan is the guy I'd want to pin my hopes of future success on. He had to sell or lease out some of his past NYC stations because his company ran them into the ground, and he also did a terrible job in Chicago. Oh, there's also the "NextRadio" debacle. That said, he did assemble successful clusters in mid-major markets like Indy, St. Louis and Austin.

 

[pjc1961]

How about move the studio into one of the grocery stores? Get it closer to the people.

I have read elsewhere that WABC is moving to 3rd Avenue and 49th Street in March 2020.

The Catsimatidis offices are (somewhat) across the street at 800 3rd Avenue.

 

[Wimmmex]

What's difficult to quantify is the long-term impact of not having 24/7 consistency.

At first a few infomercials are placed in "dead" times on weekends and overnight. A few listeners drop off but the revenue far outweighs the loss.

Then gradually more infomercials are added to the point where the station is essentially listenable 22/5. The listeners whose dials were glued to their "favorite station" are no longer there on Monday morning because the glue has been removed.

I understand the thinking that weekends are dead times for listeners and advertisers.

However, when I go to my favorite (AM) talk station on weekends now, I usually end up on NPR.

And NPR is running thoughtful, serious, intelligent talk programming...with NO commercials!

Somehow their model without commercials, they can come up with great weekend programming.

The AM talkers have to resort to awful programming that drives away their P1'S.

Its an interesting juxtaposition of business models.

I cannot tell you how many local businesses are giving up due to the greed. .

Charging market rates is "greed"?

 

[TheBigA]

Somehow their model without commercials, they can come up with great weekend programming.

All it takes is a willingness of listeners to spend their own money for radio. I found that stations received more donations on wknds than on weekdays. That may be because their weekend programming is built around longer TSL.

 

[davideduardo]

Somehow their model without commercials, they can come up with great weekend programming.

Some of the NPR affiliate stations have annual budget that exceed that of any commercial station in the market. For example, WAMU's operating expenses for 2018 were $34 million. And a good portion of their programming comes from NPR which is subsidized.

The national NPR operation has over $200 million in funding, about half of which comes from the affiliates.

Compare that with advertiser financed talk stations that have to cover expenses and garner a profit from commercials in an era where radio usage is declining and advertisers are off playing with their shiny new Internet toy.

The few talkers that have more local programming are ones like WSB and WJR and KMOX and WCCO... heritage stations in markets where advertisers are accustomed to using those stations. But even then, those stations have declining revenues and are off by as much as 50% when compared to early 2000's billing with the aging audience and political polarization all having a part in the change.

 

[Wimmmex]

Compare that with advertiser financed talk stations that have to cover expenses and garner a profit from commercials...

And let's not forget...service the debt. Thats something most non-comm's don't have to deal with. ;-)

 

[TheBigA]

And let's not forget...service the debt. Thats something most non-comm's don't have to deal with. ;-)

You'd be surprised. A lot of these stations live on pretty tight budgets, with state governments cutting their funding and corporations cutting their giving. Sure it's great in the blue states, but they're really having a tough time now at West Virginia Public Radio. I also hear cutbacks are coming in Alaska.

 

[Wimmmex]

You'd be surprised. A lot of these stations live on pretty tight budgets, with state governments cutting their funding and corporations cutting their giving.

Still amazed that while NPR is running "This American Life"..one of their more popular shows......my local AM taker is running "The Plastic Surgery Doctor" infomercial! ;-)