Buffalo Cumulus Bankruptcy V2

[Buddy Shula]

Not sure why we are not talking about the economics of radio here. This BK is a pretty big deal, as it was in 2017. Audacy’s biggest bankruptcy in history two years ago was also something to talk about, as well as I-Heart BK

Cumulus is shedding nearly 570 million dollars in debt. They are also shedding about 60 million per year in interest reorganization.

The bottom line is this is all about cash flow. The revenue broadcast companies are getting, is far below the debt on their balance sheet. More companies will be doing it.

Radio dug a hole when it way over paid for stations, then like any bubble, the stations lost value, because they lost revenue, because of technology. There are more options now.

Raise your hand if anyone you know under 50 has an actual radio in their bedroom, kitchen, etc. Yes, they are in cars. That is the only good thing, and hopefully they stay in cars

When this cycle of unloading stations for what they are really worth happens, a great operator can make a ton of money and take care of great employees with an awesome product

Wall Street radio is constantly back-tracking. Always trying to catch up and figure out a band-aid or excuse to define why they are doing so bad.

My guess, and it really is not even a guess, is major ownership will get local again. Owners will not make money on long term appreciation of the asset, but they will make lots of cash flow on the very hard work and ideas they come up with.

Revenue is not just about selling radio spots. It’s about using your asset to build other things that are emerging.

 

[TheBigA]

Revenue is not just about selling radio spots. It’s about using your asset to build other things that are emerging.

This is a key thing in what you said. If you go back in the history of radio, it was often part of a much bigger revenue package. RCA, GE, and Westinghouse owned radio stations as part of their electronics business. Car dealers owned radio stations to sell cars. The Evening News owned WBEN to help sell newspapers. This concept of radio-only companies came out of the 1980s, and it was a big mistake. Radio stations need other revenue streams besides selling spots. Cumulus is trying to do that by building its own podcasting network. It still makes less money than it needs to stay afloat.

The advice I often give to local owners who start LPFMs is to put their radio station in a restaurant or other business, and use the radio station as an attraction to bring in customers for the other business.

 

[radiofan2023]

The advice I often give to local owners who start LPFMs is to put their radio station in a restaurant or other business, and use the radio station as an attraction to bring in customers for the other business.

It’s not an LPFM, but WHB/Union Broadcasting sort of did this with their 810 Zone sports bars in the Kansas City suburbs starting in ‘05 or ‘06.

 

[Radio-Bored-Op]

Not sure why we are not talking about the economics of radio here. This BK is a pretty big deal, as it was in 2017. Audacy’s biggest bankruptcy in history two years ago was also something to talk about, as well as I-Heart BK

Cumulus is shedding nearly 570 million dollars in debt. They are also shedding about 60 million per year in interest reorganization.

The bottom line is this is all about cash flow. The revenue broadcast companies are getting, is far below the debt on their balance sheet. More companies will be doing it.

Radio dug a hole when it way over paid for stations, then like any bubble, the stations lost value, because they lost revenue, because of technology. There are more options now.

Raise your hand if anyone you know under 50 has an actual radio in their bedroom, kitchen, etc. Yes, they are in cars. That is the only good thing, and hopefully they stay in cars

When this cycle of unloading stations for what they are really worth happens, a great operator can make a ton of money and take care of great employees with an awesome product

Wall Street radio is constantly back-tracking. Always trying to catch up and figure out a band-aid or excuse to define why they are doing so bad.

My guess, and it really is not even a guess, is major ownership will get local again. Owners will not make money on long term appreciation of the asset, but they will make lots of cash flow on the very hard work and ideas they come up with.

Revenue is not just about selling radio spots. It’s about using your asset to build other things that are emerging.

My guess, and it really is not even a guess, is major ownership will get local again. Owners will not make money on long term appreciation of the asset, but they will make lots of cash flow on the very hard work and ideas they come up with....

Similar to what I have eluded to all along
Give Radio back to the people who appreciate it.

 

[TheBigA]

Give Radio back to the people who appreciate it.

Who would "give radio back to the people?" The FCC? Look at Buddy Shula. Nobody "gave" him WECK. He bought it will his own money.

There are hundreds of radio stations available for people to buy right now. Including you. Figure out a way to fund your ideas. Don't want for somebody to give it to you.

 

[Radio-Bored-Op]

Who would "give radio back to the people?" The FCC? Look at Buddy Shula. Nobody "gave" him WECK. He bought it will his own money.

There are hundreds of radio stations available for people to buy right now. Including you. Figure out a way to fund your ideas. Don't want for somebody to give it to you.

Oh no_ that's not what I intended:

I meant giving it back to people who appreciate radio as a passion project.
-As in, give back something to the listeners as an exciting stand alone
FM station ( or AM 📻 Radio )

 

[davideduardo]

This is a key thing in what you said. If you go back in the history of radio, it was often part of a much bigger revenue package. RCA, GE, and Westinghouse owned radio stations as part of their electronics business. Car dealers owned radio stations to sell cars. The Evening News owned WBEN to help sell newspapers.

I agree with your overall concept, but newspapers started radio stations in the 20's to keep their competitors from having them or to prevent competition for ad revenue from outsiders who started stations.

This concept of radio-only companies came out of the 1980s, and it was a big mistake.

No, radio-only groups started just after WW II. Companies like Storer started buying stations, even as radio was threatened by TV. Then people like Gordon McLendon and Todd Storz discovered that music format stations could be a big business. The 50's was when Kluge formed Metromedia, and there were over a dozen publicly traded radio only companies in that era as well as privately held ones like Richard Eaton's United Broadcasting. That was when Gene Autry started his broadcast business, and regional groups like "the other McLendon" had the "OK" set of Black formatted stations in the Southeast.

Just look at "group ownership" in the Broadcasting Yearbook for, let's say, 1960, and you will see pages of groups not owned by enterprises from other areas.

Heck, even Susquehanna could be called an independent owner of stations. Luis Appell bought Pfaltzgraff Pottery in the 40's and soon wanted his own station in central Pennsylvania. From that station, WSBA, he built Susquehanna Broadcasting as a separate and very successful independent radio company. Later on, the only thing that tied the stations with Pfaltzgraff was the Christmas gifts the stations gave clients each year...

Radio was so successful for Appell that in 1954, the pottery company became a division of the much more profitable radio company!

 

[TheBigA]

I meant giving it back to people who appreciate radio as a passion project.
-As in, give back something to the listeners as an exciting stand alone

Once again, there's nothing stopping anyone who appreciates radio as a passion project from buying a station

Somebody has to first own the station. Otherwise you get what you have now. It starts with the owners.

 

[davideduardo]

My guess, and it really is not even a guess, is major ownership will get local again. Owners will not make money on long term appreciation of the asset, but they will make lots of cash flow on the very hard work and ideas they come up with....

Local radio requires local revenue unless you are in a big market with agency buys.

Local revenue requires local advertisers. Walmart and most of the national brands don't buy local radio. Local "Main Street" business has not disappeared, but it is vastly less than it was 30 to 40 years ago.

 

[TheBigA]

Radio was so successful for Appell that in 1954, the pottery company became a division of the much more profitable radio company!

That was 1954. Today, radio companies need another revenue stream in order to succeed.

 

[davideduardo]

That was 1954. Today, radio companies need another revenue stream in order to succeed.

My point was that local radio ownership groups that were independent of other lines in business began to surge 40 years before "the 80's" which was what you stated.

"This concept of radio-only companies came out of the 1980s, and it was a big mistake." was your statement. That was 40 years too late, historically.

 

[TheBigA]

My point was that local radio ownership groups that were independent of other lines in business began to surge 40 years before "the 80's" which was what you stated.

How widespread was it in 1954? The arrival of Robert F.X. Sillerman in the 70s and 80s was a major game changer that fueled iHeart's expansion.

As a result of him, most of the smaller owners sold out. It was eat or be eaten. The FCC rules changed in ways unimaginable in the 50s or 60s

 

[davideduardo]

How widespread was it in 1954?

Very widespread. In my original hometown of Cleveland, in the 60's we had Kluge's Metromedia with WHK, a small group that owned WGAR and two other stations including Detroit, United Broadcasting with WJMO and Storer with WJW. That is half the viable stations in that decade.

Again, look at "Group Ownership" for any issue of the Broadcasting Yearbook from the 50's, 60's and 70's.

Even in small markets, the late 40's saw the Paul Bunyan Network out of Traverse City in places like Petoskey, Alpena, Gaylord and others. They later added TV and FM, too.

Here is the story of that group... which was typical of smaller market operators of smaller station groups in the era:

WTCM (AM) - Wikipedia

en.wikipedia.org

The arrival of Robert F.X. Sillerman in the 70s and 80s was a major game changer that fueled iHeart's expansion.

Clear Channel did not really expand until deregulation in 1995. In the 70's and 80's, we were limited to 7/7/7 stations in each service. It did not become iHeart until about a decade later.

As a result of him, most of the smaller owners sold out. It was eat or be eaten. The FCC rules changed in ways unimaginable in the 50s or 60s

The smaller owners did not sell out until after deregulation in 1995 because of ownership limits. Yes, two years before we were allowed just a small increase, but in '95 was when we saw the huge change. By the 1996 NAB in Las Vegas, someone was handing out lapel stickers each day that said ""Who owns your station today?".

 

[TheBigA]

In the 70's and 80's, we were limited to 7/7/7 stations in each service.

The 7-7-7 limits went away in 1984. Sillerman was ready and among the first to take advantage:

Deregulation: Freeing the Air Waves

Ever since Congress passed the Communications Act of 1934, the broadcasting industry has chafed under increasingly heavy regulation. The reason: the air waves were considered to be a limited...

time.com

The old 7-7-7 Rule, as it was known, stated that no company could own more than seven AM radio stations, seven FM ones and seven television stations. The commissioners voted 4 to 1 to raise the figures to 12-12-12,

It was around that time that the electronics companies such as RCA and GE started selling stations. Insurance companies too.

The limits grew every few years until 1996.

 

[davideduardo]

WTCM (AM) - Wikipedia

en.wikipedia.org

The 7-7-7 limits went away in 1984. Sillerman was ready and among the first to take advantage:

The 7/7/7 limits went away in the 90's allowing multiple stations to a market; about a year or so before the FCC had lifted the total station ownership limit above 7 per class.

"The FCC significantly relaxed radio ownership limits primarily through the Telecommunications Act of 1996, which eliminated national radio ownership caps and increased limits on the number of stations a single entity could own in local markets. Further deregulation occurred in 2003 and 2017, eliminating various cross-ownership restrictions." (Google AI)

And:

Prior to 1996, FCC rules stipulated that an entity could generally own no more than 40 radio stations (20 AM stations and 20 FM stations) nationwide.34 The Telecommunications Act of 1996 eliminated the FCC's restrictions on national radio station ownership.35 In addition, the act increased the FCC's prior limits on the number of stations a single entity could own within a local market.3

If we had been allowed to own more stations leading up to 1996, the company I managed in Puerto Rico would not have tried buying stations in Florida. We already had FMs in the three main markets of Puerto Rico, and could own no more there as we had one per market area.

(https://www.congress.gov/crs-produc..., the act increased,own within a local market.)

So, up to 1996, ownership was limited to one AM and one FM radio station per market. The only prior change was to allow 20 stations to be owned in each class, but in 20 separate markets.

It was around that time that the electronics companies such as RCA and GE started selling stations. Insurance companies too.

That happened in the 90's predominantly as those companies did not want to be in radio. In fact, both of those were close to liquidation.

The rest, like Nationwide, sold after consolidation. They were already seeing declines in ROI following Docket 80-90 so they did not want to throw good money after bad.

The limits grew every few years until 1996.

No, they grew once allowing 20 markets instead of 7 with the same caps. in the late 80's and early 90's if we could have bought more stations in Puerto Rico beyond the 3 separate market FMs we had, we would have. But it was not allowed to have more than one AM and one FM per market then. I was the one negotiating the deals on the mainland and managing the operations. I would have much preferred to just have more stations on the Island.

 

[TheBigA]

The 7/7/7 limits went away in the 90's

The article I linked said 1984.

 

[exdjted]

The sheer fact that it's been 30 years since the last significant change in the ownership rules despite mandating Quadrennial Reviews is what should really irk the industry.

 

[davideduardo]

The article I linked said 1984.

Then it was wrong. In any case, it only refers to the number of markets you could be in, not the cap on one AM and one FM per market.

The link I provided is from the FCC.

Ownership was limited to one AM and one FM per market until the 1995 change went into effect in 1996. The market count, still at one each, had been relaxed two years before to 20/20 from 7/7 AM and FMs.

I was out there driving around Florida, Georgia, and Alabama from about 1998 to 1992 with brokers looking for stations to buy because we could not own any more in Puerto Rico.

And in a few markets, Macon, GA, being the one I remember, being from Puerto Rico was looked at quite "negatively" by some...

 

[TheBigA]

Then it was wrong.

It's not wrong. Here's another article from a different source from the same time:

https://www.nytimes.com/1984/08/03/opinion/who-shall-own-how-much-tv.html

 

[exdjted]

And in a few markets, Macon, GA, being the one I remember, being from Puerto Rico was looked at quite "negatively" by some...

You should have seen the reactions my Dad got when he sold 6 hours on Saturday mornings to a Hispanic bar owner to play Regional Mexican in the heart of the orange groves in Central Florida. Some advertisers never bought from us again. Not surprising, but disappointing. He never missed a payment, and Dad eventually sold the AM to him when he built his FM.